Senior Convertible Notes

On November 3, 2014, Synergy closed a private offering of $200 million aggregate principal amount of 7.50% Convertible Senior Notes due 2019, (the "Notes"), including the full exercise of the over-allotment option granted to the initial purchasers to purchase an additional $25 million aggregate principal amount of the Notes, interest payable semiannually in arrears on May 1 and November 1 of each year, beginning on May 1, 2015. The net proceeds from the offering were $187.3 million after deducting the initial purchasers’ discounts and offering expenses.

The Notes are unsecured. Interest expense, not including amortization of deferred debt costs, for the year ended December 31, 2016 and December 31, 2015 was $6.7 million and $12.9 million, respectively. Accrued interest payable was $0.3 million and $2.0 million as of December 31, 2016 and December 31, 2015, respectively.

The Notes will mature on November 1, 2019, unless earlier purchased or converted. The Notes are convertible, at any time, into shares of Synergy’s common stock at an initial conversion rate of 321.5434 shares per $1,000 principal amount of notes, which is equivalent to the original conversion price of $3.11 per share. Subsequent to the exchange described below, the principal balance of the Notes at December 31, 2016 was $23.5 million as compared to $159.0 million at December 31, 2015.

Debt costs associated with the sale of the Notes of $12.7 million have been deferred and are being recognized as expense over the expected term of the Notes, calculated using the effective interest rate method. Amortization expense, including amortization associated attributable to reduction of the principal due to the conversion of the debentures on a prorated basis for year ended December 31, 2016 and December 31, 2015 was $6.9 million and $4.6 million, respectively. The remaining deferred debt costs have been presented as a reduction of the Notes in accordance with the newly adopted Accounting Standards Update (“ASU”) No. 2015-3 “Simplifying the Presentation of Debt Issuance Costs”.

On March 18, 2016 Synergy entered into an agreement (the "Exchange") for the exchange of $79.8 million in aggregate principal amount of the Notes, representing approximately 50% of the outstanding aggregate principal amount of Notes, for 35.3 million shares of Synergy's common stock, with a total of 25.6 million shares representing the conversion price of $3.11 pursuant to the existing terms of the Notes. Synergy also issued approximately 872,000 shares at the five day average share price of $2.81 in payment of accrued and unpaid interest of $2.4 million on Notes accepted in the Exchanges, from the applicable last interest payment date to, but not including, March 28, 2016. The amortization of deferred debt costs was accelerated consistent with the 50% reduction of aggregate principal amount this transaction represented, and resulted in additional interest expense of approximately $3.6 million. GAAP requires that such conversions be treated as induced conversions with an expense recognized equal to the fair value of the 9.6 million shares transferred in the transaction in excess of the fair value of the securities issuable pursuant to the original conversion terms, with such fair value being measured as of the date the inducement offer is accepted by the convertible debt holder. Accordingly, the Company recognized a debt conversion expense of $25.6 million for the quarter ended March 31, 2016.

In November 2016 Synergy exchanged $55.7 million in aggregate principal amount of the Notes, representing approximately 70% of the outstanding aggregate principal amount of Notes, for 20.5 million shares of Synergy's common stock, with a total of 17.9 million shares representing the conversion price of $3.11 pursuant to the existing terms of the Notes. The amortization of deferred debt costs was accelerated consistent with the 70% reduction of aggregate principal amount this transaction represented, and resulted in additional interest expense of approximately $2 million. The Company recognized a debt conversion expense of $14.5 million representing 2.6 million shares for the quarter ended December 31,2016.

A summary of quarterly activity and balances associated with the Notes and related deferred debt costs is presented below ($ in thousands):



	Notes Balance			Deferred Debt Costs			Notes, net of Deferred Debt Costs
Balance at issuance November 1, 2014	$	200,000		$	12,747		$	187,253
Less: amortization two months ended December 31, 2014				(411		)	411
Balance December 31, 2014	200,000			12,336			187,664
Less: amortization three months ended March 31, 2015				(617		)	617
Balance March 31, 2015	200,000			11,719			188,281
Less: amortization three months ended June 30, 2015 ⁽¹⁾				(1,899		)	1,899
Conversions	(22,213		)	—			(22,213		)
Balance June 30, 2015	177,787			9,820			167,967
Less: amortization three months ended September 30, 2015 ⁽¹⁾				(1,544		)	1,544
Conversions	(18,776		)	—			(18,776		)
Balance, September 30, 2015	159,011			8,276			150,735
Less: amortization three months ended December 31, 2015				(506		)	506
Balance December 31, 2015	159,011			7,770			151,241
Less: amortization three months ended March 31, 2016 ⁽¹⁾				(4,153		)	4,153
Conversions	(79,829		)	—			(79,829		)
Balance, March 31, 2016	79,182			3,617			75,565
Less: amortization three months ended June 30, 2016				(253		)	253
Balance, June 30, 2016	79,182			3,364			75,818
Less: amortization three months ended September 30, 2016				(252		)	252
Balance, September 30, 2016	79,182			3,112			76,070
Less: amortization three months ended December 31, 2016 ⁽¹⁾				(2,263		)	2,263
Conversions	(55,668		)	—			(55,668		)
Balance, December 31, 2016	$	23,514		$	849		$	22,665

_____________________

(1) Includes accelerated amortization of deferred debt costs attributable to conversions and exchanges