9. Primary Lender Credit Agreements, Notes Payable, Subordinated and Convertible Debentures Payable

9 Months Ended

Sep. 30, 2016

Primary Lender Credit Agreements Notes Payable Subordinated And Convertible Debentures Payable

Primary Lender Credit Agreements, Notes Payable, Subordinated and Convertible Debentures Payable

Credit agreements with the Company’s primary lender and notes payable consisted of the following:

	September 30,		December 31,
	2016		2015
	($ in thousands)
Credit agreements - first mortgage-related party bearing interest at prime plus 5%; due June 1, 1997	$	-	$	500
Notes payable - $1,176,000 bearing interest at prime plus 2%, the remainder non-interest bearing, all past due		1,198		1,198
		1,198		1,698
Subordinated convertible debentures payable:
At 6-1/2% interest; due June 1, 1991		447		447
At 6% interest; due May 1, 1992		8,025		8,025
		8,472		8,472
Convertible debentures payable-related party:
At 14% interest; due July 8, 1997, convertible into shares of common stock at $1.72 per share		-		1,500
	$	9,670	$	11,670

The proceeds from the sale of the Property of $9 million were received on June 23, 2016 and payment of the primary debt obligation, including all accrued interest totaling $970,000, was made to PGIP, the holder of the first mortgage note and an affiliate of the Company. In addition, on June 23, 2016, the remaining principal of the convertible debentures payable to related parties totaling $1,500,000 was paid and a portion of the related accrued interest was paid totaling $5,455,000 to the current holders of such debentures. LIC, an affiliate of L-PGI, the Company’s primary preferred stock shareholder and Love-1989, also an affiliate of L-PGI, held the collateralized convertible debentures.

The Trustee of the 6.5% unsecured subordinated convertible debentures, which matured in June, 1991, with an original face amount of $1,034,000, provided notice of final distribution to holders of such debentures on September 2, 2014. In connection with such final distributions, the Trustee has maintained a debenture reserve fund with a balance of $41,000 as of September 30, 2016 and December 31, 2015, available for final distribution to holders of such debentures who surrender their respective debenture certificates.

During the nine month period ended September 30, 2016, there were no unsecured subordinated convertible debentures that were surrendered by their respective debenture holders and no funds were utilized from the debenture reserve account. During the year ended December 31, 2015, such unsecured subordinated convertible debentures with face amounts of $80,000 were surrendered by their respective debenture holders. Funds utilized from the debenture reserve account were $7,000 during the year ended December 31, 2015 in payment of a final distribution to such debenture holders. Accordingly, the Company recognized $73,000 in forgiveness of debt during the year ended December 31, 2015. In addition, accrued interest in the amount of $136,000 on such debentures that have been surrendered was recorded as forgiveness of interest expense during the year ended December 31, 2015.

As of September 30, 2016 and December 31, 2015 the outstanding principal balance on such 6.5% unsecured subordinated convertible debentures that were not surrendered by the respective holders equals $447,000 plus accrued and unpaid interest of $809,000 and $788,000, respectively. If and when such remaining debentures are surrendered to the Trustee, the applicable portion of such principal and accrued interest will similarly be recorded as debt and accrued interest forgiveness. As the Company has consistently stated in prior filings, the Company believes that any potential claims by the respective debenture holders on such 6.5% unsecured subordinated convertible debentures would be barred under the applicable statutes of limitations.