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 (including the full exercise of the over-allotment option granted to the initial purchasers to purchase an additional $25 million aggregate principal amount of 7.50% Convertible Senior Notes due 2019, (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 financing costs for three months ended March 31, 2016 and 2015 was $0.5 million and $3.8 million, respectively. Accrued interest payable was $2.5 million and $2.0 million as of March 31, 2016 and December 31, 2015 respectively.

A summary of quarterly activity is listed below (dollars in thousands):



Interest payable on Senior Convertible Debenture at 1/1/2015	$	2,500
Accrued interest expense during the 3 months ended March 31, 2015	3,750
Interest Payable on Senior Convertible Debenture at March 31, 2015	6,250
Accrued interest expense during the 3 months ended June 30, 2015	3,388
Interest Payment on Senior Convertible Debenture at May 1, 2015	(7,416		)
Interest payable on Senior Convertible Debenture as of June 30, 2015	2,222
Accrued interest expense during the 3 months ended September 30, 2015	2,747
Interest payable on Senior Convertible Debenture as of September 30, 2015	4,969
Interest payment at November 1, 2015	(5,963		)
Accrued interest expense during the 3 months ended December 31, 2015	2,982
Interest payable as of December 31, 2015	1,988
Accrued interest expense during the 3 months ended March 31, 2016	486
Interest payable as of March 31, 2016	$	2,474

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 above, the principal balance of the Notes at March 31, 2016 is $79.2 million as compared to $159.0 million at December 31, 2015. Transaction 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 with reduction of the principal due to the conversion and exchanges of the debentures on a prorated basis for three months ended March 31, 2016 and 2015 was $4.2 million and 0.6 million, respectively. The remaining transaction 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 exchange agreement 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 25.7 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 financing 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 securities and other consideration 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 three months ended March 31, 2016.

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



	Notes Balance			Transactions Costs			Notes, net of Transaction 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

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