Notes Payable

6 Months Ended

Jun. 30, 2015

Debt Disclosure [Abstract]

Notes Payable

13. NOTES PAYABLE

As described in Notes 2 and 4, as partial consideration for the KBS acquisition, we issued the KBS Note in the principal amount of $5.5 million. We were unable to repay the note on its maturity date, December 1, 2014. Under the terms of the note, the holder had a right to charge interest at 10.0% per annum for any period during which we are in default. In April 2015, we asserted certain indemnification and other claims against the sellers of KBS and on June 26, 2015 we entered into a settlement agreement with the sellers related to such claims. The settlement agreement provides for, among other things, the amendment and restatement of the KBS Note (the “Amended and Restated KBS Note”) to reduce the principal amount from $5.5 million to $2.5 million and the forgiveness of all then-accrued interest related to the KBS Note as disclosed below. The new principal amount is to be paid in 25 installments of $100,000 on the first business day of each month, which began on July 1, 2015. The Amended and Restated KBS Note does not accrue interest unless it is in default, in which case the annual interest rate would be 10%. Since this acquisition purchase price adjustment was outside the twelve month measurement period from the acquisition date, the change was credited to earnings. The Company recorded a gain of $3.7 million in the three and six month periods ended June 30, 2015 related to the settlement, which consisted of the following (in thousands):

Reduction of principal (including adjustment for imputed interest at 9.5%)	$	3,226
Forgiveness of interest accrued to the date of settlement		461
Gain on settlement agreement	$	3,687

The principal balance of the Amended and Restated KBS Note was $2,274,217 ($2,500,000 less imputed interest of $225,783) at June 30, 2015 and is included in Long-Term Debt. See Note 14.