NOTE 16 – SUBSEQUENT EVENTS

On February 1, 2018, the Company entered into a Secured Term Credit Agreement (“Credit Agreement”) with Providence Wattenberg, LP and 5NR Wattenberg, LLC (the “Secured Lenders”). Each of Providence and 5NR are affiliates of the Lenders under the Letter Agreement.

Under the Credit Agreement, the Secured Lenders agreed to loan the Company a total of $25.0 million (the “Loan”), including the $5.0 million previously advanced pursuant to the Letter Agreement. Interest on the outstanding principal balance of the Loan accrues at the rate of 14% per year plus the greater of three-month LIBOR or 1%, but in no event to exceed 17%. Interest payments are due monthly beginning March 1, 2018. Repayment of the Loan is secured by a lien on all of the Company’s assets, which is equal in priority to the lien securing the remaining indebtedness owed to PEP III. All principal and accrued interest under the Credit Agreement is due February 1, 2020 (“Maturity Date”).

At any time, the Lenders may convert 20% of the outstanding principal of the Loan into common stock of the Company at a price of $1.15 per share and the remaining principal at a price of $1.55 per share. The Company also granted to the Lenders:

 a warrant entitling the Lenders to purchase in the aggregate 1,500,000 shares of common stock at a price of $0.01 per share, exercisable until the Maturity Date; and

an option to purchase up to 50% of any securities offered by the Company in any private or public offering until December 31, 2018, and 25% of any securities offered thereafter; and

 an option to purchase up to $25.0 million of the Company’s common stock at a 10% discount from the 30-day volume-weighted average trading price of the common stock at the time the option is exercised, but in no event less than $1.85 per share, which the option will become exercisable on the Maturity Date and expire on February 1, 2021; and

 registration rights in connection with the common stock that may be issued upon exercise of the foregoing rights.

The Company also agreed to certain affirmative and negative covenants in connection with the Loan, including the obligation to appoint up to three persons to the Company’s Board of Directors, two of whom would be designated by Providence and one by 5NR, and at least one of whom shall qualify as independent under the rules of the NYSE American.