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FORM 10-KSB
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
for the fiscal year ended December 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number 0-23782
RENAISSANCE ENTERTAINMENT CORPORATION
-------------------------------------
(Name of Registrant as Specified in its Charter)
Colorado 84-1094630
(State or other jurisdiction I.R.S. Employer
of incorporation or organization) Identification number
275 Century Circle, Suite 102, Louisville, Colorado 80027
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (303) 664-0300
Securities registered under Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.03 par value
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained in this form, and no disclosure will be
contained, to the best of Registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [ ]
The issuer's revenues for the year ended December 31, 1999 were $14,467,437.
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As of March 22, 2000, the aggregate market value of the Common Stock of the
Registrant, held by non-affiliates of the Registrant, based upon the average of
the closing bid and asked prices of the Common Stock as quoted on the NASD OTC
Bulletin Board Market, was approximately $643,467. As of March 22, 2000,
2,144,889 shares of the Common Stock of the Registrant were outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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PART I
This report contains forward-looking statements within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended, and Section 27A of the
Securities Act of 1933, as amended, and is subject to the safe harbors created
by those sections. These forward-looking statements are subject to significant
risks and uncertainties, including those identified in the section of this Form
10-K entitled "Factors That May Affect Future Operating Results," which may
cause actual results to differ materially from those discussed in such
forward-looking statements. The forward-looking statements within this Form 10-K
are identified by words such as "believes," "anticipates," "expects," "intends,"
"may," "will" and other similar expressions. However, these words are not the
exclusive means of identifying such statements. In addition, any statements
which refer to expectations, projections or other characterizations of future
events or circumstances are forward-looking statements. The Company undertakes
no obligation to publicly release the results of any revisions to these
forward-looking statements which may be made to reflect events or circumstances
occurring subsequent to the filing of this Form 10-K with the Securities and
Exchange Commission ("SEC"). Readers are urged to carefully review and consider
the various disclosures made by the Company in this report and in the Company's
other reports filed with the SEC that attempt to advise interested parties of
the risks and factors that may affect the Company's business.
ITEM 1: BUSINESS
OVERVIEW
Renaissance Entertainment Corporation currently operates four Renaissance Faires
in the United States. The Renaissance entertainment industry consists of over
100 separate events of varying size with a Renaissance theme and has an
estimated annual attendance in excess of 4,000,000 visitors.
The Renaissance Faire is a re-creation of a Renaissance village, a fantasy
experience transporting the visitor back into sixteenth century England. This
fantasy experience is created through authentic craft shops, food vendors and
continuous live entertainment throughout the day, both on the street and the
stage, including actors, jugglers, jousters, magicians, dancers and musicians.
On January 28, 2000, the Company announced the closure of its Renaissance Faire
in Fredericksburg, Virginia.
WEB SITE. The Company maintains a home page at www.recfair.com.
EXISTING RENAISSANCE FAIRES AND SITES
The Company presently owns and produces four Renaissance Faires: the Bristol
Renaissance Faire in Kenosha, Wisconsin, serving the Chicago/Milwaukee
metropolitan region; the Northern California Renaissance Pleasure Faire, serving
the San Francisco Bay and Sacramento metropolitan areas; the Southern California
Renaissance Pleasure Faire in Devore, California serving the greater Los Angeles
metropolitan area; and the New York Renaissance Faire serving the New York City
metropolitan area. From 1996 through 1999, the Company also operated the
Virginia Renaissance
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Faire in Fredericksburg, Virginia, serving the Washington, D.C. and Richmond
metropolitan areas. This Faire has recently been closed as the Company's working
capital was not adequate to enable it to continue to fund the Faire's negative
cash flow during the period required to establish the customer base necessary
for profitable operations.
The following table shows the attendance, number of vendors and net operating
income for the Company's Faires during the 1998 and 1999 seasons.
<TABLE>
<CAPTION>
Approximate Number
Attendance of Vendors Net Operating Income
----------------- -------------------- -----------------------
1999 1998 1999 1998 1999 1998
------- ------- ------- ------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Bristol 170,314 181,350 165 180 579,354 $ 916,543
Northern CA 152,374 163,239 150 180 (124,937) 917,276
Southern CA 163,834 162,316 156 150 788,338 696,038
New York 106,556 133,933 125 125 261,245 533,528
Virginia 65,855 57,738 82 60 (414,529) (445,187)
Total 658,933 698,576 $1,089,471 $2,618,198
</TABLE>
BRISTOL RENAISSANCE FAIRE. The Bristol Renaissance Faire is held at the Kenosha,
Wisconsin site leased by the Company. It has been in existence for 13 years. The
Bristol Renaissance Faire is operated annually for nine weekends beginning the
last weekend in June and ending the third weekend in August.
During November 1997, the Company sold this site and leased it back for a period
of 20 years. See "Property." Improvements which have been constructed on the
site, including the vendor booths, are permanent. Craft shops and vendor booths
are built by the individual craft vendors at their cost. In many cases, vendors
invest substantial sums of money in the construction of these shops.
Historically the Company has only utilized the site for the Renaissance Faire,
and the property has been vacant during the off-season. During the 1998 and 1999
operating season, under a joint arrangement with Educational Travel Tours, Inc.
the Company operated two School Days events in May. The Company produced a Wild
West Rodeo in October of 1998 and 1999. As of the date of this report, the
Company has not planned to hold School Days or the Wild West Rodeo in 2000.
The Company believes that the property is amenable to additional
income-producing off-season activities. The Company is considering year-round
uses which could include campgrounds, an Oktoberfest and music festivals. To
date, however, there exists no agreements, arrangements or other understandings
with respect to alternate year-round uses, and there can he no assurance that
the Company will be successful in developing any additional income-producing,
off-season activities.
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NORTHERN CALIFORNIA RENAISSANCE PLEASURE FAIRE. The Northern California
Renaissance Pleasure Faire has been held in the San Francisco Bay area for the
past 33 years. This Faire is held annually for six to seven weekends, typically
beginning Labor Day weekend and running through the first or second weekend of
October. In 1998 the Faire ran for seven weekends beginning the last weekend in
July through the Labor Day weekend. In 1999, the Faire operated eight weekends
beginning the last weekend of August and ending the third weekend of October. In
conjunction with the 1999 Faire, the Company conducted a Halloween event that
ran five weekends in October. At this time, the Company does not plan to offer
the Halloween event in 2000.
The Northern California Faire historically operated on leased property in
Novato, California. The lease for this property expired after the 1998 season.
In 1999, the Northern California Renaissance Pleasure Faire was held on the site
of the original Nut Tree Farm near Vacaville, California under a one year lease.
The Company is presently negotiating a lease for the 2000 season at the same
location near Vacaville. To date a lease has not been executed and there can he
no assurance that the Company will be successful in obtaining a lease in time
for the 2000 operating season, or that it will be on terms acceptable to the
Company.
Historically all structures, including the gates, stages, booths, shops and
arenas utilized in the Northern California Renaissance Pleasure Faires had to be
mobile. These props were loaded into the Company's semi-tractor/trailers and
transported between the Northern and Southern California Renaissance Faires and,
during the off-season, were stored at the Northern Renaissance Faire site. The
booths and craft shops utilized and owned by the individual vendors were moved
onto the site for the Faire and then removed by them. The Company is seeking a
long-term lease agreement that would allow these structures to remain in place
year-round and provide the opportunity for additional income-generating events
other than the Renaissance Faire.
SOUTHERN CALIFORNIA RENAISSANCE PLEASURE FAIRE. The Southern California
Renaissance Pleasure Faire has been held for the past 37 years in the Los
Angeles metropolitan area. This Faire is held annually for eight or nine
weekends beginning the last week of April and ending mid-June. In 1999, as is
planned for the 2000 season, the Faire ran eight weekends beginning the first
week of May. In 1999 the Company, for the first time, sponsored a School Days
event in conjunction with Events Group Corporation which was held on the Faire
site in May of 1999. A School Days event is scheduled for May 2000.
The Southern Renaissance Pleasure Faire is held in Glen Helen Regional Park
located near Devore, California. The site is leased from the San Bernardino
County Parks and Recreation Department, under a one-year lease for the 2000
Faire. Rental under the lease is equal to 4.0% of gross revenues with a
guaranteed minimum of $150,000. The Company believes it has the option of
leasing the San Bernardino site in the future.
The Southern Renaissance Pleasure Faire site is only occupied during the
operating season and must be vacated following completion of the Faire.
Accordingly, all structures are mobile and transported to the Northern
Renaissance Faire site for storage during the off-season.
Although the Company has operated this Faire during the past several years at a
profit, management believes that it should either relocate the Faire or obtain a
long-term lease for the
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current site in order to improve its profitability in the future. The owner of
the existing site has indicated that it is willing to enter into a long-term
lease. With a long-term lease, the Company would be able to make permanent
improvements to the site and reduce its annual set-up cost for the Faire. The
Company has not, as of the date of this report, entered into a long-term lease
for the existing site and there can be no assurance that it will be able to
obtain a long-term lease for this site.
NEW YORK RENAISSANCE FAIRE. The Company acquired Creative Faires, Ltd., the
owner and operator of the New York Renaissance Faire in February of 1996. The
New York Renaissance Faire opened in July 1978 and re-creates a 16th century
English Country Faire on 65 leased acres in Sterling Forest, Tuxedo, New York.
Creative Faires, Ltd. also produces Sterling Forest's Forest of Fear. The
Company issued 108,000 shares of the Company's Common Stock in consideration for
all of the outstanding shares of Creative Faires, Ltd. Effective November 19,
1998 Creative Faires, Ltd. merged with Renaissance Entertainment Corporation.
Historically, the Faire has held annually for eight weekends beginning the first
weekend of August and ending the third weekend of September. The Forest of Fear
is held annually beginning the first weekend of October and ending on Halloween.
In 1998, under a joint arrangement with Educational Travel Tours, Inc., the
Company operated two School Days events in May and June. In 1999, the Company
operated three School Day events in May and June. In 2000, the Company will
operate their School Days events in cooperation with Events Group, Inc. The
Company has two School Days events scheduled in May of 2000. In 2000, the
Company anticipates operating the Faire seven weekends beginning the first
weekend of August and the Forest of Fear will operate four weekends in October.
In 1996, the Company signed a five-year lease with Sterling Forest Corp. to
operate the New York Faire in Sterling Forest. The original lease term expires
after the operating season in 2000. The Company has negotiated a one-year
extension on this lease through the 2001 operating season. The Company is
currently negotiating a long-term lease to remain in Sterling Forest and is
investigating alternative locations for the Faire.
VIRGINIA RENAISSANCE FAIRE. On January 28, 2000, the Company announced the
closure of the Virginia Renaissance Faire located in Fredericksburg, Virginia.
The 250 acres of land on which the Faire was located was purchased by the
Company in July of 1995 for $925,000. The Virginia Renaissance Faire has had a
negative impact on the Company's cash flow and net income since its opening. In
1999, the Company recorded an asset write down of approximately $2,121,334 in
connection with the closing of the Faire. Efforts are underway to sell the
property. The Company has not, as of the date of this report, entered into a
sales agreement as it relates to the property.
VENDORS
Approximately 12% of the revenues realized from presenting the Company's
Renaissance Faires are generated from the Company's relationships with vendors
and craftspersons who sell food and crafts and offer games and rides. During the
1999 season, there were approximately 165 vendors at the Bristol Faire, 150 at
the Northern California Faire, 156 at the Southern California Faire, 125 at the
New York Faire and 82 vendors at the Virginia Faire. Typically, there is little
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turnover in vendors from one season to the next. The loss of any one or more
vendors would not have a material adverse effect upon a particular Faire.
At the Bristol Renaissance Faire site, the vendors and craftspersons are
required to construct their shops and booths at their own cost and then occupy
the structures on a year-to-year basis for an annual fee of $1,000.
At the Northern and Southern California Renaissance Pleasure Faires, craft shops
and booths are owned by the vendors and transported onto the site for the
duration of the Faire and then removed. In lieu of a flat fee to participate,
vendors at the California Faires pay the Company a fee equal to 12%-20% of their
gross revenues.
At the New York Faire site, the vendors and craftspersons pay an annual fee of
approximately $250 and 10%-17% of their gross revenues.
The decision to charge a flat fee or a percentage of revenues is based on
several factors, including the custom of a particular Faire and the extent to
which vendors must invest in the construction of their booths. The advantage to
the Company of the flat fee method is that it is easier to monitor and is more
predictable. The advantage to the Company of the percentage method is that the
Company may participate to a greater extent as Faire attendance increases.
Vendors occupy their booths and shops pursuant to written lease agreements that
have a term of one year, and require renewal by both the vendor and the Company.
Under these agreements, each vendor agrees to indemnify and hold harmless the
Company from any liability that may arise by virtue of the vendors' activities
at a Faire. Nevertheless, the Company maintains general public liability
insurance which also provides coverage for such risks.
REVENUE SOURCES
A Renaissance Faire generates revenues from numerous sources, including gate
admissions, beverage sales, parking fees, food sales, craft fees, game fees,
camping fees, souvenir sales and sponsorship fees. The following table shows the
Company's revenues during the 1998 and 1999 seasons from each of these
activities.
<TABLE>
<CAPTION>
1999 1998
<S> <C> <C>
Gate Admissions $ 6,617,279 $ 7,064,819
Beverage Revenue 2,894,414 3,051,353
Parking Revenue 847,534 864,938
Food Revenue 592,863 636,899
Craft Fees 1,570,175 1,724,922
Game Fees 221,565 237,867
Souvenir Revenue 1,063,801 942,485
Sponsorship Fees 262,899 235,556
Camping Fees 245,777 311,004
Miscellaneous Fees 151,132 149,562
Total $14,467,439 $15,219,405
</TABLE>
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GATE ADMISSIONS. Gate admissions are generally set from $14.00 to $17.50 for
adults, $6.00 to $7.50 for children, and children under the age of five admitted
free. Discounts range from $1.00 to $2.50 for seniors and, in some cases,
students and military personnel. Off premises discount ticket sales are
available at Cub Foods, Sentry Foods, Circle K, Shoprite, Fresh Field Grocers,
Hannaford's Food, and CalaBell. Discount coupons are available at retail outlets
operated by Company sponsors, including McDonalds, Subway, White Castle,
Wendy's, Blockbuster Video, Target, Best Buy, Norwest, Moto Photo, Popeye's,
Border Bookstores and Tower Records. The Company has a large group sale and
advance sale program that provides discounted tickets. Admission provides the
guest with all-day continuous entertainment on multiple stages. Major
entertainment acts include full contact jousting, falconry, variety acts, sword
duels, Shakespearean vignettes and authentic belly-dancing.
BEVERAGE INCOME. The Company sells beer, wine and soft drinks at each Faire.
PARKING INCOME. The California Faires charge $7.00 per car for regular parking
and $10 for preferred close-in parking. The Bristol
and New York Faires have preferred parking for $3.00 and $5.00.
FOOD REVENUE. At the California and New York Faires, all food concessions are
run by independent vendors. On April 6, 2000, the Company entered into an
agreement to sell their food concessions, at the Bristol Faire, to an
independent food vendor. These vendors pay the Company a commission equal to
approximately 15% of their gross revenues.
CRAFT FEES. Each Faire has approximately 80 to 170 independent craft vendors who
sell their goods to Faire patrons. Most of the craft items are handmade by the
artists who often demonstrate the making of their wares at the Faire. The
glassblowers and lace-makers are generally very popular. The craft vendors in
California pay the Company a fee of approximately 12-20% of their gross revenue.
At the Bristol and New York Faires, craft vendors are required to build their
own booth or shop, and either pay a flat annual fee or a percentage of their
gross income.
GAME FEES. Many games and rides are operated by independent contractors. The
Company receives approximately 15% of the gross
revenues from these games and rides.
SOUVENIR REVENUE. At each Faire, the Company sells souvenir t-shirts,
sweatshirts, beer mugs, books and other high quality merchandise appropriate to
the Renaissance era.
SPONSORSHIP FEES. The Company solicits sponsorship arrangements. Major sponsors
include the Coca-Cola Company, Anheuser-Busch, Inc., Miller Brewing Company,
Eastman Kodak Company, Pepsi Cola Company, Grand Pacific Resorts, Fuji Film,
Playmobil, Evian, Shell, Database, Winchells, Samuel Adams and Guinness Import
Co. The sponsors also participate in joint advertising campaigns.
CAMPING FEES. The Company allows employees and independent vendors limited
camping at the Faire sites during the Faire season. The Company provides
portable rest room facilities, showers and security for campers. The campers are
charged and pay a fee for these services.
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MARKETING
The Company markets its Faires as entertainment events for the whole family,
which also include shopping and food. Marketing is accomplished through local
television and radio stations which, from time-to-time, and often in conjunction
with other advertisers, conduct live broadcasts from the Faires. Supplementing
this television and radio advertising, newspapers and billboards provide
essential information to the general public regarding the cost of admission,
location and times of operation. Artistic brochures and fliers are directed
toward groups for advance sales campaigns.
The Company has also undertaken a "Sponsorship" campaign. Major sponsors have
included Eastman Kodak Company, Coca-Cola Company, Miller Brewing Company, Evian
Water, Shell Development, Anheuser-Busch, Inc., and Pepsi Cola Company.
Agreements with such sponsors have included joint advertising, sponsorship fees,
and product giveaways.
Since 1998, the Company has conducted matinee programs that are designed to
provide an educational experience in combination with lively entertainment for
school children. The Company has sponsored these events in conjunction with
Educational Travel Tours, Inc. and Events Group, Inc. In 1998, the Company held
five daily events at three of its Faire sites with 15,300 school children in
attendance. In 1999, the Company held seven daily events at four of its Faire
sites with 19,097 individuals attending. In 2000, in cooperation with Events
Group, Inc., the Company is planning to hold three daily events at two Faire
sites.
SEASONALITY AND WEATHER
The Company generates its revenue primarily from the production of Renaissance
Faires. Since, at this point, they are exclusively outdoor events, each Faire is
scheduled for the time of year most likely to minimize the risks and hazards of
inclement weather. With four Faires in various U.S. locations, the Company has
been able to extend the period of revenue generation from early May (the start
of the Southern California Faire) through mid-October (the end of the Northern
California Faire), with the Bristol Renaissance Faire being held during July and
August, and the New York Faire during August and September. The spread of Faires
over a six-month period, and the geographic spread across the West coast, East
coast, and Midwest, helps to assure that inclement weather in one particular
geographic area at any particular time does not adversely threaten the Company's
entire source of revenue. However, it is normal, for adverse weather, or even
the forecast of adverse weather, to harm the financial results during certain
weekends of any particular Faire.
During the period from mid-October through April, the Company currently has no
material income-generating activity and must meet its working capital
requirements from cash flow earned during the Faire season augmented by
short-term debt. The Company plans to continue producing the previously
mentioned special events and research additional events at other Faire sites.
Each Faire is scheduled for a finite period that is determined substantially in
advance in order to facilitate advertising and other promotional efforts. Since
attendance at each Faire depends on the weather, poor weather conditions can
result in substantial declines in attendance and loss of revenues. All of the
Renaissance Faires' are open "rain or shine". The Company is also vulnerable
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to severe climatic events that are similarly beyond its control but nevertheless
could have a direct and material impact upon the Company's relative success or
failure.
COMPETITION
As a promoter and operator of family entertainment events, the Company faces
significant competition from other more traditional entertainment alternatives,
including amusement parks, theme parks, local and county fairs, and specialty
festivals. At each of the markets in which the Company competes, there are many
entertainment events which compete for the consumers' entertainment dollars.
Many of these entertainment events have attendance and revenues substantially
greater than the Company's Faires in such markets. The Company competes on the
basis of entertainment value and uniqueness of the Renaissance event. The
Company emphasizes its Faires as an activity that appeals to the whole family.
While there are more than 100 annual entertainment events produced in the
country with a Renaissance theme, there are approximately 20 major Renaissance
Faire productions operated in major metropolitan areas throughout the country.
As families typically do not travel to distant metropolitan areas in order to
attend a Renaissance Faire, the Company does not experience direct competition
with those other major productions. More significant competition comes from
other entertainment alternatives and smaller faire events.
Further, by the very nature of Renaissance Faires and the lack of protection
afforded by trademark, service mark and unfair competition laws, there exist few
barriers to entry into the industry, and there can be no assurance that other
companies with substantially greater resources will not develop competing Faires
in the metropolitan areas where the Company has established productions.
INTELLECTUAL PROPERTY
Because of the number of existing Faire productions with Renaissance themes, the
Company does not rely upon trademark or service mark protection for the name
"Renaissance Faire" in connection with its business. However, the Company did
obtain in connection with its acquisition of Living History Center assets, an
assignment of a California registration of the mark "Renaissance Pleasure Faire"
which applies only to the state of California. Further, it is possible that the
Company could apply for and obtain trademark or service mark registrations on a
state level for its other individual Faires, such as "Bristol Renaissance Faire"
and other name-specific marks associated with the "Renaissance Faire"
description as those names are acquired or developed. While the Company may be
able to protect a site-specific name for its productions, the Company does not
consider this protection a significant deterrent to the entry of competitors
into existing markets, given the limited barriers to such entry.
PUBLIC LIABILITY AND INSURANCE
As a producer of public entertainment events, the Company has exposure for
claims of personal injury and property damages suffered by visitors to the
Company's Renaissance Faires. To date, however, the Company has experienced only
minimum claims that have been resolved quickly without litigation. The Company
maintains comprehensive public liability insurance in the amount
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of $1,000,000 per occurrence and $2,000,000 in the aggregate, which it considers
to be adequate against this exposure. Independent vendors operating food
concessions, games and rides are required to obtain liability insurance
protection, and to provide the Company with proof of such coverage.
GOVERNMENT REGULATION
Since food and alcoholic beverages are sold at the various Faire sites, the
Company, its vendors and/or subsidiaries must comply with all applicable rules,
regulations and/or ordinances pertaining to the handling and sale of such items.
Any material violation of these regulations would subject the Company, its
vendors and/or its subsidiaries to the possibility of having necessary food
service permits and liquor licenses revoked. Material violations may also result
in penalties and fines being assessed against the Company. The Company must also
comply with all state and federal labor laws and regulations, including all
minimum wage and overtime provisions.
The Company believes that it is in compliance with all such laws, and does not
anticipate that any existing law will have a material adverse impact upon the
proposed business and operations of the Company. Although future compliance
cannot be assured in the event of future changes in such laws or the addition of
regulations governing the proposed business and operations of the Company, the
Company will, at all times, endeavor to take all feasible and required actions
necessary to maintain compliance with such laws.
EMPLOYEES
On March 22, 2000, the Company had five full-time employees working in its
Colorado headquarters. Each Faire has its own full-time staff as well as
seasonal and temporary employees who are engaged during the Faire presentation.
On March 22, 2000 the Bristol Faire had five full-time employees, the California
Faires had twelve full-time employees, the Virginia Faire had two full-time
employees, and the New York Faire had six full-time employees.
During Faire presentations, there are over 100 street actors interacting with
Faire patrons at any given time, with over 1,000 seasonal employees and
volunteers. The Company trains its professional street actors, who perform under
contract with the Company for a fixed fee. In addition, the Company invites
numerous apprentice actors and actresses to its training programs to perform
during the Faire on a volunteer basis. Only after an actor or actress has gained
a particular proficiency are they invited to become a fully-paid contract actor
for the Company.
ITEM 2: PROPERTY
The Company's corporate headquarters are located at 275 Century Circle, Suite
102, Louisville, Colorado. This property measures 2,789 square feet and is
currently leased at $3,744 per month base rent, with annual increases based on
increases in the Consumer Price Index. The lease is for a term of five years
expiring in 2003, with two five-year renewal options. The Company considers
these offices to be suitable for its current needs.
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The Company leases approximately 160 acres in Kenosha County, Wisconsin, which
is home to the Bristol Renaissance Faire. The lease is for a period of 20 years
with lease payments of $400,000 per year during each of the first two years
beginning in November 1997 and increasing to $543,333 per year in years 13
through 20. The Company has the right to acquire the property during the term of
the lease at an aggregate price of $4,433,333 during the first three years,
increasing to $4,900,000 during years 13 through 20. The Company has made a
security deposit of $666,667, $333,333 of which is to be released in 2001 and
the balance released in 2005.
On December 17, 1999, the Company entered into a lease amendment with Faire
Partners, the landlord for the Wisconsin property. The amendment provided for a
one-time restructuring of rental payments. During the time period between
December 1, 1999 and May 31, 2000 the monthly base rent payable by the Company
to the landlord was reduced from $36,667 per month to $21,667 per month and
during the period of time between June 1, 2000 through November 30, 2000, the
monthly base rent payable was increased to $51,667 per month. As an inducement
to the landlord to execute this lease amendment the Company agreed to terminate
the existing warrant dated November 12, 1997 and issue a new warrant. The
original warrant provided for 153,333 shares at $5.00 per share and expires
November, 2003. The new warrant is 100,000 shares at $.30 per share, the closing
ask price on the date the lease amendment was signed. The new warrant is on the
same terms and conditions as contained in the original warrant.
The Southern California Faire site is leased from the San Bernardino County
Parks and Recreation Department, under a one year lease for the 2000 Faire. The
Company is currently negotiating a long-term lease with the San Bernardino
County Parks and Recreation Department. The Company has not, as of the date of
this report, entered into a long-term lease for the existing Faire site and
there can be no assurance that it will be able to obtain a long-term lease for
this site.
In 1999, the Northern California Renaissance Pleasure Faire was held on the site
of the original Nut Tree Farm near Vacaville, California under a one year lease.
The Company is presently negotiating a lease for the 2000 season at the same
location near Vacaville. To date, a lease has not been executed and there can be
no assurance that the Company will be successful in obtaining a lease, or that
it will be on terms acceptable to the Company, in time for the 2000 or future
operating seasons.
The New York Faire is operated on 65 acres of leased land in Tuxedo, New York.
The original lease term expires after the Faire season in 2000. The Company has
negotiated a one year extension on this lease through the 2001 operating season.
The Company is currently negotiating a long-term lease to remain in Sterling
Forest and is investigating alternative locations for the Faire.
On July 27, 1995, the Company acquired approximately 250 acres of land in
Stafford County, Virginia, for a purchase price of $925,000. This property
housed the Virginia Renaissance Faire. The construction of the Faire was
financed, in part, with a $1.5 million mortgage (balance at December 31, 1999 -
$426,066), repayable over 15 years at an initial interest rate of 8.65%
annually. In March, 1999 the company obtained a second mortgage on this property
in the amount of $750,000. On January 28, 2000, the Company announced the
closure of the Virginia
10
<PAGE>
Renaissance Faire. Efforts are underway to sell the property. The Company has
not, as of the date of this report, entered into a sales agreement for the
property. (See "Management's Discussion and Analysis of Financial Condition and
Results of Operations-Liquidity").
ITEM 3: LEGAL PROCEEDINGS
From time to time, the Company is a party to legal proceedings arising in the
ordinary course of business. On June 25, 1998, Dawn Morgan, a former employee of
the Company, commenced an action against the Company (on all allegations) and a
former officer of the Company in Superior Court of the State of California in
and for the County of Marin alleging breach of contract, breach of the implied
covenant of good faith and fair dealing, promissory estoppel, negligent
misrepresentation, unlawful discrimination based on age, physical disability
discrimination and negligent infliction of emotional distress. This suit has
been settled, based on the Company's agreement to pay Ms. Morgan $50,109.
ITEM 4: SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
The 1999 Annual Meeting of the Stockholders of the Company was held on
October 13, 1999. At that meeting, the following six directors were elected:
Charles S. Leavell; Robert Geller; Sanford L. Schwartz; Charles J. Weber; J.
Stanley Gilbert; and Thomas Brown.
Shareholders also approved a proposal to increase the number of shares
reserved for issuance under the Company's 1993 Incentive Stock Plan from 342,000
to 750,000. The number of shares voting for the increase were 1,698,678; against
were 254,929; abstentions were 106,447.
ITEM 5: MARKET FOR THE COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
PRICE RANGE OF COMMON STOCK
Since December 21, 1998, the Company's Common Stock has been traded on the
OTC Bulletin Board under the symbol FAIRC. From August 21, 1997 to December 21,
1998, the Company's Common Stock traded in the Nasdaq Small Cap Market and from
September 1, 1995 to August 21, 1997, it traded on the Nasdaq National Market.
From December 9, 1996, to January 27, 1998, the Company's Common Stock was also
traded on the Philadelphia Stock Exchange. The following table reflects the high
and low prices of the Company's Common Stock for each quarterly period of the
two most recent calendar years and the subsequent interim quarters retroactively
adjusted for a 1-for-5 reverse stock split in February 1998. The prices reflect
the high and low sales prices. The quotations represent prices between
broker-dealers and do not include retail mark-ups and mark-downs or any
commission to the broker-dealer and may not reflect prices in actual
transactions.
<TABLE>
<CAPTION>
Calendar Years Ended December 31 High Low
- -------------------------------- ---- ---
<S> <C> <C>
1998
First Quarter ended March 31 1.625 0.625
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
Calendar Years Ended December 31 High Low
- -------------------------------- ---- ---
<S> <C> <C>
Second Quarter ended June 30 1.12 0.375
Third Quarter ended September 30 1.46 0.437
Fourth Quarter ended December 31 0.937 0.937
1999
First Quarter ended March 31 0.9375 0.28
Second Quarter ended June 30 0.60 0.3984
Third Quarter ended September 30 0.55 0.3594
Fourth Quarter ended December 31 0.375 0.19
2000
Period ended March 22 0.4 0.19
</TABLE>
As of March 22, 2000, there were approximately 143 shareholders of record.
DIVIDENDS
The Company has never paid cash dividends on its Common Stock, and does not
anticipate the payment of such dividends in the foreseeable future.
ITEM 6: MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The following discussion should be read in conjunction with the Company's
Consolidated Financial Statements, including the footnotes for the fiscal period
ended December 31, 1999. On June 21, 1996, the Company changed its fiscal year
end from March 31 to December 31.
In the year 2000, the Company will operate four Renaissance Faires in the United
States. The four Faires include the Southern and Northern California Renaissance
Pleasure Faires, and the Bristol and New York Renaissance Faires. On January 28,
2000, the Company announced the closure of the Virginia Renaissance Faire
located in Fredericksburg, Virginia. The Virginia Renaissance Faire has had a
negative impact on the Company's cash flow and net income since its opening in
May, 1996. The Renaissance Faire is a re-creation of a Renaissance village, a
fantasy experience transporting the visitor back into sixteenth century England.
The Company has a lease for the 2000 and 2001 Faire seasons to operate the New
York Faire in Sterling Forest. The Company has a one-year lease for the 2000
Faire season to operate the Southern California Faire in Devore. The Company is
presently negotiating a lease for the 2000 season of the Northern California
Faire to be held at the same location used in 1999, near Vacaville. To date the
lease for the Northern California Faire has not been executed and there can he
no assurance that the Company will be successful in obtaining a lease, or that
it will be on terms acceptable to the Company, in time for the 2000 operating
season. It is critical to the financial
12
<PAGE>
condition of the Company, that it obtain long-term leases for its Northern and
Southern California Faires and its New York Faire.
The Company had a working capital deficit of ($1,274,542) as of December 31,
1999. During the first four months of fiscal 2000, the Company obtained $350,000
of additional capital through the issuance of 12% subordinated promissory notes
due August 31, 2001. While the Company believes that it has adequate capital to
fund anticipated operations for the balance of 2000, it believes it must obtain
additional capital for future fiscal periods. See "Liquidity and Capital
Resources."
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998. Revenues
decreased $751,975 or 5% from $15,219,412 in 1998 to $14,467,437 in 1999. During
the 1999 operating season, gross attendance at the Bristol and New York Faires
was significantly lower as compared to 1998. Gross attendance was down 6% at the
Kenosha Wisconsin Faire and 19% at the New York Faire. The decrease in
attendance was directly related to the forecast of or actual inclement weather
conditions. Gross attendance for the Northern California Faire was down 7% for
the 1999 season. This decrease was largely the result of hot weather and the new
location of the Faire. It is not unreasonable to experience a temporary decrease
in attendance when relocating an established operation such as the Northern
California Faire.
Faire operating expenses increased $379,012 or 8% from $4,678,664 in 1998 to
$5,057,676 in 1999. Of this increase, approximately $125,000 related to year
2000 operating expenses for the Virginia site which the Company was required to
accrue in 1999 as a result of its decision to close the Virginia Faire. The
balance of the increase related to the Company's plans for increased attendance
in 1999. When planning for growth, in any period, there are certain expenses,
such as contracts for entertainers, trash removal, etc., which are established
before the Faire opens. When revenue generation for a Faire is seriously
impacted, as in 1999 by the forecast of or actual inclement weather, it is
difficult and often impossible to curtail certain expenses.
Operating expenses (year-round operating costs and corporate overhead) decreased
$80,722 or 1%, from $10,333,602 in 1998 to $10,252,880 in 1999.
Of the operating expenses, salaries increased $55,814 or 1%, from $4,398,917 in
1998 to $4,454,731 in 1999.
Advertising expense decreased $83,021, or 4%, from $1,880,900 in 1998 to
$1,797,879 in 1999. This decrease was due to the continued utilization of more
cost efficient methods of advertising.
Depreciation and amortization decreased 3%, from $585,977 in 1998 to $565,646 in
1999. This decrease was primarily the result of the Company's utilization of
accelerated methods of depreciation resulting in more depreciation in the
earlier years of an asset's life and less later.
13
<PAGE>
Other operating expenses (all other general and administrative expenses of the
Company) showed a decrease of $33,184 or 1%, from $3,467,808 in 1998 to
$3,434,624 in 1999. Numerous cost savings plans were implemented, again this
year, targeted at reducing this category of expenses.
As a result of the foregoing, net operating income (before interest charges and
other income) decreased $1,050,265 from income of $207,146 for the 1998 period
to a loss of ($843,119) for the 1999 period.
A 1% decrease in interest expense from $644,227 in 1998 to $639,719 in 1999
resulted from a lower cost of borrowing over the past one year period.
Other income decreased $68,982, from $155,464 in 1998 to $86,482 in 1999. This
line item is a collection of income and expense items that do not specifically
relate to the general operations of the business in the current period. These
items are variable and often non-recurring events.
On January 28, 2000, the Company announced the closure of its Renaissance Faire
in Fredericksburg, Virginia. Efforts are underway to dispose of the property.
The December 31, 1999 income statement includes an expense line item in the
amount of $2,121,334 that related to the write-down of the property due to
closure of the site.
Combining net operating income with other income/expense resulted in a
$3,248,241 increase in net loss, from a loss of ($203,080) for the 1998 period
to a loss of ($3,451,321) for the 1999 period. Net loss to common stockholders
increased from a loss of ($203,080) for the 1998 period to a loss of
($3,451,321) for the 1999 period. Finally, net loss per common share increased
from a loss of ($0.10) for the 1998 period to a loss of ($1.61) for the 1999
period, based on 2,095,785 weighted average shares outstanding during the 1998
period and 2,144,224 weighted average shares outstanding during the 1999 period.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997. Revenues
increased $1,060,822 or 7% from $14,158,590 in 1997 to $15,219,412 in 1998. This
increase was primarily the result of increased revenue of approximately $194,000
at the Virginia Faire, $137,000 for the Southern California Faire, $351,000 for
the Wisconsin Faire, $247,000 for the New York Faire and $132,000 for the
Northern California Faire. The increased revenue for the Virginia, Wisconsin,
and New York Faires was primarily due to increased overall attendance. The
increased revenue for the Southern California Faire was due to an increase in
paid attendance, as well as being open one more weekend in 1998 than in 1997.
The increased revenue for the Northern California Faire is primarily a result of
increased paid attendance.
Faire operating expenses increased $72,062 or 2% from $4,606,602 in 1997 to
$4,678,664 in 1998. Overall cost of sales inherently increases with revenue.
Cost of sales as a percent of revenue actually decreased 1.8% from 1997 to 1998
indicating improved efficiency in the utilization of resources within this
expense category.
Operating expenses (year-round operating costs and corporate overhead) decreased
$1,506,577 or 13%, from $11,840,179 in 1997 to $10,333,602 in 1998. The
Company's management has spent a
14
<PAGE>
considerable amount of time reviewing operating expenses categorically and
implementing plans and systems to lower operating expenses.
Of the operating expenses, salaries decreased 7%, from $4,745,507 in 1997 to
$4,398,917 in 1998, reflecting a continued reduction in personnel expense for
the 1998 period as compared to the 1997 period.
Advertising expense decreased $554,329, or 23%, from $2,435,229 in 1997 to
$1,880,900 in 1998. This decrease was due to the continued utilization of more
cost efficient methods of advertising.
Depreciation and amortization decreased 16%, from $701,599 in 1997 to $585,977
in 1998. This decrease was primarily the result of the Company's utilization of
accelerated methods of depreciation resulting in more depreciation in the
earlier years of an asset's life and less later.
Other operating expenses (all other general and administrative expenses of the
Company) showed a decrease of $490,036 or 12%, from $3,957,844 in 1997 to
$3,467,808 in 1998. Numerous cost savings plans were implemented again this year
targeted at reducing this category of expenses.
As a result of the foregoing, net operating income (before interest charges and
other income) increased $2,495,337 from a loss of ($2,288,191) for the 1997
period to income of $207,146 for the 1998 period.
A 74% increase in interest expense from $370,813 in 1997 to $644,227 in 1998
resulted from the accounting treatment of the sale-leaseback of the Wisconsin
property effected in November, 1997. Due to the structuring of this transaction,
FASB 98 required that this transaction be treated as a financing arrangement
resulting in interest expense as opposed to operating lease payments. Except for
the above-mentioned item, the Company's borrowing level and associated interest
expense has decreased over the past one year period.
Other income increased $124,588, from $30,876 in 1997 to $155,464 in 1998. This
line item is a collection of income and expense items that do not specifically
relate to the general operations of the business in the current period. These
items are variable and often non-recurring events such as the receipt of income
as the result of an easement grant on Company held property.
Combining net operating income with other income/expense resulted in a
$2,364,017 decrease in net loss, from a loss of ($2,567,097) for the 1997 period
to a loss of ($203,080) for the 1998 period. Net loss to common stockholders
decreased $2,364,017, from a loss of ($2,567,097) for the 1997 period to a loss
of ($203,080) for the 1998 period. Finally, net loss per common share decreased
from a loss of ($1.32) for the 1997 period to a loss of ($0.10) for the 1998
period, based on 1,949,217 weighted average shares outstanding during the 1997
period and 2,095,785 weighted average shares outstanding during the 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
The Company's working capital deficit widened during 1999 from ($147,726) at
December 31, 1998 to ($1,274,542) at December 31, 1999. The disappointing
performance of three of the
15
<PAGE>
Company's five Faires, in large part, explains the negative impact on working
capital in 1999. SEE RESULTS OF OPERATIONS.
The Company's working capital requirements are greatest during the period from
January 1 through April 30, when it is incurring start-up expenses for its first
Faire of the Faire season, the Southern California Faire.
In 1999, the Company authorized the issuance for up to $1,000,000, 12%
subordinated promissory notes due August 31, 2001 on units, each unit consisting
of two promissory notes of equal principal, identical in nature except that one
note is convertible to common stock at a price of $0.30 per share. Interest is
due and payable quarterly. Subscribers to these units are expected to be
primarily related parties. During the first four months of fiscal 2000, the
Company raised capital in the amount of $350,000 under the above mentioned debt
structure. These funds were provided by Charles S. Leavell ($250,000), Chairman
of the Board of Directors and one other investor.
During March of 1999, the Company secured a second mortgage on its Virginia real
estate. The total amount of the loan is $750,000, of which $500,000 was funded
at closing and $250,000 was funded in July, 1999. This loan is secured by a
Second Deed of Trust on the Virginia property. This loan allows interest at 13%
per annum. Payments are interest only 4/1/99 through 6/1/99; principal and
interest on a five-year amortization of the amount of debt remaining unpaid on
6/1/99 from 7/1/99 through 1/1/2000; interest only 2/1/2000 through 6/1/2000;
principal and interest on a five-year amortization of the amount of debt
remaining unpaid on 6/1/2000 from 7/1/2000 through 11/1/2000; and remaining
principal and interest is due in full on 12/31/2000. The investor also was
granted an option to purchase one share of the Company's common stock for each
$10.00 loaned to the Company at an exercise price of $0.81 per share. These
options expire on the earlier of 12/31/2005 or the third anniversary of the
payment in full of the loan.
While the Company believes it has adequate capital to fund anticipated
operations for fiscal 2000, it believes it must obtain additional working
capital for future periods.
Reviewing the change in financial position over the years, current assets,
largely comprised of cash and prepaid expenses, increased from $771,045 at
December 31, 1998 to $1,515,134 at December 31, 1999, a increase of $744,089 or
97%. Of these amounts, cash and cash equivalents increased from $379,336 at
December 31, 1998 to $1,049,044 at December 31, 1999. Accounts receivable
decreased from $18,509 at December 31, 1998 to $4,951 at December 31, 1999.
Prepaid expenses increased from $237,021 at December 31, 1998 to $259,646 at
December 31, 1999.
Current liabilities increased from $918,771 at December 31, 1998 to $2,789,676
at December 31, 1999, an increase of $1,870,905 or 203%. This change is
primarily due to an increase during the twelve-month period in accounts payable
of $1,116,176 from $604,434 at December 31, 1998 to $1,720,610 at December 31,
1999 as a result of the Company's decision to defer payments of trade payables.
Unearned income, which consists primarily of the sale of admission tickets to
upcoming Faires, and deposits received from craft vendors for future Faires,
increased from $161,010 at December 31, 1998 to $214,789 at December 31, 1999.
Notes payable, current portion, increased from $153,327 at December 31, 1998 to
$854,277 at December 31, 1999. The Company's overall
16
<PAGE>
indebtedness increased during the twelve-month period as a result of the second
mortgage on the Virginia Faire real property.
Total assets decreased from $8,806,809 at December 31, 1998 compared to
$7,108,820 at December 31, 1999. Property, plant and equipment (net of
depreciation) decreased by $2,316,303 or 35% from $6,610,466 at December 31,
1998 to $4,294,163 at December 31, 1999. This decrease is primarily the result
of the write-down of the Virginia site assets that totaled approximately
$2,118,000. The Company decreased the net book value of certain fixed assets in
New York approximately $47,000 to coincide with the two years remaining on the
lease of the Sterling Forest property. Goodwill, which arose from the purchase
of the two California Faires and is being amortized over 15 years, decreased
from $519,474 at December 31, 1998 to $468,798 at December 31, 1999 as the
result of normal amortization. Other miscellaneous assets such as vendor
deposits, decreased from $900,828 at December 31, 1998 to $830,725 at December
31, 1999.
Total liabilities increased from $5,377,508 at December 31, 1998 to $7,128,340
at December 31, 1999, an increase of $1,750,832 or 33%. Total liabilities at
December 31, 1999 include $2,789,676 in current liabilities (discussed above),
plus $311,873 from the long-term portion of debt primarily resulting from the
first mortgage on the Virginia Faire site and the $3,987,116 lease obligation
with respect to the sale/leaseback of the Bristol Faire site described above.
Stockholders' Equity decreased from $3,429,301 at December 31, 1998 to a deficit
of ($19,520) at December 31, 1999, a decrease of $3,448,821 or 101%. This
decrease resulted primarily from the net loss of ($3,451,321). As of December
31, 1999, the Company had outstanding 2,144,889 shares of common stock, 334,716
Class A Warrants representing the right to purchase common stock at $10.00 per
share, and 393,395 Class B warrants representing the right to purchase common
stock at $13.125 per share. The Company's A and B warrants expired in January of
2000.
Although inflation can potentially have an effect on financial results, during
1998 and 1999, it caused no material effect on the Company's operations, since
the change in prices charged by the Company and by the Company's vendors has not
been significant.
The Company has no significant commitment for capital expenses during the fiscal
year ending December 31, 2000.
FACTORS THAT MAY AFFECT FUTURE OPERATING RESULTS
In addition to the other information contained in this report, prospective
investors should carefully consider the following factors in evaluating the
Company and its business.
RECENT LOSSES. The Company has incurred operating losses since
fiscal 1995. In addition, the Company incurred a ($3,451,321) loss in fiscal
1999. There is no assurance that the Company will return to profitability in any
subsequent period.
The Virginia Faire has operated at a loss for all fiscal years since opening in
1996. The Faire has had a negative impact on the Company's cash flow and results
of operations since its opening.
17
<PAGE>
As a result, on January 28, 2000, the Company announced the closure of the
Virginia Renaissance Faire located in Fredericksburg, Virginia. The Company has
recorded an asset write-down of approximately $2,121,334 in fiscal 1999 in
connection with the closing of the Faire.
During the third quarter of 1999, the Company's Wisconsin and New York Faires'
experienced the threat of or actual inclement weather throughout much of their
operating season. The Northern California Faire was relocated in 1999 and was
negatively impacted by weather. As a result the Wisconsin, New York and Northern
California Faire fiscal 1999 results of operations were adversely affected.
NEED FOR ADDITIONAL CAPITAL. The Company had a working capital deficit
of ($1,274,542) as of December 31, 1999. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations." While the Company
believes that it has adequate capital to fund anticipated operations for the
balance of fiscal year 2000, it may need additional capital to sustain
operations after that time. Additional capital may be sought through borrowings
or from additional equity financing. Such additional equity financing may result
in additional dilution to investors. In any case, there can be no assurance that
any additional capital can be satisfactorily obtained if and when required.
POSSIBLE SUSPENSION OF NORTHERN CALIFORNIA FAIRE. In 1999, the Northern
California Renaissance Pleasure Faire was held on the site of the original Nut
Tree Farm near Vacaville, California under a one year lease. The Company is
presently negotiating a lease for the 2000 season at the same location near
Vacaville. To date a lease has not been executed and there can he no assurance
that the Company will be successful in obtaining a lease, or that it will be on
terms acceptable to the Company, in time for the 2000 operating season. The
Company is seeking a long-term lease agreement that would provide expense
savings, by allowing the Faire structures to remain in place year-round, and
provide the opportunity for additional income-generating events other than the
Renaissance Faire. Should the Company be unable to operate a Northern
Renaissance Faire it could have a material adverse effect on the Company's
business, results of operations and financial condition.
POSSIBLE RELOCATION OF SOUTHERN CALIFORNIA FAIRE. Since April 1994, the
Company has operated its Southern California Faire in Devore, California. The
site is leased from the San Bernardino County Parks and Recreation Department,
under a one year lease for the 2000 Faire. The Company is currently negotiating
with the owners of the Devore property regarding long-term use of this property.
The Company believes that it either needs to obtain a long-term lease for the
current site or relocate the Faire to another site for which a long-term lease
would be available. This would allow the Company to construct permanent
structures on the site and significantly reduce setup costs for this Faire. As
of the date of this report, the Company has not entered into a long-term lease
for the current site and there can be no assurance that it will be able to do
so.
COMPETITION. The Company faces significant competition from numerous
organizations throughout the country which offer Renaissance Faires and other
entertainment events, including amusement parks, theme parks, local and county
fairs and festivals, some of which possess
18
<PAGE>
significantly greater resources than the Company, and in many cases, greater
expertise and industry contacts. The Company estimates that there are currently
20 major Renaissance Faires produced each year. In addition, the Company
estimates that there are 100 minor Renaissance Faire events held throughout the
United States each year, ranging in duration from one day to two weekends.
LACK OF TRADEMARK PROTECTION. Because of the large number of existing
Renaissance Faires, the Company is not able to rely upon trademark or service
mark protection for the name "Renaissance Faire." As a result, there is no
protection against others using the name "Renaissance Faire" for the production
of entertainment events similar to those produced by the Company. The Company's
own Faires could be negatively impacted by association with substandard
productions.
PUBLIC LIABILITY AND INSURANCE. As a producer of a public entertainment
event, the Company has exposure for claims of personal injury and property
damage suffered by visitors to the Faires. To date, the Company has experienced
only minimal claims, which it has been able to resolve without litigation. The
Company maintains comprehensive liability insurance which it considers to be
adequate against this risk; however, there can be no assurance that a
catastrophic event or claim which could result in damage or liability in excess
of this coverage will not occur.
DEPENDENCE UPON VENDORS. A substantial portion of the Company's revenues
generated at each Faire is derived from arrangements that the Company has with
vendors who construct elaborate booths at the Faires and sell a variety of food,
crafts and souvenirs. This arrangement consists of either a fixed rental paid by
the vendors to the Company, or a percent of revenues. In either case, the
success of a Faire is dependent upon the Company's ability to attract
responsible vendors who sell high quality goods.
SEASONALITY. The Company's Renaissance Faires are located in traditionally
seasonal areas which attract the greatest number of visitors during the warm
weather months in the spring, summer, and early fall. Unless the Company
acquires or develops additional Faire sites in areas which are counter-seasonal
to the present sites located in temperate climates, the Company's revenues and
income will be highly concentrated in the six months ended September 30th of
each year.
DEPENDENCE UPON WEATHER. Each Renaissance Faire operated by the Company is
scheduled for a finite period, typically consecutive weekends during a seven to
nine-week period, which are determined substantially in advance in order to
facilitate advertising and other promotional efforts. The success of each Faire
is directly dependent upon public attendance, which is directly affected by
weather conditions. While each of the Company's Faires are open, rain or shine,
poor weather, or even the forecast of poor weather, can result in substantial
declines in attendance and, as a result, loss of revenues. Further, as the
Renaissance Faires are outdoor events, they are vulnerable to severe weather
conditions that can cause damage to the Faire's infrastructure and buildings, as
well as injuries to patrons and employees. Risks associated with the weather are
beyond anyone's control, but have a direct and material impact upon the relative
success or failure of a given Faire.
19
<PAGE>
LICENSING AND OTHER GOVERNMENTAL REGULATION. For each Faire operated by the
Company, it is necessary for the Company to apply for and obtain permits and
other licenses from local governmental authorities controlling the conduct of
the Faire, service of alcoholic beverages, service of food, health, sanitation,
and other matters at the Faire sites. Each governmental jurisdiction has its own
regulatory requirements that can impose unforeseeable delays or impediments in
preparing for a Faire production. While the Company has been able to obtain all
necessary permits and licenses in the past, there can be no assurance that
future changes in governmental regulation or the adoption of more stringent
requirements may not have a material adverse impact upon the Company's future
operations.
FAIRE SITES. The Company currently has leases, for the Southern
California Faire, Bristol Renaissance Faire, and the New York Faire sites. The
terms and conditions of each lease will vary by location, and to a large extent,
are beyond the control of the Company. Further, there can be no assurance that
the Company will be able to continue to lease existing Faire sites on terms
acceptable to the Company, or be successful in obtaining other sites on
favorable locations. The Company's dependence upon leasing Faire sites creates a
substantial risk of fluctuation in the Company's operations from year to year.
ITEM 7: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements are filed as part of this report:
1. Report of Independent Certified Public Accountants;
2. Consolidated Balance Sheets as of December 31, 1998 and 1999,
(audited);
3. Consolidated Statements of Operations for the Fiscal Years Ended
December 31, 1998 and December 31, 1999 (audited);
4. Consolidated Statements of Changes in Stockholders' Equity for the
Fiscal Years from December 31, 1997 through December 31, 1999
(audited);
5. Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 31, 1998 and December 31, 1999 (audited); and
6. Notes to the Consolidated Financial Statements.
ITEM 8: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
20
<PAGE>
PART II
ITEM 9: DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT
COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT
Name, position with the Company, age of each Director or officer, and the period
during which each Director has served are as follows:
<TABLE>
<CAPTION>
Director
Name Age Position Since
- ---- --- -------- --------
<S> <C> <C> <C>
Charles S. Leavell 58 Chairman of the Board of Directors, 1993
Chief Executive Officer and Chief
Financial Officer
Sanford L. Schwartz 50 Director 1993
Robert M. Geller 47 Director 1994
Thomas G. Brown 55 Director 1999
J. Stanley Gilbert 62 President and Chief Operating 1999
Officer, and a Director
Howard Hamburg 63 Vice President --
Sue Brophy 44 Controller and Chief Accounting --
Officer
</TABLE>
CHARLES S. LEAVELL was elected Chief Executive Officer effective June 20,
1996. From April 1993 to March 31, 1995, he was Chief Executive Officer, and
from April 1, 1995 to present he has served as Chairman of the Board of the
Company. From 1988 to present, Mr. Leavell has served as President and Chairman
of the Board of Leavell Management Group, Inc. and Ellora Corporation. In that
capacity, he has acquired, developed, and managed numerous ventures, including
the Bristol Renaissance Faire; the 4UR Guest Ranch in Creede, Colorado, a 3,000
acre luxury ranch; and South Meadow, an exclusive 96 unit single family
development in Boulder, Colorado. Prior to his affiliation with Leavell
Management Group and Ellora Corporation, Mr. Leavell worked with Columbia
Pictures in Los Angeles, California, where he was producer of the feature film,
"The Quick and the Dead," about Grand Prix automobile racing, and was the
executive producer of another film, "Evil Ways," about street gangs in East Los
Angeles. Mr. Leavell also produced a rock musical for the stage entitled
"Goosebumps." Mr. Leavell currently sits on the Board of Directors of CK
Properties, L.C., of El Paso, Texas, which is a real estate development and
management corporation with extensive holdings in apartments and office
buildings. Mr. Leavell's former affiliations include Board of Directors of the
Denver
21
<PAGE>
International Film Festival, Denver, Colorado, and Vice-Chair of Colorado
Venture Capital Corporation, a regional investment firm.
SANFORD L. SCHWARTZ has been a Director of the Company since April, 1993.
Mr. Schwartz has been a founder, senior executive or director of nine
publicly-traded companies over the past twenty years. From 1992 to present, Mr.
Schwartz has been the Chairman of Creative Business Strategies, Inc. a business
consulting firm.
ROBERT M. GELLER has been a Director of the Company since April 1, 1994. He
served as Chief Financial Officer of Online System Services, Inc., a provider of
internet services, from March 1995 to October 1996. Mr. Geller has also served
as the President of The Growth Strategies Group, a consulting firm specializing
in executive/board services for emerging growth companies since August 1991.
From April, 1990 to July, 1991, he was Executive Vice-President for HealthWatch,
Inc., a publicly-traded medical equipment manufacturer.
THOMAS G. BROWN was elected a director of the Company in October 19, 1999.
Mr. Brown has been President and Managing Director of Wyndham Capital
Corporation, an investment banking and research firm since he founded it in
1996. Mr. Brown was also a co-founder of Ablum, Brown & Company, an investment
banking firm specializing in leveraged buyout transactions. He served as its
Managing Director from January 1988 until December 1995. Prior to his tenure
with Ablum, Brown & Company, Mr. Brown served as principal of several investment
management and investment banking firms including seven years as a principal of
Deihl, Speyer & Brown, a regional investment banking firm. Mr. Brown is a
Chartered Financial Analyst. He also serves as a director of both Ashton
Technology Group, Inc. and Mobile P.E.T. Systems Inc.
J. STANLEY GILBERT became President and Chief Operating Officer in January,
1997. In 1996 Mr. Gilbert was a Vice President of the Company and he managed the
Bristol Renaissance Faire from 1988 until 1996. Prior to that he worked in the
commercial banking field in senior management. Prior to that, he was senior vice
president of Cinema America, a film and video production company. Mr. Gilbert
was the president of Just in Jest, Inc., an art studio featuring Renaissance and
fantasy handmade sculptures, whose works have been displayed in galleries and
museums, including the Delaware Museum of Fine Art. Mr. Gilbert has served as a
board member of the Kenosha Area Convention and Business Bureau.
HOWARD HAMBURG was Chief Operating Officer of the Company from April 1,
1994 to June 20, 1996, at which time he was elected a Vice President of the
Company. From 1989 to March 31, 1994, Mr. Hamburg served as Treasurer and
Planning Director of the Living History Centre, Inc., a California non-profit,
public benefit corporation and producer of the California Renaissance Pleasure
Faires. In addition to his work with LHC, Mr. Hamburg served, from 1990 to 1993,
as Vice-President of the Patent Protection Institute, Inc., an intellectual
property licensing and royalty recovery corporation.
SUE BROPHY has been Controller and Chief Accounting Officer of the Company
since August, 1995. From 1994 until 1995, Ms. Brophy was employed by Clifton,
Gunderson & Co.,
22
<PAGE>
a public accounting firm in accounting services. From 1990 to 1993, she was
self-employed. Ms. Brophy holds a Bachelor of Arts degree in Biology, a Master
of Science degree in Accounting, and has been a licensed CPA since 1995.
Each Director is elected to serve for a term of one year and until the next
Annual Meeting of Shareholders or until a successor is duly elected and
qualified.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
On May 1, 1991, comprehensive new rules promulgated by the Securities and
Exchange Commission relating to the reporting of securities transactions by
directors and officers became effective. To the Company's knowledge, based
solely on a review of the copies of such reports furnished to the Company and
written representations that no other reports were required, during the fiscal
year ended December 31, 1999, all required reports were filed on a timely basis.
ITEM 10. EXECUTIVE COMPENSATION
The following table sets forth certain information for the Company's fiscal
periods ended December 31, 1999 and December 31, 1998, regarding compensation
earned by or awarded to the Company's chief executive officer and the other
executive officers whose total annual salary and bonus exceeded $100,000 (the
"Named Executive Officers").
TABLE I
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long Term Compensation
Annual Compensation Awards Payouts
Other Restricted LTIP
Name and Annual Stock Options/ All Other
Principal Salary Bonus Compensation Award(s) Payouts Compensation
Position Year ($) ($) ($) ($) SARs ($) ($)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles S. Leavell,
Chairman and CEO 1999 $160,000 -0- -0- -0- -0- -0- -0-
1998 120,000 -0- -0- -0- -0- -0- -0-
23
<PAGE>
Howard Hamburg, VP 1999 $ 85,000 -0- -0- -0- -0- -0- -0-
1998 115,978 -0- -0- -0- -0- -0- -0-
J. Stanley Gilbert,
COO and President 1999 $120,000 -0- -0- -0- -0- -0- -0-
1998 90,000 -0- -0- -0- -0- -0- -0-
</TABLE>
(1) All executive officers of the Company participate in the Company's group
health insurance plan. However, no Named Executive Officer received
perquisites and other personal benefits which, in the aggregate, exceeded
the lesser of either $50,000 or 10% of the total of annual salary and bonus
paid during the respective years.
OPTIONS GRANTED DURING FISCAL 1999
The following table shows option grants during fiscal 1999 to the Named
Executive Officers of the Company.
<TABLE>
<CAPTION>
Options Granted Percent of Total Exercise Expiration
Name in Fiscal 1999 Options Granted Price Date
---- -------------- --------------- ----- ----
<S> <C> <C> <C> <C>
Charles S. Leavell 110,000 40% .58 2004
Howard Hamburg 0 0 N/A N/A
J. Stanley Gilbert 100,000 36% .53 2004
</TABLE>
AGGREGATED OPTION EXERCISES DURING FISCAL 1999 AND FISCAL YEAR-END OPTION VALUES
The following table provides information related to the number and value of
options held by the Named Executive Officers as of December 31, 1999. The
Company does not have any outstanding stock appreciation rights.
24
<PAGE>
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised In-the-
Options/SARs at Money Option/SARs
Value FY-end (#) at FY-End ($)(1)
Shares Acquired Realized Exercisable/ Exercisable/
Name on Exercise (#) ($) Unexercisable Unexercisable
<S> <C> <C> <C> <C>
Charles S. Leavell -0- $-0- 56,000/110,000 0/0
Howard Hamburg -0- $-0- 5,000/0 0/0
J. Stanley Gilbert -0- $-0- 40,000/100,000 0/0
</TABLE>
(1) The value of unexercised options is determined by calculating the
difference between the fair market value of the securities underlying the
options at fiscal period end and the exercise price of the options.
EMPLOYMENT AGREEMENTS
Effective December 11, 1998 the Company entered into an Employment Agreement
with Charles S. Leavell, CEO, and J. Stanley Gilbert, President and COO. The
agreements become effective at such time as a change of control (as defined by
the acquisition by any individual, entity or group of 30% of more of the then
outstanding shares of common stock of the Company or the combined voting power
of the then outstanding voting securities of the Company) takes place. These
agreements have a term of three years beginning with a change in control of the
Company.
DIRECTOR COMPENSATION
During the fiscal year ended December 31, 1999, Directors, other than Mr.
Geller, Mr. Schwartz, Mr. Gilbert and Mr. Leavell, received no cash compensation
for their services as such, however they were reimbursed for their expenses
associated with attendance at meetings or otherwise incurred in connection with
the discharge of their duties as Directors of the Company. During July 1997, the
Board of Directors authorized the granting of options to outside directors
representing the right to acquire up to 8,000 shares (retroactively adjusted for
the February 1998 one-for-five reverse stock split) for each year that a
director serves on the Board. These options are to be granted in lieu of cash
compensation. Directors who are also executive officers of the Company receive
no additional compensation for their services as Directors.
GELLER AGREEMENT
Effective April 1, 1994, the Company appointed Robert M. Geller to serve on the
Board of Directors' of the Company. As a Director, Mr. Geller receives
compensation as outlined in the above section entitled Director Compensation. In
addition, Mr. Geller provides consulting
25
<PAGE>
services to the company. For these services, Mr. Geller received cash
compensation in the amount of $22,950 in 1998 and $35,000 in 1999.
SCHWARTZ COMPENSATION
During 1999, Mr. Schwartz provided consulting services to the Company. He
received $37,500 for these services.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Geller, Schwartz and Leavell. Mr.
Leavell, who is Chief Executive Officer and a director of the Company,
participates in all discussions and decisions regarding salaries, benefits and
incentive compensation for all employees of the Company, except discussions and
decisions relating to his own salary, benefits and incentive compensation.
ITEM 11: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock, as of March 22, 2000, by:
(i) each of the directors of the Company, (ii) all officers and directors of the
Company as a group, and (iii) holders of 5% or more of the Company's Common
Stock. Each person has sole voting and investment power with respect to the
shares shown, except as noted.
<TABLE>
<CAPTION>
Name and Address Percent of
of Beneficial Owner Number of Shares Class (1)
- ------------------- ---------------- ---------
<S> <C> <C>
Charles S. Leavell 865,333 (2) 40.3%
275 Century Circle, Suite 102
Louisville, Colorado 80027
Robert M. Geller 104,333 (3) 4.9%
275 Century Circle, Suite 102
Louisville, Colorado 80027
Sanford L. Schwartz 39,870 (4) 1.9%
275 Century Circle, Suite 102
Louisville, Colorado 80027
Thomas G. Brown 5,000(5) 0.2%
275 Century Circle, Suite 102
Louisville, Colorado 80027
26
<PAGE>
J. Stanley Gilbert 215,287(6) 10.0%
275 Century Circle, Suite 102
Louisville, Colorado 80027
All Directors & Officers as a Group 1,257,823 (7) 58.6%
(7 Persons)
</TABLE>
(1) Shares not outstanding but deemed beneficially owned by virtue of the
individual's right to acquire them as of March 22, 2000, or within 60 days
of such date, are treated as outstanding when determining the percent of
the class owned by such individual and when determining the percent owned
by the group.
(2) Includes 176,000 shares of Common Stock held of record by Leavell
Management Group, Inc., a controlled corporation of Mr. Leavell who would
be deemed to exercise the voting and investment power with respect to the
securities held by LMG. 26,667 shares of Common Stock held of record by LMG
are subject to an option granted in favor of Mr. Leavell. Includes
non-qualified options to purchase 166,000 shares. Includes warrants to
purchase 40,000 shares, 20,000 of which are held by Leavell Management
Group, Inc. Includes conversion rights to 416,666 shares of Common Stock,
83,333 of which are held by Leavell Management Group, Inc. Mr. Leavell
disclaims beneficial ownership of the securities held by LMG for purposes
of Section 16 under the Exchange Act.
(3) Includes non-qualified options to purchase 82,333 shares of Common Stock
and warrants to purchase 22,000 shares.
(4) Includes 870 shares owned by Creative Business Strategies, Inc., a
corporation of which Mr. Schwartz is an officer, director and shareholder.
Includes non-qualified options to purchase 24,000 shares of Common Stock
and warrants (owned by Creative Business Strategies) to purchase 15,000
shares.
(5) Includes 5,000 shares of Common Stock held of record by his spouse. Mr.
Brown disclaims beneficial ownership of the securities for purposes of
Section 16 under the Exchange Act.
(6) Includes 5,200 shares of Common Stock held of record and an option to
purchase 15,000 shares of Common Stock held by his spouse. Mr. Gilbert
disclaims beneficial ownership of the securities for purposes of Section 16
under the Exchange Act. Includes 25,487 shares of Common Stock held of
record by Mr. Gilbert.
(7) Includes 447,333 shares issuable upon exercise of stock options exercisable
within 60 days of March 22, 2000, and 114,600 shares issuable upon exercise
of warrants exercisable within 60 days of March 22, 2000.
27
<PAGE>
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
SHORT-TERM NOTES-1998
During the first four months of fiscal 1998, the Company raised $498,000 of
short-term capital. These funds were provided by Charles S. Leavell ($100,000),
Chairman of the Board of Directors, two directors and two officers of the
Company (an aggregate of $198,000) and three other investors. The loans allowed
interest at 6% per quarter and were secured by substantially all of the
Company's assets other than its real estate. The investors also were granted a
five-year warrant to purchase one share of common stock for each $2.50 loaned to
the Company at an exercise price of $1.50 per share. These loans were repaid in
August of 1998.
SHORT-TERM NOTES-1999
During the first four months of fiscal 1999 the Company raised $500,000 of
short-term capital. These funds were provided by Charles S. Leavell ($100,000),
Chairman of the Board of Directors, two directors and two officers of the
Company (an aggregate of $225,000) and three other investors. The loans provide
for interest at 4.5% per quarter and are secured by existing monies and future
revenues from the Company's Faires. The investors also were granted a five-year
warrant to purchase one share of common stock for each $5.00 loaned to the
Company at an exercise price equal to the average closing bid price for the
Company's common stock for the five business days immediately preceding the
closing of each loan. These loans were retired during July 1999.
PROMISSORY NOTES-1999
In 1999, the Company authorized the issuance of up to $1,000,000 of 12%
subordinated promissory notes due August 31, 2001 in units, each unit consisting
of two promissory notes of equal principal, identical in nature except that one
note is convertible to common stock at a price of $0.30 per share. Interest is
due and payable quarterly. Subscribers to these units are expected to be
primarily related parties. During the first four months of fiscal 2000, the
Company raised capital in the amount of $350,000 under the above mentioned debt
structure. These funds were provided by Charles S. Leavell ($250,000), Chairman
of the Board of Directors and one other investor.
The Company believes that the foregoing transactions were on terms as favorable
to the Company as could have been obtained from non-affiliated parties.
PART IV
ITEM 13: EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
EXHIBITS
<TABLE>
<CAPTION>
Exhibit No Title
<S> <C>
28
<PAGE>
3.0(i) Amended and Restated Articles of Incorporation, incorporated by
reference from the Amendment No. 1 to Registrant's Registration
Statement on Form 8-A filed with the Commission on April 12, 1994.
3.0(ii) By-Laws, incorporated by reference from the Amendment No. 1 to
Registrant's Registration Statement on Form 8-A filed with the
Commission on April 12, 1994.
* 3.1 Articles of Amendment to the Articles of Incorporation.
4.1 Specimen Certificate of Common Stock, incorporated by reference
from the Amendment No. 1 to Registrant's Registration Statement on
Form 8-A filed with the Commission on April 12, 1994.
* 4.2 Renaissance Entertainment Corporation 1993 Stock Incentive Plan.(1)
* 10.1 Specimen Vendor and Exhibitor Agreement for the Bristol Renaissance Faire.
* 10.2 Specimen Vendor and Exhibitor Agreement for the Northern and
Southern Renaissance Pleasure Faires.
* 10.3 Specimen Bristol Renaissance Faire Concession Agreement.
* 10.4 Specimen Bristol Renaissance Faire Games Concession Agreement.
10.5 Lease Agreement between Creative Faires, Ltd. and Sterling Forest
Corporation dated June 12, 1996 incorporated by reference from the
Registrant's Annual Report on Form 10-KSB for the year ended March 31, 1996.
10.6 Form of Loan and Security Agreement for 1998, including form of
Stock-Term Notes and form of Warrant to purchase common stock,
incorporated by reference from the Registrants Quarterly Report on
Form 10-Q for the quarter ended March 31, 1998.
10.7 Mortgage with Union Bank & Trust in the amount of $1,500,000 with
respect to the Virginia property, incorporated by reference from
the Registrant's Annual Report on Form 10-KSB for the year ended
March 31, 1996.
10.8 Consulting and Warrant Compensation Agreement dated October 15,
1998 between the Company and Wall Street Financial incorporated by
reference from Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1998.
10.9 Purchase Agreement dated November 12, 1997 between Faire Partners,
LLC and Renaissance Entertainment Corporation, including Lease
Agreement and Warrant to Purchase Common Stock as exhibits
thereto, incorporated by reference from Registrant's Registration
Statement on Form S-1 (No. 333-43503).
10.10 Lease dated January 21, 1998 by and between Attache Publishing
Services, Inc. and the Company, incorporated by reference from the
Registrants Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
10.11 Employment Agreement dated December 11, 1998 with Charles S.
Leavell, incorporated by reference from Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 1998.
10.12 Employment Agreement dated December 11, 1998 with J. Stanley
Gilbert, incorporated by reference from Registrant's Annual Report
on Form 10-KSB for the year ended December 31, 1998.
** 10.13 Amendment dated December 17, 1999 to Lease with Faire Partners LLC.
** 10.14 Guaranty Agreement of Charles S. Leavell dated December 17, 1999.
29
<PAGE>
** 10.15 Warrant Agreement dated December 17, 1999.
** 10.16 Amendment dated February 15, 2000 to Lease with San Bernardino
County Regional Parks Division.
** 10.17 Amendment dated March 24, 2000 to Lease with Sterling Forest LLC.
** 10.18 Asset Purchase Agreement between Jim and Marta Selway and the
Company dated April 6, 2000.
** 23.1 Independent Auditor's Consent.
** 27 Financial Data Schedule.
</TABLE>
* Incorporated by reference from the Company's Registration Statement on Form
SB-2, declared effective by the Commission on January 27, 1995, and the
Post-Effective amendments thereto.
** Filed herewith.
REPORTS ON FORM 8-K
The Registrant filed no Current Reports on Form 8-K during the final quarter of
the fiscal period ended December 31, 1999.
30
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
RENAISSANCE ENTERTAINMENT CORPORATION
Date: April 14, 2000 /s/ Charles S. Leavell
-------------------------------------
Charles S. Leavell, Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Charles S. Leavell Chairman of the Board, April 14, 2000
- ------------------------ Chief Executive and Chief
Charles S. Leavell Financial Officers
/s/ Sue Brophy Chief Accounting Officer April 14, 2000
- ------------------------
Sue Brophy
/s/ J. Stanley Gilbert Director, President, April 14, 2000
- ------------------------ and Chief Operating Officer
J. Stanley Gilbert
/s/ Sanford L. Schwartz Director April 14, 2000
- ------------------------
Sanford L. Schwartz
/s/ Robert M. Geller Director April 14, 2000
- ------------------------
Robert M. Geller
/s/ Thomas G. Brown Director April 14, 2000
- ------------------------
Thomas G. Brown
31
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
FINANCIAL STATEMENTS
WITH
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
DECEMBER 31, 1998 AND DECEMBER 31, 1999
F-1
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
FINANCIAL STATEMENTS
with
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Certified Public Accountants F-3
Audited Financial Statements:
Balance Sheets F-4
Statements of Operations F-5
Statement of Changes in Stockholders'
equity (deficit) F-6
Statements of Cash Flows F-7
Notes to Financial Statements F-8
</TABLE>
F-2
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Renaissance Entertainment Corporation
We have audited the balance sheets of Renaissance Entertainment Corporation as
of December 31, 1998 and 1999 and the related statements of operations and
changes in stockholders' equity (deficit), and cash flows for the years ended
December 31, 1998 and 1999. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Renaissance Entertainment
Corporation as of December 31, 1998 and 1999 and the results of operations,
changes in stockholders' equity (deficit) and cash flows for the years ended
December 31, 1998 and 1999 in conformity with generally accepted accounting
principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As described in Note 1, the Company
has suffered recurring losses from operations and has a net working capital
deficiency that raise substantial doubts about its ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Schumacher & Associates, Inc.
Certified Public Accountants
2525 Fifteenth Street, Suite 3H
Denver, CO 80211
March 13, 2000
F-3
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
December 31, December 31,
1998 1999
<S> <C> <C>
Current Assets:
Cash and equivalents 379,336 $ 1,049,044
Accounts receivable, net of allowance
for doubtful accounts of $17,797 18,509 4,951
Inventory, at lower of cost or market 136,179 201,493
Prepaid expenses and other current assets 237,021 259,646
----------- -----------
Total Current Assets 771,045 1,515,134
Property and equipment, net of accumulated
depreciation of $2,588,320 and $2,364,201
at December 31, 1998 and 1999 respectively
(Note 7) 6,610,466 4,294,163
Goodwill, net of accumulated amortization
of $307,771 and $358,447 at December 31,
1998 and 1999 respectively (Note 5) 519,474 468,798
Covenant not to compete, net of accumulated
amortization of $95,004 and $100,000 at
December 31, 1998 and 1999 respectively
(Note 5) 4,996 --
Other assets 900,828 830,725
----------- -----------
Total Assets $ 8,806,809 $ 7,108,820
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Accounts payable and accrued expenses $ 604,434 $ 1,720,610
Notes payable, current portion (Note 3) 153,327 854,277
Unearned income 161,010 214,789
----------- -----------
Total Current Liabilities 918,771 2,789,676
Lease obligation payable (Note 11) 3,942,359 3,987,116
Notes payable, net of current portion (Note 3) 477,853 311,873
Other 38,525 39,675
----------- -----------
Total Liabilities 5,377,508 7,128,340
----------- -----------
Commitments (Notes 2,3,4,8,10,11,12 and 13) -- --
Stockholders' equity (deficit) (Notes 2,8,9 and 10):
Preferred stock, $1.00 par value, 1,000,000
shares authorized, none issued and
outstanding -- --
Common stock, $.03 par value, 50,000,000
shares authorized, 2,139,891 and 2,144,889
issued and outstanding at December 31, 1998
and 1999 respectively 64,196 64,346
Additional paid-in capital 9,428,477 9,430,827
Accumulated deficit) (6,063,372) (9,514,693)
----------- -----------
Total Stockholders' equity (deficit) 3,429,301 (19,520)
----------- -----------
Total Liabilities and Stockholders' equity
(deficit) $ 8,806,809 $ 7,108,820
=========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1999
------------ ------------
<S> <C> <C>
REVENUE:
Sales $ 15,219,412 $ 14,467,437
Faire operating costs 4,678,664 5,057,676
------------ ------------
Gross Profit 10,540,748 9,409,761
------------ ------------
OPERATING EXPENSES:
Salaries and wages 4,398,917 4,454,731
Depreciation and amortization 585,977 565,646
Advertising 1,880,900 1,797,879
Other operating expenses 3,467,808 3,434,624
------------ ------------
Total Operating Expenses 10,333,602 10,252,880
------------ ------------
Net Operating Income (Loss) 207,146 (843,119)
------------ ------------
Other Income (Expenses):
Interest income 78,537 66,369
Interest (expense) (644,227) (639,719)
Other income (expense) 155,464 86,482
Write-down of Virginia site (Note 12) -- (2,121,334)
------------ ------------
Total Other Income (Expenses) (410,226) (2,608,202)
------------ ------------
Net (Loss) $ (203,080) $ (3,451,321)
============ ============
Net (Loss) per Common Share $ (.10) $ (1.61)
============ ============
Weighted Average Number of
Shares Outstanding 2,095,785 2,144,224
============ ============
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
FROM DECEMBER 31, 1997 THROUGH DECEMBER 31, 1999
<TABLE>
<CAPTION>
Common Stock Additional
------------------------ Paid-in Accumulated
Shares Amount Capital (Deficit) Total
--------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance December 31, 1997 2,051,679 $61,550 $9,372,500 $(5,860,292) $ 3,573,758
Issuance of stock for services 19,996 600 35,325 -- 35,925
Conversion of notes payable to stock 68,216 2,046 20,652 -- 22,698
Net loss for the year ended
December 31, 1998 -- -- -- (203,080) (203,080)
--------- ------- ---------- ----------- -----------
Balance December 31, 1998 2,139,891 64,196 9,428,477 (6,063,372) 3,429,301
Issuance of stock for services 4,998 150 2,350 -- 2,500
Net loss for the year ended
December 31, 1999 -- -- -- (3,451,321) (3,451,321)
--------- ------- ---------- ----------- -----------
Balance December 31, 1999 2,144,889 $64,346 $9,430,827 $(9,514,693) $ (19,520)
========= ======= ========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, December 31,
1998 1999
--------- -----------
<S> <C> <C>
Cash Flows from Operating Activities:
Net Income (loss) $(203,080) $(3,451,321)
Adjustments to reconcile net income to net
cash provided by operating activities:
Common stock issued for services 35,325 --
Depreciation and amortization 585,977 565,646
(Increase) decrease in:
Accounts receivable 3,201 13,558
Inventory 7,375 (65,314)
Prepaid expenses and other 188,448 43,172
Increase (decrease) in:
Accounts payable and accrued
expenses (578,355) 1,116,176
Unearned revenue and other 21,508 54,929
--------- -----------
Net Cash Provided by (Used in) Operating
Activities 60,399 (1,723,154)
--------- -----------
Cash Flows from Investing Activities:
Reduction of restricted cash 314,078 --
Net acquisition (reduction) of property and
equipment, goodwill and covenant not to compete (238,891) 1,810,635
--------- -----------
Net Cash Provided by Investing Activities 75,187 1,810,635
--------- -----------
Cash Flows from Financing Activities:
Common stock issued and additional
paid-in capital 23,298 2,500
Proceeds from lease obligation
payable 32,663 44,757
Proceeds from notes payable 44,793 1,265,590
Principal payments on notes payable (447,026) (730,620)
--------- -----------
Net Cash Provided by (Used in) Financing Activities (346,272) 582,227
--------- -----------
Net Increase (Decrease) in Cash (210,686) 669,708
Cash, beginning of period 590,022 379,336
--------- -----------
Cash, end of period $ 379,336 $ 1,049,044
========= ===========
Interest paid $ 644,227 $ 639,719
========= ===========
Income tax paid $ -- $ --
========= ===========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-7
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
This summary of significant accounting policies of Renaissance
Entertainment Corporation (Company) (REC) is presented to assist in
understanding the Company's financial statements. The financial statements
and notes are representations of the Company's management who is
responsible for their integrity and objectivity. These accounting policies
conform to generally accepted accounting principles and have been
consistently applied in the preparation of the financial statements.
(a) GENERAL
REC was incorporated under the laws of the State of Colorado on June 24,
1988. On April 6, 1993, REC acquired one hundred percent of the common
stock of Ellora Corporation, a Wisconsin corporation which owned and
operated the Bristol Renaissance Faire located in Kenosha, Wisconsin.
During the year ended March 31, 1994 REC formed a wholly-owned subsidiary
called Heroes and Villains, Ltd. This entity was formed to provide
entertainment services. During February, 1994 REC formed Renaissance
Pleasure Faires, Inc. (RPFI) which acquired the assets and the business of
two Renaissance Faires in California.
The business combination with the California Faires was accounted for as a
purchase by REC with the excess of cost over fair value of net assets
acquired accounted for as goodwill. See Note 5 for additional information
related to this business combination.
Effective December 31, 1995 REC acquired 100% ownership of Creative Faires,
Ltd. (CFL) in exchange for the issuance of restricted common shares of REC
stock. The business combination with CFL was accounted for as a pooling of
interests. The financial statements include the accounts of CFL.
All references to the "Company" refer to REC and its subsidiaries. All
intercompany transactions and account balances have been eliminated in the
financial statements other than as noted above.
All subsidiaries of the Company were merged into REC as of March 31, 1996
with the exception of Creative Faires, Ltd. which was merged into REC
during 1998.
The Company uses a December 31 year end.
F-8
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(b) PER SHARE INFORMATION
Per share information is determined using the weighted average number of
shares outstanding during the periods after giving effect for the stock
splits.
(c) PROPERTY AND EQUIPMENT
Property and equipment is carried at cost, net of accumulated depreciation.
Depreciation is computed using principally accelerated methods over the
useful lives of the assets ranging from three to thirty years.
(d) REVENUE AND EXPENSE RECOGNITION AND COST OF SALES
The Company recognizes revenues from the Renaissance Faires as earned
during the period when the faires are in operation. These revenues consist
principally of gate entrance fees, food and beverage concessions sales,
lease revenue and fees charged to craft vendors. At various dates
subsequent to the end of the operation of the prior years faires, and prior
to the opening of the next years faires, the Company receives deposits from
the craft vendors and others. These deposits are carried as unearned
revenue until applied to fees charged and then earned on a pro-rata basis
during the operation of the faire.
Faire operating expenses as shown in the statement of operations includes
all direct costs associated with the production of the Renaissance Faire,
including cost of food, beverage and merchandise sold and other direct
costs of the production. All other expenses related to operation of the
faire are shown as operating expenses in the statement of operations.
Advertising costs are expensed over the term of the faire to which the
expense applies. Direct costs related to the setting up of the faires are
capitalized as prepaid expenses and expensed during the period of the
operation of the applicable faires.
F-9
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(e) STOCK SPLIT
Effective February 23, 1998, the Company effected a one for five reverse
stock split. The financial statements were retroactively adjusted for the
split.
(f) CONCENTRATIONS OF CREDIT RISKS
Financial instruments that potentially subject the company to
concentrations of credit risk consist principally of temporary cash
investments and cash equivalents and trade accounts receivables. At
December 31, 1999, the Company had approximately $850,000 of its cash and
cash equivalents in financial institutions in excess of amounts insured by
agencies of the U.S. Government. Most of the trade receivables are from
customers in one geographic location, principally California. The Company
does not require collateral for its trade accounts receivables.
(g) CASH EQUIVALENTS
The Company considers all short term investments in securities that mature
in 90 days or less to be cash equivalents.
(h) INVENTORY
The Company's inventory consists principally of merchandise held for sale.
The Company carries its inventory at the lower of cost or market. Cost is
determined on an average cost basis.
(i) ALLOWANCE FOR BAD DEBTS
The Company provides an allowance for bad debts based on prior collection
experience.
(j) USE OF ESTIMATES IN THE PREPARATION OF FINANCIAL STATEMENTS
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenue and expenses
during the reporting period. Actual results could differ from those
estimates.
F-10
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED
(k) GEOGRAPHIC AREA OF OPERATIONS AND INTEREST RATES
The Company owns and operates Renaissance Faires principally in five major
metropolitan areas of the U.S.A. The potential for severe financial impact
can result from negative effects of economic conditions within the markets
or geographic areas. Since the Company's business is principally in five
areas, this concentration of operations results in an associated risk and
uncertainty.
(l) BASIS OF PRESENTATION - GOING CONCERN
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation
of the Company as a going concern. However, the Company has sustained
operating losses and has a net capital deficiency. Management is attempting
to raise additional capital.
In view of these matters, realization of certain of the assets in the
accompanying balance sheet is dependent upon continued operations of the
Company, which in turn is dependent upon the Company's ability to meet its
financial requirements, raise additional capital, and the success of its
future operations.
Management is in the process of attempting to raise additional capital and
reduce operating expenses. Management believes that its ability to raise
additional capital and reduce operating expenses provide an opportunity for
the Company to continue as a going concern.
(2) COMMON AND PREFERRED STOCK
The Articles of Incorporation of the Company authorize issuance of a
maximum of 50,000,000 shares of $.03 par value common stock and 1,000,000
shares of $1.00 par value preferred stock.
During January, 1995 the Company sold in a public offering 1,035,000 units
of its securities. Each unit consisted of one share of common stock and one
Class A warrant and one Class B warrant. Each Class A warrant entitles the
warrant holder thereof to purchase one share of common stock at a price of
$4.00 per share through January 27, 2000. Each Class B warrant entitles the
holder thereof to purchase one share of common stock at a price of $5.25
per share through January 27, 2000. These warrants were changed based upon
the forward two-for-one split effective October 17, 1996 and the reverse
one-for-five stock split effective February 23, 1998, decreasing the number
of warrants on a one-for-two and one-half basis and increasing the exercise
price to $10.00 and $13.125
F-11
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(2) COMMON AND PREFERRED STOCK, CONTINUED
per share respectively. These warrants were immediately exercisable. The
warrants are redeemable by the Company at a price of $.05 per warrant upon
30 days' notice mailed within ten days after the closing bid price of the
Company's common stock has equaled or exceeded 150% of the then current
respective warrant exercise price for a period of 20 consecutive trading
days. The holders of the warrants called for redemption are granted
exercise rights until the close of business on the date preceding the date
fixed for redemption.
The Company incurred $646,056 of costs related to this offering. These
offering costs were offset against the proceeds of the offering.
During 1999, in connection with financing activities, the Company issued
warrants for 75,000 shares at $.81 exercise price and 100,000 shares at
$.30 per share exercise price. These warrants expire in 2005 and 2003,
respectively.
In addition, options of 275,000 were granted at an exercise price of $.53
per share.
(3) NOTES PAYABLE
Notes payable at December 31, 1999 are summarized as follows:
<TABLE>
<S> <C>
Note payable to bank at 8.95%, monthly principal and
interest payment currently of $15,396, increasing over
the term of the loan through May, 2000, collateralized
by land and improvements. $ 426,066
Note payable to Mortgage lender, collateralized by all
assets and prior perfected to all debt except note
payable bank. Interest only payments payable at 13%
from February 1, 2000 through June 1, 2000. Principal
and interest payments from July 1, 2000 through
November 1, 2000 in an amount equal to a five year
amortization of the outstanding balance as of June 1,
2000. Balance due in full on December 31, 2000. 681,741
Notes payable to equipment manufacturers collateralized
by certain equipment, payable in monthly installments
of principal and interest; final payments due in 2003,
interest ranging from 9.776% to 22%. 58,343
----------
Total 1,166,150
Less current portion 854,277
----------
Long-term portion $ 311,873
==========
</TABLE>
F-12
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(3) NOTES PAYABLE, CONTINUED
Principal payments due on notes payable for each of the next five fiscal
years ending December 31 and in the aggregate thereafter, are as follows:
<TABLE>
<S> <C>
2000 $ 854,277
2001 158,507
2002 145,349
2003 7,495
Thereafter 522
-----------
$ 1,166,150
===========
</TABLE>
(4) LEASES
The Company leases the New York Faire site with terms expiring through the
year 2000. Annual lease payments on the New York Faire site are $323,075
for 1999 and $338,905 for 2000.
Effective January 21, 1998, the Company entered into an operating lease at
275 Century Circle in Louisville, Colorado for office facilities. Initial
monthly rental payments are $3,603 plus 27% of operating costs with annual
increases tied to the CPI for a term of five years.
Future minimum rentals under all operating leases with terms exceeding
twelve months are as follows:
<TABLE>
<CAPTION>
Year Ending
December 31,
<S> <C>
2000 390,424
2001 43,236
2002 43,236
--------
Total $476,896
========
</TABLE>
Rent expense for the year ended December 31, 1999 and for the year ended
December 31, 1998 totalled approximately $976,069 and $974,233
respectively. See Note 13 for subsequent event.
(5) GOODWILL AND COVENANT NOT TO COMPETE
The cost of the acquisition of the California Faire assets and business as
described in Note 1 in excess of the fair value of assets acquired has been
recorded as goodwill in the accompanying financial statements. Goodwill is
being amortized on a straight-line basis over fifteen years. Management
reviews the carrying value of goodwill on a periodic basis, at least
annually, to determine if there is any impairment in value. If management
determines that the
F-13
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(5) GOODWILL AND COVENANT NOT TO COMPETE, CONTINUED
carrying value is not recoverable over the remaining amortization term, the
excess balance, if any, will be expensed. During the period ended December
31, 1996, the Company determined that the goodwill was impaired and wrote
off $380,000 as a charge to other operating expenses. As of December 31,
1999 the Company's net carrying value for goodwill was $468,798 after
amortization.
In addition, the Company allocated $100,000 for certain covenants not to
compete for certain officers and employees of The Living History Centre
related to the asset and business acquisition. These covenants not to
compete are fully amortized at December 31, 1999.
(6) INCOME TAXES
As of December 31, 1999, there are no current or deferred income taxes
payable. As of December 31, 1999, the Company has total deferred tax assets
of approximately $1,360,000 due to operating loss carryforwards and the
depreciation timing differences described above. However, because of the
uncertainty of potential realization of these tax assets, the Company has
provided a valuation allowance for the entire $1,360,000. Thus, no tax
assets have been recorded in the financial statements as of December 31,
1999.
The Company has available at December 31, 1999, unused operating loss
carryforwards of approximately $6,600,000 which may be applied against
future taxable income, expiring in various years through 2019. The
available net operating loss carryforwards may be reduced if there is a 50%
or more change in ownership.
(7) PROPERTY AND EQUIPMENT
<TABLE>
<S> <C>
Land $ 2,585,283
Buildings and Improvements 1,558,770
Office Furniture and Equipment 482,091
Costumes, Props and Other Assets 2,032,220
-----------
Sub-total 6,658,364
Less Accumulated Depreciation (2,364,201)
-----------
Total $ 4,294,163
===========
</TABLE>
F-14
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(8) WARRANTS AND OPTIONS
At December 31, 1999, the Company had 1,116,133 warrants and options
outstanding with expiration dates through 2005. The following is a summary
of the options and warrants outstanding at December 31, 1999:
<TABLE>
<CAPTION>
Number Exercise Price Expiration Date
------ -------------- ---------------
<S> <C> <C>
13,200 Market January, 2000
120,000 $ .62 October, 2000
40,000 $ 1.25 October, 2000
7,000 $1.125 June, 2001
99,600 $ 1.51 March, 2003
174,500 $ .31 November, 2003
131,833 $ .81 June, 2003
375,000 $ .53 March, 2004
75,000 $ .81 December, 2005
80,000 $ .81 June, 2005
---------
1,116,133
=========
</TABLE>
During the year ended December 31, 1998, 286,833 options were granted of
which 74,500 have exercise prices of $.31 expiring in November, 2003 and
212,333 have exercise prices of $.81 expiring in June, 2003. During the
year ended December 31, 1999, 275,000 options were granted which have
exercise prices of $.53 expiring in March, 2004. The options granted during
1999 were principally granted to employees and directors of the Company.
The exercise prices at the dates of grants approximated market value of the
common stock. Therefore, no compensation expense was recorded in the
financial statements related to the options since the estimated fair value
would not be material.
(9) BUSINESS COMBINATION, CALIFORNIA FAIRES
Effective April 1, 1994 the Company acquired the assets and certain
liabilities of The Living History Centre, (LHC) a California,
not-for-profit corporation. The Company issued 227,333 shares of its common
stock and 175,000 shares of its preferred stock as consideration for the
net assets acquired. The preferred stock was converted into common stock
during January, 1995. In addition to acquiring certain assets and
liabilities of LHC, the Company has acquired the rights to operate two
California Renaissance Faires.
See Note 1 of the financial statements for additional information related
to the business combination. The transaction was accounted for as a
purchase by REC.
F-15
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(10) COMMITMENTS
Effective December 16, 1994, the Company entered into an agreement with a
consulting firm to provide to the Company certain promotional services for
the Company's fairs. The Company has agreed to pay commissions to the
consulting firm of 17.65% of the actual net billings by advertisers for
media placed pursuant to plans approved by the Company. The Company has
also granted an option to the consulting firm to allow the firm to acquire
a minimum of 13,200 and a maximum of 26,400 shares of the Company's common
stock at $8.13 per share with the increase depending on the results of the
services performed by the consulting firm.
(11) SALE LEASE BACK TRANSACTION
During November, 1997, the Company sold its real property in Wisconsin to a
related party for $4,000,000 and signed a 20 year non-cancelable lease back
on this property with monthly lease payments in the initial amount of
$33,333 increasing to $45,278 over the term of the lease. The Company has
an option to reacquire the property during the twenty year lease period at
fixed amounts as specified in the lease. Since the Company continues to
have an economic interest in the property due to the option, the Company
treated the transaction as a financing arrangement. As of December 31,
1999, the outstanding balance on the finance obligation was $3,987,116
using an effective interest rate of approximately 11%. The purchaser was
deemed to be a related party as a relative of the Chairman of the Board of
the Company is a minority interest investor in the Company which purchased
this property.
On December 17, 1999, the Company entered into a lease amendment with Faire
Partners, the landlord for the Wisconsin property. The amendment provided
for a one-time restructuring of rental payments. During the time period
between December 1, 1999 and May 31, 2000 the monthly base rent payable by
the Company to the landlord was reduced from $36,667 per month to $21,667
per month and during the period of time between June 1, 2000 through
November 30, 2000, the monthly base rent payable was increased to $51,667
per month. As an inducement to the landlord to execute this lease amendment
the company agreed to terminate the existing warrant dated November 12,
1997 and issue a new warrant. The original warrant provided for 153,333
shares at $5.00 per share and expires November, 2003. The new warrant
grants 100,000 shares at $.30 per share, the closing ask price on the date
the lease amendment was signed. The new warrant is on the same terms and
conditions as contained in the orginal warrant.
F-16
<PAGE>
RENAISSANCE ENTERTAINMENT CORPORATION
NOTES TO FINANCIAL STATEMENTS
December 31, 1999 and 1998
(12) WRITE-DOWN OF VIRGINIA SITE
On October 27, 1999, the board of directors decided to discontinue
operations at the Virginia site. Efforts are underway to list the property
for sale. The 1999 financial statements include a loss of $2,121,334
related to the write-down of the property due to closure of the site. The
Company also accrued closing expenses of $122,667 which have been included
with other operating expenses. The property is pledged as collateral on a
first and second mortgage totaling $1,107,807.
(13) SUBSEQUENT EVENTS
The Company's leases for three of its four Faire sites have or will expire
in 2000 or prior. To date no leases have been obtained to extend operations
beyond 2000. Management is pursuing leases in each location. An
unsuccessful lease negotiation in 1999 for Northern California resulted in
a loss of $70,000 of a $100,000 deposit made in 1998.
The Company authorized the issuance of in maximum aggregate of $1,000,000,
12% subordinated promissory notes due August 31, 2001 on units, each unit
consisting of two promissory notes of equal principal, identical in nature
except that one note is convertible to common stock at a price of $.30 per
share. Interest is due and payable quarterly. Subscribers to these units
are expected to be primarily related parties.
F-17
<PAGE>
EXHIBIT 10.13
AMENDMENT OF LEASE AGREEMENT
This AMENDMENT OF LEASE AGREEMENT is made this 17TH day of December 1999 to
be effective as of December 1, 1999, by and between FAIRE PARTNERS, LLC, a
limited liability company organized and existing under the laws of the State of
Texas ("Landlord") and RENAISSANCE ENTERTAINMENT CORPORATION, a corporation
organized and existing under the laws of the State of Colorado ("Tenant").
PRELIMINARY STATEMENTS
A. Landlord and Tenant executed that certain Lease Agreement dated November
13, 1997 pursuant to the terms of which the Landlord did lease unto the Tenant
and the Tenant did hire from the Landlord the real property described on Exhibit
"A" attached hereto, together with all improvements (as defined in the Lease
Agreement) located thereon.
B. Landlord and Tenant have reached certain understandings and agreements
with respect to a modification of the Lease Agreement and desire to reduced such
understanding and agreement to writing.
ACCORDINGLY, in consideration of the mutual covenants and agreements herein
contained, and other good and valuable consideration, Landlord and Tenant agree
as follows:
1. RENT DEFERRAL. Notwithstanding anything contained in Section 2.1 of
the Lease Agreement to the contrary, during the period of time between
December 1, 1999 and May 31, 2000 the Monthly Base Rent payable by Tenant
to Landlord shall be reduced from $36,666.66 per month to $21,666.66 per
month and during the period of time between June 1, 2000 through November
30, 2000, the Monthly Base Rent payable by Tenant to Landlord shall be
increased to $51,666.66 per month. Subsequent to November 30, 2000, the
Monthly Basic Rent shall be payable in accordance with the terms and
provisions of Section 2.1 of the Lease Agreement.
2. GUARANTY OF PAYMENT/STOCK WARRANT. As an inducement to Landlord to
execute this Lease Amendment, simultaneously with the execution hereof,
Tenant has caused Charles S. Leavell to execute and deliver to Landlord the
Guaranty Agreement attached hereto as Exhibit "B" guaranteeing the payment
of the rent deferred during the Deferral Period and shall cause to be
issued to Landlord within thirty (30) days after the date hereof a Warrant
to Purchase 100,000 shares of the common stock of Tenant at a price of $.30
per share (the "New Warrant"); the understanding and agreement being that:
(i) the New Warrant same shall be on the terms and conditions as contained
in that certain Warrant to Purchase Common Stock of Renaissance
Entertainment Corporation dated November 12, 1997 issued by Tenant to
Landlord (the "Existing Warrant")
<PAGE>
other than the number of shares covered thereby and the price per share;
and (ii) the Existing Warrant will be surrendered by Landlord to Tenant
simultaneously with the issuance of the New Warrant.
3. NO FURTHER MODIFICATIONS. Except as herein modified, the terms and
provisions of the Lease Agreement are hereby ratified and confirmed in all
respects by the parties hereto.
FAIRE PARTNERS, LLC
By /s/ Stephen L. Feinberg
------------------------------------
Stephen L. Feinberg
Its Manager
By /s/ William Wise
------------------------------------
William Wise, Manager
By /s/ Shirley T. Leavell
------------------------------------
Shirley T. Leavell, Attorney-in-Fact
For Charles H. Leavell, Manager
LANDLORD
RENAISSANCE ENTERTAINMENT CORPORATION
By /s/ Charles S. Leavell
------------------------------------
Charles S. Leavell
Its CEO
TENANT
<PAGE>
EXHIBIT A
LEGAL DESCRIPTION
PARCEL I:
Part of the Southeast Quarter and part of the Northeast Quarter of Section 36,
Town 1 North, Range 21 East of the Fourth Principal Meridian, lying and being in
the Town of Bristol, Kenosha County, Wisconsin, and being more particularly
described as: Beginning on the South line of the Southeast Quarter of said
Section at a point 600.7 feet South 89 degrees 24 minutes 50 seconds West from
the Southeast corner of said Quarter Section; thence South 89 degrees 24 minutes
50 seconds West along the South line of said Quarter Section 729.8 feet and to
the West line of the East half of said Quarter Section; thence North 1 degree 53
minutes 10 seconds West along the West line of the East Half of said Quarter
Section 2675.0 feet and to the North line of said Quarter Section; thence North
1 degree 46 minutes 40 seconds West along the West line of the Southeast Quarter
of the Northeast Quarter of said Section 1325.36 feet and to the North line of
said Quarter Quarter Section; thence North 89 degrees 02 minutes East along the
North line of said Quarter Quarter Section 1051.34 feet and to the Westerly
right-of-way line of Interstate Highway 94; thence South 2 degrees 03 minutes
East along said right-of-way line 131.93 feet; thence South 21 degrees 06
minutes West along said right-of-way line 788.49 feet; thence South 2 degrees 03
minutes East along said right-of-way line 700 feet; thence South 17 degrees 45
minutes 50 seconds East along said right-of-way line 1167.69 feet; thence South
10 degrees 58 minutes 40 seconds East along said right-of-way line 482.66 feet;
thence South 89 degrees 24 minutes 50 seconds West parallel to the South line of
the Southeast Quarter of said Section 395.04 feet; thence South 0 degree 35
minutes 10 seconds East at right angles to the South line of said Quarter
Section 851.72 feet to the point of beginning.
PARCEL II:
The East Half of the West Half of the Southeast Quarter and the Southwest
Quarter of the Northeast Quarter of Section Thirty-six (36), in Town One (1)
North, Range Twenty-one (21) East of the Fourth Principal Meridian; in the Town
of Bristol, County of Kenosha and State of Wisconsin.
<PAGE>
EXHIBIT 10.14
GUARANTY AGREEMENT
The undersigned, CHARLES S. LEAVELL ("Guarantor"), for the purpose of
inducing FAIRE PARTNERS, LLC, a limited liability company organized and existing
under the laws of the State of Texas ("Landlord") to execute that certain
Amendment of Lease Agreement between Landlord and RENAISSANCE ENTERTAINMENT
CORPORATION, a corporation organized and existing under the laws of the State of
Colorado ("Tenant") pursuant to the terms of which $15,000.00 of the rent
otherwise due and owing each month during the period of time between December 1,
1999 and May 31, 2000 shall be deferred (aggregating $90,000.00) and which is to
subsequently be repaid by increasing the monthly rent by $15,000.00 per month
during the period of time between June 1, 2000 and November 30, 2000 and
recognizing that Guarantor has benefitted or shall benefit, directly or
indirectly, by such rent deferral and that but for this Guaranty Agreement such
rent deferral would not be agreed to by Landlord, Guarantor hereby irrevocably,
absolutely and unconditionally guarantees the payment to Landlord of the
$90,000.00 rent to be deferred in accordance with the terms of the Amendment of
Lease Agreement and all costs, attorneys' fees and expenses incurred or expended
by Landlord in collecting the rent deferred in accordance with the terms of the
Amendment of Lease Agreement (collectively, the "Obligation").
1. PRIMARY LIABILITY. Guarantor shall be liable as a primary obligor for
the payment and performance of the Obligation.
2. PAYMENT. In each event whenever any part of the Obligation shall become
due and remains unpaid, Guarantor will, on demand, pay the amount due to
Landlord. All amounts becoming payable by Guarantor to Landlord under this
Guaranty Agreement shall be payable at Landlord's principal office in El Paso
County, Texas or such other place as Landlord may from time to time designate.
The payment by Guarantor of any amount pursuant to this Guaranty Agreement shall
not in anywise entitle Guarantor to any right, title or interest (whether by way
of subrogation or otherwise) in and to any of the Obligation, or any security or
collateral therefor, unless and until the full amount owing to Landlord on the
Obligation has been fully paid, but when the same has been fully paid, Guarantor
shall be subrogated as to any payments made by Guarantor to the rights of
Landlord against Tenant.
3. WAIVER OF NOTICE. Guarantor specifically waives any notice of acceptance
of this Guaranty by Landlord and of the creation, advancement, existence,
extension, renewal, modification, consolidation, or rearrangement from time to
time of the Obligation, or any indulgence from time to time with respect to the
Obligation, or any part thereof. Landlord additionally waives grace, demand,
protest, presentment and notice of demand, protest, presentment and dishonor
with respect to the Obligation, notice of intent to accelerate, notice of
acceleration and notice of disposition of collateral and waives notice of the
amount of the Obligation outstanding at any time, and agrees that the maturity
of the Obligation, or any part thereof, may be accelerated, extended, modified,
amended or renewed from time to time, or any other indulgence may be granted
with respect thereto by Landlord at its will or as may be agreed by Tenant
without notice to or further consent by Guarantor, at any time or times.
<PAGE>
4. RIGHTS OF LANDLORD.
a. Guarantor agrees that no release of Tenant, any co-guarantor, or of
any other person primarily or secondarily liable on the Obligation, or any
part thereof shall in any manner impair, diminish or affect the liability
of Guarantor or the rights of Landlord hereunder.
b. Guarantor specifically agrees that it shall not be necessary or
required, and that Guarantor shall not be entitled to require, that
Landlord mitigate damages, or file suit or proceed to obtain or assert a
claim for personal judgment against Tenant for the Obligation, or make any
effort at collection of the Obligation from Tenant, or foreclose against or
seek to realize upon any security or collateral now or hereafter existing
for the Obligation, or file suit or proceed to obtain or assert a claim for
personal judgment against any other party (whether maker, guarantor,
endorser or surety) liable for the Obligation, or make any effort at
collection of the Obligation from any such other party, or exercise or
assert any other right or remedy to which Landlord is or maybe entitled in
connection with the Obligation or any security or collateral or other
guaranty therefor, or assert or file any claim against the assets or estate
of Tenant or any other guarantor or other person liable for the Obligation,
or any part thereof, before or as a condition of enforcing the liability of
Guarantor under this Guaranty or requiring payment of the Obligation by
Guarantor hereunder, or at any time thereafter.
c. No delay or omission or lack of diligence or care in exercising any
right or power with respect to the Obligation or under this Guaranty shall
in any manner impair, diminish or affect the liability of Guarantor or the
rights of Landlord hereunder.
d. Guarantor's liability hereunder shall in no manner be affected,
reduced, impaired or released by reason of any renewal, extension,
modification, consolidation, or rearrangement of or any other indulgence,
forbearance or compromise with respect to the Obligation, or any part
thereof.
e. Guarantor waives all defenses given to sureties or guarantors at
law or in equity other than actual payment of the Obligation. Guarantor
absolutely and unconditionally covenants and agrees that if all or any part
of the Obligation (or any instrument or agreement made or executed in
connection therewith) is for any reason found to be invalid, illegal,
unenforceable, uncollectible or legally impossible, for any reason
whatsoever (including, without limiting the generality of the foregoing,
upon the grounds that the payment and/or performance of the Obligation is
ultra vires or otherwise without authority, may violate applicable usury
laws, is subject to valid defenses, claims or offsets of Tenant, or any
instrument evidencing any of the Obligation is forged or otherwise
irregular), then in any such case Guarantor shall pay and perform the
Obligation as herein provided and that no such occurrence shall in any way
diminish or otherwise affect Guarantor's obligations hereunder.
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f. Guarantor agrees, to the full extent he may legally do so,
that suit may be brought against Guarantor with or without making
Tenant a party to such suit (as Landlord may elect).
5. CHANGE IN COMPOSITION. Should the status, composition, structure or name
of Tenant change, including, but not limited to, by reason of a merger,
dissolution, consolidation or reorganization, this Guaranty shall continue and
also cover the indebtedness and Obligation of Tenant under the new status,
composition structure or name according to the terms hereof.
6. LIABILITY IN THE EVENT OF PREFERENCE. In the event any payment by Tenant
to Landlord is held to constitute a preference under the bankruptcy laws, such
payment by Tenant to Landlord shall not constitute a release of Guarantor from
any liability hereunder, but Guarantor agrees to pay such amount to Landlord
upon demand and this Guaranty shall continue to be effective or shall be
reinstated, as the case may be, to the extent of any such payment or payments.
7. RIGHTS OF SUBROGATION AND CONTRIBUTION. Notwithstanding anything
contained in this Guaranty to the contrary, Guarantor does not herein waive or
release (whether expressly or impliedly) any rights of subrogation that
Guarantor may have against Tenant (except as same are expressly subordinated in
Paragraph 1 above) or rights of reimbursement that Guarantor may have as against
Tenant (except as same may be limited by the provisions of Paragraph 1 above).
8. NOTICE. Any notice or demand to Guarantor hereunder or in connection
herewith may be given and shall conclusively be deemed and considered to have
been given and received upon the deposit thereof, in writing, in the U.S. Mails,
duly stamped and addressed to Guarantor at the address of Guarantor shown below;
but actual notice, however given or received, shall always be effective. The
last preceding sentence shall not be construed in anywise to affect or impair
any waiver of notice or demand herein provided or to require giving of notice or
demand to or upon Guarantor in any situation for any reason.
9. RIGHTS OF LANDLORD CUMULATIVE. The rights of Landlord hereunder are
cumulative and shall not be exhausted by its exercise of any of its rights
hereunder or by any number of successive actions until and unless all
indebtedness constituting the Obligation has been paid.
10. APPLICABLE LAW AND VENUE. This Guaranty shall be deemed to have been
made under and shall be governed by the laws of the State of Texas in all
respects. The jurisdiction and venue of all litigation, bankruptcy actions and
other legal proceedings involving this Guaranty shall be El Paso County, Texas.
11. SUCCESSORS OR ASSIGNS. This Guaranty shall bind the heirs, personal
representatives, successors and assigns of Guarantor and shall inure to the
benefit of all transferees, assignees and/or endorsees of Landlord,
notwithstanding that some or all of the monies owed by Guarantor pursuant to
this Guaranty may be actually advanced after any bankruptcy, receivership,
reorganization or death of Guarantor.
12. INTERPRETATION. Headings are provided as a matter of convenience only
and are not to be considered in interpreting the meaning of any provision
hereunder. The use of any gender herein shall include the other gender.
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13. SEVERABILITY. A determination that any provision of this Guaranty is
unenforceable or invalid shall not affect the enforceability or validity of any
other provision.
14. ENTIRE AGREEMENT.
THIS GUARANTY AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN
GUARANTOR AND LANDLORD WITH RESPECT TO THE MATTERS SET FORTH HEREIN
AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN GUARANTOR AND LANDLORD
RELATING TO THIS GUARANTY AGREEMENT OR THE MATTERS SET FORTH HEREIN.
EXECUTED as of the 17TH of December, 1999.
GUARANTOR:
Charles S. Leavell
-------------------------------
CHARLES S. LEAVELL
Address:
275 CENTURY CIRCLE, SUITE 102
LOUISVILLE, COLORADO 80027
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THE STATE OF COLORADO )
)
COUNTY OF BOULDER )
THIS Guaranty Agreement was acknowledged before me on the 17TH day of
December, 1999, by CHARLES S. LEAVELL.
My commission expires: /s/ Joan C. Jackson
1/27/2001 ------------------------
- ---------------------- NOTARY PUBLIC IN AND FOR
THE STATE OF COLORADO
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EXHIBIT 10.15
No. W-SLB-1 Warrant to Purchase 100,000 Shares
WARRANT TO PURCHASE COMMON STOCK OF
RENAISSANCE ENTERTAINMENT CORPORATION
THIS CERTIFIES THAT for value received FAIRE PARTNERS, LLC is entitled,
subject to the terms and conditions hereinafter set forth, to purchase from
RENAISSANCE ENTERTAINMENT CORPORATION, a Colorado corporation (the "Company"),
100,000 fully paid and non-assessable shares of Common Stock of the Company
(herein called the "Common Stock"), upon presentation and surrender of this
Warrant with the Subscription Form duly executed, at any time during the term
hereof, at the principal office of the Company or at such other office as shall
have theretofore been designated by the Company by notice pursuant hereto and
upon payment therefor of the Purchase Price, in lawful money of the United
States of America, determined as set forth below. The term of this Warrant shall
commence on the date hereof, and terminate, if not exercised prior thereto, at
5:00 p.m. Mountain Time, on November 11, 2003 (the "Expiration Date").
This Warrant is issued pursuant to a certain Amendment of Lease Agreement
dated December 17, 1999 and replaces a certain warrant dated November 12, 1997.
This Warrant is subject to the following terms and conditions:
1. The purchase rights represented by this Warrant are exercisable at any
time after November 11, 1998 and prior to 5:00 p.m. Mountain Time on the
Expiration Date, at the option of the registered holder hereof (the "Holder"),
in whole or in part (but not as to a fractional share of Common Stock). In the
case of the purchase of less than all the shares purchasable under this Warrant,
the Company shall cancel this Warrant upon the surrender hereof and shall
execute and deliver a new Warrant of like tenor for the balance of the shares
purchasable hereunder.
2. The purchase price for each share of Common Stock purchasable pursuant
to the exercise of this Warrant shall be Thirty Cents ($0.30) per share (the
"Initial Purchase Price") or the adjusted price, if applicable, determined as
set forth in Section 9 hereof. The Initial Purchase Price, and from time to time
the number of shares of Common Stock subject to purchase hereunder are subject
to adjustment in certain circumstances provided for below. The purchase price,
as defined above, is hereinafter referred to as the "Purchase Price".
(a) In case the Company shall (i) pay a dividend in shares of its
capital stock (other than an issuance of shares of capital stock to holders
of Common Stock who have elected to receive a dividend in shares in lieu of
cash), (ii) subdivide its outstanding shares of Common Stock, (iii) reduce,
consolidate or combine its outstanding shares of Common Stock into a
smaller number of shares, or (iv) issue by reclassification of its shares
of Common Stock any shares of the Company, the number of shares of Common
Stock issuable upon exercise of this Warrant shall be the number of shares
of Common Stock of the Company which the Warrant Holder would have owned or
would have been
<PAGE>
entitled to receive after the happening of any of the events described
above had this Warrant been exercised immediately prior to the happening of
such event. Such adjustment shall be made successively whenever any such
effective date or record date shall occur. An adjustment made pursuant to
this subsection (a) shall become effective retroactively, immediately after
the record date in the case of a dividend and shall become effective
immediately after the effective date in the case of a subdivision,
reduction, consolidation, combination or reclassification.
(b) If the Company shall at any time issue or sell or be deemed
pursuant to the provisions of subsections 2(c) and (d) hereof to have
issued or sold shares of its Common Stock for consideration per share less
than the Initial Purchase Price then in effect with respect to such Common
Stock, then the Initial Purchase Price shall be reduced by multiplying it
by a fraction, the numerator of which equals the number of shares of Common
Stock outstanding prior to the sale or issuance plus the number of shares
of Common Stock which would have been issued in the transaction if the
Initial Purchase Price had been applied, and the denominator of which
equals the number of shares of Common Stock outstanding after the sale or
issuance plus the number of shares of Common Stock actually issued in the
transaction.
(c) In case at any time after the date hereof the Company shall in any
manner grant (whether directly or by assumption in a merger or otherwise)
any rights to subscribe for or to purchase, or any options for the purchase
of, Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (such rights or options being herein called
"Options" and such convertible or exchangeable stock or securities being
herein called "Convertible Securities") at an option or conversion price
per share of Common Stock (determined by dividing: (i) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of additional
consideration payable upon the exercise of such Options, plus, in the case
of such Options which relate to Convertible Securities, the minimum
aggregate amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock of the Company, issuable upon the exercise of such Options and in the
case of Convertible Securities, upon conversion thereof) less than the
Initial Purchase Price then in effect with respect to such Common Stock,
then the total maximum number of shares of Common Stock issuable upon the
exercise and conversion of such Options and Convertible Securities shall be
deemed to be outstanding and to have been issued and sold by the Company as
of the date of the issue or sale of the Options, for such price per share.
No sale, issuance or transfer of shares of Common Stock shall be deemed to
have been made upon the actual issuance of such Common Stock except as
otherwise provided in subsection 2(e) hereof.
(d) In case at any time after the date hereof the Company shall in any
manner issue or sell (whether directly or by assumption in merger or
otherwise) any Convertible Securities, whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the price
per share of Common Stock issuable upon such conversion or
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exchange (determined by dividing: (i) the total amount received or
receivable by the Company, as consideration for the issue or sale of such
Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Initial Purchase Price then in effect
with respect to such Common Stock, then the total maximum number of shares
of Common Stock issuable upon conversion of all such Convertible Securities
shall be deemed to be outstanding and to have been issued and sold by the
Company as of the date of the issue or sale of the Convertible Securities,
for such price per share. No sale, issuance or transfer of shares of Common
Stock shall be deemed to have been made upon the actual issuance of such
Common Stock except as otherwise provided in subsection 2(e) hereof.
(e) If the purchase price payable or number of shares of Common Stock
subject to purchase as provided for in any Options referred to in
subsection 2(c) hereof, the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in
subsections 2(c) or (d), or the rate at which any Convertible Securities
referred to in subsections 2(c) or (d) are convertible into Common Stock
shall change so as to reduce the deemed sale price of Common Stock
previously calculated under subsections 2(c) and/or (d), then a sale of
shares of Common Stock shall be deemed to have occurred for the purposes of
subsections 2(c) and/or (d), as applicable, with appropriate adjustments to
be made to the number of shares of Common Stock deemed to have been sold to
reflect the prior related deemed sale and such adjustments by the
adjustment of the Initial Purchase Rate and Initial Purchase Price pursuant
to subsections 2(c) or (d), as applicable.
(f) In case of any consolidation of the Company with or merger of the
Company with or into another corporation or in case of any sale, transfer
or lease to another corporation of all or substantially all of the property
of the Company, the Company or such successor or purchasing corporation, as
the case may be, shall execute an agreement that the Holder of a Warrant
shall have the right thereafter upon payment of the Initial Purchase Price
in effect immediately prior to such action to purchase upon exercise of the
Warrant the kind and amount of shares and other securities and property
which the Holder would have owned or would have been entitled to receive
after the happening of such consolidation, merger, sale, transfer or lease
had the Warrant been exercised immediately prior to such action. The
Company shall give prompt written notice of the execution of any such
agreement to the Holder of each Warrant at the address of such Holder as
shown on the records of the Company. Such agreement shall provide for
subsequent adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this section 2, after the
happening of such consolidation, merger, sale, transfer or lease. The
provisions of this subsection 2(f) shall similarly apply to successive
consolidations, mergers, sales, transfers or leases.
(g) The provisions of this section shall not apply to any currently
outstanding securities of the Company or any management stock grants or
sales, stock options or shares of Common Stock issued upon exercise of
stock options issued to officers,
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directors, employees or consultants of the Company pursuant to a plan
heretofore adopted and approved by the Board of Directors of the Company.
(h) Upon the expiration of any Option or the termination of any right
to convert or exchange any Convertible Securities without the issuance of
shares of Common Stock, then with respect to any Warrants which then remain
outstanding, the Initial Purchase Price shall be readjusted to the Initial
Purchase Price which would have prevailed absent the adjustment made as a
result of the issuance of such Options or Convertible Securities.
(i) In case any Options shall be issued in connection with the issue
or sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have
been issued without consideration.
(j) In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold or deemed to have been issued or sold
for cash, the consideration received therefor shall be deemed to be the
amount received therefor by the Company. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair market value of such
consideration, as determined by the Board of Directors of the Company.
3. In case at any time:
(a) The Company shall declare any cash dividend on its Common Stock at
a rate in excess of the rate of the last cash dividend theretofore paid;
(b) The Company shall pay any dividend payable in stock upon its
Common Stock or make any distribution (other than regular cash dividends)
to the holders of its Common stock;
(c) The Company shall offer for subscription pro rata to the holders
of its Common Stock any additional shares of stock of any class or other
rights;
(d) There shall be any capital reorganization, or reclassification of
the capital stock of the Company or consolidation or merger of the Company
with, or sales of all or substantially all of its assets to, another
corporation; or
(e) There shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company; then, in any one or more of said cases, the
Company shall give written notice, by first class mail, postage prepaid,
addressed to the Holder at the address of such holder as shown on the books
of the Company, of the date on which (1) the books of the Company shall
close or a record shall be taken for such dividend, distribution or
subscription rights, or (2) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding up shall
take place, as the
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case may be. Such notice shall also specify the date as of which the
holders of Common Stock of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up, as the case may be. Such written notice shall
be given at least 20 days prior to the action in question and not less than
20 days prior to the record date or the date on which the Company's
transfer books are closed in respect thereto.
4. If any event occurs as to which, in the sole opinion of the Board of
Directors of the Company, the other provisions of this Warrant are not strictly
applicable or if strictly applicable would not fairly protect the rights of the
Holder in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustment in the
application of such provisions as may be necessary, in the sole judgment of such
Board, in accordance with such essential intent and principles, to protect such
rights as aforesaid.
5. Exercise of this Warrant shall be made by the surrender hereof by the
Holder to the Company at its principal office together with (i) the attached
Subscription Form designating the number of shares of Common Stock being
purchased, (ii) a certified check or cash in payment for such shares and (iii) a
letter of transmittal setting forth the computation of the amount of said
payment. The Company shall thereafter promptly (in any event within seven (7)
business days after such exercise) issue certificates for the number of shares
of the Common Stock of the Company purchased at the Purchase Price in effect at
the time of such exercise. The Holder shall be deemed to be the record owner of
such shares of Common Stock as of the close of business on the date of such
exercise. The Holder shall not be entitled to receive a fractional share, but in
lieu thereof the Company shall pay in cash an amount equal to the market value
of such fractional share if the Common Stock has a market value, or if not, the
book value of such fractional share. The Company shall thereupon cancel this
Warrant; and in the event that less than the entire number of shares purchasable
are purchased, shall issue a new Warrant for the number not so purchased.
6. The Company covenants and agrees that all shares which may be issued
upon the exercise of this Warrant will, upon issuance, be duly and validly
authorized and issued, fully paid and nonassessable, and free from all taxes,
liens and charges with respect to the issue thereof; and without limiting the
generality of the foregoing, the Company covenants and agrees that it will, from
time to time, take all such action as may be requisite to assure that the par
value or stated value per share of the Common Stock to be acquired upon the
exercise of this Warrant is at all times equal to or less than the then
effective Purchase Price per share of the Common Stock issuable pursuant to
exercise of this Warrant. The Company further covenants and agrees that during
the period within which this Warrant may be exercised, the Company will at all
times have authorized and reserved for the purpose of the issue upon exercise of
this Warrant a sufficient number of shares of its Common Stock to provide for
such exercise.
7. (a) The Holder represents that he is acquiring this Warrant and, in
the absence of an effective registration statement under the Securities Act
of 1993 (the "1933 Act") for the shares of Common Stock issuable hereunder,
such shares for the purpose of
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investment and not with a view to or for sale in connection with any
distribution thereof. The Holder and the holder of any shares of Common
Stock issued upon exercise hereof, by his acceptance hereof, agrees that he
will notify the Company in writing before selling or otherwise disposing of
this Warrant or any shares of Common Stock issued to him upon exercise
hereof, describing briefly the nature of any such sale or other
disposition, and no such sale or other disposition shall be made unless and
until (i) the Company has received an opinion of counsel reasonably
acceptable to it that no registration (or perfection of an exemption) under
the 1933 Act is required with respect to such sale or disposition (which
opinion may be conditioned upon the transferee's assuming the Holder's
obligation under this section 7) or (ii) an appropriate registration
statement with respect to such Warrant or such Common Stock, or both, has
been filed with the Securities and Exchange Commission (the "Commission")
and declared effective by the Commission. The Company may require that this
Warrant and certificates representing shares of Common Stock issued upon
exercise hereof be stamped or imprinted with an appropriate legend
reflecting the foregoing restrictions. For the purposes of this section 7,
the term "Securities" shall include this Warrant and the shares of Common
Stock issued or issuable upon the exercise hereof.
(b) The restrictions imposed by this section 7 on the transfer of the
Securities shall terminate as to any portion of the Securities when:
(i) Such portion of the Securities shall have been effectively
registered under the 1933 Act and sold by the holder thereof in
accordance with such registration or exemption; or
(ii) Written opinions to the effect that such a registration is
no longer required or necessary under any Federal or State law or
regulation of governmental authority shall have been received from
legal counsel for the Company and counsel for the holder of such
portion of the Securities; or, if a favorable opinion is obtained from
holder's counsel, and counsel for the Company declines to render such
an opinion, upon the holder's undertaking to indemnify the Company, on
terms satisfactory to the Company, against all liability or loss the
Company may sustain in connection with such transfer; or
Whenever the restrictions imposed by this section 7 shall terminate,
as provided above, any holder of the Securities as to which such
restrictions shall have terminated shall be entitled to receive promptly
from the Company, without expense to him, a new certificate, not bearing
the restrictive legend referred to in clause (a) hereof.
8. The Company will use its best efforts to cause the shares of Common
Stock issuable upon exercise of the Warrants (the "Registerable Securities") to
be registered with the Securities and Exchange Commission, at the Company's
expense, under the Securities Act of 1933 (the "1933 Act") prior to September
30, 2000. In the event that the Registration Statement to be filed with the
Commission as set forth in this section 8 has not been declared effective by the
Commission by September 30, 2000, the purchase price of the Warrants shall be
reduced as
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follows: the Initial Purchase Price shall be reduced by 2% for every 30 days
following September 30,2000, until the Registration Statement is declared
effective. The Company will use its best efforts to keep such Registration
Statement effective until the earlier of November 11, 2003 or until all of the
Registerable Securities have been sold pursuant to such Registration Statement.
In connection with such registration:
(a) The Company will pay all costs and expenses incurred in connection
with the registration of the Registerable Securities, including all
registration filing fees, printing fees, fees and disbursements of counsel
and accountants of the Company and one set of counsel for the Investors.
Transfer taxes, brokerage commissions and underwriters' discounts
attributable to the Registerable Securities shall be for the account of the
Investors;
(b) The Company will furnish at its expense to the Investors such
number of copies of the preliminary, final, supplemental or amended
prospectus in conformity with the requirements of the 1933 Act and rules
and regulations thereunder, as may be reasonably required in order to
facilitate the disposition of the Registerable Securities;
(c) Unless preempted by Federal law, the Company will register or
qualify the Registerable Securities under any applicable state securities
or blue sky laws in such jurisdictions as the Investors shall reasonably
request;
(d) The Company will cause the Registerable Securities to be listed on
the NASDAQ Small Cap Market (or principal exchange if applicable) on which
the Common Stock is then listed; and
(e) The Company shall indemnify and hold harmless, to the full extent
permitted by law, each Investor, its officers and directors and each person
who controls such Investor within the meaning of the 1933 Act and any
investment adviser against all losses, claims, damages, liabilities and
expenses caused by any untrue or alleged untrue statement of a material
fact contained in any registration statement, prospectus or preliminary
prospectus or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements
therein not misleading, except insofar as the same are caused by or
contained in any information with respect to the Investor furnished in
writing to the Company by such Investor expressly for use therein. The
Company will indemnify the underwriters, if any, of the Registerable
Securities, their officers and directors and each person who controls any
such underwriter to the same extent. The Company will reimburse each
indemnified party for all legal expenses incurred in connection with
investigating or defending any such claims. Each Investor severally, but
not jointly, shall indemnify and hold harmless the Company against all
losses, claims, damages, liabilities, and expenses caused by any untrue or
alleged untrue statement or a material fact in any registration statement,
prospectus or preliminary prospectus or any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading; except that such
indemnification shall be available in each case to the extent, but only to
the extent, that such untrue statement or alleged untrue statement or
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omission or alleged omission was made in reliance upon information and in
conformity with written information furnished to the Company by Investor
specifically for use in the preparation thereof. If the indemnification
provided for herein is unavailable or insufficient to hold harmless an
indemnified party, then each indemnifying party shall contribute to the
amount paid or payable by such indemnified party as a result of the losses,
claims, damages, or liabilities referred to above (a) in such proportion as
is appropriate to reflect the relative benefits received by the Company on
the one hand and the Investors on the other; or (b) if the allocation
provided by clause (a) above is not permitted by applicable law, in such
proportion as is appropriate to reflect the relative benefits referred to
in clause (a) above but also the relative fault of the Company on the one
hand and the Investors on the other in connection with the statements or
omissions which resulted in such losses, claims, damages, or liabilities,
as well as any other relevant equitable considerations. Relative fault
shall be determined by reference to, among other things, whether the untrue
statement of a material fact or the omission to state a material fact
relates to information supplied by the Company or the Investor and the
parties' relative intent, knowledge, access to information, and opportunity
to correct or prevent such untrue statement or omission. For purposes of
this subsection, the term "damages" shall include any counsel fees or other
expenses reasonably incurred by the Company or the Investors in connection
with investigating or defending any action or claim which is the subject of
the contribution provisions of this section.
Each party entitled to contribution agrees that upon the service of a
summons or other initial legal process upon it in any action instituted
against it in respect of which contribution may be sought, it shall
promptly give written notice of such service to the party or parties from
whom contribution may be sought, but the omission so to notify such party
or parties of any such service shall not relieve the party from whom
contribution may be sought from any obligation it may have hereunder or
otherwise.
9. This Warrant is exchangeable, upon the surrender hereof by the Holder at
the principal office of the Company, for new warrants of like tenor and date
representing in the aggregate the right to purchase the number of shares
purchasable hereunder, each of such new Warrants to represent the right to
purchase such number of shares as shall be designated by said Holder at the time
of such surrender. Subject to section 7 hereof, this Warrant and all rights
hereunder are transferable in whole or in part by the Holder, in person or by
duly authorized attorney, upon surrender of this Warrant duly endorsed, at the
principal office of the Company.
10. Upon the receipt by the Company of evidence reasonably satisfactory to
it of the loss, theft, destruction or mutilation of this Warrant, and, in case
of loss, theft or destruction, of indemnity or security reasonably satisfactory
to it, and reimbursement to the Company of all reasonable expenses incidental
thereto, and upon surrender and cancellation of this Warrant, if mutilated, the
Company will make and deliver a new Warrant of like tenor, in lieu of this
Warrant.
11. All notices, requests, consents and other communications hereunder
shall be in writing and shall be deemed to have been made when delivered or
mailed first-class postage prepaid or delivered to a telegraph office for
transmission:
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(a) If to the Holder at such address as may have been furnished by
such holder to the Company in writing; and
(b) If to the Company at such address as may have been furnished by
the Company to the Holder of this Warrant in writing.
12. This Warrant shall be binding upon any successors or assigns of the
Company.
13. This Warrant shall be construed in accordance with and governed by the
laws of the State of Colorado.
IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed
and delivered as of the date set forth below by one of its officers thereunto
duly authorized.
Dated: December 17, 1999.
RENAISSANCE ENTERTAINMENT CORPORATION
By /s/ Charles S. Leavell
-----------------------------
Its Chief Executive Officer
9
<PAGE>
------------------------------
SUBSCRIPTION FORM
To be signed only upon exercise of Warrant
The undersigned the holder of the within Warrant, hereby irrevocably elects
to exercise the purchase right represented by such Warrant for, and to purchase
thereunder, __________ of the shares of Common Stock of RENAISSANCE
ENTERTAINMENT CORPORATION to which such Warrant relates and herewith makes
payment of $__________, therefor in cash or by certified check and requests that
the certificates for such shares be issued in the name of, and be delivered to,
______________________________, the address for which is set forth below the
signature of the undersigned.
Dated: ____________________
-----------------------------------
(Signature)
-----------------------------------
-----------------------------------
(Address)
To be signed only upon transfer of Warrant
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto _______________ ______________________________ the right to purchase shares
of Common Stock of RENAISSANCE ENTERTAINMENT CORPORATION to which the within
Warrant relates and appoints ______________________________, attorney, to
transfer said right on the books of RENAISSANCE ENTERTAINMENT CORPORATION with
full power of substitution in the premises.
Dated: ____________________
-----------------------------------
(Signature)
-----------------------------------
-----------------------------------
(Address)
10
<PAGE>
EXHIBIT 10.16
SAN BERNARDINO COUNTY
REGIONAL PARKS DIVISION
RENAISSANCE PLEASURE FAIRE
SEVENTH AMENDMENT OF LICENSE
This amendment of license ("Amendment") is made between the County of San
Bernardino, hereinafter referred to as "COUNTY", whose address is 777 E. Rialto
Avenue, San Bernardino, CA 92415-0763, and RENAISSANCE ENTERTAINMENT
CORPORATION, a Colorado corporation hereinafter referred to as "RENAIISSANCE
ENTERTAINMENT CORPORATION" or as "LICENSEE", whose address for the purposes of
this Amendment is 275 Century Circle, Suite 102, Louisville, CO 80027.
1. RECITALS: This seventh Amendment is made with reference to the following
facts and objectives:
COUNTY, as licensor and the LIVING HISTORY CENTRE, a California
not-for-profit Corporation, hereinafter referred to as the "LIVING HISTORY
CENTRE", whose address is P.O. Box B, Novato, CA 94948, as licensee, entered
into a written license, COUNTY Contract No. 90-118, dated January 22, 1990 (the
"LICENSE), in which COUNTY licensed to the LIVING HISTORY CENTRE a portion ("Use
Area") of Glen Helen Regional Park ("Park") located in the County of San
Bernardino, California, as described in Exhibit "B" attached to the LICENSE and
made a part thereof, to hold a living history celebration called the
"Renaissance Pleasure Faire" (the "FAIRE"). The LICENSE was amended on September
30, 1991 by Contract Amendment No. 90-118 A-1, on October 19, 1992 by Contract
Amendment No. 90-118 A-2, on January 24, 1995 by Contract Amendment No. 90-118
A-3, on June 11, 1996 by Contract Amendment No. 90-118 A-4, on January 27, 1998
by Contract Amendment No. 90-118 A-5, and again on February 23, 1999 by Contract
Amendment No. 90-118 A-6. The amendment of January 24, 1995, Contract Amendment
No. 90-118 A-3 also provided for the first assignment of the LICENSE, from the
LIVING HISTORY CENTRE to RENAISSANCE PLEASURE FAIRES. The amendment of June 11,
1996, Contract Amendment No. 90-118 A-4 also provided for the assignment of the
LICENSE, from the RENAISSANCE PLEASURE FAIRES to the RENAISSANCE ENTERTAINMENT
CORPORATION.
2. AMENDMENTS TO LICENSE:
a) The parties agree that the LICENSE is extended for an additional one
year term in 2000, consisting of eight (8) weekends, commencing the
weekend of May 6 and 7, 2000 through and including June 24 and 25,
2000, and Memorial Day (all open to the general public), and May 19
(school day, not open to he general public). Notwithstanding anything
in this LICENSE to the contrary. LICENSEE shall NOT have any option to
extend the term of the LICENSE for an additional weekend even if the
FAIRE is officially closed due to rain or other good cause on or
before noon of any day.
b) In Paragraph 1, TERM OF LICENSE, Subparagraph C, SET UP, ADD a
reference for LICENSEE being allowed access to the Use Area for set up
on February 21, 2000. In preparation for taking possession on February
21: Set up of power poles and lines may begin on February 16, 2000,
within the same guidelines established in the installation process in
1997; access to upper Lot 3 and administration building may begin on
February 16, 2000.
<PAGE>
c) In paragraph 1, TERM OF LICENSE, Subparagraph D, TAKE DOWN, ADD a
reference for LICENSEE being allowed access to the Use Area for take
down no later that Friday, July 7, 2000.
d) In paragraph 2, USE AREA, Subparagraph A, DELETE exiting Exhibit B and
SUBSTITUTE the attached as a new Exhibit B identifying the Use Area,
subject to the provisions of this Amendment.
e) In Paragraph 3, USE FEE, Subparagraph B, Additional Terms, ADD a
reference for 2000 or year 11-4.00% of gross revenues, with a
guaranteed minimum of $150,000 on use fees paid to COUNTY.
f) ADD the following as a new subparagraph 3.E (2). To Paragraph 3, USE
FEE, subparagraph E, DAMAGES/CLEAN UP DEPOSIT:
(2) The damage and clean up deposit for the 2000 FAIRE shall be
fifteen thousand dollars ($15,000).
g) In paragraph 3, USE FEE, Subparagraph F, METHOD AND TIME OF PAYMENT,
Subparagraph F(2) ADDITIONAL TERMS, ADD a payment schedule for 2000 as
follows:
<TABLE>
<S> <C>
Wednesday, May 17, 2000 $50,000
Wednesday, May 31, 2000 $50,000
Wednesday, June 21, 2000 $50,000
December 6, 2000 Remainder of balance of 4.00% of gross
</TABLE>
h) In paragraph 3, USE FEE, Subparagraph H, ACCOUNTING REPORT, ADD a
reference to submit the financial statement for 2000 on September 8,
2000.
i) In paragraph 5, WALK-THROUGH, Subparagraph A, PRE-FAIRE INSPECTION,
ADD the date of Monday, February 21, 2000.
j) In paragraph 5, WALK-THROUGH, Subparagraph B, PUBLIC USE AREA TRASH,
LITTER, EQUIPMENT REMOVAL INSPECTION, ADD the date of Thursday, July
6, 2000.
k) In paragraph 5, WALK-THROUGH, Subparagraph B, USE AREA TRASH, LITTER,
EQUIPMENT REMOVAL AND GROUNDS RESTORATION INSPECTION, ADD the date of
July 31, 2000. Additionally in the event the Use Area is not
completely restored by the July 31, 2000 walk-through; the LICENSEE
shall pay COUNTY Fifty Dollars ($50.00) per day until such restoration
is complete.
l) In paragraph 14, INSURANCE AND INDEMNIFICATION, Subparagraph B, ADD
the date of Thursday, February 3, 2000 to the list of dates in the
second sentence.
m) CHANGE that portion of subparagraph 22.A (1) OFF SEASON STORAGE, which
now reads "...no later than March 31,2000." to read"...no later than
August 31, 2000."
<PAGE>
n) Paragraph 25, NONCOMPETITION AND SCHEDULING OF OTHER EVENTS,
Subparagraph A, that portion of the second sentence stating "...until
December 31, 1999..." SHALL BE REVISED TO READ "...until December 31,
2000...."
o) Paragraph 25, NONCOMPETITIION AND SCHEDULING OF OTHER EVENTS,
Subparagraph B, that portion of the last sentence stating "...after
January 1, 2000..." SHALL BE REVISED TO READ "...after January 1,
2001..."
p) DELETE Subparagraph 26A(2.)(A)(4.) in its entirety.
3. Except as modified by this agreement, all provisions of Contract No.
90-118, including amendment A-1 through A-6; remain in full force and
effect.
4. This amendment shall be effective when approved by both parties.
IN WITNESS WHEREOF, the parties hereto have caused their respective names to be
hereunto subscribed by their respective proper officer hereto duly authorized.
COUNTY OF SAN BERNARDINO RENAISSANCE ENTERTAINMENT CORPORATION
By: By:
--------------------------- ---------------------------
John D. Mikels, Chairman Title:
Board of Supervisors ------------------------
Date: Date:
------------------------- -------------------------
Signed and certified that a copy of this
document has been delivered to the
Chairman of the Board by Earlene Sproat
Clerk of the Board of Supervisors of the
County of San Bernardino
By:
---------------------------
Date:
-------------------------
APPROVED AS TO LEGAL FORM
ALAN K. MARKS, County Counsel
By:
---------------------------
Fiona Luke, Deputy
Date:
-------------------------
<PAGE>
EXHIBIT 10.17
LEASE AND LICENSE EXTENSION AND MODIFICATION AGREEMENT
AGREEMENT made and entered into this 24 day of March 2000, by and between
STERLING FOREST LLC (hereinafter "SFLLC"), a limited liability company formed
under the laws of Delaware having an office at 16 Sterling Lake Road, Tuxedo,
New York 10987, and RENAISSANCE ENTERTAINMENT CORPORATION (hereinafter "REC'), a
foreign corporation authorized to do business in New York, having and office at
Rt. 17A West, Tuxedo, New York 10987 and an address for mail at 600 Rt. 17A,
Tuxedo, New York 10987.
SFLLC is successor in interest b y merger to STERLING FOREST CORPORATION. REC is
successor in interest to CREATIVE FAIRES, LTD.
WITNESSETH
WHEREAS, SFLLC, as Landlord/Licensor, and REC, as Tenant/Licensee, are parties
to an Agreement of Lease and License Agreement dated as of June, 1996 (the
Agreement"), as modified by a Modification of Lease and License Agreement
entered into as of July, 1997 (the "First Modification Agreement"); by a Second
Modification of Lease and License Agreement entered into as of September, 1997
(the "Second Modification Agreement"); by a Third Modification of Lease and
License Agreement entered into as of September, 1997 (the "Third Modification
Agreement"); and by a Fourth Modification of Lease and License Agreement entered
into as of April 27, 1998 (the "Fourth Modification Agreement") and by a Fifth
Modification of Lease and License Agreement dated May 10, 1999 (collectively,
the "Agreement") and
WHEREAS, the Term of the Agreement expires on December 31, 2000, except as to
the lease of Additional Leased Premises in the First Modification Agreement,
which expires on December 31, 2001; and
WHEREAS, REC wishes to extend the term of the Agreement, and SFLLC is willing to
agree to an extension on the terms and conditions set forth below;
NOW, THEREFORE, for good and valuable consideration, receipt of which is hereby
acknowledged, SFLLC and REC agree that the Agreement is hereby extended and
modified as follows:
1. EXTENSION TERM. The Term of the Agreement is hereby extended to
December 31, 2001 (the "First Extension Term").
<PAGE>
2. ARTICLE 3, "RENT," IS HEREBY MODIFIED BY ADDING THE FOLLOWING NEW
SUBSECTION 3.02(D):
"Section 302(D). During the First Extension Term, the Rents as set
forth in Sections 3.02, 3.02(A), 3.02(B), and 3.02(C) shall be
consolidated into a single annual Rent of THREE HUNDRED SIXTY THOUSAND
and00/100 ($360,000.00) DOLLARS, payable in four installments of
$60,000.00 due and payable on May 1, 2001 and July 31, 2001 and
$120,000.00 due and payable on August 31, 2001 and September 30, 2001.
The provisions in Section 3.02 regarding late payment of Rent shall
remain in full force and effect during the First and Second Extension
Terms."
3. RATIFICATION. SFLLC and REC hereby ratify and confirm all of the terms
and provisions contained in the Initial Agreement, the First
Modification Agreement, Second Modification Agreement, Third
Modification Agreement, Fourth Modification Agreement, and the Fifth
Modification Agreement, except as expressly modified by this Extension
and Modification Agreement.
IN WITNESS WHEREOF, the parties have caused this Extension and Modification
Agreement to be executed by STERLING FOREST LLC and by RENAISSANCE ENTERTAINMENT
CORPORATION.
STERLING FOREST LLC,
Landlord/Licensor
By:
-----------------------------------
Louis Heimbach, Chairman, President
And Chief Executive Officer
RENAISSANCE ENTERTAINMENT
CORPORATION, Tenant/Licensee
By:
-----------------------------------
Charles S. Leavell
Chairman and Chief Executive Officer
<PAGE>
EXHIBIT 10.18
ASSET PURCHASE AGREEMENT
THIS AGREEMENT, made and entered into as of April 6, 2000, by and among
Renaissance Entertainment Corporation, a Colorado corporation (hereinafter
referred to as "Seller"), and Marta and Jim Selway, dba Willows Fare, L.L.C.
residents of the State of California (hereinafter referred to as "Buyer");
W I T N E S S E T H:
WHEREAS, Seller owns and operates the Bristol Renaissance Faire in Kenosha,
Wisconsin (the "Faire"); and
WHEREAS Seller owns and operates an number of food and bererage concessions
at the Faire; and
WHEREAS, Seller desires to sell and Buyer desires to purchase certain
assets of Seller used in connection with certain of these food concessions.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto do hereby agree as
follows:
1. SALE AND PURCHASE OF ASSETS. On the terms and subject to the conditions
contained herein, Seller agrees to sell, convey, transfer, and assign to Buyer,
on the Closing Date (as hereinafter defined), and Buyer agrees to purchase from
Seller, the assets described in a. below in return for the consideration herein
provided:
a. ASSETS
(i) All kitchen equipment listed on EXHIBIT A.
(ii) All signage listed on EXHIBIT B.
(iii) The right to use the concessions buildings listed on
EXHIBIT C (the "Concessions"), provided that Buyer and Seller are
parties to a current concessionaire agreement.
2. PURCHASE PRICE. Subject to the terms and conditions of this Agreement,
Buyer shall purchase the asserts specified in Paragraph 1 of this Agreement,
and, in full consideration for such assets and as the agreed purchase price
therefor, Buyer shall pay to Seller $300,000.00.
3. PAYMENT OF PURCHASE PRICE AND CLOSING. The purchase price to be paid by
Buyer to Seller for the assets specified in this Agreement, shall be paid as
follows:
a. PURCHASE PRICE. The purchase price shall be paid at closing
1
<PAGE>
b. CLOSING.
The closing of the sale and purchase contemplated hereby shall
take place at such place and date as mutually agreed upon by Buyer and
Seller to close (such date is herein called the "Closing Date"). At
the closing, the following shall occur:
(i) Seller shall deliver to Buyer:
(A) A bill of sale and other good and sufficient Instruments
of transfer and conveyance as shall be effective to vest in Buyer
marketable title to the assets to be sold and assigned to Buyer
as provided in this Agreement;
(ii) Buyer shall deliver to Seller:
(A) $150,000.00 by certified or cashier's check or wire
transfer.
(B) Balance of $150,000.00 to be paid in accordance with
Exhibit D.
4. COVENANTS OF SELLER. Seller covenants and agrees to allow Buyer to sell
Italian Ices at the Tuscany Tavern, a concession building owned by the Seller.
5. COVENANTS OF BUYER. Buyer covenants and agrees to allow Seller, at no
cost to Seller, to use space in the Queens Kitchen and the Black Swan Kitchen to
dispense beverages.
6. CONCESSIONAIRE AGREEMENT. Buyer may operate the concessions listed on
Exhibit C only pursuant to a current Concessionaire Agreement. If Buyer chooses
not to return to the Faire for a season or is not invited back to the Faire,
Buyer shall have the right to assign interest in the concessions as provided in
the most recent form of Concessionaire Agreement.
7. INDEMNIFICATION BY BUYER. Buyer shall indemnify and hold harmless Seller
against and In respect of:
a. Any and all liabilities and obligations of and claims arising out
of operation by Buyer of the Concessions;
b. Any and all loss, damage, or deficiency resulting from any
misrepresentation, breach of warranty or non-fulfillment of any agreement
on the part of Buyer under this Agreement; and
2
<PAGE>
c. Any and all actions, suits, proceedings, demands, assessments,
judgments, costs and expenses and reasonable attorneys fees incident to any
of the foregoing.
Buyer shall reimburse Seller, on demand, for any payment made by Seller at
any time after the Closing Date, in respect of any liability, obligation, or
claim to which the foregoing indemnity by Buyer relates.
8. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure
to the benefit of the parties hereto and their respective heirs,
representatives, successors, and assigns, but shall not be assignable in whole
or in part by Buyer without the written consent of Seller.
9. NOTICES. Any notice or other communication provided for herein or given
hereunder to a party hereto shall be in writing and shall be delivered in person
to such party or mailed by first class mail, postage prepaid, addressed as
follows:
If to Seller: Renaissance Entertainment Corporation
ATTN: J. Stanley Gilbert
275 Century Circle, Suite 102
Louisville, CO 80027
If to Buyer: Marta and Jim Selway, dba Willows Fare, L.L.C.
235 North Murray Street
Suite C
Banning, CA 92220
or to such other address with respect to a party as such party shall notify the
others in writing as above provided.
10. GOVERNING LAW. All questions relating to the validity, construction,
performance or enforcement of this Agreement shall be governed by the laws of
the State of Colorado.
IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
day and year first above written.
SELLER:
RENAISSANCE ENTERTAINMENT
CORPORATION
By
-------------------------------------
J. Stanley Gilbert
President and Chief Operating Officer
BUYER:
By
-------------------------------------
Jim Selway
By
-------------------------------------
Marta Selway
3
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITOR'S CONSENT
We hereby consent to the use of our reports dated March 13, 2000 accompanying
the consolidated financial statements of Renaissance Entertainment Corporation
as of December 31, 1999 and 1998, included in the Company's Annual Report on
Form 10-KSB and to the incorporation by reference of the aforementioned
financial statements in Registration Statement No. 33-90044 for the 1993 Stock
Incentive Plan, Registration Statement No. 33-97388 also for the 1993 Stock
Incentive Plan, and Registration Statement No. 333-17167 for the 1996 Consultant
Compensation Agreements.
- -----------------------------------------------
Schumacher and Associates, Inc
April 4, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,049,044
<SECURITIES> 0
<RECEIVABLES> 22,748
<ALLOWANCES> 17,797
<INVENTORY> 201,493
<CURRENT-ASSETS> 1,515,134
<PP&E> 6,658,364
<DEPRECIATION> 2,364,201
<TOTAL-ASSETS> 7,108,820
<CURRENT-LIABILITIES> 2,789,676
<BONDS> 5,153,266
0
0
<COMMON> 9,495,175
<OTHER-SE> (9,514,693)
<TOTAL-LIABILITY-AND-EQUITY> 7,108,820
<SALES> 14,467,437
<TOTAL-REVENUES> 14,467,437
<CGS> 1,575,076
<TOTAL-COSTS> 5,057,676
<OTHER-EXPENSES> 10,252,880
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 639,719
<INCOME-PRETAX> (3,451,321)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,451,321)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,451,321)
<EPS-BASIC> (1.61)
<EPS-DILUTED> (1.61)
</TABLE>
