DRS/A

Amendment No. 1 to confidential draft submission

As submitted confidentially to the Securities and Exchange Commission on June 24, 2014

Registration No. 333-            

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

AAC HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

Nevada	8093	35-2496142
(State or other jurisdiction of incorporation or organization)	(Primary Standard Industrial Classification Code Number)	(I.R.S. Employer Identification No.)

115 East Park Drive, Second Floor

Brentwood, TN 37027

(615) 732-1231

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive office)

Michael T. Cartwright

Chief Executive Officer and Chairman of the Board

AAC Holdings, Inc.

115 East Park Drive, Second Floor

Brentwood, TN 37027

(615) 732-1231

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Howard H. Lamar III, Esq. Laura R. Brothers, Esq. Bass, Berry & Sims PLC 150 3^rd Avenue S., Suite 2800 Nashville, TN 37201 (615) 742-6200 Michael P. Heinz, Esq. Lindsey A. Smith, Esq. Sidley Austin LLP One South Dearborn Chicago, IL 60603 (312) 853-7000

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this registration statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box.  ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (check one)

Large Accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities to be Registered	Proposed Maximum Aggregate Offering Price(1)	Amount of Registration Fee
Common Stock, par value $0.001 per share

(1) Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended. Includes the offering price of shares that the underwriters have the option to purchase to cover over-allotments, if any.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED                     , 2014

PRELIMINARY PROSPECTUS

             Shares

AAC Holdings, Inc.

Common Stock

This is the initial public offering of our common stock, and no public market currently exists for our stock. We currently expect the initial public offering price to be between $         and $         per share of common stock.

We have granted the underwriters a 30-day option to purchase up to              additional shares of common stock to cover over-allotments, if any.

We intend to apply to list our common stock on the New York Stock Exchange under the symbol “AAC”.

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. Investing in our common stock involves risks. See “Risk Factors” beginning on page 15.

	Per Share	Total
Initial public offering price	$	$
Underwriting discounts and commissions1	$	$
Proceeds, before expenses, to us	$	$

¹ We refer you to “Underwriting” beginning on page 140 for additional information regarding underwriting compensation.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares on or about                     , 2014 through the book-entry facilities of The Depository Trust Company.

Joint Book-Running Managers

William Blair Wells Fargo Securities

Raymond James Avondale Partners

The date of this prospectus is                     , 2014

TABLE OF CONTENTS

	Page
Summary		1
Risk Factors		15
Special Note Regarding Forward-Looking Statements		33
Use of Proceeds		35
Dividend Policy		35
Capitalization		37
Dilution		39
Unaudited Pro Forma Consolidated Financial Statements		41
Selected Historical and Pro Forma Consolidated Financial and Operating Data		52
Management’s Discussion and Analysis of Financial Condition and Results of Operations		57
Business		86
Management		107
Executive Compensation		115
Certain Relationships and Related Party Transactions		122
Principal Stockholders		129
Description of Capital Stock		131
Shares Eligible For Future Sale		134
Material U.S. Federal Income Tax Consequences to Non-U.S. Holders		136
Underwriting		140
Validity of the Common Stock		146
Experts		146
Where You Can Find More Information		146
Index to Financial Statements		F-1

You should rely only on the information contained in this prospectus to which we have referred you. No dealer, salesperson or other person is authorized to give any information or to represent anything not contained in this prospectus. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares of common stock offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is accurate only as of the date of this prospectus or as of another date specified herein.

Trademarks, Trade Names and Service Marks

This prospectus includes our trademarks such as “American Addiction Centers,” “Desert Hope,” “FitRx,” “Forterus,” “Greenhouse,” “Singer Island,” “The Academy” and other company trade names and service marks that are protected under applicable intellectual property laws and constitute the property of AAC Holdings, Inc. or its subsidiaries. For convenience, we may not include the ^® or ™ symbols, but such failure is not meant to indicate that we would not protect our intellectual property rights to the fullest extent allowed by law. Any other trademarks, trade names or service marks referred to in this registration statement are the property of their respective owners.

Industry and Market Data

Market data and other statistical information contained in this registration statement are based on independent industry publications, government publications, reports by market research firms and other published independent sources and reports. Some data is also based on our good faith estimates, which are derived from other relevant statistical information. Statements as to our market position are based on market data currently available to us and, primarily, on management estimates, as information regarding most of our major competitors is not publicly available. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading “Risk Factors” in this prospectus.

PROSPECTUS SUMMARY

This summary highlights the information contained elsewhere in this prospectus. Because it is only a summary, it does not contain all of the information that may be important to you. Before investing in our common stock, you should read this entire prospectus, including the information set forth under the heading “Risk Factors” and the financial statements and the notes thereto. In this prospectus, unless we indicate otherwise or the context requires, “we,” “our,” “us” and the “company” refer, prior to the Reorganization Transactions discussed below, to American Addiction Centers, Inc. and, after the Reorganization Transactions, to AAC Holdings, Inc., in each case together with its consolidated subsidiaries. The term “Holdings” refers to AAC Holdings, Inc. and the term “AAC” refers to American Addiction Centers, Inc. Unless otherwise noted, all information in this prospectus assumes (i) no exercise of the underwriters’ over-allotment option and (ii) the consummation of the Reorganization Transactions described under the caption “Reorganization Transactions.”

Our Business

We believe we are a leading provider of inpatient substance abuse treatment services for individuals with drug and alcohol addiction. As of March 31, 2014, we operated six substance abuse treatment facilities located throughout the United States, focused on delivering effective clinical care and treatment solutions across our 407 beds, which included 278 licensed detoxification beds. In addition, we have three facilities under development and an additional property under contract that we plan to develop into a new facility. The majority of our 679 employees are highly trained clinical staff who deploy evidence-based treatment programs with structured curricula for detoxification, residential treatment, partial hospitalization and intensive outpatient care. By applying a tailored treatment program based on the individual needs of each client, many of whom require treatment for a co-occurring mental health disorder, such as depression, bipolar disorder and schizophrenia, we believe we offer the level of quality care and service necessary for our clients to achieve and maintain sobriety. For the years ended December 31, 2013 and December 31, 2012, we had $115.7 million and $66.0 million in revenues, $11.6 million and $7.2 million in Adjusted EBITDA and $1.5 million and $1.1 million in net income, respectively. For the three months ended March 31, 2014 and 2013, we had $30.1 million and $29.4 million in revenues, $3.6 million and $5.0 million in Adjusted EBITDA and $0.8 million and $2.2 million in net income, respectively. See “Summary Historical and Pro Forma Consolidated Financial and Operating Data” for a discussion of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure.

We have made substantial investments in our treatment facilities with a specific focus on providing aesthetically pleasing properties and grounds, numerous amenities, healthy food and a courteous and attentive staff to distinguish us from our competitors. Our commitment to clinical excellence, premium facilities and customer service has allowed us to form relationships across a broad set of key referral sources, including hospitals, other treatment facilities, employers, alumni and employee assistance programs. In 2013 and the first quarter of 2014, approximately 90% and 91% of our revenues, respectively, were reimbursable by commercial payors, including amounts paid by such payors to clients, and the remaining portion was payable directly by our clients. We currently do not receive any revenues from government healthcare payment programs such as Medicare and Medicaid. Our platform is supported by a centralized infrastructure that includes a multi-faceted sales and marketing program, call center operations, a laboratory facility, billing and collection services and support functions. This infrastructure, in conjunction with our premium service offerings, has enabled us to develop a strong national brand. The substantial investments we have made at a corporate level contribute to our operational efficiencies and provide us flexibility to place clients at a variety of our facilities in order to optimize care that best fits both the clients’ clinical needs and their insurance benefits.

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Our Industry

Addiction is a chronic disease that affects brain function and behavior. Substance abuse, specifically the abuse of drugs and alcohol, is one of the most common and serious forms of addiction. If left untreated, substance abuse can lead to a variety of destructive social conditions such as problems at home or work, violence, crime and even death. According to the National Institute on Drug Abuse, or NIDA, the total societal cost of substance abuse in the United States is estimated to be over $600 billion annually. The 2012 National Survey on Drug Use and Health estimates that approximately 23.1 million people aged 12 or older needed treatment for a drug or alcohol use problem in the United States in 2012, of which only 2.5 million, or 10.8% of those needing treatment, received treatment at a specialty facility. The mental health and substance abuse treatment industry is expected to continue to expand as a result of a combination of factors, including increased awareness and de-stigmatization of substance abuse treatment and recent healthcare reform improving access to care, particularly for young adults now able to access their parents’ insurance. According to a 2008 report by the Substance Abuse and Mental Health Services Administration, or SAMHSA, annual spending on treatment for substance abuse in the United States is expected to grow to $35 billion in 2014.

The National Comorbidity Survey reports that up to 65% of adults with substance abuse addiction also have a co-occurring mental health disorder, defined by SAMHSA as at least one major mental health disorder, such as depression, bipolar disorder and schizophrenia, occurring concurrently with substance abuse. According to the Disease Management and Health Outcomes Journal, integrating treatment for both substance abuse and a co-occurring mental health disorder is believed to result in significantly better outcomes.

In addition to strong industry growth dynamics, the substance abuse treatment sector has several favorable attributes that differentiate it from other healthcare services sectors. Of particular note, as a result of the nature of substance abuse treatment, clients have more control in deciding when to seek treatment and who to select as their treatment provider. Also, clients are typically not limited to their local geographic area in selecting a treatment facility. As a result, providers are able to market and advertise directly to potential clients and their families on a national level.

Our Competitive Strengths

We believe the following strengths differentiate us from our competitors and will allow us to successfully operate and grow our business:

• Leading substance abuse treatment platform. We believe we are a leading provider of substance abuse treatment services based on the scale and nationwide reach of our platform, quality of our facilities and breadth of our treatment capabilities. We believe we offer one of the largest for-profit fully licensed programs to treat drug and alcohol addiction regardless of stage or severity. In addition, we believe our commitment to quality and customer service, as well as our dedication to clinical excellence, results in improved client retention, an important factor in ensuring clients receive the care they need.

• Comprehensive addiction treatment programs with co-occurring mental health disorder treatment capabilities. Our clinical staff is trained to deploy an evidence-based treatment program with a structured curriculum, particularly focused on identifying and addressing the needs of clients with co-occurring mental health disorders. Given that up to 65% of adults with substance abuse addiction are estimated to also have at least one co-occurring mental health disorder, we believe our medical and clinical staff’s ability to identify and treat both disorders is critical in helping clients achieve sobriety. We believe our ability to address these complex conditions enhances our reputation with clients, their families and other referral sources.

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• Proven ability to develop de novo treatment facilities. We have a successful track record of identifying suitable de novo sites, securing properties, overseeing the licensing and development of facilities and integrating de novo centers into our broader platform. We have successfully transformed acquired properties, such as a luxury spa and an assisted living facility, into substance abuse treatment facilities. We believe our skill and experience in executing our de novo development strategy provides us with a competitive advantage in quickly and cost-effectively developing substance abuse treatment facilities and enrolling clients.

• Multi-faceted sales and marketing program. Our national sales and marketing program provides a competitive advantage compared to treatment facilities that primarily target local geographic areas and use fewer marketing channels to attract clients. Our national team of 36 professional sales representatives develops and maintains relationships with key referral sources such as hospitals, other treatment facilities, employers, alumni and employee assistance programs. In addition, our team of over 60 centralized, trained call center treatment consultants provides coverage and support 24 hours a day, seven days a week. Our coordinated approach across multiple channels and our ability to serve clients from our varied facilities across the United States allows us to reach a broad audience of potential clients and build a nationally recognized brand.

• Attractive payor mix and diversified client base. We have generated revenues solely from commercial payors and our clients with no reimbursement from government healthcare payment programs such as Medicare and Medicaid, which are typically subject to lower reimbursement rates. The relationships we have developed with our referral sources enhance our interactions with payors and help us achieve our attractive reimbursement profile. For the year ended December 31, 2013 and the three months ended March 31, 2014, approximately 90% and 91% of our revenues, respectively, were reimbursable by commercial payors, including amounts paid by such payors to clients, with the remaining portion of our revenues payable directly by our clients. No single payor in 2013 or the first quarter of 2014 accounted for more than 12.3% and 16.1% of our revenue reimbursements, respectively.

• Strong financial performance and attractive returns on invested capital. We have achieved strong financial performance in terms of recent growth and profitability. Our revenues for the year ended December 31, 2013 were $115.7 million, representing a 75.3% increase over $66.0 million in 2012. Our revenues for the three months ended March 31, 2014 were $30.1 million, representing a 2.2% increase over $29.4 million for the same period in 2013. We have demonstrated the ability to generate attractive returns on investment with our de novo development strategy. Each of our two de novo developments, Greenhouse and Desert Hope, which added 218 total beds on a combined basis, was profitable within its first year of operation.

• Experienced management team with track record of success. Our senior management team, with an average of over 15 years of experience in the healthcare industry, has significant experience developing, operating and growing a variety of behavioral health treatment facilities. We believe the combination of our management team’s skills and experiences provides us with an advantage in developing high quality de novo treatment facilities and quickly integrating them into our broader platform.

Our Growth Strategy

We have developed our company and the American Addiction Centers national brand through substantial investment in our facilities, our clinical expertise, our professional staff and our national sales and marketing program. We seek to extend our position as a leading provider of treatment for drug and alcohol addiction by executing the following growth strategies:

• Improve census at existing facilities by increasing our client leads through our multi-faceted sales and marketing program.

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• Expand capacity at existing residential facilities by selectively increasing our number of residential beds, expanding our clinical facility space and hiring additional clinical staff to enable us to provide services to additional clients.

• Pursue de novo development of residential facilities built on the success of two full-service residential treatment facilities that we developed in the past two years: Greenhouse, a former luxury spa in Dallas, Texas, and Desert Hope, a former assisted living facility in Las Vegas, Nevada.

• Opportunistically pursue treatment facility acquisitions to expand and diversify our geographic presence and service offerings.

• Expand outpatient operations to complement our broader network of residential treatment facilities and further enhance our brand and our ability to provide a more comprehensive suite of services across the spectrum of care.

• Target complementary growth opportunities, including providing pharmacy and laboratory services, expanding licensure of existing facilities, treating other mental health and wellness disorders and expanding other ancillary services.

Our Substance Abuse Treatment Facilities

The following table presents information, as of March 31, 2014, about our network of substance abuse treatment facilities, including current facilities, facilities under development and properties under contract:

Facility Name(1)	Location	Capacity (beds)			First Clients Served	Treatment Certifications(2)	Real Property Leased / Owned
Desert Hope	Las Vegas, NV		148		2013	DTX, RTC, PHP, IOP	Owned
Greenhouse	Grand Prairie, TX (Dallas area)		130	(3)	2012	DTX, RTC, PHP, IOP	Owned
Forterus	Temecula, CA		76		2004	DTX, RTC, PHP, IOP	Leased
Singer Island	West Palm Beach, FL		65		2012	PHP, IOP	Leased
San Diego Addiction Treatment Center	San Diego, CA		36		2010	DTX, RTC, PHP, IOP	Leased
The Academy	West Palm Beach, FL		12		2012	PHP, IOP	Leased
TBD	Riverview, FL (Tampa area)		164	(4)	Under Development(4)	DTX, RTC, PHP, IOP(4)	Owned
TBD	Arlington, TX (Dallas area)		n/a		Under Development(5)	PHP, IOP(5)	Owned
TBD	Las Vegas, NV		n/a		Under Development(6)	PHP, IOP(6)	Owned
TBD	Ringwood, NJ (New York City area)		150	(7)	Under Contract(7)	DTX, RTC, PHP, IOP(7)	n/a

(1) Excluded from this table is our non-substance abuse treatment facility, FitRx, which is a 20-bed leased facility located in Brentwood, Tennessee that provides outpatient treatment services for men and women who struggle with obesity-related behavioral disorders.

(2) DTX: Detoxification; RTC: Residential Treatment; PHP: Partial Hospitalization; IOP: Intensive Outpatient.

(3) This figure includes 60 additional beds anticipated as a result of the ongoing Greenhouse expansion, which we anticipate to be completed in the second half of 2014.

(4) Reflects our current expectations with respect to this facility, which we anticipate will begin construction in the second half of 2014 and open in the first half of 2015.

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(5) In March 2014, we acquired an approximately 20,000 square foot property in Arlington, Texas. We intend to begin construction of an outpatient treatment facility at this location in the third quarter of 2014, and we are targeting opening this facility in the second half of 2014. The facility will provide treatment services and additional programming space for our Greenhouse facility. Treatment certifications reflect our expectations.

(6) In May 2014, we acquired an approximately 20,000 square foot property in Las Vegas, Nevada. We intend to begin construction of an outpatient treatment facility at this location in the third quarter of 2014, and we are targeting opening this facility by the end of 2014. The facility will provide treatment services and additional programming space for our Desert Hope facility. Treatment certifications reflect our expectations.

(7) We entered into a purchase agreement to acquire a 96 acre property located fewer than 50 miles from New York City, subject to the satisfaction of certain closing conditions and the arrangement of financing. We anticipate beginning construction of a residential treatment facility at this location by early 2015, and we are targeting opening this facility in 2016 with approximately 150 beds. Treatment certifications reflect our expectations.

Risks Related to Our Business

Our business is subject to a number of risks that you should understand before making an investment decision. These risks, which are discussed more fully in “Risk Factors” following this prospectus summary, include the following:

• We currently operate a limited number of treatment facilities. Our revenues, profitability and cash flows could be materially adversely affected if we are unable to operate certain key treatment facilities or our corporate office.

• We rely on our multi-faceted sales and marketing program to continuously attract and enroll clients to our network of facilities. Any disruption in our national sales and marketing program would have a material adverse effect on our business, financial condition and results of operations.

• We derive a significant portion of our revenues from providing services to clients covered by third-party payors who could reduce their reimbursement rates or otherwise restrain our ability to obtain, or provide services to, clients. This risk is heightened because we are generally an “out-of-network” provider.

• An increase in uninsured and underinsured clients or the deterioration in the collectability of the accounts of such clients could have a material adverse effect on our business, financial condition and results of operations.

• If we overestimate the reimbursement amounts that payors will pay us for services performed, it would increase our revenue adjustments, which could have a material adverse effect on our revenues, profitability and cash flows.

• Our business may face significant risks with respect to future de novo expansion, including the time and costs of identifying new geographic markets, the ability to obtain necessary licensure and other zoning or regulatory approvals and significant start-up costs including advertising, marketing and the costs of providing equipment, furnishings, supplies and other capital resources.

• Our acquisition strategy exposes us to a variety of operational and financial risks, which may have a material adverse effect on our business, financial condition and results of operations.

• Our ability to maintain census and the average length of stay of our clients is dependent on a number of factors outside of our control, and if we are unable to maintain census, or if we experience a significant decrease in average length of stay, our business, results of operations and cash flows could be materially adversely affected.

• We will need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.

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• If we fail to comply with the extensive laws and government regulations impacting our industry, we could suffer penalties, be the subject of federal and state investigations and potential claims and legal actions by clients, employees and others or be required to make significant changes to our operations, which may reduce our revenues, increase our costs and have a material adverse effect on our business, financial condition and results of operations.

• Our directors, executive officers and principal stockholders and their respective affiliates will continue to have substantial control over the company after this offering and could delay or prevent a change in corporate control.

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. We will remain an emerging growth company until the earlier of (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of this offering, (b) in which we have total annual gross revenues of at least $1.0 billion, or (c) in which we are deemed to be a large accelerated filer, which means the market value of our common stock that is held by non-affiliates was $700.0 million or more as of the prior June 30th, and (2) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

As an emerging growth company, we may take advantage of specified reduced disclosure and other requirements that may otherwise be applicable to public companies. These provisions include:

• only two years of audited consolidated financial statements in addition to any required unaudited interim financial statements with correspondingly reduced “Management’s Discussion and Analysis of Financial Condition and Results of Operations” disclosure;

• reduced disclosure about our executive compensation arrangements;

• no requirement that we hold non-binding advisory votes on executive compensation or golden parachute arrangements; and

• exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.

We have taken advantage of some of these reduced requirements and may continue to do so for so long as we remain an emerging growth company, and thus the information we provide stockholders may be less than what you might receive from other public companies in which you hold shares.

Reorganization Transactions

AAC Holdings, Inc. was incorporated as a Nevada corporation on February 12, 2014 for the purpose of acquiring all of the common stock of American Addiction Centers, Inc. and to engage in certain reorganization transactions, as described below. In April 2014, Holdings completed the following transactions:

• a voluntary private share exchange with certain stockholders of AAC, whereby holders representing 93.6% of the outstanding shares of common stock of AAC exchanged their shares on a one-for-one basis for shares of Holdings common stock, which we refer to as the Private Share Exchange;

• substantially concurrent with the Private Share Exchange, the acquisition of all of the outstanding common membership interests of Behavioral Healthcare Realty, LLC, or BHR, an entity controlled by related parties, which owns all the outstanding equity interests of Concorde Real Estate, LLC, Greenhouse Real Estate, LLC and The Academy Real Estate, LLC, which entities own the Desert Hope,

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Greenhouse and Riverview, Florida properties, respectively, in exchange for $3.0 million in cash, the assumption of a $1.8 million term loan and 521,999 shares of Holdings common stock, representing 5.2% of our outstanding common stock immediately prior to this offering, which we refer to as the BHR Acquisition; and

• substantially concurrent with the Private Share Exchange and BHR Acquisition, the acquisition of all of the outstanding membership interests of Clinical Revenue Management Services, LLC, or CRMS, an entity controlled by related parties, which provides client billing and collection services for AAC, in exchange for $0.5 million in cash and 149,144 shares of Holdings common stock, representing 1.5% of our outstanding common stock immediately prior to this offering, which we refer to as the CRMS Acquisition.

As a result of the foregoing transactions, which are collectively referred to as the “Reorganization Transactions,” Holdings now owns (i) 93.6% of the outstanding common stock of AAC, (ii) 100% of the outstanding common membership interests in BHR, which represents 100% of the voting rights in BHR, and (iii) 100% of the outstanding membership interests in CRMS. To help fund or facilitate the Reorganization Transactions, the following additional financing transactions were undertaken in 2014 prior to or in connection with the Reorganization Transactions: (i) AAC sold 471,843 shares of its common stock in a private placement to certain accredited investors from February 2014 through April 2014, with net proceeds of $6.0 million, (ii) BHR sold 8.5 Series A Preferred Units in a private placement to certain accredited investors in January and February 2014 with net proceeds of $0.4 million, (iii) BHR redeemed all of the outstanding 36.5 Series A Preferred Units from certain accredited investors in April 2014 and (iv) BHR sold 160 new Series A Preferred Units in a private placement to an accredited investor in April 2014 with net proceeds of $7.7 million. For additional information related to the Reorganization Transactions, see “Unaudited Pro Forma Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 18 to our audited financial statements included elsewhere in this prospectus.

Subsequent to this offering, we expect to conduct a subsidiary short-form merger with AAC whereby the legacy holders who did not participate in the Private Share Exchange, representing 6.4% of the outstanding common stock of AAC, would be entitled to receive Holdings shares on a one-for-one basis. Upon the completion of the short-form merger, Holdings would own 100% of AAC. No assurance can be given that the subsequent short-form merger will occur in a timely manner or at all.

Corporate Information

AAC Holdings, Inc. is a Nevada corporation. Our principal executive offices are located at 115 East Park Drive, Second Floor, Brentwood, Tennessee 37027, and our telephone number is (615) 732-1231. Our website address is www.americanaddictioncenters.com. The information contained on, or that can be accessed through, our website is not a part of this prospectus. Investors should not rely on any such information in deciding whether to purchase our common stock. We have included our website address in this prospectus solely as an inactive textual reference.

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The Offering

Common stock offered by us              shares

Common stock to be outstanding immediately after this offering              shares

Option to purchase additional shares We have granted the underwriters a 30-day option to purchase up to an additional              shares of our common stock to cover over-allotments, if any.

Use of proceeds We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses payable by us, will be approximately $         million assuming a public offering price of $         per share (the midpoint of the range set forth on the cover page of this prospectus). We intend to use the net proceeds to repay approximately $         million of outstanding indebtedness and the remaining net proceeds for working capital and other general corporate purposes. In addition, we may use a portion of the net proceeds of this offering to finance future potential acquisitions and de novo facility developments. We may allocate funds from other sources to fund some or all of these activities. See “Use of Proceeds.”

Dividend policy We do not anticipate paying dividends on our common stock for the foreseeable future. See “Dividend Policy.”

Risk factors For a discussion of certain factors you should consider before making an investment, see “Risk Factors.”

Conflict of interest An affiliate of Wells Fargo Securities, LLC, an underwriter in this offering, is the lender under our amended and restated credit facility and may receive more than 5% of the net proceeds from this offering. Accordingly, Wells Fargo Securities, LLC may be deemed to have a “conflict of interest” with us within the meaning of Rule 5121 of the Conduct Rules of the Financial Industry Regulatory Authority, Inc., or FINRA. William Blair & Company, L.L.C. has agreed to serve as a “qualified independent underwriter” as defined by FINRA and performed due diligence investigations and reviewed and participated in the preparation of the registration statement of which this prospectus forms a part. See “Underwriting—Conflict of Interest.”

Proposed New York Stock Exchange symbol “AAC”

Directed share program At our request, the underwriters have reserved up to 5% of the common stock being offered by this prospectus for sale at the initial public offering price to our directors, officers and certain of our employees. See “Underwriting.”

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The number of shares of common stock to be outstanding immediately after this offering is based on the number of shares outstanding as of                     , 2014, plus the issuance of             shares of common stock in this offering and excludes (i) 1,000,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan, or the 2014 Plan, which we have adopted in connection with this offering, and (ii) 630,886 shares of common stock, which we plan to issue in connection with the subsidiary short-form merger with AAC subsequent to this offering.

Except as otherwise noted, all information in this prospectus:

• assumes no exercise of the underwriters’ over-allotment option; and

• gives effect to a             -for-1 stock split effected on                     , 2014.

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SUMMARY HISTORICAL AND PRO FORMA CONSOLIDATED FINANCIAL AND OPERATING DATA

The following tables present AAC’s summary historical and pro forma consolidated financial and operating data as of the dates and for the periods indicated. Holdings was formed as a Nevada corporation on February 12, 2014, and acquired 93.6% of the outstanding shares of common stock of AAC prior to the consummation of this offering in connection with the Reorganization Transactions, and Holdings therefore controls AAC. Holdings has not engaged in any business or other activities except in connection with its formation and the Reorganization Transactions. Accordingly, all financial and other information herein relating to periods prior to the completion of the Reorganization Transactions is that of AAC and its consolidated subsidiaries.

The summary consolidated financial data as of and for the years ended December 31, 2012 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The summary consolidated financial data for the year ended December 31, 2011 are derived from our audited consolidated financial statements not included in this prospectus. The summary consolidated financial data as of March 31, 2014 and for the three months ended March 31, 2013 and 2014 are derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The results for the three months ended March 31, 2013 and the three months ended March 31, 2014 are not necessarily indicative of the results that may be expected for the entire year. The following summary consolidated financial data should be read together with our audited consolidated financial statements, unaudited condensed consolidated financial statements and accompanying notes and information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The summary unaudited pro forma financial and other data for the year ended December 31, 2013 and as of and for the three months ended March 31, 2014 have been adjusted to give effect to this offering and our intended use of proceeds from this offering and certain other transactions as described in the section titled “Unaudited Pro Forma Consolidated Financial Statements” included elsewhere in this prospectus. Specifically, the “Pro Forma as Adjusted” columns in the summary unaudited pro forma financial and other data give effect to the Reorganization Transactions, the related financing transactions and this offering and our intended use of proceeds therefrom as described in “Use of Proceeds,” in each case for the year ended December 31, 2013 and as of and for the three months ended March 31, 2014. This data is subject and gives effect to the assumptions and adjustments described in the notes accompanying the unaudited pro forma consolidated financial statements included elsewhere in this prospectus. The summary unaudited pro forma financial data is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the transactions and this offering been consummated on the dates indicated and does not purport to be indicative of financial condition data or results of operations as of any future date or for any future period.

The “Pro Forma as Adjusted” columns do not include the effects of the CRMS Acquisition, as CRMS’s only revenue stream is payments from us, and CRMS no longer has revenues subsequent to the completion of the CRMS Acquisition. Accordingly, CRMS does not meet the definition of a business under Regulation S-X Rule 11-01(d), and this transaction is not permitted to be included in the unaudited pro forma consolidated financial statements included elsewhere in this prospectus. However, for the purposes of the following table we have included an additional column to reflect the pro forma effects of the CRMS Acquisition because it provides investors with information from which to analyze our financial results in a manner that is consistent with the way management reviews and analyzes our results of operations as a combined company following the consummation of the Reorganization Transactions and the related financing transactions. In addition, we believe the “Pro Forma as Adjusted including CRMS Acquisition” income statement data provide investors with the most meaningful comparison between our financial results for prior and future periods.

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					Year Ended December 31, 2013								Three Months Ended March 31, 2014
	Year Ended December 31,							Pro Forma as Adjusted	Pro Forma as Adjusted including CRMS Acquisition(1)	Three Months Ended March 31,         2013          Actual (unaudited)			Actual (unaudited)		Pro Forma as Adjusted	Pro Forma as Adjusted including CRMS Acquisition(1)
	2011		2012		Actual
	(in thousands, except for share and per share amounts)
Income Statement Data:
Revenues	$	28,275	$	66,035	$	115,741		$	$	$	29,438		$	30,083	$	$
Operating expenses:
Salaries, wages and benefits		9,171		25,680		46,856					10,911			11,544
Advertising and marketing		4,915		8,667		13,493					3,148			3,290
Professional fees		1,636		5,430		10,277					2,055			2,497
Client related services		5,791		8,389		7,986					1,897			2,457
Other operating expenses		2,448		6,384		11,615					2,806			2,723
Rents and leases		1,196		3,614		4,634					1,335			470
Provision for doubtful accounts		1,063		3,344		10,950					2,640			4,173
Litigation settlement(2)		—		—		2,588					—			—
Restructuring(3)		—		—		806					—			—
Depreciation and amortization		195		1,288		3,003					683			1,077
Total operating expenses		26,415		62,796		112,208					25,475			28,231
Income from operations		1,860		3,239		3,533					3,963			1,852
Interest expense		337		980		1,390					410			354
Other expense, net		—		12		36					(38	)		42
Income before income tax expense		1,523		2,247		2,107					3,591			1,456
Income tax expense		652		1,148		615					1,352			615
Net income		871		1,099		1,492					2,239			841
Less: net loss (income) attributable to noncontrolling interest(4)		—		405		(706	)				(146	)		178
Net income attributable to American Addiction Centers, Inc.		871		1,504		1,786					2,093			1,019
Deemed contribution – redemption of Series B Preferred		—		—		1,000					1,000			—
Net income available to American Addiction Centers, Inc. common stockholders	$	871	$	1,504	$	1,786		$	$	$	3,093		$	1,019	$	$
Earnings per share attributable to common stockholders(5):
Basic	$	0.20	$	0.19	$	0.20		$	$	$	0.36		$	0.11	$	$
Diluted	$	0.20	$	0.19	$	0.20		$	$	$	0.36		$	0.11	$	$
Weighted-average shares outstanding(5):
Basic		4,287,131		7,770,359		8,819,062					8,503,928			9,175,580
Diluted		4,314,051		7,869,017		9,096,660					8,566,920			9,225,073
Other Financial Information:
Adjusted EBITDA(6)	$	2,055	$	7,168	$	11,558		$	$	$	5,002		$	3,592	$	$

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	As of December 31,				As of March 31, 2014
					Actual (unaudited)		Pro Forma		AAC Holdings, Inc. Pro Forma as Adjusted(7)
	2012		2013
							(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	740	$	2,012	$	4,340	$	9,077	$
Working capital		3,190		1,220		3,733		8,143
Total assets		53,598		81,638		89,557		94,308
Total debt, including current portion		25,222		43,075		45,015		46,774
Total mezzanine equity (including noncontrolling interest)(8)		11,613		11,842		12,267		7,739
Total stockholders’ equity (including noncontrolling interest)(9)		4,678		11,883		16,519		24,089

	Year Ended December 31,				Three Months Ended March 31,
	2012		2013		2013		2014
Operating Metrics: (unaudited):
Average daily census(10)		238		339		368		371
Average daily revenue(11)	$	759	$	935	$	889	$	901
Average net daily revenue(12)	$	722	$	847	$	809	$	776
New admissions(13)		2,934		4,027		1,085		1,065
Bed count at end of period(14)		338		431		486		427

(1) CRMS’s only revenue stream is payments from us, and CRMS no longer has revenues upon completion of the CRMS Acquisition. Accordingly, CRMS does not meet the definition of a business under Regulation S-X Rule 11-01(d), and this transaction is not permitted to be included in the unaudited pro forma consolidated financial statements included elsewhere in this prospectus. The 2013 column includes the historical results of CRMS for the year ended December 31, 2013 that consist of revenues of $3.4 million, salaries, wages and benefits of $2.0 million, professional fees of $0.1 million, other operating expenses of $0.5 million, rentals and leases of $0.2 million and depreciation and amortization of $0.1 million. These historical financial results are as adjusted for (i) the elimination of CRMS’s revenues of $3.4 million and the elimination of the corresponding $3.4 million of professional fees we paid to CRMS, (ii) the reduction of $0.3 million in salary expense for an executive officer whose employment ended effective upon the consummation of the CRMS Acquisition and (iii) recording a tax provision of $0.3 million on the historical income of CRMS and the pro forma adjustments at a tax rate of 36.0%. The first quarter 2014 column includes the historical financial results of CRMS for the three months ended March 31, 2014 that consist of revenues of $1.1 million, salaries, wages and benefits of $1.1 million, professional fees of $6,000, other operating expense of $0.1 million and rents and leases of $0.1 million. These historical results are adjusted for (i) the elimination of CRMS’s revenues of $1.1 million and the elimination of the corresponding $1.1 million of professional fees we paid to CRMS, (ii) the reduction of $0.1 million in salary expense for an executive officer whose employment ended effective upon the consummation of the CRMS Acquisition and (iii) recording a tax provision of $19,000 on the historical income of CRMS and the pro forma adjustments at a tax rate of 36.0%.

(2) We recorded a $2.6 million reserve in the second quarter of 2013 in connection with a consolidated wage and hour class action claim. We made a payment of $2.6 million in the second quarter of 2014 to settle the matter. For additional discussion of this litigation settlement, see Note 16 to our audited financial statements included elsewhere in this prospectus.

(3) During the first half of 2013, management adopted restructuring plans to centralize our call centers and to close the Leading Edge facility. As a result, aggregate restructuring and exit charges of $0.8 million were recognized in 2013. We did not recognize any restructuring expenses during 2012 as expenses related to the corporate relocation were not significant.

(4) Represents the net loss (income) attributable to the noncontrolling interest in BHR (for 2012, 2013 and first quarter 2014) and the Professional Groups (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidation of VIEs”) (for 2013 and first quarter 2014) and the net loss (income) in the Pro Forma columns, the Pro Forma as Adjusted columns and the Pro Forma as Adjusted including CRMS Acquisition columns of (i) the Professional Groups and (ii) the net income attributable to the stockholders of AAC that did not exchange their shares for Holdings common stock.

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(5) After giving effect to the subsidiary short-form merger with AAC that we expect to complete subsequent to this offering, pro forma basic and diluted earnings per share attributable to common stockholders would be              and             , respectively, based on pro forma basic and diluted weighted-average shares outstanding of                      and                     , respectively.

(6) Adjusted EBITDA is a “non-GAAP financial measure” as defined under the rules and regulations promulgated by the U.S. Securities and Exchange Commission or SEC. We define Adjusted EBITDA as net income adjusted for interest expense, depreciation and amortization expense, income tax expense, stock-based compensation and related tax reimbursements, litigation settlement and restructuring charges and acquisition related de novo startup expenses, which includes professional services for accounting, legal and valuation services related to the acquisitions and legal and licensing expenses related to de novo projects. Adjusted EBITDA, as presented in this prospectus, is considered a supplemental measure of our performance and is not required by, or presented in accordance with, generally accepted accounting principles in the United States or GAAP. Adjusted EBITDA is not a measure of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measures derived in accordance with GAAP. We have included information concerning Adjusted EBITDA in this prospectus because we believe that such information is used by certain investors as a measure of a company’s historical performance. We believe this measure is frequently used by securities analysts, investors and other interested parties in the evaluation of issuers of equity securities, many of which present EBITDA and Adjusted EBITDA when reporting their results. Because Adjusted EBITDA is not determined in accordance with GAAP, it is subject to varying calculations and may not be comparable to the Adjusted EBITDA (or similarly titled measures) of other companies. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. The following table presents a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure, for each of the periods indicated:

					Year Ended December 31, 2013				Three Months Ended March 31,         2013          Actual (unaudited)		Three Months Ended March 31, 2014
	Year Ended December 31,						Pro Forma as Adjusted	Pro Forma as Adjusted including CRMS Acquisition			Actual (unaudited)		Pro Forma as Adjusted	Pro Forma as Adjusted including CRMS Acquisition
	2011		2012		Actual
Net Income	$	871	$	1,099	$	1,492	$	$	$	2,239	$	841	$	$
Non-GAAP Adjustments:
Interest expense		337		980		1,390				410		354
Depreciation and amortization		195		1,288		3,003				683		1,077
Income tax expense		652		1,148		615				1,352		615
Stock-based compensation and related tax reimbursements		—		2,408		1,649				303		705
Litigation settlement		—		—		2,588				—		—
Restructuring		—		—		806				—		—
Acquisition related and de novo start-up expenses		—		245		15				15		—
Adjusted EBITDA	$	2,055	$	7,168	$	11,558	$	$	$	5,002	$	3,592	$	$

(7) Reflects the issuance of             shares of Holdings common stock at the initial public offering price of $             per share (the midpoint of the price range set forth on the cover page of this prospectus) and the estimated net proceeds of $             and a use of a portion of the proceeds to repay approximately $             million of outstanding indebtedness. Each $1.00 increase or decrease in the assumed initial public offering price of $             per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our cash and cash equivalents, working capital, total assets and total stockholders’ equity by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(8) For additional discussion of mezzanine equity and noncontrolling interest, see Note 11 to our audited financial statements included elsewhere in this prospectus.

(9) Noncontrolling interest represents the equity of BHR and the Professional Groups (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidation of VIEs”) that we do not own as well as the outstanding shares of AAC common stock that were not exchanged for shares of Holdings common stock.

(10) Includes client census at all of our owned or leased inpatient facilities, including FitRx, as well as beds obtained through contractual arrangements to meet demand exceeding capacity. For additional information about contracted beds, see “Revenues” under Note 3 to our audited financial statements included elsewhere in this prospectus.

(11) Average daily revenue is calculated as total revenues during the period divided by the product of the number of days in the period multiplied by average daily census.

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(12) Average net daily revenue is calculated as total revenues less provision for doubtful accounts during the period dividend by the product of the number of days in the period multiplied by average daily census.

(13) Includes total client admissions for the period presented.

(14) Bed count at end of period includes all beds at owned and leased inpatient facilities, including FitRx, but excludes contracted beds as of December 31, 2012. We did not have any contracted beds as of any other period presented. Bed count at the end of the 2012 period and the March 31, 2013 period includes 70 beds at our former Leading Edge facility, which was closed in the second quarter of 2013. For additional information regarding the closure of the Leading Edge facility, see Note 13 to our audited financial statements included elsewhere in this prospectus. In the first quarter of 2014, we added two beds at the FitRx facility to accommodate increased client census and eliminated six beds at The Academy facility as a result of an expired housing lease.

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RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the risk factors discussed below, as well as the other information presented in this prospectus, in evaluating us, our business and an investment in our common stock. If any of the matters highlighted by the following risks actually occur, our business, financial condition, results of operations, cash flows and prospects could be materially and adversely affected. As a result, the trading price of our common stock could decline and you could lose all or part of your investment in our common stock. See “Special Note Regarding Forward-Looking Statements.”

Risks Related to Our Business

Our revenues, profitability and cash flows could be materially adversely affected if we are unable to operate certain key treatment facilities or our corporate office.

We derive a significant portion of our revenues from three treatment facilities located in California, Nevada and Texas. These treatment facilities accounted for 76.5% of our total revenues in 2013 and 83.8% for the three months ended March 31, 2014. It is likely that a small number of facilities will continue to contribute a significant portion of our total revenues in any given year for the foreseeable future. Additionally, we have a centralized corporate office that houses our accounting, billing and collections, information technology, marketing and call center departments. If any event occurs that would result in a complete or partial shutdown of any of these facilities or our centralized corporate office, including, without limitation, any material changes in legislative, regulatory, economic, environmental or competitive conditions in these states or natural disasters such as hurricanes, earthquakes, tornadoes or floods or prolonged airline disruptions for any reason, such event could lead to decreased revenues and/or higher operating costs, which could have a material adverse effect on our revenues, profitability and cash flows.

We rely on our multi-faceted sales and marketing program to continuously attract and enroll clients to our network of facilities. Any disruption in our national sales and marketing program would have a material adverse effect on our business, financial condition and results of operations.

We believe our national sales and marketing program provides us with a competitive advantage compared to treatment facilities that primarily target local geographic areas and use fewer marketing channels to attract clients. If any disruption occurs in our national sales and marketing program for any reason or if we are unable to effectively attract and enroll new clients to our network of facilities, our ability to maintain census could be adversely affected, which would have a material adverse effect on our business, financial condition and results of operations.

In addition, our ability to grow or even to maintain our existing level of business depends significantly on our ability to establish and maintain close working and referral relationships with hospitals, other treatment facilities, employers, alumni, employee assistance programs and other referral sources. We have no binding commitments with any of these referral sources. We may not be able to maintain our existing referral relationships or develop and maintain new relationships in existing or new markets. If we lose existing relationships with our referral sources, the number of people to whom we provide services may decline, which may adversely affect our revenues. Also, if we fail to develop new referral relationships, our growth may be restrained.

We derive a significant portion of our revenues from providing services to clients covered by third-party payors who could reduce their reimbursement rates or otherwise restrain our ability to obtain, or provide services to, clients. This risk is heightened because we are generally an “out-of-network” provider.

Managed care organizations and other third-party payors pay for the services that we provide to many of our clients. For 2013 and the three months ended March 31, 2014, approximately 90% and 91% of our revenues, respectively, were reimbursable by third-party payors, including amounts paid by such payors to clients, with the

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remaining portion payable directly by our clients. If any of these third-party payors reduce their reimbursement rates or elect not to cover some or all of our services, our business, financial condition and results of operations may decline.

In addition to limiting the amounts payors will pay for the services we provide to their members, controls imposed by third-party payors designed to reduce admissions and the length of stay for clients, commonly referred to as “utilization review,” have affected and are expected to continue to affect our facilities. Utilization review entails the review of the admission and course of treatment of a client by third-party payors. Inpatient utilization, average lengths of stay and occupancy rates continue to be negatively affected by payor-required preadmission authorization and utilization review and by payor pressure to maximize outpatient and alternative healthcare delivery services for less acutely ill clients. Efforts to impose more stringent cost controls are expected to continue. Although we are unable to predict the effect these controls and changes will have on our operations, significant limits on the scope of services reimbursed and on reimbursement rates and fees could have a material adverse effect on our business, financial condition and results of operations.

We are considered an “out-of-network” provider with respect to the vast majority of third-party payors, and, therefore, we bill our full charges for services covered by such third-party payors. Third-party payors will generally attempt to limit use of out-of-network providers by requiring clients to pay higher copayment and/or deductible amounts for out-of-network care. Additionally, third-party payors have become increasingly aggressive in attempting to minimize the use of out-of-network providers by disregarding the assignment of payment from clients to out-of-network providers (i.e., sending payments to clients instead of out-of-network providers), capping out-of-network benefits payable to clients, waiving out-of-pocket payment amounts and initiating litigation against out-of-network providers for interference with contractual relationships, insurance fraud and violation of state licensing and consumer protection laws. If third-party payors impose further restrictions on out-of-network providers, our revenues could be threatened, forcing our facilities to participate with third-party payors and accept lower reimbursement rates compared to our historic reimbursement rates.

Third-party payors also are entering into sole source contracts with some healthcare providers, which could effectively limit our pool of potential clients. Moreover, third-party payors are beginning to carve out specific services, including substance abuse treatment services, and establish small, specialized networks of providers for such services at fixed reimbursement rates. Continued growth in the use of carve-out arrangements could materially adversely affect our business to the extent we are not selected to participate in such smaller specialized networks or if the reimbursement rate is not adequate to cover the cost of providing the service.

An increase in uninsured and underinsured clients or the deterioration in the collectability of the accounts of such clients could have a material adverse effect on our business, financial condition and results of operations.

Collection of receivables from third-party payors and clients is critical to our operating performance. Our primary collection risks are (i) the risk of overestimating our net revenues at the time of billing that may result in us receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies denying claims, (iii) the risk that clients will fail to remit insurance payments to us when the commercial insurance company pays out-of-network claims directly to the client, (iv) resource and capacity constraints that may prevent us from handling the volume of billing and collection issues in a timely manner, (v) the risk that clients do not pay us for their self-pay balance (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured clients. Additionally, our ability to hire and retain experienced personnel also affects our ability to bill and collect accounts in a timely manner. We establish our provision for doubtful accounts based on the aging of the receivables and taking into consideration historical collection experience by facilities, services provided and respective payors’ historical reimbursements. At December 31, 2013 and March 31, 2014, our allowance for doubtful accounts represented approximately 35.2% and 38.5%, respectively, of our accounts receivable balance as of such date, with three commercial payors each representing in excess of 10% of the accounts receivable balance as of December 31,

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2013 and March 31, 2014. We routinely review accounts receivable balances in conjunction with these factors and other economic conditions that might ultimately affect the collectability of the client accounts and make adjustments to our allowances as warranted. Significant changes in business office operations, payor mix or economic conditions, including changes resulting from implementation of the Affordable Care Act, could affect our collection of accounts receivable, cash flows and results of operations. In addition, increased client concentration in states that permit commercial insurance companies to pay out-of-network claims directly to the client instead of us, such as California and Nevada, will adversely affect our collection of receivables. If we experience unexpected increases in the growth of uninsured and underinsured clients or in our provision for doubtful accounts or unexpected changes in reimbursement rates by third-party payors, it could have a material adverse effect on our business, financial condition and results of operations.

If we overestimate the reimbursement amounts that payors will pay us for services performed, it would increase our revenue adjustments, which could have a material adverse effect on our revenues, profitability and cash flows.

We recognize revenues from commercial payors at the time services are provided based on our estimate of the amount that payors will pay us for the services performed. We estimate the net realizable value of revenues by adjusting gross client charges using our expected realization and applying this discount to gross client charges. Through December 31, 2013, our expected realization was determined by management after taking into account historical collections received from the commercial payors since our inception compared to the gross client charges billed. Beginning in January 2014, we enhanced the methodology related to our net realizable value to more quickly react to potential changes in reimbursements by facility, by type of service and by payor. As a result, management adjusted the expected realization to reflect a twelve-month historical analysis of reimbursement data by facility in addition to considering the type of services provided, the payors and the gross client charge rates. This adjustment resulted in a decrease in our expected realization for the first quarter of 2014. Although we are unable to quantify the future effects of this change in methodology, we currently anticipate this adjustment will decrease our expected realization and net realizable value of revenues over the remainder of 2014.

During the three months ended March 31, 2014, we experienced a decline in our collection rates as expressed as a percentage of gross client charges. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of Three Months ended March 31, 2014 to Three Months ended March 31, 2013—Revenues.” A significant or sustained decrease in our collection rates could have a material adverse effect on our operating results. There is no assurance that we will be able to maintain or improve historical collection rates in future reporting periods.

Estimates of net realizable value are subject to significant judgment and approximation by management. It is possible that actual results could differ from the historical estimates management has used to help determine the net realizable value of revenues. If our actual collections either exceed or are less than the net realizable value estimates, we will record a revenue adjustment, either positive or negative, for the difference between our estimate of the receivable and the amount actually collected in the reporting period in which the collection occurred. A significant negative revenue adjustment could have a material adverse effect on our revenues, profitability and cash flows.

Certain third-party payors account for a significant portion of our revenues, and the reduction of reimbursement rates by any such payor could have a material adverse effect on our revenues, profitability and cash flows.

For the year ended December 31, 2013, approximately 12.3% of our revenue reimbursements came from Blue Cross Blue Shield of California, 12.1% came from Aetna, and 10.3% came from United Behavioral Health. No other payor accounted for more than 10% of our revenue reimbursements for the year ended December 31, 2013. For the three months ended March 31, 2014, approximately 16.1% of our revenue reimbursements came from Anthem Blue Cross Blue Shield of Colorado, 13.6% came from Blue Cross Blue Shield of California and 12.4% came from Aetna. No other payor accounted for more than 10% of our revenue

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reimbursements for the three months ended March 31, 2014. If any of these or other third-party payors reduce their reimbursement rates for the services we provide, our revenues, profitability and cash flows could be materially adversely affected.

Our business may face significant risks with respect to future de novo expansion, including the time and costs of identifying new geographic markets, the ability to obtain necessary licensure and other zoning or regulatory approvals and significant start-up costs including advertising, marketing and the costs of providing equipment, furnishings, supplies and other capital resources.

As part of our growth strategy, we intend to develop new substance abuse treatment facilities in existing and new markets, either by building a new facility from the ground up or acquiring an existing facility with an alternative use and repurposing it as a substance abuse treatment facility. Such de novo expansion involves significant risks, including, but not limited to, the following:

• identifying locations in suitable geographic markets can be a lengthy and costly process;

• a change in existing comprehensive zoning plans or zoning regulations that imposes additional restrictions on use or requirements could impact our expansion into otherwise suitable geographic markets;

• the de novo facility may require significant advertising and marketing expenditures to attract clients;

• we will need to provide each de novo facility with the appropriate equipment, furnishings, materials, supplies and other capital resources;

• our ability to obtain licensure, obtain accreditation, establish relationships with healthcare providers in the community and delays or difficulty in installing our operating and information systems;

• the time and costs of evaluating new markets, hiring experienced local physicians, management and staff and opening new facilities, and the time lags between these activities and the generation of sufficient revenues to support the costs of the expansion; and

• our ability to finance de novo expansion and possible dilution to our existing stockholders if our common stock is used as consideration.

As a result of these risks, there can be no assurance that a de novo treatment facility will become profitable.

Our acquisition strategy exposes us to a variety of operational and financial risks, which may have a material adverse effect on our business, financial condition and results of operations.

A principal element of our business strategy is to grow by acquiring other companies and assets in the mental health and substance abuse treatment industry. We evaluate potential acquisition opportunities consistent with the normal course of our business. Our ability to complete acquisitions is subject to a number of risks and variables, including our ability to negotiate mutually agreeable terms with the counterparties and our ability to finance the purchase price. We may not be successful in identifying and consummating suitable acquisitions, which may impede our growth and negatively affect our results of operations and may also require a significant amount of management resources. In addition, growth, especially rapid growth, through acquisitions exposes us to a variety of operational and financial risks. We summarize the most significant of these risks below.

Integration risks. We must integrate our acquisitions with our existing operations. This process includes the integration of the various components of our business and of the businesses we have acquired or may acquire in the future, including the following:

• physicians and employees who are not familiar with our operations;

• regulatory compliance programs; and

• disparate operating, information and record keeping systems and technology platforms.

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The integration of acquisitions with our operations could be expensive, require significant attention from management, may impose substantial demands on our operations or other projects and may impose challenges on the combined business including, without limitation, consistencies in business standards, procedures, policies and business cultures.

Benefits may not materialize. When evaluating potential acquisition targets, we identify potential synergies and cost savings that we expect to realize upon the successful completion of the acquisition and the integration of the related operations. We may, however, be unable to achieve or may otherwise never realize the expected benefits. If we do not achieve our expected results, it may adversely impact our results of operations.

Assumptions of unknown liabilities. Facilities that we acquire may have unknown or contingent liabilities, including, without limitation, liabilities for failure to comply with healthcare laws and regulations. Although we typically attempt to exclude significant liabilities from our acquisition transactions and seek indemnification from the sellers of such facilities for at least a portion of these matters, we may experience difficulty enforcing those indemnification obligations, or we may incur material liabilities for the past activities of acquired facilities. Such liabilities and related legal or other costs and/or resulting damage to a facility’s reputation could negatively impact our business.

Competing for acquisitions. We face competition for acquisition candidates primarily from other for-profit healthcare companies as well as from not-for-profit entities. Some of our competitors have greater resources than we do. As a result, we may pay more to acquire a target business or may agree to less favorable deal terms than we would have otherwise. Also, suitable acquisitions may not be accomplished due to unfavorable terms. Further, the cost of an acquisition could result in a dilutive effect on our results of operations, depending on various factors, including the amount paid for an acquired facility, the acquired facility’s results of operations, the fair value of assets acquired and liabilities assumed, effects of subsequent legislation and limits on reimbursement rate increases.

Managing growth. Some of the facilities we have acquired or may acquire in the future may have had significantly lower operating margins than the facilities we operated prior to the time of our acquisition thereof or had operating losses prior to such acquisition. If we fail to improve the operating margins of the facilities we acquire, operate such facilities profitably or effectively integrate the operations of acquired facilities, our results of operations could be negatively impacted.

Our ability to maintain census and the average length of stay of our clients is dependent on a number of factors outside of our control, and if we are unable to maintain census, or if we experience a significant decrease in average length of stay, our business, results of operations and cash flows could be materially adversely affected.

Our revenues are directly impacted by our ability to maintain census and the average length of stay of our clients. These metrics are dependent on a variety of factors, many of which are outside of our control, including the effectiveness of our sales and marketing efforts, our referral relationships, our staffing levels and facility capacity, the extent to which third-party payors require preadmission authorization or utilization review controls, competition in the industry and the decisions of our clients to seek and commit to treatment. A significant decrease in census or average length of stay could materially adversely affect our revenues, profitability and cash flows due to lower reimbursements received and the additional resources required to collect accounts receivable and to maintain our existing level of business.

Given the client-driven nature of the substance abuse treatment sector, our business is dependent on clients seeking and committing to treatment. Although increased awareness and de-stigmatization of substance abuse treatment in recent years has resulted in more people seeking treatment, the decision of each client to seek treatment is ultimately discretionary. In addition, even after the initial decision to seek treatment is made, our adult clients may decide at any time to discontinue treatment and leave our facilities against the advice of our

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physicians and other treatment professionals. If clients or potential clients decide not to seek treatment or discontinue treatment early, census and average length of stay could decrease and, as a result, our business, financial condition and results of operations could be adversely affected.

As a provider of treatment services, we are subject to governmental investigations and potential claims and legal actions by clients, employees and others, which may increase our costs and have a material adverse effect on our business, financial condition and results of operations.

Given the addiction and mental health of clients and the services provided, the substance abuse treatment industry is heavily regulated by governmental agencies and involves significant risk of liability. We and others in our industry are exposed to the risk of governmental investigations and lawsuits or other claims against us and our physicians and professionals arising out of our day to day business operations, including, without limitation, client treatment at our facilities and relationships with healthcare providers that may refer clients to us. Addressing any investigations, lawsuits or other claims may distract management and divert resources. Fines, restrictions and penalties imposed as a result of an investigation or a successful lawsuit or claim that is not covered by, or is in excess of, our insurance coverage may increase our costs and reduce our profitability. Our insurance premiums have increased year over year, and insurance coverage may not be available at a reasonable cost, especially given the significant increase in insurance premiums generally experienced in the healthcare industry.

We are also subject to potential medical malpractice lawsuits and other legal actions in the ordinary course of business. Some of these actions may involve large claims as well as significant defense costs. We cannot predict the outcome of these lawsuits or the effect that findings in such lawsuits may have on us. All professional and general liability insurance we purchase is subject to policy limitations. We believe that, based on our past experience, our insurance coverage is adequate considering the claims arising from the operation of our facilities. While we continuously monitor our coverage, our ultimate liability for professional and general liability claims could change materially from our current estimates. If such policy limitations should be partially or fully exhausted in the future or if payments of claims exceed our estimates or are not covered by our insurance, it could have a material adverse effect on our financial condition and results of operations.

We operate in a highly competitive industry, and competition may lead to declines in client volumes and an increase in labor costs, which could have a material adverse effect on our business, financial condition and results of operations.

The substance abuse treatment industry is highly competitive, and competition among substance abuse treatment providers (including behavioral healthcare facilities) for clients has intensified in recent years. There are other behavioral healthcare facilities that provide substance abuse and other mental health treatment services comparable to at least some of those offered by our facilities in each of the geographical areas in which we operate. Some of our competitors are owned by tax-supported governmental agencies or by nonprofit corporations and may have certain financial advantages not available to us, including endowments, charitable contributions, tax-exempt financing and exemptions from sales, property and income taxes. If our competitors are better able to attract clients, expand services or obtain favorable participation agreements at their facilities, we may experience a decline in client volume, and it could have a material adverse effect on our business, financial condition and results of operations.

Our operations depend on the efforts, abilities and experience of our management team, physicians and medical support personnel, including our nurses, mental health technicians, therapists and counselors. We compete with other healthcare providers in recruiting and retaining qualified management, nurses and other support personnel responsible for the daily operations of our facilities.

The nationwide shortage of nurses and other medical support personnel has been a significant operating issue facing us and other healthcare providers. This shortage may require us to enhance wages and benefits to

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recruit and retain nurses and other medical support personnel or require us to hire more expensive temporary or contract personnel. In addition, certain of our facilities are required to maintain specified nurse-staffing levels. To the extent we cannot meet those levels, we may be required to limit the services provided by these facilities, which could have a corresponding adverse effect on our net operating revenues.

Increased labor union activity is another factor that could adversely affect our labor costs. Although we are not aware of any union organizing activity at any of our facilities, we are unable to predict whether any such activity will take place in the future. To the extent that a portion of our employee base unionizes, it is possible that our labor costs could increase materially.

We cannot predict the degree to which we will be affected by the future availability or cost of attracting and retaining talented medical support staff. If our general labor and related expenses increase, we may not be able to raise our rates correspondingly. Our failure to either recruit and retain qualified management, nurses and other medical support personnel or control our labor costs could have a material adverse effect on our business, financial condition and results of operations.

We will need additional financing to execute our business plan and fund operations, which additional financing may not be available on reasonable terms or at all.

As of March 31, 2014, we had $3.7 million of working capital. Our acquisition and de novo development strategies will require substantial additional capital. We will consider raising additional funds through various financing sources, including the sale of our equity and debt securities and the procurement of commercial debt financing. However, there can be no assurance that such funds will be available on commercially reasonable terms, if at all. If such financing is not available on satisfactory terms, we may be unable to expand or continue our business as desired and operating results may be adversely affected. Any debt financing will increase expenses and must be repaid regardless of operating results and may involve restrictions limiting our operating flexibility. If we issue equity securities to raise additional funds, the percentage ownership of our existing stockholders will be reduced, and our stockholders may experience additional dilution in net book value per share.

Our ability to obtain needed financing may be impaired by such factors as the capital markets, both generally and specifically in our industry, which could impact the availability or cost of future financings. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, we may be required to decrease the pace of, or eliminate, our acquisition strategy and potentially reduce or even cease operations.

Our level of indebtedness could adversely affect our ability to meet our obligations under our indebtedness, react to changes in the economy or our industry and to raise additional capital to fund our operations.

As of March 31, 2014, we had total debt of $45.0 million outstanding, including $13.1 million of indebtedness with respect to our revolving line of credit that we intend to pay down with the net proceeds from this offering. We have historically relied on debt financing to fund our real estate development and our operating cash flow requirements, and we expect such debt financing needs to continue. A summary of the material terms of our indebtedness can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.” Our level of indebtedness could have important consequences to our stockholders. For example, it could:

• make it more difficult for us to satisfy our obligations with respect to our indebtedness, resulting in possible defaults on, and acceleration of, such indebtedness;

• increase our vulnerability to general adverse economic and industry conditions;

• require us to dedicate a substantial portion of our cash flows from operations to payments on indebtedness, thereby reducing the availability of such cash flows to fund working capital, capital expenditures and other general corporate requirements or to carry out other aspects of our business;

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• limit our ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements or to carry out other aspects of our business;

• limit our ability to make material acquisitions or take advantage of business opportunities that may arise; and

• place us at a potential competitive disadvantage compared to our competitors that have less debt.

Our operating flexibility is limited in significant respects by the restrictive covenants in our amended and restated credit facility, and we have been and may in the future be unable to comply with such covenants.

Our Second Amended and Restated Credit Facility (the “Credit Facility”) imposes restrictions that could impede our ability to enter into certain corporate transactions, as well as increases our vulnerability to adverse economic and industry conditions, by limiting our flexibility in planning for, and reacting to, changes in our business and industry. These restrictions limit our and our subsidiaries’ ability to, among other things:

• incur or guarantee additional debt;

• pay dividends on our capital stock or redeem, repurchase, retire or otherwise acquire any of our capital stock;

• make certain capital expenditures;

• enter into leases;

• make certain payments or investments;

• create liens on our assets;

• make any substantial change in the nature of our business as it is currently conducted; and

• merge or consolidate with other companies or transfer all or substantially all of our assets.

In addition, our Credit Facility requires us to meet certain financial covenants. The restrictions may prevent us from taking actions that we believe would be in the best interests of our business and may make it difficult for us to successfully execute our business strategy or effectively compete with companies that are not similarly restricted. Our Credit Facility also contains cross-default provisions that apply to loans made pursuant to the Credit Facility and to any other material indebtedness we may have. We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. Our ability to comply with these covenants in future periods will largely depend on our ability to successfully implement our overall business strategy. In April 2014, in connection with the amendment and restatement of our prior credit facility, we received waivers from previous periods of noncompliance with certain financial covenants and other negative covenants under that prior credit facility. We cannot assure you that we will be granted any further waivers or amendments to the Credit Facility if for any reason we are unable to comply with the terms of the Credit Facility in the future. The breach of any of these covenants or restrictions could result in a default under the Credit Facility, which could result in the acceleration of our debt. In the event of an acceleration of debt, we could be forced to apply all available cash flows to repay such debt and could be forced into bankruptcy or liquidation.

We depend heavily on key management personnel, and the departure of one or more of our key executives or a significant portion of our local facility management personnel or sales force could have a material adverse effect on our business, financial condition and results of operations.

The expertise and efforts of our key executives, including our chief executive officer, president, chief operating officer, chief financial officer and general counsel, and other key members of our facility management personnel and sales staff are critical to the success of our business. We do not currently have employment agreements or non-competition covenants with any of our key executives. The loss of the services of one or more of our key executives or of a significant portion of our facility management personnel or sales staff could significantly undermine our management expertise and our ability to provide efficient, quality healthcare services at

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our facilities. Furthermore, if one or more of our key executives were to terminate employment with us and engage in a competing business, we would be subject to increased competition, which could have a material adverse effect on our business, financial condition and results of operations.

Failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley, could have a material adverse effect on our business.

Historically, as a privately-held company, we were not required to maintain internal control over financial reporting in a manner that meets the standards of publicly traded companies required by Section 404 of Sarbanes-Oxley. As a public company, we will be required to meet these standards in the course of preparing our consolidated financial statements. If we are unable to maintain effective internal control over financial reporting, we may be unable to report our financial information on a timely basis, may suffer adverse regulatory consequences or violations of applicable stock exchange listing rules and may breach the covenants under our Credit Facility. There could also be a negative reaction in the financial markets due to a loss of investor confidence in us and the reliability of our financial statements. Confidence in our financial statements is also likely to suffer if we report a material weakness in our internal control over financial reporting. In addition, we will incur incremental costs in order to improve our internal control over financial reporting and comply with Section 404 of Sarbanes-Oxley, including increased auditing and legal fees.

A cyber security incident could cause a violation of the Health Insurance Portability and Accountability Act of 1996, or HIPAA, breach of client privacy or other negative impacts.

A cyber-attack that bypasses our information technology (“IT”) security systems causing an IT security breach, loss of individually identifiable health information or other data subject to privacy laws, loss of proprietary business information or a material disruption of our IT business systems, could have a material adverse impact on our business, financial condition and results of operations. In addition, our future results of operations, as well as our reputation, could be adversely impacted by theft, destruction, loss or misappropriation of individually identifiable health information, other confidential data or proprietary business information.

Failure to adequately protect our trademarks and any other proprietary rights could have a material adverse effect on our business, financial condition and results of operations.

We maintain a trademark portfolio that we consider to be of significant importance to our business. If the actions we take to establish and protect our trademarks and other proprietary rights are not adequate to prevent imitation of our services by others or to prevent others from seeking to block sales of our services as an alleged violation of their trademarks and proprietary rights, it may be necessary for us to initiate or enter into litigation in the future to enforce our trademark rights or to defend ourselves against claimed infringement of the rights of others. Any legal proceedings could result in an adverse determination that could have a material adverse effect on our business, financial condition and results of operations.

Risks Related to Regulatory Matters

If we fail to comply with the extensive laws and government regulations impacting our industry, we could suffer penalties, be the subject of federal and state investigations or be required to make significant changes to our operations, which may reduce our revenues, increase our costs and have a material adverse effect on our business, financial condition and results of operations.

Healthcare service providers are required to comply with extensive and complex laws and regulations at the federal, state and local government levels relating to, among other things:

• licensure, certification and accreditation of substance abuse treatment services;

• Clinical Laboratory Improvement Amendments (“CLIA”) certification and state licensure of laboratory services;

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• handling, administration and distribution of controlled substances;

• necessity and adequacy of care, quality of services, and qualifications of professional and support personnel;

• referrals of clients and permissible relationships with physicians and other referral sources;

• billings for reimbursement from commercial payors;

• consumer protection issues and billing and collection of client-owed accounts issues;

• privacy and security issues associated with health-related information, client personal information and medical records, including their use and disclosure, client notices, adequate security safeguards and the handling of breaches, complaints and accounting for disclosures;

• physical plant planning, construction of new facilities and expansion of existing facilities;

• activities regarding competitors;

• state corporate practice of medicine, fee-splitting, self-referral and kickback prohibitions; and

• claim submission and collections, including penalties for the submission of, or causing the submission of, false, fraudulent or misleading claims.

Failure to comply with these laws and regulations could result in the imposition of significant civil or criminal penalties, loss of license or certification or require us to change our operations, which may have a material adverse effect on our business, financial condition and results of operations. Both federal and state government agencies as well as commercial payors have heightened and coordinated civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare organizations.

We may be required to spend substantial amounts to comply with legislative and regulatory initiatives relating to privacy and security of client health information.

There are currently numerous legislative and regulatory initiatives at the federal and state levels addressing client privacy and security concerns. In particular, federal regulations issued under the Drug Abuse Prevention, Treatment and Rehabilitation Act of 1979 strictly restrict the disclosure of client identifiable information related to substance abuse and apply to any of our facilities that receive any federal assistance, which is interpreted broadly to include facilities licensed, certified or registered by a federal agency. In addition, the federal privacy and security regulations issued under HIPAA require our facilities to comply with extensive administrative requirements on the use and disclosure of individually identifiable health information (known as “protected health information”) and require covered entities, which include most healthcare providers, to implement and maintain administrative, physical and technical safeguards to protect the security of such information. Additional security requirements apply to electronic protected health information. These regulations also provide clients with substantive rights with respect to their health information and impose substantial administrative obligations on our facilities, including the requirement to enter into written agreements with contractors to whom our programs disclose protected health information. In 2013, the U.S. Department of Health and Human Services, or HHS, published revisions to the HIPAA privacy and security regulations which require our facilities to take additional compliance measures, including revising and entering into new contractor agreements and implementing procedures to comply with more onerous standards related to notifying individuals, HHS and, in some cases, the media of breaches involving unsecured protected health information. These regulations also implemented a number of provisions that gave HHS greater enforcement authority. Violations of the HIPAA privacy and security regulations may result in significant civil and criminal penalties and data breaches and other HIPAA violations may give rise to class action lawsuits by affected clients under state law.

Our programs remain subject to any privacy-related federal or state laws that are more restrictive than the HIPAA privacy and security regulations. These laws vary by state and could impose additional requirements and penalties. For example, some states impose strict restrictions on the use and disclosure of health information

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pertaining to mental health or substance abuse. Further, most states have enacted laws and regulations that require us to notify affected individuals in the event of a data breach involving individually identifiable information. In addition, the Federal Trade Commission may use its consumer protection authority to initiate enforcement actions in response to data breaches.

As public attention is drawn to issues related to the privacy and security of medical and other personal information, federal and state authorities may increase enforcement efforts, seek to impose harsher penalties as well as revise and expand laws or enact new laws concerning these topics. Compliance with current as well as any newly established provisions or interpretations of existing requirements will require us to expend significant resources. Increased focus on privacy and security issues by enforcement authorities may increase the overall risk that our substance abuse treatment facilities may be found lacking under federal and state privacy and security laws and regulations.

Our treatment facilities operate in an environment of increasing state and federal investigation of healthcare providers.

Both federal and state government agencies have heightened and coordinated their civil and criminal enforcement efforts as part of numerous ongoing investigations of healthcare companies and various segments of the healthcare industry. These investigations relate to a wide variety of topics, including relationships with physicians, billing practices and use of controlled substances. The Affordable Care Act included an additional $350 million of federal funding over 10 years to fight healthcare fraud, waste and abuse, including $40 million for federal fiscal year 2014. From time to time, the Office of Inspector General and the Department of Justice have established national enforcement initiatives that focus on specific billing practices or other suspected areas of abuse. Although we do not currently bill Medicare or any other federal healthcare program for substance abuse treatment services, there is a risk that specific investigation initiatives could be expanded to include our treatment facilities. In addition, increased government enforcement activities, even if not directed towards our treatment facilities, also increase the risk that our facilities, physicians and other clinicians furnishing services in our facilities, or our executives and directors, could become named as defendants in private litigation such as state or federal false claims act cases or consumer protection cases, or could become the subject of complaints at the various state and federal agencies that have jurisdiction over our operations. Any governmental investigations involving any of our facilities, our executives or our directors, even if we ultimately prevail, could result in significant expense and could adversely affect our reputation.

Changes to federal, state and local regulations, as well as different or new interpretations of existing regulations, could adversely affect our operations and profitability.

Because our treatment programs and operations are regulated at federal, state and local levels, we could be affected by different regulatory changes in different regional markets. Increases in the costs of regulatory compliance and the risks of noncompliance may increase our operating costs, and we may not be able to recover these increased costs, which may adversely affect our results of operations and profitability.

Also, because many of the current laws and regulations are relatively new, we do not always have the benefit of significant regulatory or judicial interpretation of these laws and regulations. In the future, different interpretations or enforcement of these laws and regulations could subject our current or past practices to allegations of impropriety or illegality or could require us to make changes in our treatment facilities, equipment, personnel, services or capital expenditure programs. A determination that we have violated these laws, or the public announcement that we are being investigated for possible violations of these laws, could adversely affect our business, operating results and overall reputation in the marketplace.

In addition, federal, state and local regulations may be enacted that impose additional requirements on our facilities, such as the 2013 changes to the HIPAA privacy and security regulations. Adoption of legislation or the creation of new regulations affecting our facilities could increase our operating costs, restrain our growth,

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limit us from taking advantage of opportunities presented and could have a material adverse effect on our business, financial condition and results of operations. Adverse changes in existing comprehensive zoning plans or zoning regulations that impose additional restrictions on the use or requirements with respect to our facilities may affect our ability to operate our existing facilities or acquire new facilities, which may adversely affect our results of operations and profitability.

We are subject to uncertainties regarding the impact of the Affordable Care Act and related payment reform efforts, which represent a significant change to the healthcare industry.

The Affordable Care Act provides for increased access to coverage for healthcare and seeks to reduce healthcare-related expenses. Overall, the expansion of health insurance coverage under the Affordable Care Act, most of which went into effect on January 1, 2014, is expected to be beneficial to the substance abuse treatment industry. Beginning January 1, 2014, health insurers are prohibited from denying coverage to individuals because of preexisting conditions. Further, all new small group and individual market health plans are required to cover ten essential health benefit categories, which include substance abuse addiction and mental health disorder services. Likewise, as of January 1, 2014, small group and individual market plans are required to comply with the requirements of the Mental Health Parity and Addiction Equity Act of 2008. According to HHS estimates published in February 2013, these changes are expected to expand coverage for substance abuse addiction treatment and mental health disorders treatment for another 62.5 million Americans.

The expansion of commercial insurance for substance abuse treatment services under the Affordable Care Act may result in a higher demand for services from all providers. This may bring new competitors to the market, some of which may be better capitalized and have greater market penetration than we do. Further, we expect increased demand for substance abuse treatment services to also increase the demand for case managers, therapists, medical technicians and others with clinical expertise in substance abuse treatment, which may make it both more difficult to adequately staff our substance abuse treatment facilities and could significantly increase our costs in delivering treatment, which may adversely affect both our operations and profitability.

One of the many impacts of the Affordable Care Act has been a dramatic increase in payment reform efforts by federal and state government payors as well as commercial payors. These efforts take many forms including the growth of accountable care organizations (“ACOs”), pay-for-performance bonus arrangements, partial capitation arrangements and the bundling of services into a single payment. The end result of these efforts is that more risk of the overall cost of care is being transferred to providers. As institutional providers and their affiliated physicians assume more risk for the cost of care, we expect more services to be furnished within provider networks formed to accept these types of payment reform. Our ability to compete and retain our traditional sources of clients may be adversely affected by our exclusion from such networks or our inability to be included in such networks.

We cannot predict the impact the implementation of the Affordable Care Act and related rulemaking and regulations may have on our business, results of operations, cash flow, capital resources and liquidity or whether we will be able to adapt successfully to the changes required by the Affordable Care Act.

Change of ownership or change of control requirements imposed by state and federal licensure and certification agencies as well as third-party payors may limit our ability to timely realize opportunities, adversely affect our licenses and certifications, interrupt our cash flows and adversely affect our profitability.

State licensure laws and many federal healthcare programs (where applicable) impose a number of obligations on healthcare providers undergoing a change of ownership or change of control transaction. These requirements may require new license applications as well as notices given a fixed number of days prior to the closing of affected transactions. These provisions require us to be proactive when considering both internal restructuring, such as this offering and the Reorganization Transactions (as described in the section entitled “Prospectus Summary—Reorganization Transactions”), as well as acquisitions of third-party targets. Failure to provide such notices or to submit required paperwork can adversely affect licensure on a going forward basis, can subject the parties to penalties and can adversely affect our ability to operate our facilities.

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Many third-party payor agreements, including government payor programs, also have change of ownership or change of control provisions. Such provisions generally include a prior notice provision as well as require the consent of the payor in order to continue the terms of the payor agreement. A failure to abide by the terms of such provisions can result in a breach of the underlying third-party payor agreement. Further, abiding by the terms of such provisions may reopen pricing negotiations with third-party payors where the provider currently has favorable reimbursement terms as compared to the market. Currently, we have very few third-party payor agreements; however, as substance abuse treatment coverage and payment reform initiatives continue to expand, these types of provisions could have a significant impact on our ability to realize opportunities as well as adversely affect our cash flows and profitability.

We could face risks associated with, or arising out of, environmental, health and safety laws and regulations.

We are subject to various federal, state and local laws and regulations that:

• regulate certain activities and operations that may have environmental or health and safety effects, such as the generation, handling and disposal of medical wastes;

• impose liability for costs of cleaning up, and damages to natural resources from, past spills, waste disposals on and off-site or other releases of hazardous materials or regulated substances; and

• regulate workplace safety.

Compliance with these laws and regulations could increase our costs of operation. Violation of these laws may subject us to significant fines, penalties or disposal costs, which could negatively impact our results of operations, financial position or cash flows. We could be responsible for the investigation and remediation of environmental conditions at currently or formerly operated or leased sites, as well as for associated liabilities, including liabilities for natural resource damages, third-party property damage or personal injury resulting from lawsuits that could be brought by the government or private litigants relating to our operations, the operations of our facilities or the land on which our facilities are located. We may be subject to these liabilities regardless of whether we lease or own the facility, and regardless of whether such environmental conditions were created by us or by a prior owner or tenant, or by a third-party or a neighboring facility whose operations may have affected such facility or land, because liability for contamination under certain environmental laws can be imposed on current or past owners or operators of a site without regard to fault. We cannot assure you that environmental conditions relating to our prior, existing or future sites or those of predecessor companies whose liabilities we may have assumed or acquired will not have a material adverse effect on our business.

State efforts to regulate the construction or expansion of healthcare facilities could impair our ability to operate and expand our facilities.

The construction of new healthcare facilities, the expansion of existing facilities, the transfer or change of ownership of existing facilities and the addition of new beds, services or equipment may be subject to state laws that require prior approval by state regulatory agencies under certificate of need laws. These laws generally require that a state agency determine the public need for construction or acquisition of facilities or the addition of new services. Review of certificates of need and other healthcare planning initiatives may be lengthy and may require public hearings. Violations of these state laws may result in the imposition of civil sanctions or revocation of a facility’s license. We currently do not operate facilities in any states where a certificate of need is required to be obtained for capital expenditures exceeding a prescribed amount, changes in capacity or services offered. States in which we now or may in the future operate may require certificates of need under certain circumstances not currently applicable to us or may impose standards and other health planning requirements upon us. Our failure to obtain any necessary state approval could:

• result in our inability to acquire a targeted facility, complete a desired expansion or make a desired replacement; or

• result in the revocation of a facility’s license or impose civil or criminal penalties on us,

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any of which could have a material adverse effect on our business, financial condition and results of operations.

If we are unable to obtain required regulatory, zoning or other required approvals for renovations and expansions, our growth may be restrained and our operating results may be adversely affected. In the past, we have not experienced any material adverse effects from such requirements, but we cannot predict the future impact of these changes upon our operations.

Risks Related to Our Organization and Structure

We are a holding company with nominal net worth and will depend on dividends and distributions from our subsidiaries to pay dividends, if any.

AAC Holdings, Inc. is a holding company with nominal net worth. We do not have any assets or conduct any business operations other than our investments in our subsidiaries. Our business operations are conducted primarily out of our direct operating subsidiary, AAC. As a result, our ability to pay dividends, if any, will be dependent upon cash dividends and distributions or other transfers to us from our subsidiaries, including AAC. Payments to us by our subsidiaries will be contingent upon their respective earnings and subject to any limitations on the ability of such entities to make payments or other distributions to us. In addition, our subsidiaries, including our direct operating subsidiary, AAC, are separate and distinct legal entities and have no obligation to make any funds available to us.

Our directors, executive officers and principal stockholders and their respective affiliates will continue to have substantial control over the company after this offering and could delay or prevent a change in corporate control.

After this offering, our directors, executive officers and holders of more than 5% of our common stock, together with their affiliates, will beneficially own, in the aggregate, approximately     % of our outstanding common stock. In addition, Michael T. Cartwright, our Chairman and Chief Executive Officer, and his affiliates will own approximately     % of our common stock, and Jerrod N. Menz, our President, and his affiliates will own approximately     % of our common stock. As a result, these stockholders, acting together, will continue to have substantial control over the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or sale of all or substantially all of our assets. In addition, these stockholders, acting together, will continue to have significant influence over the management and affairs of our company. Accordingly, this concentration of ownership may have the effect of:

• delaying, deferring or preventing a change in corporate control;

• impeding a merger, consolidation, takeover or other business combination involving us; or

• discouraging a potential acquirer from making a tender offer or otherwise attempting to obtain control of us.

Anti-takeover provisions in our articles of incorporation, bylaws and Nevada law could prevent or delay a change in control of our company.

Provisions in our articles of incorporation and amended and restated bylaws, which we refer to as our bylaws, which bylaws will be effective upon the closing of this offering, may discourage, delay or prevent a merger, acquisition or change of control. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors and take other corporate actions. These provisions:

• permit our Board of Directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate, including the right to approve an acquisition or other change in our control;

• provide that the authorized number of directors may be changed only by resolution of the Board of Directors;

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• provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

• provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder’s notice;

• provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders;

• do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); and

• provide that special meetings of our stockholders may be called only by the chairman of the Board of Directors, our Chief Executive Officer, the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors or the holders of a majority of the outstanding shares of voting stock.

We may be subject to additional risks and uncertainties as a result of the Reorganization Transactions, including risks related to whether a short-form merger is completed in a timely manner, or at all, following the completion of this offering.

Prior to this offering, Holdings engaged in a voluntary private share exchange with certain stockholders of AAC, whereby holders representing 93.6% of the outstanding shares of common stock of AAC exchanged their shares on a one-for-one basis for shares of Holdings common stock. We refer to this transaction as the Private Share Exchange. Subsequent to this offering, Holdings expects to conduct a subsidiary short-form merger with AAC whereby the legacy holders who did not participate in the Private Share Exchange, representing 6.4% of the outstanding common stock of AAC, would be entitled to receive Holdings shares on a one-for-one basis. We currently expect to register this short-form merger on a Form S-4 registration statement to be filed with the SEC after consummation of this offering. Consummation of the short-form merger may be delayed or prevented by a number of factors outside our control. If the short-form merger is not completed in a timely manner, or at all, a significant minority interest in AAC will be held by third parties, which may affect the manner in which we conduct our business.

The lack of public company experience of our management team could adversely impact our ability to comply with the reporting requirements of U.S. securities laws.

Our management team lacks public company experience, which could impair our ability to comply with legal and regulatory requirements such as those imposed by the SEC, the New York Stock Exchange, or the NYSE, or Sarbanes-Oxley, which would apply to us after this offering. Such responsibilities include complying with federal securities laws and making required disclosures on a timely basis. Despite recent reforms made possible by the JOBS Act, compliance with these laws, regulations and requirements will occupy a significant amount of time of our management and will significantly increase our legal, accounting and other expenses, particularly after we no longer qualify as an “emerging growth company.” Our senior management may not be able to implement programs and policies in an effective and timely manner that adequately respond to such increased legal, regulatory compliance and reporting requirements, including establishing and maintaining internal controls over financial reporting. Any such deficiencies, weaknesses or lack of compliance could have a material adverse effect on our ability to comply with the reporting requirements of the Securities Exchange Act of 1934, or the Exchange Act, which is necessary to maintain our public company status. If we were to fail to fulfill those obligations, our ability to continue as a U.S. public company would be in jeopardy, in which event you could lose your entire investment in our company.

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We are an emerging growth company, and we cannot be certain if the reduced reporting requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company” as defined under the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of Sarbanes-Oxley, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We could be an emerging growth company for up to five years, although we could lose that status sooner if our revenues exceed $1 billion, if we issue more than $1 billion in non-convertible debt in a three year period or if the market value of our common stock held by non-affiliates meets or exceeds $700 million as of any June 30th before that time, in which case we would no longer be an emerging growth company as of the following December 31st. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock, and our stock price may be more volatile.

Under the JOBS Act, emerging growth companies can also delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period for implementing new or revised accounting standards and, therefore, will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies that are not emerging growth companies.

Risks Related to this Offering

Market volatility may cause our stock price and the value of your investment to decline.

The initial public offering price for our common stock was determined through negotiations between the underwriters and us. The initial public offering price may vary from the market price of our common stock after the closing of this offering. Investors may not be able to sell their common stock at or above the initial public offering price.

We expect that the price of our common stock will fluctuate substantially as the market price for our common stock after this offering will be affected by a number of factors including:

• changes in policies affecting third-party coverage and reimbursement in the United States;

• our ability to achieve market success;

• actual or anticipated variations in our results of operations or those of our competitors;

• announcements of new services, innovations or product advancements by us or our competitors;

• sales of common stock or other securities by us or our stockholders in the future;

• additions or departures of key management personnel;

• trading volume of our common stock;

• developments in our industry; and

• general market conditions and other factors unrelated to our operating performance or the operating performance of our competitors.

In addition, the stock prices of many companies in the healthcare industry have experienced wide fluctuations that have often been unrelated to the operating performance of these companies. We expect our stock price to be similarly volatile. These broad market fluctuations may continue and could harm our stock price. Following

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periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Class action securities litigation, if instituted against us, could result in substantial costs and a diversion of our management resources, which could have a material adverse effect on our business, financial condition and results of operations.

Securities analysts may not initiate coverage for our common stock or may issue negative reports, and this may have a negative impact on the market price of our common stock.

Securities analysts may elect not to provide research coverage of our common stock after the completion of this offering. The lack of research coverage may adversely affect the market price of our common stock. The trading market for our common stock may be affected in part by the research and reports that industry or financial analysts publish about us or our business, and our failure to achieve analyst earnings estimates. It may be difficult for companies such as ours, with smaller market capitalizations, to attract securities analysts that will cover our common stock. If one or more of the analysts who elects to cover us downgrades our stock, our stock price would likely decline rapidly. If one or more of these analysts ceases coverage of our company, we could lose visibility in the market, which in turn could cause our stock price to decline.

We have not paid dividends in the past and do not expect to pay dividends in the future.

We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business, and therefore, we do not anticipate paying cash dividends in the foreseeable future. Any future determination related to the payment of dividends will be made at the discretion of our Board of Directors and will depend on, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our Board of Directors may deem relevant. In addition, as a holding company, our ability to pay dividends, if any, will be dependent upon cash dividends and distributions or other transfers from our subsidiaries, including AAC. Payments to us by our subsidiaries will be contingent upon their respective earnings and subject to any limitations on the ability of such entities to make payments or other distributions to us. Our subsidiaries, including our direct operating subsidiary, AAC, are separate and distinct legal entities and have no obligation to make any funds available to us. Additionally, the terms of our Credit Facility impose restrictions on our ability to declare and pay dividends. If we do not pay dividends, a return on your investment will only occur if our stock price appreciates.

Sales of a substantial number of shares of our common stock in the public market after this offering, or the perception that they may occur, may depress the market price of our common stock.

Sales of substantial amounts of our common stock in the public market following this offering, or the perception that substantial sales may be made, could cause the market price of our common stock to decline. The lock-up agreements to be delivered by our executive officers, directors and certain of our stockholders provide that the underwriters, acting jointly and in their discretion, may release those parties, at any time, or from time to time, and without notice, from their obligation not to dispose of shares of common stock for a period of 180 days after the date of this prospectus. The underwriters do not have any pre-established conditions to waiving the terms of the lock-up agreements, and any decision by them to waive those conditions would depend on a number of factors, which may include market conditions, the performance of the common stock in the market and our financial condition at that time.

Based on the number of shares of common stock outstanding as of                     , 2014, upon completion of this offering,             shares of our common stock will be outstanding. All of the shares sold in this offering will be freely transferable unless held by an affiliate of ours. The lock-up agreements between the underwriters and our directors, executive officers and those stockholders participating in the Private Share Exchange and directed share program will expire 180 days after the date of this prospectus, at which time all of the shares of our common stock will be freely transferable subject to compliance with the provisions of Rule 144. See “Shares

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Eligible for Future Sale—Lock-up Agreements.” Our affiliates must comply with the volume, manner of sale, holding period and other limitations of Rule 144. As restrictions on resale end, the market price could drop significantly if the holders of these restricted shares sell them or are perceived by the market as intending to sell them. Any substantial sale of common stock pursuant to any resale registration statements or Rule 144 may have an adverse effect on the market price of our common stock by creating an excessive supply.

We intend to file a registration statement on Form S-8 to register the 1,000,000 shares reserved for issuance under our 2014 Equity Incentive Plan. The registration statement will become effective when filed, and, subject to applicable lock-up agreements, if any, these shares may be resold without restriction in the public marketplace. For a more detailed description, please see the section of this prospectus entitled “Shares Eligible for Future Sale—Equity Incentive Plans.”

We intend to file a registration statement on Form S-4 to register the 630,886 shares that we expect to issue pursuant to our short-form merger with AAC following the completion of this offering, whereby the legacy holders who did not participate in the Private Share Exchange, representing 6.4% of the outstanding common stock of AAC, would be entitled to receive Holdings shares on a one-for-one basis. When the registration is declared effective by the SEC, subject to applicable lock-up agreements, if any, these shares may be resold without restriction in the public marketplace. For a more detailed description, please see the section of this prospectus entitled “Shares Eligible for Future Sale—Short-Form Merger.”

New investors in our common stock will experience immediate and substantial dilution after this offering.

If you purchase shares of our common stock in this offering, you will experience immediate dilution of $             per share, based on the mid-point of the range on the cover of this prospectus, because the price that you pay will be substantially greater than the adjusted pro forma net tangible book value per share of common stock that you acquire. This dilution is due in large part to the fact that many of our earlier investors paid substantially less than the price of the shares being sold in this offering when they purchased their shares of our capital stock. In addition, in the future we may decide to convert our operating company into a limited liability company and use common units in our operating company as currency to acquire facility properties, which could result in stockholder dilution or limit our ability to sell such properties, which could have a material adverse effect on us. See the section entitled “Dilution” in this prospectus for a more detailed description of this dilution.

An active trading market for our common stock may not develop.

Prior to this offering, there has been no public market for our common stock. We intend to apply for listing of our common stock on the NYSE; however, an active trading market for our shares may never develop or be sustained following this offering. Accordingly, you may not be able to sell your shares quickly or at the market price if trading in our stock is not active.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

We make statements in this prospectus that are forward-looking statements within the meaning of the federal securities laws. Some of the statements under “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus may contain forward-looking statements that reflect our current views with respect to, among other things, future events and financial performance. Likewise, our pro forma financial statements and anticipated market conditions and results of operations are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “may,” “potential,” “predicts,” “projects,” “should,” “will,” “would,” and similar expressions intended to identify forward-looking statements, although not all forward-looking statements contain these words. You can also identify forward-looking statements by discussions of strategy, plans or intentions. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. These risks, uncertainties and other factors include, without limitation:

• our inability to operate certain key treatment facilities or our corporate office;

• our reliance on our sales and marketing program to continuously attract and enroll clients to our network of facilities;

• our dependence on payments by third-party payors with whom we are considered an “out-of-network” provider;

• the impact of an increase in uninsured and underinsured clients or the deterioration in the collectability of the accounts of such clients;

• a reduction in reimbursement rates by certain third-party payors that account for a significant portion of our revenues;

• our failure to successfully achieve growth through acquisitions and de novo expansions;

• the impact of governmental regulations on our operations and potential governmental investigations and claims or lawsuits or other claims brought against us by others;

• the impact of competition and its potential effect on census volume and the availability or cost of attracting and retaining talented medical support staff;

• our failure to obtain necessary outside financing on favorable terms or at all;

• our ability to meet our debt obligations and the impact of the restrictive covenants in our Credit Facility;

• our dependence on key management personnel;

• our failure to comply with extensive laws and government regulations impacting our industry;

• the impact of legislative and regulatory initiatives relating to privacy and security of client health information and standards for electronic transactions;

• the impact of recent healthcare reform;

• the impact of state efforts to regulate the construction or expansion of healthcare facilities on our ability to operate and expand our operations;

• the fact that our directors, executive officers and principal stockholders will continue to have substantial control over us after this offering;

• the fact that we have not previously been required to comply with regulatory requirements applicable to publicly-traded companies;

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• the impact of market volatility and the initiation or lack of security analyst coverage on the market price of our common stock;

• general economic conditions; and

• the other risks described under the heading “Risk Factors.”

The factors identified above should not be construed as an exhaustive list of factors that could affect our future results and should be read in conjunction with the other cautionary statements that are included in this prospectus. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future about which we cannot be certain.

As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame or at all. We do not undertake to update any of the forward-looking statements after the date of this prospectus except to the extent required by applicable securities laws.

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USE OF PROCEEDS

We estimate that the net proceeds from our issuance and sale of              shares of common stock in this offering will be approximately $         million, assuming an initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

A $1.00 increase or decrease in the assumed initial public offering price of $         per share would increase or decrease, as applicable, our expected net proceeds from this offering by approximately $         million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full, we estimate that the net proceeds from this offering will be approximately $         million, assuming an initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

We intend to use the net proceeds to repay approximately $         million of outstanding indebtedness, consisting of the outstanding balance of approximately $         million on our revolving line of credit and a term loan of approximately $1.8 million that we assumed and refinanced in connection with the BHR Acquisition, and the remaining net proceeds for working capital and other general corporate purposes. In addition, we may use a portion of the net proceeds of this offering to finance future potential acquisitions and de novo facility developments. We may allocate funds from other sources to fund some or all of these activities.

Pending these uses, we plan to invest the remaining net proceeds that we receive in this offering in short-term and intermediate-term interest-bearing obligations, investment-grade investments, certificates of deposit or direct or guaranteed obligations of the U.S. government.

As of March 31, 2014, the interest rate on our revolving line of credit, which is available for general corporate purposes and matures on April 1, 2015, was 2.75%. As of March 31, 2014, the interest rate under the term loan, which matures on April 15, 2015, was 5.0%. The original proceeds from the term loan were used to repay a loan of a BHR subsidiary, Greenhouse Real Estate, LLC.

An affiliate of Wells Fargo Securities, LLC, an underwriter in this offering, is the lender under our Credit Facility and may receive more than 5% of the net proceeds from this offering. Accordingly, Wells Fargo Securities, LLC may be deemed to have a “conflict of interest” with us within the meaning of Rule 5121 of the Conduct Rules of FINRA. Accordingly, this offering will be made in compliance with the applicable provisions of Rules 5110 and 5121 of the Conduct Rules regarding the underwriting of securities of a company with a member that has a conflict of interest within the meaning of those rules. William Blair & Company, L.L.C. has agreed to serve as a “qualified independent underwriter” as defined by FINRA and performed due diligence investigations and reviewed and participated in the preparation of the registration statement of which this prospectus forms a part. Wells Fargo Securities, LLC will not execute sales in discretionary accounts without the prior written specific approval of its customers. For more information, see “Underwriting—Conflict of Interest.”

DIVIDEND POLICY

We have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings to support our operations and finance the growth and development of our business. We do not intend to pay cash dividends on our common stock for the foreseeable future. Any future determination related to dividend policy will be made at the discretion of our Board of Directors and will depend on, among other factors, our results of operations, financial condition, capital requirements, contractual

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restrictions, business prospects and other factors our Board of Directors may deem relevant. In addition, as a holding company, our ability to pay dividends, if any, will be dependent upon cash dividends and distributions or other transfers from our subsidiaries, including AAC. Payments to us by our subsidiaries will be contingent upon their respective earnings and subject to any limitations on the ability of such entities to make payments or other distributions to us. Our subsidiaries, including our direct operating subsidiary, AAC, are separate and distinct legal entities and have no obligation to make any funds available to us. Additionally, the terms of our Credit Facility impose restrictions on our ability to declare and pay dividends. If we do not pay dividends, a return on your investment will only occur if our stock price appreciates.

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CAPITALIZATION

The following table sets forth our consolidated cash and cash equivalents and capitalization as of March 31, 2014:

• on an actual basis;

• on a pro forma basis to give effect to the transactions described under “Unaudited Pro Forma Consolidated Financial Statements” (the “Pro Forma Adjustments”); and

• on a pro forma as adjusted basis to give further effect to the sale of             shares of our common stock in this offering by us at an assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover page of this prospectus) and the application of the net proceeds from this offering, after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, to repay approximately $             million of outstanding indebtedness.

You should read the following table in conjunction with the sections entitled “Use of Proceeds,” “Selected Historical and Pro Forma Consolidated Financial and Operating Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

	As of March 31, 2014
	Actual (unaudited)			Pro Forma		Pro Forma as  Adjusted(1)
	(amounts in thousands, except share and per share data)
Cash and cash equivalents	$	4,340		$	9,077	$
Debt, including current portion:
Notes payable (variable interest entities)	$	23,070		$	—	$
Subordinated notes payable (non-related party)		689			689
Other non-related party debt		3,820			28,649
Related party debt		4,386			4,386
Revolving line of credit		13,050			13,050
Total long term debt, including current portion		45,015			46,774
Total mezzanine equity (including noncontrolling interest)(2)		12,267			7,739
Stockholders’ equity (including noncontrolling interest):
Holdings common stock, $0.001 par value per share, 70,000,000 shares authorized, no shares issued and outstanding, actual; 9,762,076 shares issued and outstanding, pro forma; and              shares issued and outstanding, pro forma as adjusted		—			11
Holdings common stock, 12,150 shares subscribed, net of subscription receivable of $33		—			67
AAC common stock, $0.001 par value per share, 15,000,000 shares authorized, 2,919,640 shares issued and 2,452,002 outstanding, actual; no shares issued and outstanding, pro forma; and              shares issued and outstanding, pro forma as adjusted		3			—
AAC common stock, 12,150 shares subscribed, net of subscription receivable of $33		67			—
Additional paid-in capital		14,185			17,766
AAC treasury stock		(3,671	)		—
Retained earnings		3,379			3,379
Noncontrolling interest(3)		2,556			2,866
Total stockholders’ equity (including noncontrolling interest)		16,519			24,089
Total capitalization	$	73,801		$	78,602	$

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(1) A $1.00 increase or decrease in the assumed initial public offering price of $     per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our cash and cash equivalents and total stockholders’ equity by approximately $     million, assuming the number of shares offered by us, as set forth on the cover of this prospectus, remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

(2) The pro forma column for total mezzanine equity includes 37,174 shares of AAC common stock that were not exchanged for shares of Holdings common stock and are classified as noncontrolling interest within mezzanine equity. For additional discussion of mezzanine equity, see Note 11 to our audited financial statements included elsewhere in this prospectus.

(3) Noncontrolling interest represents the equity of BHR and the Professional Groups (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidation of VIEs”) that we do not own as well as 599,051 actual and 599,051 pro forma shares of AAC common stock that were not exchanged for shares of Holdings common stock and are classified in permanent equity.

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DILUTION

If you invest in our common stock in this offering, your ownership interest will be diluted to the extent of the difference between the initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering.

Our historical net tangible book value of our common stock as of March 31, 2014 was $10.2 million, or $1.05 per share, based on the 9,733,285 shares of common stock outstanding, including 7,281,283 shares classified as mezzanine equity, as of March 31, 2014. Historical net tangible book value per share is determined by dividing the number of shares of common stock outstanding as of March 31, 2014 into our total net tangible assets (total assets less intangible assets) less total liabilities and noncontrolling interest.

Investors participating in this offering will incur immediate, substantial dilution. After giving effect to the sale of common stock offered by us in this offering at an assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover page of this prospectus), and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, our as adjusted net tangible book value as of March 31, 2014 would have been approximately $             million, or approximately $             per share of common stock. This represents an immediate increase in as adjusted net tangible book value of $             per share to existing stockholders, and an immediate dilution of $             per share to investors participating in this offering.

The following table illustrates this per share dilution to investors participating in this offering:

Assumed initial public offering price per share	$
Historical net tangible book value per share as of March 31, 2014		1.05
Increase in pro forma net tangible book value per share attributable to this offering
Pro forma as adjusted net tangible book value per share after this offering
Dilution per share to new investors in this offering	$

A $1.00 increase or decrease in the assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase or decrease, as applicable, our as adjusted net tangible book value per share after this offering by $             and the dilution in pro forma as adjusted net tangible book value to investors participating in this offering by $             per share, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us.

If the underwriters exercise their over-allotment option in full to purchase              additional shares of common stock in this offering, our as adjusted net tangible book value per share after this offering would be $             per share, the increase in the net tangible book value per share to existing stockholders would be $             per share and the dilution to investors participating in this offering would be $             per share.

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The following table summarizes, on a pro forma basis as of March 31, 2014 as adjusted for the Reorganization Transactions and the related financing transactions, the differences between the number of shares of common stock purchased from us by officers, directors and affiliated persons during the past five years (“Existing Stockholders”) and by new investors participating in this offering, the total consideration and the average price per share paid to us by Existing Stockholders and by investors participating in this offering, before deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us, at an assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover page of this prospectus):

	Shares Purchased				Total Consideration				Average Price Per Share
	Number	Percent			Amount	Percent
Existing Stockholders				%	$			%	$
New Investors
Total			100.0	%	$		100.0	%	$

A $1.00 increase or decrease in the assumed initial public offering price of $             per share (the midpoint of the price range set forth on the cover page of this prospectus) would increase or decrease, as applicable, total consideration paid to us by investors participating in this offering by approximately $             million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

Except as otherwise indicated, the discussion and tables above assume no exercise of the underwriters’ over-allotment option. If the underwriters’ over-allotment option is exercised in full, the number of shares of common stock held by Existing Stockholders will be reduced to     % of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by investors participating in this offering will be further increased to             , or     % of the total number of shares of common stock to be outstanding after this offering.

The number of shares in the table above excludes, as of March 31, 2014, 1,000,000 shares of common stock reserved for future issuance under our 2014 Equity Incentive Plan, which we have adopted in connection with this offering, and 630,886 shares of common stock that we plan to issue in connection with the subsidiary short-form merger with AAC subsequent to this offering.

We may choose to raise additional capital through the sale of equity or convertible debt securities due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that new options are issued under our equity incentive plans or we issue additional shares of common stock, other equity securities or convertible debt securities in the future, there will be further dilution to investors participating in this offering.

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UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Holdings was formed in the first quarter of 2014 and completed the Reorganization Transactions in April 2014, which included the Private Share Exchange, the BHR Acquisition and the CRMS Acquisition. As a result of the Reorganization Transactions, Holdings now owns (i) 93.6% of the outstanding common stock of AAC, (ii) 100% of the outstanding common membership interests in BHR, which represents 100% of the voting rights in BHR, and (iii) 100% of the outstanding membership interests in CRMS. To help fund or facilitate the Reorganization Transactions, the following additional financing transactions were undertaken in 2014 prior to or in connection with the Reorganization Transactions: (i) AAC sold 471,843 shares of its common stock in a private placement to certain accredited investors from February 2014 through April 2014, with net proceeds of $6.0 million, (ii) BHR sold 8.5 Series A Preferred Units to certain accredited investors in January and February 2014 with net proceeds of $0.4 million, (iii) BHR redeemed all of the outstanding 36.5 Series A Preferred Units from certain accredited investors in April 2014 and (iv) BHR sold 160 new Series A Preferred Units to an accredited investor in April 2014 with net proceeds of $7.7 million. The financing transactions that occurred in February and March 2014 are reflected in AAC’s consolidated financial statements as of and for the three months ended March 31, 2014 and are reflected as pro forma adjustments in the unaudited pro forma consolidated statement of income for the year ended December 31, 2013. For additional information related to the Reorganization Transactions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus.

The following unaudited pro forma consolidated balance sheet as of March 31, 2014 gives effect to (i) a private placement of common stock by AAC to certain accredited investors in April 2014, (ii) the redemption of Series A Preferred Units of BHR in April 2014, (iii) the sale of Series A Preferred Units by BHR in April 2014, (iv) the Private Share Exchange, (v) the completion of the BHR Acquisition and (vi) this offering and the application of the net proceeds therefrom to repay approximately $             million of outstanding indebtedness, as if each had been consummated on March 31, 2014. The following unaudited pro forma consolidated statement of income for the year ended December 31, 2013 also gives effect to (i) the consolidation of Greenhouse Real Estate, LLC, (ii) the Reorganization Transactions and the financing transactions related to the Reorganization Transactions and (iii) this offering and our intended use of proceeds therefrom described in “Use of Proceeds,” as if each had been consummated on January 1, 2013. It does not include (i) any adjustments for Concorde Real Estate, LLC, a subsidiary of BHR, as its results of operations are included in the historical financial results for the entire year, (ii) any adjustments for The Academy Real Estate, LLC, a subsidiary of BHR, as its results of operations are included in the historical financial results for the entire period of existence during 2013 and (iii) the effect of the acquisition of the membership interests in CRMS as CRMS does not meet the definition of a business under applicable regulations. The following unaudited pro forma condensed consolidated statement of income for the three months ended March 31, 2014 also gives effect to the (i) Reorganization Transactions and the financing transactions related to the Reorganization Transactions and (ii) this offering and our intended use of proceeds therefrom described in “Use of Proceeds,” as if each had been consummated on January 1, 2013. It does not include (i) any adjustments for Greenhouse Real Estate, LLC, Concorde Real Estate, LLC and The Academy Real Estate, LLC, each of which is a subsidiary of BHR, as their results of operations are included in the historical financial results for the entire three months and (ii) the effect of the acquisition of the membership interests of CRMS as CRMS does not meet the definition of a business under applicable regulations. The notes to the unaudited pro forma consolidated financial statements describe the pro forma amounts and adjustments presented.

The pro forma adjustments reflecting the completion of the BHR Acquisition are based upon accounting for the acquisition of BHR as an acquisition of additional ownership interests in a variable interest entity that does not result in a change of control of that subsidiary, as BHR was already being consolidated as a variable interest entity in accordance with ASC 810 (Consolidation) and upon the assumptions set forth in the notes included in this section. These unaudited pro forma consolidated financial statements should be read in conjunction with the accompanying notes. The pro forma statements are primarily based on, and should also be read in conjunction with, (i) AAC’s consolidated financial statements and accompanying notes as of and for the year

41

ended December 31, 2013, (ii) AAC’s unaudited condensed consolidated financial statements and accompanying notes as of and for the three months ended March 31, 2014 and (iii) Greenhouse Real Estate, LLC’s Historical Statement of Revenues and Certain Direct Operating Expenses for the period from January 1, 2013 to October 7, 2013, all of which are included elsewhere in this prospectus. The separate financial statements of AAC Holdings, Inc. are not being presented because we consider such entity a “business combination related shell company” under Regulation S-X. Holdings was created for the sole purpose of completing the Reorganization Transactions and did not have any assets as of December 31, 2013 or March 31, 2014. As a result, the complete financial statements of American Addiction Centers, Inc. and its consolidated subsidiaries are being presented.

The unaudited pro forma consolidated financial statements are presented for informational purposes only and do not reflect future events that may occur after the foregoing transactions or any operating efficiencies or inefficiencies that may result from the transactions. Therefore, the unaudited pro forma consolidated financial statements are not necessarily indicative of results that would have been achieved had the businesses been consolidated during the period presented or the results that we will experience after the transactions are consummated. In addition, the preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates and assumptions are preliminary and have been made solely for purposes of developing these unaudited pro forma consolidated financial statements. Actual results could differ, perhaps materially, from these estimates and assumptions.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE YEAR ENDED DECEMBER 31, 2013

	American Addiction  Centers, Inc.			Greenhouse  Real Estate, LLC for the Period January 1, 2013 to October 7, 2013			Pro Forma  Adjustments				Pro Forma			This  Offering		AAC  Holdings, Inc.  Pro Forma as Adjusted
	(in thousands, except share and per share amounts)
Income Statement Data:
Revenues	$	115,741		$	1,265		$	(1,265	)	(a)	$	115,741		$		$
Operating expenses:
Salaries, wages and benefits		46,856			—			—				46,856
Advertising and marketing		13,493			—			—				13,493
Professional fees		10,277			13			—				10,290
Client related services		7,986			—			—				7,986
Other operating expenses		11,615			—			—				11,615
Rents and leases		4,634			—			(1,265	)	(a)		3,369
Provision for doubtful accounts		10,950			—			—				10,950
Litigation settlement		2,588			—			—				2,588
Restructuring		806			—			—				806
Depreciation and amortization		3,003			125			65		(b)		3,193
Total operating expenses		112,208			138			(1,200	)			111,146
Income (loss) from operations		3,533			1,127			(65	)			4,595
Interest expense		1,390			388			87		(c)		1,865			(i)
															(j)
Other expense, net		36			—			—				36
Income (loss) before income tax expense		2,107			739			(152	)			2,694
Income tax expense		615			—			211		(d)		1,325			(k)
								499		(e)
Net income (loss)		1,492			739			(862	)			1,369
Less: net (income) loss attributable to noncontrolling interest		(706	)		(739	)		2,093		(f)		563
								(85	)	(g)
Net income attributable to American Addiction Centers, Inc.		786			—			1,146				1,932
Deemed contribution – redemption of Series B Preferred		1,000			—			—				1,000
Less: dividend to BHR Series A Preferred Unit holder		—			—			(960	)			(960	)
Net income available to American Addiction Centers, Inc. common stockholders	$	1,786		$	—		$	186			$	1,972		$		$
Earnings per share:
Basic	$	0.20		$	—		$	—			$	0.21		$		$
Diluted	$	0.20		$	—		$	—			$	0.21		$		$
Weighted-average shares outstanding:
Basic		8,819,062			—			357,617		(h)		9,176,679			(l)
Diluted		9,096,660			—			357,617		(h)		9,454,277			(l)

See accompanying notes to unaudited pro forma consolidated financial statements.

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UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME

FOR THE THREE MONTHS ENDED MARCH 31, 2014

	American Addiction Centers, Inc.		Pro Forma Adjustments					Pro Forma			This Offering			AAC Holdings, Inc. Pro Forma as Adjusted
	(in thousands, except share and per share amounts)
Income Statement Data:
Revenues	$	30,083		—				$	30,083		$			$
Operating expenses:
Salaries, wages and benefits		11,544		—					11,544
Advertising and marketing		3,290		—					3,290
Professional fees		2,497		—					2,497
Client related services		2,457		—					2,457
Other operating expenses		2,723		—					2,736
Rents and leases		470		—					470
Provision for doubtful accounts		4,173		—					4,173
Depreciation and amortization		1,077		—					1,077
Total operating expenses		28,231		—					28,231
Income from operations		1,852		—					1,852
Interest expense		354		—					354			(f	)
												(g	)
Other expense, net		42		—					42
Income (loss) before income tax expense		1,456		—					1,456
Income tax expense		615		(17	)	(a	)		723			(h	)
				125		(b	)
Net income (loss)		841		(108	)				733
Less: net (income) loss attributable to noncontrolling interest		178		(346	)	(c	)		(216	)
				(48	)	(d	)
Net income attributable to American Addiction Centers, Inc.		1,019		(502	)				517
Less: dividend to BHR Series A Preferred Unit holder		—		(240	)				(240	)
Net income available to American Addiction Centers, Inc. common stockholders	$	1,019	$	(742	)			$	277		$			$
Earnings per share:
Basic	$	0.11	$	—				$	0.03		$			$
Diluted	$	0.11	$	—				$	0.03		$			$
Weighted-average shares outstanding:
Basic		9,175,580		240,792		(e	)		9,416,372			(i	)
Diluted		9,225,073		240,792		(e	)		9,465,865			(i	)

See accompanying notes to unaudited pro forma consolidated financial statements.

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UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET

AS OF MARCH 31, 2014

	American Addiction  Centers, Inc.			Financing  Transactions				Private Share  Exchange				BHR  Acquisition				Pro Forma		This  Offering			AAC  Holdings, Inc.  Pro Forma as Adjusted
	(in thousands)
Assets
Current assets:
Cash	$	4,340		$	—			$	—			$	(3,000	)	(jj)	$	9,077	$	(nn	)	$
					1,825		(aa)
					(1,825	)	(bb)
					7,737		(cc)
Accounts receivable, net of allowances		26,576			—				—				—				26,576
Deferred tax asset		751			—				—				14		(kk)		765
Notes and other receivables—related party		664			—				—				—				664
Prepaid expenses and other current assets		2,727			—				—				—				2,727
Total current assets		35,058			7,737				—				(2,986	)			39,809
Property and equipment, net		39,702			—				—				—				39,702
Goodwill		10,863			—				—				—				10,863
Intangible assets, net		3,345			—				—				—				3,345
Other assets		589			—				—				—				589
Total assets	$	89,557		$	7,737			$	—			$	(2,986	)		$	94,308
Liabilities, mezzanine equity and stockholders’ equity
Current liabilities:
Accounts payable	$	3,119		$	—			$	—			$	—			$	3,119	$			$
Accrued liabilities		10,412			—				—				—				10,412
Current portion of long-term debt		16,981			—				—				341		(ll)		17,322
Current portion of long-term debt – related party		813			—				—				—				813
Total current liabilities		31,325			—				—				341				31,666
Deferred tax liabilities		2,092			—				—				(50	)	(kk)		2,042
Long-term debt, net of current portion		23,648			—				—				1,418		(ll)		25,066
Long-term debt – related party, net of current portion		3,573			—				—				—				3,573
Other long-term liabilities		133			—				—				—				133
Total liabilities		60,771			—				—				1,709				62,480
Mezzanine equity including noncontrolling interest
Common stock		10,442			—				(10,440	)	(dd)		—				—
									(2	)	(ee)
Noncontrolling interest–Series A Preferred		—			7,737		(cc)		—				—				7,737
Noncontrolling interest		1,825			—				2		(ee)		—				2
					(1,825	)	(bb)
Total mezzanine equity including noncontrolling interest		12,267			5,912				(10,440	)			—				7,739
Stockholders’ equity including noncontrolling interest
Common stock		3			—				(3	)	(ff)		—				—
Common stock subscribed, net of subscription receivable		67			—				(67	)	(gg)		—				—
Common stock AAC Holdings, Inc.		—			—				3		(ff)		1		(mm)		11		(nn	)
									7		(dd)
Common stock subscribed, net of subscription receivable AAC Holdings, Inc.		—			—				67		(gg)		—				67
Additional paid-in capital		14,185			1,825		(aa)		10,433		(dd)		(1	)	(mm)		17,766		(nn	)
									(3,988	)	(hh)		702		(kk)
									(3,671	)	(ii)		(1,759	)	(ll)
													40		(mm)
Treasury stock, at cost		(3,671	)		—				3,671		(ii)		—				—
Retained earnings		3,379			—				—				—				3,379
Noncontrolling interest		2,556			—				3,988		(hh)		(3,000	)	(jj)		2,866
													(638	)	(kk)
													(40	)	(mm)
Total stockholders’ equity including noncontrolling interest		16,519			1,825				10,440				(4,695	)			24,089
Total liabilities, mezzanine equity and stockholders’ equity	$	89,557		$	7,737			$	—			$	(2,986	)		$	94,308	$			$

See accompanying notes to unaudited pro forma consolidated financial statements.

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NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

The unaudited pro forma consolidated statement of income and unaudited pro forma consolidated balance sheet do not include any adjustments for the following:

• Concorde Real Estate, LLC, a subsidiary of BHR, as its results of operations are included in the historical financial results for the entire year as it has been consolidated as a variable interest entity (“VIE”) since June 27, 2012.

• The Academy Real Estate, LLC, a subsidiary of BHR, as its results of operations are included in the historical financial results for the entire period of its existence during 2013.

• The effects of the CRMS Acquisition as CRMS’s only revenue stream is with AAC and upon completion of the acquisition CRMS will no longer have revenues. Accordingly, CRMS does not meet the definition of a business under Regulation S-X Rule 11-01(d).

Additionally, Greenhouse Real Estate, LLC, a subsidiary of BHR, is not included in the historical balance sheet as of March 31, 2014 and in the historical results of operations for the three months ended March 31, 2014 as we consolidate it as an VIE since October 8, 2013.

Note 1—Unaudited Pro Forma Consolidated Statement of Income Adjustments for the Year Ended December 31, 2013

The unaudited pro forma consolidated statement of income for the year ended December 31, 2013 gives effect to the adjustments described below relating to the initial VIE consolidation of Greenhouse Real Estate, LLC, a subsidiary of BHR, accounted for as a business combination, and the Reorganization Transactions, the financing transactions related to the Reorganization Transactions and this offering and the use of proceeds therefrom as described in “Use of Proceeds,” as if each had been consummated on January 1, 2013.

(a) Reflects the elimination of historical rental revenues received by Greenhouse Real Estate, LLC and paid by the Company.

(b) Reflects additional depreciation expense for the period from January 1 to October 7, 2013 attributable to recording the assets of Greenhouse Real Estate, LLC at fair value on October 8, 2013, the date on which Greenhouse Real Estate, LLC became a consolidated VIE.

(c) Reflects additional interest expense related to the $1.8 million term loan, which bears interest at 5.0% per annum, assumed and refinanced by us in connection with the BHR Acquisition from the individuals who collectively owned 100% of the common membership interests of BHR prior to the BHR Acquisition. Our Credit Facility requires us to repay this loan in full with proceeds from this offering (see adjustment (j) below).

(d) Reflects the estimated income tax expense, at an effective income tax rate of 36.0%, on (i) Greenhouse Real Estate, LLC income for the period from January 1, 2013 through October 7, 2013, (ii) the pro forma adjustments related to Greenhouse Real Estate, LLC for the period from January 1, 2013 through October 7, 2013 as set forth in adjustments (a) through (c) above and (iii) the pro forma adjustment related to the income attributable to shares of AAC common stock that were not exchanged for shares of Holdings common stock in the Private Share Exchange and classified in mezzanine equity. The historical results of Greenhouse Real Estate, LLC do not include a provision for income tax expense as the LLC is a flow-through entity for tax purposes and AAC was not a member of the LLC.

(e) Reflects the estimated income tax expense, at an income tax rate of 36.0%, on $1.4 million of net income of the BHR subsidiaries included in the historical results of AAC. The historical results of BHR do not include a provision for income tax expense as BHR is a flow-through entity for tax purposes and AAC was not a member of BHR.

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(f) Reflects the elimination of the noncontrolling interest as a result of the BHR Acquisition. The Series A Preferred Unit holder does not have any rights to the income of BHR other than the payment of the 12% per annum preferred return. The net loss (income) attributable to noncontrolling interest in the “Pro Forma” column represents the net loss of the professional groups with which our treatment facilities have management services arrangements. For additional information related to these professional groups, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidation of VIEs” included elsewhere in this prospectus.

(g) Reflects the income attributable to shares of AAC common stock that were not exchanged for Holdings common stock and classified in mezzanine equity.

(h) Reflects (i) the sale of 471,843 shares of AAC common stock to certain accredited investors from February through April 2014, (ii) the issuance of 521,999 shares of Holdings common stock in connection with the BHR Acquisition and (iii) the deduction of the 636,225 shares of AAC common stock not exchanged for Holdings shares in the Private Share Exchange as presented in the table included in Note 3—Unaudited Pro Forma Consolidated Balance Sheet Adjustments.

(i) Reflects the elimination of the historical interest expense on our Credit Facility for 2013. The outstanding balance of the revolving line will be paid down with proceeds from this offering.

(j) Reflects the elimination of the pro forma interest expense on the $1.8 million term loan with a financial institution assumed in connection with the BHR Acquisition that will be repaid in full with proceeds from this offering.

(k) Reflects the estimated tax impact of the elimination of interest expense as described in (i) and (j) above.

(l) Reflects the sale of              shares of Holdings common stock in connection with this offering.

Note 2—Unaudited Pro Forma Consolidated Statement of Income Adjustments for the Three Months Ended March 31, 2014

The unaudited pro forma consolidated statement of income for the three months ended March 31, 2014 gives effect to the adjustments described below relating to the Reorganization Transactions, the financing transactions related to the Reorganization Transactions and this offering and the use of proceeds therefrom as described in “Use of Proceeds,” as if each had been consummated on January 1, 2013.

(a) Reflects the estimated income tax expense, at an effective income tax rate of 36.0%, on the pro forma adjustment related to the income attributable to shares of AAC common stock that were not exchanged for shares of Holdings common stock in the Private Share Exchange and classified in mezzanine equity.

(b) Reflects the estimated income tax expense, at an income tax rate of 36.0%, on $0.3 million of net income of the BHR subsidiaries included in the historical results of AAC. The historical results of BHR do not include a provision for income tax expense as BHR is a flow-through entity for tax purposes and AAC was not a member of BHR prior to the BHR Acquisition.

(c) Reflects the elimination of the noncontrolling interest as a result of the BHR Acquisition. The Series A Preferred Unit holder does not have any rights to the income of BHR other than the payment of the 12% per annum preferred return. The net loss (income) attributable to noncontrolling interest in the “Pro Forma” and “AAC Holdings, Inc. Pro Forma as Adjusted” columns represent the net loss of the professional groups with which our treatment facilities have management services arrangements. For additional information related to these professional groups, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidation of VIEs” included elsewhere in this prospectus.

(d) Reflects the income attributable to the shares of AAC common stock that were not exchanged for shares of Holdings common stock in the Private Share Exchange and classified in mezzanine equity.

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(e) Reflects (i) the sale of 143,017 shares of AAC common stock to certain accredited investors in April 2014, (ii) the addition of 212,001 shares of AAC common stock to fully reflect the 328,826 shares of AAC common stock sold to certain accredited investors in February and March 2014 as outstanding for the entire quarter (116,826 shares were included in the historical column of the weighted-average shares outstanding), (iii) the issuance of 521,999 shares of Holdings common stock in connection with the BHR Acquisition and (iv) the deduction of the 636,225 shares of AAC common stock not exchanged for Holdings shares in the Private Share Exchange as presented in the table included in Note 3—Unaudited Pro Forma Consolidated Balance Sheet Adjustments.

(f) Reflects the elimination of the historical interest expense on our Credit Facility for 2014. The outstanding balance of the revolving line will be paid down with proceeds from this offering.

(g) Reflects the elimination of the pro forma interest expense on the $1.8 million term loan with a financial institution assumed in connection with the BHR Acquisition that will be repaid in full with proceeds from this offering.

(h) Reflects the estimated tax impact of the elimination of interest expense as described in (f) and (g) above.

(i) Reflects the sale of              shares of Holdings common stock in connection with this offering.

Note 3—Unaudited Pro Forma Consolidated Balance Sheet Adjustments

The unaudited pro forma consolidated balance sheet as of March 31, 2014 gives effect to the transactions below as if each had occurred on March 31, 2014. To facilitate the Reorganization Transactions, several financing transactions were undertaken in 2014 prior to or in connection with the Reorganization Transactions. The following pro forma adjustments also reflect the effects of those financing transactions that occurred subsequent to March 31, 2014 as if each had occurred on March 31, 2014.

(aa) Reflects the sale of 143,017 shares of AAC common stock to certain accredited investors at $12.76 per share in April 2014 pursuant to a private placement, with net proceeds to AAC of $1.8 million. In determining the fair value of the AAC common stock, we reviewed an independent third party valuation report, which determined the implied equity value of AAC using a discounted cash flow analysis, a comparison to a selection of precedent merger and acquisition transactions and a comparison to publicly held companies. For additional information related to this transaction and our determination of the fair value of AAC common stock, see Note 18 to our audited financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Stock-Based Compensation Expense” included elsewhere in this prospectus.

(bb) Reflects the redemption by BHR of 36.5 Series A Preferred Units in April 2014 for $1.8 million.

(cc) Reflects the sale by BHR in April 2014 of 160 Series A Preferred Units, valued at $50,000 per unit, to Alcentra, with proceeds to BHR of $7.7 million, net of issuance costs of $0.3 million. For additional information related to the Series A Preferred Units, see adjustment (aa) above and “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financing Relationships—BHR Preferred Equity” included elsewhere in this prospectus. See Note 18 to our audited financial statements included elsewhere in this prospectus for additional information related to this transaction.

The following table and adjustments described in (dd) through (ii) below relate to the Private Share Exchange completed on April 15, 2014, whereby shares of the outstanding common stock of AAC were exchanged on a one-for-one basis for shares of Holdings common stock. The shares of AAC common stock that were not exchanged have been reclassified at their carrying value as noncontrolling interest in either mezzanine

48

equity or stockholders’ equity based on their pre-exchange classification. The transaction between AAC and Holdings was accounted for similar to a common control transaction resulting in the assets, liabilities and equity of AAC being carried over at their historical basis. See Note 11 and Note 18 to our audited financial statements included elsewhere in this prospectus for additional information related to this transaction.

	Outstanding and Subscribed Shares Prior to the Share Exchange			Shares Exchanged			Shares Not Exchanged
Common stock classified in mezzanine equity as of March 31, 2014		7,281,283			7,244,109			37,174
Common stock classified in permanent equity as of March 31, 2014		2,452,002			1,852,951			599,051
Common stock subscribed classified in permanent equity as of March 31, 2014		12,150			12,150			—
AAC common stock outstanding and subscribed at March 31, 2014		9,745,435			9,109,210			636,225
Common shares issued in April 2014 in the private placement		143,017			143,017			—
Total		9,888,452			9,252,227			636,225
The pro forma shares exchanged does not include the following share transactions that occurred from April 1, 2014 through June 15, 2014:
Issuance of common stock in connection with the exercise of warrants		3,774			—			3,774
April 2014 restricted stock grants		52,515			52,515			—
Conversion of 2007 Plan unvested shares(1)		(71,156	)		(71,156	)		—
Redemptions of common stock(2)		(9,113	)		—			(9,113	)
Total		(23,980	)		(18,641	)		(5,339	)
Total of all shares		9,864,472			9,233,586			630,886

(1) At the closing of the Private Share Exchange, Holdings assumed the 2007 Plan. Immediately prior to the closing of the Private Share Exchange, 71,156 unvested shares of AAC common stock were converted into an equal number of unvested shares of Holdings common stock under the 2007 Plan on a one-for-one basis to former holders of unvested shares of AAC common stock.

(2) For additional information related to these redemptions, see Note 18 to our audited financial statements included elsewhere in this prospectus.

(dd) Reflects 7,244,109 shares of AAC common stock, with a carrying value of $10.4 million, that were classified as mezzanine equity and were exchanged in the Private Share Exchange on a one-for-one basis for shares of Holdings common stock.

(ee) Reflects 37,174 shares of AAC common stock, with a carrying value of $2,000, that were classified as mezzanine equity and were not exchanged in the Private Share Exchange and are still outstanding. The carrying value of these shares has been reclassified to noncontrolling interest in mezzanine equity.

(ff) Reflects the exchange, on a one-for-one basis, of 1,995,968 shares of AAC common stock, with a par value $0.001 per share, for shares of Holdings common stock, with a par value of $0.001 per share.

(gg) Reflects the exchange of 12,150 shares of AAC common stock subscribed but not outstanding, on a one-for-one basis, for shares of common stock of Holdings subscribed but not outstanding.

(hh) Reflects 599,051 shares of AAC common stock, with a carrying value of $4.0 million, classified in stockholders’ equity that were not exchanged for Holdings common stock in the Private Share Exchange. The carrying value of these shares has been reclassified to noncontrolling interest in stockholders’ equity.

(ii) Reflects the elimination of historical treasury stock of AAC with an offsetting charge to additional paid-in capital of $3.7 million.

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The following discussion and adjustments described in (jj) through (mm) below relate to the BHR Acquisition, which we consummated substantially concurrent with the Private Share Exchange. As of March 31, 2014, BHR owned 100% of the membership interests in the following entities:

• Concorde Real Estate, LLC. In December 2011, we entered into a purchase agreement to acquire a vacant facility located in Las Vegas, Nevada for a purchase price of $4.8 million in order to relocate and expand our then current client service capacity. We funded $3.5 million of the purchase price with seller financing. In January 2012, we assigned our rights to the purchase agreement to Concorde Real Estate, LLC, at which time our CEO, President and CFO owned a controlling membership interest in Concorde Real Estate, LLC. On June 27, 2012, Concorde Real Estate, LLC refinanced the original seller financing with a term loan with a financial institution. In connection with this financing arrangement, we guaranteed the debt of Concorde Real Estate, LLC. Based on our guarantee of Concorde Real Estate, LLC’s debt and our ability to direct the activities that most significantly impact the economic performance of Concorde Real Estate, LLC, we have determined that it is a VIE and that we are the primary beneficiary. The assets and liabilities of Concorde Real Estate, LLC have been included in the consolidated financial statements since June 27, 2012. The consolidation of Concorde Real Estate, LLC was accounted for as a business combination as common control did not exist, and as such we recorded the amounts associated with Concorde Real Estate, LLC’s interests in the VIE based upon the fair value of the assets and liabilities as of June 27, 2012.

• Greenhouse Real Estate, LLC. Greenhouse Real Estate, LLC owns the real estate that is leased to our treatment facility located in Grand Prairie, Texas. In connection with the formation of BHR, on October 8, 2013, Greenhouse Real Estate, LLC entered into a $13.2 million purchase and construction loan facility with a financial institution to refinance existing debt. The construction loan facility is guaranteed by us and by our CEO and President.

• The Academy Real Estate, LLC. In May 2013, through our wholly owned subsidiary, The Academy Real Estate, LLC, we acquired a property located in Riverview, Florida for a purchase price of $5.8 million, of which $3.6 million was funded from a new bank loan with an existing lender.

On October 8, 2013, BHR acquired all of the membership interests in Concorde Real Estate, LLC and all of the membership interests in Greenhouse Real Estate, LLC. Based upon our guarantee of BHR’s debt and our ability to direct the activities that most significantly impact the economic performance of BHR, we determined that BHR is a VIE and that we are the primary beneficiary. Accordingly, we began consolidating BHR, which resulted in Greenhouse Real Estate, LLC being included in our consolidated financials as of October 8, 2013. The consolidation of BHR was accounted for as a business combination as common control did not exist, and as such we recorded the amounts associated with BHR’s interests in Greenhouse Real Estate, LLC based upon the fair value of the assets and liabilities as of October 8, 2013. No gain or loss was recognized as a result of this transaction.

On December 10, 2013, we sold our membership interest in The Academy Real Estate, LLC, to BHR for $3.1 million plus the assumption of the $3.6 million bank loan, which we have guaranteed. Based on our guarantee of The Academy Real Estate, LLC’s debt and our ability to direct the activities that most significantly impact the economic performance of The Academy Real Estate, LLC, we have determined that it is a VIE and that we are the primary beneficiary. Therefore, the assets and liabilities of The Academy Real Estate, LLC have been included in the consolidated financial statements since the acquisition of the Riverview, Florida property in May 2013.

The historical consolidated balance sheet as of March 31, 2014 included the following assets and liabilities of BHR: cash and cash equivalents of $0.2 million, prepaid expenses and other current assets of $0.4 million, property and equipment of $31.7 million, other assets of $0.2 million, accrued liabilities of $1.0 million, long-term debt of $26.0 million (of which $17.6 million represents the current portion) and noncontrolling interest of $5.5 million (of which $1.8 million is classified in mezzanine equity and $3.7 million is classified in stockholders’ equity). We accounted for the April 15, 2014 BHR Acquisition at BHR’s carryover basis as AAC

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previously accounted for the initial consolidation of Concorde Real Estate, LLC, Greenhouse Real Estate, LLC and the Professional Groups as business combinations and the initial consolidation of The Academy Real Estate, LLC as an asset purchase. The BHR Acquisition was accounted for as an acquisition of additional ownership interests in a variable interest entity that does not result in a change of control of that subsidiary, as BHR was already being consolidated as a variable interest entity in accordance with ASC 810 (Consolidation). Accordingly, only the cash paid and the assumption of the $1.8 million term loan have been reflected as pro forma adjustments, and the carrying value of BHR’s assets and liabilities previously accounted for as a business combination will not receive a step up in basis.

(jj) Reflects the payment of $3.0 million of cash purchase price in the BHR Acquisition and a corresponding reduction in noncontrolling interest.

(kk) Reflects the issuance of 521,999 shares of Holdings common stock with a par value of $0.001 per share ($0.1 million in common stock) with a fair market value of $13.41 per share, or $7.0 million in the aggregate in connection with the BHR Acquisition. The BHR Acquisition was accounted for as an acquisition of additional ownership interests in a variable interest entity that does not result in a change of control of that subsidiary as BHR was already being consolidated as a VIE in accordance with ASC 810 (Consolidation). Accordingly, we recognized $4.7 million of the $11.8 million in fair value of consideration transferred (consisting of $3.0 million cash consideration, the $1.8 million loan assumed and the net deferred tax assets of $0.1 million). We eliminated the noncontrolling interest attributable to BHR of $4.3 million with the excess of fair value over the carrying value of noncontrolling interest recorded as a reduction to additional paid-in capital of $0.4 million. In determining the fair value of our common stock for purposes of the BHR Acquisition and CRMS Acquisition, we considered, among other things, the valuation analyses for previous transactions in 2012 and 2013, a new valuation report prepared by an independent third party that took into account the Private Share Exchange, the CRMS Acquisition and the BHR Acquisition and the strong demand for the recent private placement of AAC common stock from February through April 2014. For additional information related to our determination of the fair value of our common stock, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies—Stock-Based Compensation Expense” included elsewhere in this prospectus.

(ll) Reflects the assumption and refinancing by Holdings of a $1.8 million term loan from a financial institution to our CEO, President and CFO. The original proceeds from the loan were used to repay Greenhouse Real Estate, LLC loan with a financial institution, and the loan was accounted for as an additional capital contribution in BHR. The loan, which matures in April 2015, bears interest at 5.0% per annum and requires monthly principal payments of $36,000. Our Credit Facility requires us to repay this loan in full with the proceeds from this offering.

(mm) Reflects the recognition of deferred tax assets and deferred tax liabilities in connection with the application of purchase accounting for the BHR Acquisition. The principal book-tax differences are attributable to property, equipment and depreciation, unamortized loan costs and cash to accrual adjustments. The recognition of the deferred tax assets and liabilities is preliminary and subject to change.

The following pro forma adjustment relates to this offering:

(nn) Reflects the issuance of              shares of Holdings common stock at the initial public offering price of $             per share (the midpoint of the price range set forth on the cover page of this prospectus) and the estimated net proceeds of $             and a use of a portion of the proceeds to repay $             million of outstanding indebtedness. The recording of the proceeds also reflects the reclassification of offering expenses of $             out of prepaid and other current assets.

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SELECTED HISTORICAL AND PRO FORMA CONSOLIDATED

FINANCIAL AND OPERATING DATA

The following tables present AAC’s selected historical and pro forma consolidated financial and operating data as of the dates and for the periods indicated. Holdings was formed as a Nevada corporation on February 12, 2014, and acquired 93.6% of the outstanding shares of common stock of AAC prior to the consummation of this offering in connection with the Reorganization Transactions, and Holdings therefore controls AAC. Holdings has not engaged in any business or other activities except in connection with its formation and the Reorganization Transactions. Accordingly, all financial and other information herein relating to periods prior to the completion of the Reorganization Transactions is that of AAC and its consolidated subsidiaries.

The selected consolidated financial data as of and for the years ended December 31, 2012 and 2013 are derived from our audited consolidated financial statements included elsewhere in this prospectus. The selected consolidated financial data for the year ended December 31, 2011 are derived from our audited consolidated financial statements not included in this prospectus. The selected consolidated financial data as of March 31, 2014 and for the three months ended March 31, 2013 and 2014 are derived from our unaudited condensed consolidated financial statements included elsewhere in this prospectus. The following selected consolidated financial data should be read together with our audited consolidated financial statements, unaudited condensed consolidated financial statements and accompanying notes and information under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this prospectus. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes. In the opinion of management, the interim financial data set forth below include all adjustments, consisting of normal recurring accruals, necessary to fairly present our financial position. Our historical results are not necessarily indicative of results that may be expected in the future. See Note 18 to our audited consolidated financial statements included elsewhere in this prospectus for additional information regarding the BHR Acquisition and the CRMS Acquisition and see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” for a discussion of the anticipated impact the BHR Acquisition and the CRMS Acquisition will have on our future results of operations and financial position.

The selected unaudited pro forma financial and other data for the year ended December 31, 2013 and as of and for the three months ended March 31, 2014 have been adjusted to give effect to this offering and our intended use of proceeds from this offering and certain other transactions as described in the section titled “Unaudited Pro Forma Consolidated Financial Statements” included elsewhere in this prospectus. Specifically, the “Pro Forma as Adjusted” columns in the selected unaudited pro forma financial and other data give effect to the Reorganization Transactions, the related financing transactions and this offering and our intended use of proceeds therefrom as described in “Use of Proceeds,” in each case for the year ended December 31, 2013 and as of and for the three months ended March 31, 2014. This data is subject and gives effect to the assumptions and adjustments described in the notes accompanying the unaudited pro forma consolidated financial statements included elsewhere in this prospectus. The selected unaudited pro forma financial data is presented for informational purposes only and should not be considered indicative of actual results of operations that would have been achieved had the transactions and this offering been consummated on the dates indicated, and does not purport to be indicative of financial condition data or results of operations as of any future date or for any future period.

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					Year Ended December 31, 2013				Three Months Ended March 31,         2013          Actual (unaudited)			Three Months Ended March 31, 2014
	Year Ended December 31,							Pro Forma as Adjusted				Actual (unaudited)		Pro Forma as Adjusted
	2011		2012		Actual
	(in thousands, except for share and per share amounts)
Income Statement Data:
Revenues	$	28,275	$	66,035	$	115,741		$	$	29,438		$	30,083	$
Operating expenses:
Salaries, wages and benefits		9,171		25,680		46,856				10,911			11,544
Advertising and marketing		4,915		8,667		13,493				3,148			3,290
Professional fees		1,636		5,430		10,277				2,055			2,497
Client related services		5,791		8,389		7,986				1,897			2,457
Other operating expenses		2,448		6,384		11,615				2,806			2,723
Rents and leases		1,196		3,614		4,634				1,335			470
Provision for doubtful accounts		1,063		3,344		10,950				2,640			4,173
Litigation settlement(1)		—		—		2,588				—			—
Restructuring(2)		—		—		806				—			—
Depreciation and amortization		195		1,288		3,003				683			1,077
Total operating expenses		26,415		62,796		112,208				25,475			28,231
Income from operations		1,860		3,239		3,533				3,963			1,852
Interest expense		337		980		1,390				410			354
Other expense, net		—		12		36				(38	)		42
Income before income tax expense		1,523		2,247		2,107				3,591			1,456
Income tax expense		652		1,148		615				1,352			615
Net income		871		1,099		1,492				2,239			841
Less: net loss (income) attributable to noncontrolling interest(3)		—		405		(706	)			(146	)		178
Net income attributable to American Addiction Centers, Inc.		871		1,504		786				2,093			1,019
Deemed contribution – redemption of Series B Preferred		—		—		1,000				1,000			—
Net income available to American Addiction Centers, Inc. common stockholders	$	871	$	1,504	$	1,786		$	$	3,093		$	1,019	$
Earnings per share attributable to common stockholders(4):
Basic	$	0.20	$	0.19	$	0.20		$	$	0.36		$	0.11	$
Diluted	$	0.20	$	0.19	$	0.20		$	$	0.36		$	0.11	$
Weighted-average shares outstanding:
Basic		4,287,131		7,770,359		8,819,062				8,503,928			9,175,580
Diluted		4,314,051		7,869,017		9,096,660				8,566,920			9,225,073
Other Financial Information:
Adjusted EBITDA(5)	$	2,055	$	7,168	$	11,558		$	$	5,002		$	3,592	$

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					As of March 31, 2014
	As of December 31,				Actual (unaudited)		Pro Forma		AAC Holdings, Inc. Pro Forma as Adjusted(6)
	2012		2013
					(in thousands)
Balance Sheet Data:
Cash and cash equivalents	$	740	$	2,012	$	4,340	$	9,077	$
Working capital		3,190		1,220		3,733		8,143
Total assets		53,598		81,638		89,557		94,308
Total debt, including current portion		25,222		43,075		45,015		46,774
Total mezzanine equity (including noncontrolling interest)(7)		11,613		11,842		12,267		7,739
Total stockholders’ equity (including noncontrolling interest)(8)		4,678		11,883		16,519		24,089

	Year Ended December 31,				Three Months Ended March 31,
	2012		2013		2013		2014
Operating Metrics (unaudited):
Average daily census(9)		238		339		368		371
Average daily revenue(10)	$	759	$	935	$	889	$	901
Average net daily revenue(11)	$	722	$	847	$	809	$	776
New admissions(12)		2,934		4,027		1,085		1,065
Bed count at end of period(13)		338		431		486		427

(1) We recorded a $2.6 million reserve in the second quarter of 2013 in connection with a consolidated wage and hour class action claim. We made a payment of $2.6 million in the second quarter of 2014 to settle the matter. For additional discussion of this litigation settlement, see Note 16 to our audited financial statements included elsewhere in this prospectus.

(2) During the first half of 2013, management adopted restructuring plans to centralize our call centers and to close the Leading Edge facility. As a result, aggregate restructuring and exit charges of $0.8 million were recognized in 2013. We did not recognize any restructuring expenses during 2012 as expenses related to the corporate relocation were not significant.

(3) Represents the net loss (income) attributable to the noncontrolling interest in BHR (for 2012, 2013 and first quarter 2014) and the Professional Groups (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidation of VIEs” ) (for 2013 and first quarter 2014) and the net loss (income) in the Pro Forma and Pro Forma as Adjusted columns of (i) the Professional Groups and (ii) the net income attributable to the stockholders of AAC that did not exchange their shares for Holdings common stock.

(4) After giving effect to the subsidiary short-form merger with AAC that we expect to complete subsequent to this offering, pro forma basic and diluted earnings per share attributable to common stockholders would be              and             , respectively, based on pro forma basic and diluted weighted-average shares outstanding of                      and                     , respectively.

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(5) Adjusted EBITDA is a “non-GAAP financial measure” as defined under the rules and regulations promulgated by the SEC. We define Adjusted EBITDA as net income adjusted for interest expense, depreciation and amortization expense, income tax expense, stock-based compensation and related tax reimbursements, litigation settlement and restructuring charges and acquisition related de novo startup expenses, which includes professional services for accounting, legal and valuation services related to the acquisitions and legal and licensing expenses related to de novo projects. Adjusted EBITDA, as presented in this prospectus, is considered a supplemental measure of our performance and is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measure of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measures derived in accordance with GAAP. We have included information concerning Adjusted EBITDA in this prospectus because we believe that such information is used by certain investors as a measure of a company’s historical performance. We believe this measure is frequently used by securities analysts, investors and other interested parties in the evaluation of issuers of equity securities, many of which present EBITDA and Adjusted EBITDA when reporting their results. Because Adjusted EBITDA is not determined in accordance with GAAP, it is subject to varying calculations and may not be comparable to the Adjusted EBITDA (or similarly titled measures) of other companies. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. The following table presents a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure, for each of the periods indicated:

					Year Ended December 31, 2013			Three Months Ended March 31,         2013          Actual (unaudited)		Three Months Ended March 31, 2014
	Year Ended December 31,						Pro Forma as Adjusted			Actual (unaudited)		Pro Forma as Adjusted
	2011		2012		Actual
Net Income	$	871	$	1,099	$	1,492	$	$	2,239	$	841	$
Non-GAAP Adjustments:
Interest expense		337		980		1,390			410		354
Depreciation and amortization		195		1,288		3,003			683		1,077
Income tax expense		652		1,148		615			1,352		615
Stock-based compensati on and related tax reimbursements		—		2,408		1,649			303		705
Litigation settlement		—		—		2,588			—		—
Restructuring		—		—		806			—		—
Acquisition related and de novo start-up expenses		—		245		15			15		—
Adjusted EBITDA	$	2,055	$	7,168	$	11,558	$	$	5,002	$	3,592	$

(6) Reflects the issuance of              shares of Holdings common stock at the initial public offering price of $         per share (the midpoint of the price range set forth on the cover page of this prospectus) and the estimated net proceeds of $         and a use of a portion of the proceeds to repay approximately $         million of outstanding indebtedness. Each $1.00 increase or decrease in the assumed initial public offering price of $         per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase or decrease, as applicable, our cash and cash equivalents, working capital, total assets and total stockholders’ equity by approximately $         million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.

(7) For additional discussion of mezzanine equity and noncontrolling interest, see Note 11 to our audited financial statements included elsewhere in this prospectus.

(8) Noncontrolling interest represents the equity of BHR and the Professional Groups (as defined in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Consolidation of VIEs”) that we do not own as well as the outstanding shares of AAC common stock that were not exchanged for shares of Holdings common stock.

(9) Includes client census at all of our owned or leased inpatient facilities, including FitRx, as well as beds obtained through contractual arrangements to meet demand exceeding capacity. For additional information about contracted beds, see “Revenues” under Note 3 to our audited financial statements included elsewhere in this prospectus.

(10) Average daily revenue is calculated as total revenues during the period divided by the product of the number of days in the period multiplied by average daily census.

(11) Average net daily revenue is calculated as total revenues less provision for doubtful accounts during the period divided by the product of the number of days in the period multiplied by average daily census.

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(12) Includes total client admissions for the period presented.

(13) Bed count at end of period includes all beds at owned and leased inpatient facilities, including FitRx, but excludes contracted beds as of December 31, 2012. We did not have any contracted beds as of any other period presented. Bed count at the end of the 2012 period and the March 31, 2013 period includes 70 beds at our former Leading Edge facility, which was closed in the second quarter of 2013. For additional information regarding the closure of the Leading Edge facility, see Note 13 to our audited financial statements included elsewhere in this prospectus. In the first quarter of 2014, we added two beds at the FitRx facility to accommodate increased client census and eliminated six beds at The Academy facility as a result of an expired housing lease.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that are based upon current expectations and involve risks, assumptions and uncertainties. You should review the “Risk Factors” section of this prospectus for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements described in the following discussion and analysis.

Overview

General. We believe we are a leading provider of inpatient substance abuse treatment services for individuals with drug and alcohol addiction. As of March 31, 2014, we operated six substance abuse treatment facilities located throughout the United States, focused on delivering effective clinical care and treatment solutions across our 407 beds, which included 278 licensed detoxification beds. We are currently developing three facilities and have an additional property under contract that we plan to develop into a new facility. The majority of our 679 employees are highly trained clinical staff who deploy evidence-based treatment programs with structured curricula for detoxification, residential treatment, partial hospitalization and intensive outpatient care. By applying a tailored treatment program based on the individual needs of each client, many of whom require treatment for a co-occurring mental health disorder, such as depression, bipolar disorder and schizophrenia, we believe we offer the level of quality care and service necessary for our clients to achieve and maintain sobriety.

De Novo Facilities. We have completed two successful de novo development projects. In March 2012, we opened Greenhouse in a suburb of Dallas, Texas, which provided us with 70 licensed residential and detoxification beds. In January 2013, we opened Desert Hope in Las Vegas, Nevada, which provided us with 148 licensed residential and detoxification beds. We refer to these two development projects as the “De Novo Facilities.” Both facilities were extensively renovated and remodeled to convert them into high quality inpatient treatment centers, and each achieved profitability in its first year of operation. We believe we were able to quickly increase census at our De Novo Facilities through increased sales and marketing efforts prior to each facility opening. As a result of the BHR Acquisition in April 2014, we acquired ownership of the real properties on which the De Novo Facilities operate. The anticipated effect of the BHR Acquisition is reflected under “Unaudited Pro Forma Consolidated Financial Statements.”

TSN Facilities. On August 31, 2012, we acquired the outpatient treatment operations of Singer Island (65 beds in West Palm Beach, Florida), The Academy (12 beds in West Palm Beach, Florida) and Leading Edge (70 beds in Trenton, New Jersey) (collectively, the “TSN Facilities”), for an aggregate purchase price of $14.6 million (collectively, the “TSN Acquisition”). In connection with the TSN Acquisition, we issued 888,868 shares of common stock (662,452 unrestricted shares and 226,416 restricted shares at a fair value of $6.27 per share), valued collectively at $5.6 million; paid cash of $2.5 million from proceeds received from bank financing; and issued $6.5 million of subordinated notes to the sellers to fund the acquisition. The purchase agreement includes provisions that contemplate a potential purchase price adjustment at the maturity of the subordinated notes issued to the sellers in August 2015. If certain operational performance metrics are not achieved during the three-year term of the subordinated notes, we may withhold up to $1.5 million of the $4.0 million balloon payment at maturity with respect to the subordinated notes and cause the forfeiture of up to 226,416 restricted shares of AAC common stock. The TSN Acquisition provided us with a professional sales force and a network of hospitals, other treatment facilities, employers, alumni, and employee assistance programs, along with established Internet sites and toll free numbers. Collectively, these sales channels have contributed to an increase in our average monthly admissions of over 125 clients from September 2012 through March 2014. The Leading Edge facility was later closed by management in the second quarter of 2013 because management determined the amenities and service offerings at the facility were inconsistent with our long-term strategy.

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Corporate Relocation. In 2012, we moved our corporate offices to Brentwood, Tennessee from Temecula, California. In 2012, we also opened a centralized call center; staffed our marketing department to transition outsourced marketing activities in-house; expanded our accounting and finance department to accommodate the financial reporting needs of a more mature, seasoned company; and added human resource, IT and operations personnel to meet the demands of our rapid growth.

Recent Developments. In April 2014, we completed the Reorganization Transactions in preparation for this offering. These included the Private Share Exchange, BHR Acquisition and CRMS Acquisition. BHR owns all the outstanding equity interests of Concorde Real Estate, LLC, Greenhouse Real Estate, LLC and The Academy Real Estate, LLC, which entities own the Desert Hope, Greenhouse and Riverview, Florida properties, respectively, and CRMS provides our client billing and collection services. For additional information related to the Reorganization Transactions, see “Unaudited Pro Forma Consolidated Financial Statements” included elsewhere in this prospectus. In May 2014, we completed the purchase of an approximately 20,000 square foot property in Las Vegas, Nevada for $2.0 million. We paid $1.9 million at closing and a $0.1 million deposit was applied to the purchase price. We intend to begin construction of an outpatient treatment facility at this location in the third quarter of 2014.

Subsequent to this offering, we expect to conduct a subsidiary short-form merger with AAC whereby the legacy holders who did not participate in the Private Share Exchange, representing 6.4% of the outstanding common stock of AAC, would be entitled to receive Holdings shares on a one-for-one basis. Upon completion of the short-form merger, Holdings would own 100% of AAC. No assurance can be given that the short-form merger will occur in a timely manner or at all.

Anticipated Obligations and Requirements with Becoming a Public Company. As a public company, we expect that we will incur significant additional costs and expenses such as increased legal and audit fees, professional fees, directors’ and officers’ insurance costs, expenses related to compliance with Sarbanes-Oxley regulations and other annual costs of doing business as a public company, including hiring additional personnel and expanding our administrative functions.

Revenues. Our revenues primarily consist of service charges related to providing addiction treatment. Our revenues also include charges related to the collection and laboratory testing of urine for controlled substances. We recognize revenues at the estimated net realizable value in the period in which services are provided. For the year ended December 31, 2013 and the three months ended March 31, 2014, approximately 90% and 91% of our revenues, respectively, were reimbursable by commercial payors, including amounts paid by such payors to clients, with the remaining revenues payable directly by our clients. Given the scale and nationwide reach of our network of substance abuse treatment facilities, we generally have the ability to serve clients located across the country from any of our facilities, which allows us to operate our business and analyze revenue on a system-wide basis rather than focusing on any individual facility. For the year ended December 31, 2013 and the three months ended March 31, 2014, no single payor accounted for more than 12.3% and 16.1% of our revenue reimbursements, respectively.

We recognize revenues from commercial payors at the time services are provided based on our estimate of the amount that payors will pay us for the services performed. We estimate the net realizable value of revenues by adjusting gross client charges using our expected realization and applying this discount to gross client charges. Through December 31, 2013, our expected realization was determined by management after taking into account historical collections received from the commercial payors since our inception compared to the gross client charges billed. Beginning in January 2014, we enhanced our methodology related to our net realizable value to more quickly react to potential changes in reimbursements by facility, by type of service and by payor. As a result, management adjusted the expected realization to reflect a twelve-month historical analysis of reimbursement data by facility in addition to considering the type of services provided, the payors and the gross client charge rates.

Our accounts receivable primarily consists of amounts due from commercial payors. The client self-pay portion is usually collected upon admission and in limited circumstances the client will make a deposit and nego-

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tiate the remaining payments as part of the services. We do not recognize revenue for any amounts not collected from the client in either of these situations. From time to time we may provide free care to a limited number of clients, which we refer to as scholarships. We do not recognize revenues for scholarships provided. Included in the aging of accounts receivable are amounts for which the commercial insurance company paid out-of-network claims directly to the client and for which the client has yet to remit the insurance payment to us (which we refer to as “paid to client”). Such amounts paid to client continue to be reflected in our accounts receivable aging as amounts due from commercial payors. Accordingly, our accounts receivable aging does not provide for the distinct identification of paid to client receivables.

Operating Expenses. Our operating expenses are primarily impacted by eight categories of expenses: salaries, wages and benefits; advertising and marketing; professional fees; client related services; other operating expenses; rents and leases; provision for doubtful accounts; and depreciation and amortization.

• Salaries, wages and benefits. We employ a variety of staff related to providing client care including case managers, therapists, medical technicians, housekeepers, cooks and drivers, among others. Our clinical salaries, wages and benefits expense is largely driven by the total number of beds in our facilities and our average daily census. We also employ a professional sales force and staff a centralized call center. Our corporate staff includes accounting, billing and finance professionals, marketing and human resource personnel, IT staff and senior management.

• Advertising and marketing. We promote our treatment facilities through a variety of channels including television advertising, Internet search engines and Yellow Page advertising, among others. While we do not compensate our referral sources for client referrals, we do have arrangements with multiple marketing channels that we pay on a performance basis (i.e., pay per click or pay per inbound call). We also host and attend industry conferences. Our advertising and marketing efforts and expense is largely driven by the total number of available beds in our facilities.

• Professional fees. Professional fees are comprised of various professional services used to support primarily corporate related functions. These services include client billings and collections, accounting related fees for financial statement audits and tax preparation and legal fees for, among other matters, employment, compliance and general corporate matters. These fees also consist of information technology, consulting, payroll fees and national medical director fees.

• Client related services. Client related services consist of physician and medical services as well as client meals, pharmacy, travel, and various other expenses associated with client treatment, including the cost of contractual arrangements for the treatment of clients where the demand for services exceed our capacity. Client related services are significantly influenced by our average daily census.

• Other operating expenses. Other operating expenses consists primarily of utilities, insurance, telecom, travel and repairs and maintenance expenses, and is significantly influenced by the total number of beds in our facilities and our average daily census.

• Rents and leases. Rents and leases is mainly comprised of properties under various equipment and operating leases, which includes space required to perform client services and space for administrative facilities.

• Provision for doubtful accounts. The provision for doubtful accounts represents the expense associated with management’s best estimate of accounts receivable that could become uncollectible in the future. We establish our provision for doubtful accounts based on the aging of the receivables and taking into consideration historical collection experience by facilities, services provided and respective payors’ historical reimbursements. Our primary collection risks are (i) the risk of overestimating our net revenues at the time of billing that may result in us receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies denying claims, (iii) the risk that clients will fail to remit insurance payments to us when the commercial insurance company pays out-of-network claims directly to the client, (iv) resource and capacity constraints that may prevent us from

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handling the volume of billing and collection issues in a timely manner, (v) the risk that clients do not pay us for their self-pay balance (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured clients. As of March 31, 2014, all accounts receivable aged greater than 365 days were fully reserved in our consolidated financial statements. In assessing the adequacy of the allowance for doubtful accounts, we rely on the results of detailed reviews of historical write-offs and recoveries (the hindsight analysis) as a primary source of information to utilize in estimating the collectability of our accounts receivable. We perform the hindsight analysis on a quarterly basis, utilizing rolling twelve-month accounts receivable collection, write-off and recovery data. We supplement this hindsight analysis with other analytical tools, including, but not limited to, historical trends in cash collections compared to net revenues less bad debt and days sales outstanding. The allowance for doubtful accounts is based on our historical collection experience, payor source, the aging of the receivables and current economic trends.

• Depreciation and amortization. Depreciation and amortization represents the ratable use of our capitalized property and equipment, including assets under capital leases, over the estimated useful lives of the assets, and amortizable intangible assets, which are mainly comprised of trademark-related intangibles and non-compete agreements.

Key Drivers of Our Results of Operations. Our results of operations and financial condition are affected by numerous factors, including those described above under “Risk Factors” and elsewhere in this prospectus and those described below:

• Average Daily Census. We refer to the average number of clients to whom we are providing services on a daily basis over a specific period as our “average daily census.” Our revenues are directly impacted by our average daily census, which fluctuates based on the effectiveness of our sales and marketing efforts, total number of beds, the number of client admissions and discharges in a period, average length of stay, and the ratio of clinical staff to clients.

• Average Daily Revenue and Average Net Daily Revenue. Our average daily revenue is a per census metric equal to our total revenues for a period divided by our average daily census for the same period divided by the number of days in the period. Our average net daily revenue is a per census metric equal to our total revenues less provision for doubtful accounts for a period divided by our average daily census for the same period divided by the number of days in the period. The key drivers of average daily revenue and average net daily revenue include the mix of services and level of care that we provide to our clients during the period and payor mix. We provide a broad continuum of services including detoxification, residential treatment, partial hospitalization and intensive outpatient care, with detoxification resulting in the highest daily charges and intensive outpatient care resulting in the lowest daily charges. In addition, we have generated revenues from ancillary services associated with serving our clients.

• Expense Management. Our profitability is directly impacted by our ability to manage our expenses, most notably salaries, wages and benefits and advertising and marketing costs, and to adjust accordingly based upon our capacity.

• Billing and Collections. Our revenues and cash flow are directly impacted by our ability to properly verify our clients’ insurance benefits, obtain authorization for levels of care, properly submit insurance claims and manage collections.

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Results of Operations

Comparison of Three Months ended March 31, 2014 to Three Months ended March 31, 2013

The following table presents our consolidated statements of income from continuing operations for the periods indicated (dollars in thousands):

	Three Months Ended March 31,
	2013 (unaudited)						2014 (unaudited)				Quarter over Quarter Increase (Decrease)
	Amount			%			Amount		%		Amount			%
Revenues	$	29,438			100.0		$	30,083		100.0	$	645			2.2
Operating expenses
Salaries, wages and benefits		10,911			37.1			11,544		38.4		633			5.8
Advertising and marketing		3,148			10.7			3,290		10.9		142			4.5
Professional fees		2,055			7.0			2,497		8.3		442			21.5
Client related services		1,897			6.4			2,457		8.2		560			29.5
Other operating expenses		2,806			9.5			2,723		9.0		(83	)		(3.0	)
Rents and leases		1,335			4.5			470		1.5		(865	)		(64.8	)
Provision for doubtful accounts		2,640			9.0			4,173		13.9		1,533			58.1
Depreciation and amortization		683			2.3			1,077		3.6		394			57.7
Total operating expenses		25,475			86.5			28,231		93.8		2,756			10.8
Income from operations		3,963			13.5			1,852		6.2		(2,111	)		(53.3	)
Interest expense		410			1.4			354		1.2		(56	)		(13.7	)
Other expense, net		(38	)		(0.1	)		42		0.2		80			n/m
Income before income tax expense		3,591			12.2			1,456		4.8		(2,135	)		(59.5	)
Income tax expense		1,352			4.6			615		2.0		(737	)		(54.5	)
Net income	$	2,239			7.6		$	841		2.8	$	(1,398	)		(62.4	)
Less: net loss (income) attributable to noncontrolling interest		(146	)		(0.5	)		178		0.6		324			n/m
Net income attributable to American Addiction Centers, Inc.		2,093			7.1			1,019		3.4		(1,074	)		(51.3	)
Deemed contribution — redemption of Series B Preferred		1,000			3.4			—		—		(1,000	)		n/m
Net income available to American Addiction Centers, Inc. common stockholders	$	3,093			10.5		$	1,019		3.4	$	(2,074	)		(51.3	)

n/m = not meaningful

Revenues

Revenues increased $0.6 million, or 2.2%, to $30.1 million for the three months ended March 31, 2014 from $29.4 million for the three months ended March 31, 2013. The increase resulted primarily from our average daily census increasing to 371 for the three months ended March 31, 2014 from 368 for the three months ended March 31, 2013, or 0.8%, and average daily revenue increasing to $901 for the three months ended March 31, 2014 from $889 for the three months ended March 31, 2013, or 2.1%. The increase in average daily revenue was primarily related to the Professional Groups, which generated $0.5 million of revenues during the three months ended March 31, 2014 compared to no revenues during the three months ended March 31, 2013, as the Professional Groups were not consolidated until October 1, 2013.

During the three months ended March 31, 2014, we experienced a decline in our collection percentage as expressed as a percentage of gross client charges. This decline was principally driven by lower than estimated collections for (i) Desert Hope for which we had limited operating history and a new commercial network agreement and (ii) laboratory revenues for which we had limited operating history. We have since instituted fur-

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ther clinical placement review procedures with respect to Desert Hope to ensure maximum program benefits through the participating commercial network programs, and we have augmented our laboratory billing practices by converting billing codes, adding primary diagnosis codes and enhancing patient claim information. While we believe these actions should improve collection percentages in future reporting periods, there can be no assurances that we will be able to maintain or improve historical collection rates in future reporting periods.

In addition, as previously disclosed, through December 31, 2013, our expected realization was determined by management after taking into account historical collections received from the commercial payors since our inception compared to the gross client charges billed. Beginning in January 2014, we enhanced our methodology related to our net realizable value to more quickly react to potential changes in reimbursements by facility, by type of service and by payor. As a result, management adjusted the expected realization to reflect a twelve-month historical analysis of reimbursement data by facility in addition to considering the type of services provided, the payors and the gross client charge rates. This adjustment resulted in a decrease in our expected realization for the first quarter of 2014. Although we are unable to quantify the future effects of this change in methodology, we currently anticipate this adjustment will decrease our expected realization and net realizable value of revenues over the remainder of 2014.

The following table presents a summary of our aging of accounts receivable as of March 31, 2013 and 2014:

	Current			30-120 Days			Over 120 Days			Total
March 31, 2013		24.3	%		35.5	%		40.2	%		100.0	%
March 31, 2014		23.9	%		27.2	%		48.9	%		100.0	%

Our days sales outstanding as of March 31, 2013 and 2014 were 77 and 80, respectively.

Salaries, Wages and Benefits

Salaries, wages and benefits increased $0.6 million, or 5.8%, to $11.5 million for the three months ended March 31, 2014 from $10.9 million for the three months ended March 31, 2013. As a percentage of revenues, salaries, wages and benefits were 38.4% of revenues for the three months ended March 31, 2014 compared to 37.1% of revenues for the three months ended March 31, 2013. The increase was primarily related to a $0.3 million increase in stock compensation expense for the three months ended March 31, 2014 compared to the

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three months ended March 31, 2013 relating to the vesting of equity award grants under our 2007 Stock Incentive Plan. Our Chief Operating Officer commenced employment in February 2013 and our General Counsel and Secretary commenced employment in December 2013. Accordingly, our salaries, wages and benefits expense for the three months ended March 31, 2014 included their salaries for the entire period in 2014. In addition, salaries, wages and benefits for the three months ended March 31, 2014 increased $0.3 million for discretionary bonuses.

As a result of the CRMS Acquisition in April 2014, we expect that increased headcount with the addition of 31 CRMS personnel will contribute approximately $1.7 million in additional salaries, wages and benefits expense for the period in 2014 subsequent to the CRMS Acquisition. In addition, we expect the opening of the Greenhouse expansion in the second half of 2014 will contribute $0.4 million in additional salaries, wages and benefits expense for the period in 2014 subsequent to the completion of the expansion.

Advertising and Marketing

Advertising and marketing expenses increased $0.1 million, or 4.5%, to $3.3 million for the three months ended March 31, 2014 from $3.1 million for the three months ended March 31, 2013. As a percentage of revenues, advertising and marketing expenses were 10.9% of revenues for the three months ended March 31, 2014 compared to 10.7% of revenues for the three months ended March 31, 2013. The increase was primarily driven by the expansion of our national advertising program as well as a heightened emphasis on internet advertising campaigns.

Professional Fees

Professional fees increased $0.4 million, or 21.5%, to $2.5 million for the three months ended March 31, 2014 from $2.1 million for the three months ended March 31, 2013. As a percentage of revenues, professional fees were 8.3% of revenues for the three months ended March 31, 2014 compared to 7.0% of revenues for the three months ended March 31, 2013. The increase was primarily due to an increase in service fees for outsourced medical billing and collections. The transition from the other third party billing companies to CRMS in 2013 combined with the CRMS Acquisition is expected to result in a reduction in customer billing and collection fees of approximately $3.3 million in the remainder of 2014 as compared to the prior year.

Client Related Services

Client related services expenses increased $0.6 million, or 29.5%, to $2.5 million for the three months ended March 31, 2014 from $1.9 million for the three months ended March 31, 2013. As a percentage of revenues, client related services expenses were 8.2% of revenues for the three months ended March 31, 2014 compared to 6.4% of revenues for the three months ended March 31, 2013. The increase was primarily related to increases in clinician fees paid to the Professional Groups due to greater census in detoxification and residential beds which require greater numbers of more highly qualified medical staff.

Other Operating Expenses

Other operating expenses decreased $0.1 million, or 3.0%, to $2.7 million for the three months ended March 31, 2014 from $2.8 million for the three months ended March 31, 2013. As a percentage of revenues, other operating expenses were 9.0% of revenues for the three months ended March 31, 2014 compared to 9.5% of revenues for the three months ended March 31, 2013. The decrease was primarily the result of the closure of the Leading Edge facility in June 2013.

Rents and Leases

Rents and leases decreased $0.9 million, or 64.8%, to $0.5 million for the three months ended March 31, 2014 from $1.3 million for the three months ended March 31, 2013. As a percentage of revenues, rents and leases declined to 1.5% of revenues for the three months ended March 31, 2014 compared to 4.5% of revenues for the

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three months ended March 31, 2013. The decrease was primarily related to a $0.4 million reduction in rent expense resulting from the consolidation of Greenhouse Real Estate, LLC effective October 8, 2013 and $0.4 million reduction related to the closure of the Leading Edge facility in June 2013.

We expect to continue to experience a reduction in rent expense in the second and third quarters of 2014 of $0.4 million per quarter related to the acquisition of Greenhouse Real Estate, LLC, partially offset by a $0.1 million increase in rent expense for the remainder of 2014 as a result of the CRMS Acquisition.

Provision for Doubtful Accounts

The provision for doubtful accounts increased $1.5 million, or 58.1%, to $4.2 million for the three months ended March 31, 2014 from $2.6 million for the three months ended March 31, 2013, due primarily to a greater volume of receivables and lower than estimated collection rates. As a percentage of revenues, the provision for doubtful accounts was 13.9% of revenues for the three months ended March 31, 2014 compared to 9.0% of revenues for the three months ended March 31, 2013. Our provision for doubtful accounts is directly impacted by the aging of our receivables, and accounts receivable aged over 120 days increased by $8.2 million to $21.7 million as of March 31, 2014 from $13.5 million as of March 31, 2013 as a result of growth in uncollected revenue. The increase of accounts receivable aged over 120 days was driven by the increase in total revenues from California and Nevada. In these states, two large commercial payors directly reimburse clients instead of remitting payments to us, which requires greater collections efforts, extends payment times and reduces recovery amounts.

Depreciation and Amortization

Depreciation and amortization expense increased $0.4 million, or 57.7%, to $1.1 million for the three months ended March 31, 2014 from $0.7 million for the three months ended March 31, 2013. As a percentage of revenues, depreciation and amortization expense was 3.6% of revenues for the three months ended March 31, 2014 compared to 2.3% of revenues for the three months ended March 31, 2013. The increase was primarily the result of the consolidation of Greenhouse Real Estate, LLC in October 2013. The increase in depreciation and amortization expense was also attributable to additions of property and equipment in the last nine months of 2013 and the three months ended March 31, 2014.

We expect to record an additional $0.2 million in depreciation expense during the remainder of 2014 related to a full year consolidation of Greenhouse Real Estate, LLC plus an additional $0.1 million in depreciation expense associated with the opening of the Greenhouse expansion anticipated in the second half of 2014.

Interest Expense

Interest expense was $0.4 million for both the three months ended March 31, 2014 and the three months ended March 31, 2013. As a percentage of revenues, interest expense was 1.2% of revenues for the three months ended March 31, 2014 compared to 1.4% of revenues for the three months ended March 31, 2013. We expect interest expense to increase $0.2 million for the remainder of 2014 related to the consolidation of Greenhouse Real Estate, LLC, and we expect to incur approximately $0.1 million of additional interest on construction financing related to the Greenhouse expansion.

Income Tax Expense

For the three months ended March 31, 2014, income tax expense was $0.6 million, reflecting an effective tax rate of 42.2%, compared to $1.4 million, reflecting an effective tax rate of 37.6%, for the three months ended March 31, 2013. As a percentage of revenue, income tax expense was 2.0% of revenues for the three months ended March 31, 2014 compared to 4.6% of revenues for the three months ended March 31, 2013. The increase in the effective tax rate for the three months ended March 31, 2014 was primarily attributable to an increase in the valuation allowance related to net losses of the Professional Groups and to our forecasted net taxable income.

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Net (Loss) Income Attributable to Noncontrolling Interest

For the three months ended March 31, 2014, net loss attributable to noncontrolling interest was $0.2 million compared to net income attributable to noncontrolling interest of $0.1 million for the three months ended March 31, 2013, representing a $0.3 million decrease. This decrease was primarily the result of the consolidation of Greenhouse Real Estate, LLC effective October 8, 2013 and the consolidation of the Professional Groups effective October 1, 2013.

Comparison of Year ended December 31, 2013 to Year ended December 31, 2012

The following table presents our consolidated statements of income from continuing operations for the periods indicated (dollars in thousands):

	Year Ended December 31,
	2012				2013						Year over Year   Increase (Decrease)
	Amount		%		Amount			%			Amount			%
Revenues	$	66,035		100.0	$	115,741			100.0		$	49,706			75.3
Operating expenses
Salaries, wages and benefits		25,680		38.9		46,856			40.5			21,176			82.5
Advertising and marketing		8,667		13.1		13,493			11.7			4,826			55.7
Professional fees		5,430		8.2		10,277			8.9			4,847			89.3
Client related services		8,389		12.7		7,986			6.9			(403	)		(4.8	)
Other operating expenses		6,384		9.7		11,615			10.0			5,231			81.9
Rents and leases		3,614		5.5		4,634			4.0			1,020			28.2
Provision for doubtful accounts		3,344		5.1		10,950			9.5			7,606			227.5
Litigation settlement		—		—		2,588			2.2			2,588			—
Restructuring		—		—		806			0.7			806			—
Depreciation and amortization		1,288		1.9		3,003			2.6			1,715			133.2
Total operating expenses		62,796		95.1		112,208			97.0			49,412			78.7
Income from operations		3,239		4.9		3,533			3.0			294			9.1
Interest expense		980		1.5		1,390			1.2			410			41.8
Other expense, net		12		0.0		36			0.0			24			200.0
Income before income tax expense		2,247		3.4		2,107			1.8			(140	)		(6.2	)
Income tax expense		1,148		1.7		615			0.5			(533	)		(46.4	)
Net income	$	1,099		1.7	$	1,492			1.3		$	393			35.8
Less: net loss (income) attributable to noncontrolling interest		405		0.6		(706	)		(0.6	)		1,111			n/m
Net income attributable to American Addiction Centers, Inc.	$	1,504		2.3	$	786			0.7		$	(718	)		(47.7	)
Deemed contribution — redemption of Series B Preferred		—		—		1,000			0.8			1,000			—
Net income available to American Addiction Centers, Inc. common stockholders	$	1,504		2.3	$	1,786			1.5		$	282			18.8

n/m = not meaningful

Revenues

Revenues increased $49.7 million, or 75.3%, to $115.7 million for the year ended December 31, 2013 from $66.0 million for the year ended December 31, 2012. The increase resulted primarily from our average daily census increasing to 339 in 2013 from 238 in 2012, or 42.4%, and average daily revenue increasing to $935 in 2013 from $759 in 2012, or 23.2%. This growth was attributable to opening the De Novo Facilities as well as added capacity from the TSN Facilities.

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Revenues generated from our De Novo Facilities were $52.9 million in 2013 compared to $13.8 million in 2012. The substantial increase was the result of the opening dates of the new facilities. The 70-bed Greenhouse facility started accepting clients in March 2012, and the 148-bed Desert Hope facility opened in January 2013. In addition, the TSN Facilities generated revenues of $24.1 million in 2013 compared to $11.0 million in 2012. The year-over-year increase with respect to the TSN Facilities was the result of a full year of revenues recorded during 2013, while 2012 only included a relatively short partial year with respect to these facilities. The additional sales channels provided by the TSN Acquisition also contributed to the revenue increase by improving our average daily census. The increases in revenues were offset by a $3.5 million decrease at other existing facilities.

As previously noted, we closed one of the TSN Facilities (Leading Edge) in the second quarter of 2013; however, our other facilities were able to absorb the majority of the closed facility’s clients, resulting in an insignificant loss of consolidated revenues.

The following table presents a summary of our aging of accounts receivable as of December 31, 2012 and 2013:

	Current			30-120 Days			Over 120 Days			Total
December 31, 2012		23.5	%		39.4	%		37.1	%		100.0	%
December 31, 2013		23.1	%		28.5	%		48.4	%		100.0	%

Our days sales outstanding as of December 31, 2012 and 2013 were 115 and 77, respectively. The improvement in days sales outstanding from 2012 to 2013 was primarily the result of consolidation of our billing and collections processing from three companies to one.

Salaries, Wages and Benefits

Salaries, wages and benefits increased $21.2 million, or 82.5%, to $46.9 million for the year ended December 31, 2013 from $25.7 million for the year ended December 31, 2012. As a percentage of revenues, salaries, wages and benefits were 40.5% of revenues for the year ended December 31, 2013 compared to 38.9% of revenues for the year ended December 31, 2012. The increase was primarily related to (i) the addition of 208 employees in connection with the TSN Acquisition and 97 employees in conjunction with the opening of Desert Hope in January 2013 and (ii) an increase in our corporate staff, including the expansion of our sales force and call center. In addition, our total number of employees has grown to 629 at December 31, 2013 from 231 at the beginning of 2012. In addition, salaries, wages and benefits expense for the year ended December 31, 2013 included $3.5 million of discretionary bonuses of cash and stock in December 2013 to our executive officers, of which $2.5 million was paid or granted as of December 31, 2013 and $1.0 million is included in accrued liabilities on the consolidated balance sheet at December 31, 2013.

As a result of the CRMS Acquisition in April 2014, we expect that salaries, wages and benefits will increase by approximately $1.7 million in 2014 with the addition of 31 personnel. In addition, we expect salaries, wages and benefits will increase approximately $0.2 million in 2014 related to the opening of the Greenhouse expansion.

Advertising and Marketing

Advertising and marketing expenses increased $4.8 million, or 55.7%, to $13.5 million for the year ended December 31, 2013 from $8.7 million for the year ended December 31, 2012. As a percentage of revenues, advertising and marketing expenses were 11.7% of revenues for the year ended December 31, 2013 compared to 13.1% of revenues for the year ended December 31, 2012. The year-over-year increase was primarily driven by the expansion of our national advertising program, particularly targeted television advertising, in connection with the opening of the De Novo Facilities and the TSN Acquisition. A heightened emphasis on internet advertising campaigns also contributed to the increase in advertising expense.

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Professional Fees

Professional fees increased $4.8 million, or 89.3%, to $10.3 million for the year ended December 31, 2013 from $5.4 million for the year ended December 31, 2012. As a percentage of revenues, professional fees were 8.9% of revenues for the year ended December 31, 2013 compared to 8.2% of revenues for the year ended December 31, 2012. The increase was primarily due to an increase in service fees for outsourced medical billing and collections. Our demand for these services significantly increased in mid-2012 and again in early 2013 proportional with revenues generated from the opening and ramp-up of the De Novo Facilities and the addition of the TSN Facilities. The increase was also attributable to an increase in legal fees incurred in connection with the wage and hour class action lawsuit and settlement discussed below.

During 2013, all of our medical billing and collections were transitioned to a single billing service, CRMS. The transition from other third party billers in 2013 combined with the CRMS Acquisition is expected to result in a reduction in customer billing and collection fees of approximately $2.9 million in 2014.

Client Related Services

Client related services expenses decreased $0.4 million, or 4.8%, to $8.0 million for the year ended December 31, 2013 from $8.4 million for the year ended December 31, 2012. As a percentage of revenues, client related services expenses were 6.9% of revenues for the year ended December 31, 2013 compared to 12.7% of revenues for the year ended December 31, 2012. The decrease was primarily related to greater reliance in 2012 on subcontracted services to accommodate clients exceeding the Company’s capacity. The opening of the De Novo Facilities and the addition of the TSN Facilities substantially decreased the need for these subcontracted services, resulting in a decrease of subcontracted services expenses to $0.8 million in 2013 from $5.4 million in 2012. However, the decrease in subcontracted services expenses was partially offset by additional client related expenses attributable to the 70-bed Greenhouse facility that started accepting clients in March 2012, the 148-bed Desert Hope facility that opened in January 2013, a full year of expenses for the TSN Facilities and additional expenses at existing facilities.

Other Operating Expenses

Other operating expenses increased $5.2 million, or 81.9%, to $11.6 million for the year ended December 31, 2013 from $6.4 million for the year ended December 31, 2012. As a percentage of revenues, other operating expenses were 10.0% of revenues for the year ended December 31, 2013 compared to 9.7% of revenues for the year ended December 31, 2012. The increase was the result of additional operating expenses associated with the opening of Greenhouse in March 2012 and Desert Hope in January 2013 and the addition of the TSN Facilities in August 2012. Other operating expenses as a percentage of revenues was relatively unchanged, as these expenses typically correlate with the number of beds in our facilities. We expect other operating expenses will increase approximately $0.4 million in 2014 as a result of the CRMS Acquisition.

Rents and Leases

Rents and leases increased $1.0 million, or 28.2%, to $4.6 million for the year ended December 31, 2013 from $3.6 million for the year ended December 31, 2012. As a percentage of revenues, rents and leases declined to 4.0% of revenues for the year ended December 31, 2013 compared to 5.5% of revenues for the year ended December 31, 2012. The year-over-year dollar increase was primarily related to the TSN Acquisition, as we did not begin paying rent on the TSN Facilities until September 2012. A full year of rent for the TSN Facilities (excluding rent for the Leading Edge facility after its closure in June 2013) is included in rents and leases for 2013. All rent transactions with the real estate entities consolidated as variable interest entities are eliminated effective from June 27, 2012 for Concorde Real Estate, LLC and October 8, 2013 for Greenhouse Real Estate, LLC, with minimal year-over-year impact to expense. We expect to experience a reduction in rent expense in 2014 of approximately $1.3 million related to consolidating Greenhouse Real Estate, LLC for an entire year and expect rent expense will increase by $0.1 million with the acquisition of CRMS.

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Provision for Doubtful Accounts

The provision for doubtful accounts increased $7.6 million, or 227.5%, to $11.0 million for the year ended December 31, 2013 from $3.3 million for the year ended December 31, 2012. As a percentage of revenues, the provision for doubtful accounts was 9.5% of revenues for the year ended December 31, 2013 compared to 5.1% of revenues for the year ended December 31, 2012. Our provision for doubtful accounts is directly impacted by the aging of our receivables, and accounts receivable aged over 120 days increased by $10.7 million to $18.2 million as of December 31, 2013 from $7.5 million as of December 31, 2012. The increase of accounts receivable aged at over 120 days was driven by the significant growth in revenues in 2013, which increased receivables as a whole across all aging periods; transition issues encountered when our billing and collection functions were combined from multiple providers to CRMS during 2013; payment delays normally associated with the opening of new facilities, such as Desert Hope in January 2013, due to being an out-of-network provider with a limited operating history; and the increase of total revenues from California and Nevada where two large commercial payors in these markets pay their portion directly to the client instead of us, which requires greater collections efforts, extends payment times and reduces recovery amounts. As a result of the foregoing factors, our provision for doubtful accounts reflects a higher reserve percentage due to uncertainty of collecting these accounts.

Litigation Settlement

Litigation settlement expenses for the year ended December 31, 2013 were $2.6 million. In September 2012, a wage and hour class-action claim was filed against us in the State of California. In March 2013, an amended complaint alleging additional wage and hour violations was filed against us in the same court, and the two claims were subsequently consolidated into a class action. In June 2013, the parties agreed to settle the substantive claims for $2.6 million during mediation. Once the settlement amount became probable, we recorded a $2.6 million reserve in the second quarter of 2013 for this matter. The reserve is reflected in accrued liabilities as of December 31, 2013. On April 9, 2014 and following court approval, we settled this matter with a payment of $2.6 million. We did not record any litigation settlement expenses for the year ended December 31, 2012.

Restructuring

Restructuring expenses for the year ended December 31, 2013 were $0.8 million. During the first half of 2013, management adopted restructuring plans to centralize our call centers and to close the Leading Edge facility acquired in the TSN Acquisition. As a result, aggregate restructuring and exit charges of $0.8 million were recognized in 2013. We did not recognize any restructuring expenses during 2012 as expenses related to the corporate headquarters relocation were not significant.

The Leading Edge facility was closed in June 2013. Management elected to close the facility because the amenities and the service offerings at the facility were inconsistent with our long-term strategy. During the transition period leading up to closing, clients that would have been candidates for the Leading Edge facility were referred to other treatment facilities, primarily Desert Hope. As a result of the facility closure, we recorded restructuring and exit charges of $0.5 million. These charges consisted of $0.2 million of payroll, severance and employee related costs and facility exit costs related to ongoing lease obligations of $0.3 million. We estimate that approximately $0.3 million of aggregate cash payments related to lease obligations will be made from 2014 through January 2017 as the related leases expire.

Two call centers were closed in the third quarter of 2013 and were consolidated with the existing call center at our headquarters in Brentwood, Tennessee to create a centralized call center. The call center operations were centralized in order to manage costs more effectively and optimize the call center’s view of client services, thus streamlining the placement of clients to treatment facilities. Restructuring expenses related to centralizing the call centers totaled $0.3 million in 2013, which included $0.1 million related to payroll, severance and other employee related costs, $0.1 million related to relocation costs and $0.1 million of facility exit costs related to ongoing lease obligations (net of approximately $0.1 million in sublease income). We estimate that approximately $0.2 million of aggregate cash payments related to these lease obligations will be made from 2014 through October 2015 as the related leases expire.

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Depreciation and Amortization

Depreciation and amortization expense increased $1.7 million, or 133.2%, to $3.0 million for the year ended December 31, 2013 from $1.3 million for the year ended December 31, 2012. As a percentage of revenues, depreciation and amortization expense was 2.6% of revenues for the year ended December 31, 2013 compared to 1.9% of revenues for the year ended December 31, 2012. The increase was primarily the result of a full year of expense in 2013 related to the TSN Facilities, combined with depreciation expense associated with Desert Hope, which we began recording in January 2013 when that facility was opened, and to a lesser extent, depreciation related to the consolidation of Greenhouse in October 2013. The increase in depreciation and amortization expense was also attributable to additions of property and equipment during 2013 of $14.1 million, including capital lease obligations of $1.2 million. Also contributing to the increase was the addition of depreciable assets associated with the expansion of our call center.

We expect to record an additional $0.2 million in depreciation expense during 2014 related to a full year consolidation of the existing Greenhouse facility plus an additional $0.1 million in depreciation expense associated with the opening of the Greenhouse expansion anticipated in the second half of 2014.

Interest Expense

Interest expense increased $0.4 million, or 41.8%, to $1.4 million for the year ended December 31, 2013 from $1.0 million for the year ended December 31, 2012. As a percentage of revenues, interest expense was 1.2% of revenues for the year ended December 31, 2013 compared to 1.5% of revenues for the year ended December 31, 2012. The year-over-year dollar increase was associated with $15.0 million in net additional borrowings in 2013 to fund growth and acquisitions, $11.3 million in additional VIE debt and $1.2 million in new capital leases. We expect interest expense to increase $0.3 million in 2014 related to the consolidation of Greenhouse, and we expect to incur approximately $0.1 million of additional interest on construction financing for the Greenhouse expansion.

Income Tax Expense

For the year ended December 31, 2013, income tax expense was $0.6 million, reflecting an effective tax rate of 29.2%, compared to $1.1 million, reflecting an effective tax rate of 51.1%, for the year ended December 31, 2012. As a percentage of revenue, income tax expense was 0.5% of revenues for the year ended December 31, 2013 compared to 1.7% of revenues for the year ended December 31, 2012. Our effective tax rate on pre-tax income attributable to AAC was 54.8% in 2013 compared to 44.3% in 2012. The increase in the effective tax rate on pre-tax income attributable to AAC was primarily due to an increase in non-deductible expenses, an increase in the valuation allowance and the recognition of uncertain tax positions. The reduction in our overall effective tax rate was primarily attributable to additional income that is not taxable to us from various VIEs that we are consolidating in our results of operations, partially offset by increases in non-deductible expenses and an increase in the valuation allowance. Other items affecting our overall tax rate include the release of previously established valuation allowances, a reduction to our apportioned state income tax rate and various adjustments arising from amended tax returns filed during 2013.

Net (Loss) Income Attributable to Noncontrolling Interest

For the year ended December 31, 2013, net income attributable to noncontrolling interest was $0.7 million compared to a net loss attributable to noncontrolling interest of $0.4 million for the year ended December 31, 2012, representing a $1.1 million, or 274.3%, increase. This increase is principally a result of the consolidation of Concorde Real Estate for all twelve months in 2013, compared to the period from June 27, 2012 through December 31, 2012, and the consolidation of Greenhouse Real Estate from October 8, 2013 through December 31, 2013.

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Quarterly Results of Operations

The following tables set forth unaudited quarterly condensed consolidated statements of operations data for the last two fiscal years and the quarter ended March 31, 2014. We have prepared the statement of operations for each of these quarters on the same basis as the audited consolidated financial statements included elsewhere in this prospectus. In the opinion of management, the quarterly financial information reflects all necessary adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of this data. This information should be read in conjunction with the audited consolidated financial statements and related notes and the unaudited condensed consolidated financial statements and related notes included elsewhere in this prospectus. These quarterly operating results are not necessarily indicative of our operating results for any future quarters or for a full year.

	Three Months Ended
	Mar. 31, 2012			June 30, 2012		Sept. 30, 2012		Dec. 31, 2012			Mar. 31, 2013		June 30, 2013			Sept. 30, 2013		Dec. 31, 2013			Mar. 31, 2014
	(dollars in thousands, except average daily revenue and average net daily revenue)
Revenues	$	10,173		$	12,220	$	16,616	$	27,026		$	29,438	$	30,327		$	28,318	$	27,658		$	30,083
Operating expenses		10,064			11,490		13,698		27,544			25,475		30,408	(7)		26,190		30,134	(8)		28,231
Income (loss) before income tax expense		(1	)		553		2,716		(1,021	)		3,591		(395	)		1,666		(2,755	)		1,852
Net income (loss)		(3	)		311		1,494		(703	)		2,239		(164	)		1,165		(1,748	)		841
Adjusted EBITDA(1)		259			1,053		3,286		2,570			5,002		4,108			3,334		(886	)		3,592
Operating Metrics:
Average daily census(2)		206			176		232		337			368		361			318		309			371
Average daily revenue(3)	$	559		$	745	$	778	$	871		$	889	$	923		$	968	$	972		$	901
Average net daily revenue(4)	$	516		$	725	$	765	$	813		$	809	$	844		$	866	$	877		$	776
New admissions(5)		695			604		674		961			1,085		1,066			932		944			1,065
Bed count at end of period(6)		194			194		338		338			486		420			431		431			427

(1) Adjusted EBITDA is a “non-GAAP financial measure” as defined under the rules and regulations promulgated by the SEC. We define Adjusted EBITDA as net income adjusted for interest expense, depreciation and amortization expense, income tax expense, stock-based compensation and related tax reimbursements, litigation settlement and restructuring charges and acquisition related de novo startup expenses, which includes professional services for accounting, legal and valuation services related to the acquisitions and legal and licensing expenses related to de novo projects. Adjusted EBITDA, as presented in this prospectus, is considered a supplemental measure of our performance and is not required by, or presented in accordance with, GAAP. Adjusted EBITDA is not a measure of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measures derived in accordance with GAAP. We have included information concerning Adjusted EBITDA in this prospectus because we believe that such information is used by certain investors as a measure of a company’s historical performance. We believe this measure is frequently used by securities analysts, investors and other interested parties in the evaluation of issuers of equity securities, many of which present EBITDA and Adjusted EBITDA when reporting their results. Because Adjusted EBITDA is not determined in accordance with GAAP, it is subject to varying calculations and may not be comparable to the Adjusted EBITDA (or similarly titled measures) of other companies. Our presentation of Adjusted EBITDA should not be construed as an inference that our future results will be unaffected by unusual or nonrecurring items. The following table presents a reconciliation of Adjusted EBITDA to net income, the most comparable GAAP measure, for each of the periods indicated:

	Three Months Ended
	Mar. 31, 2012			June 30, 2012		Sept. 30, 2012		Dec. 31, 2012			Mar. 31, 2013		June 30, 2013			Sept. 30, 2013		Dec. 31, 2013			Mar. 31, 2014
	(dollars in thousands)
Net income (loss)	$	(3	)	$	311	$	1,494	$	(703	)	$	2,239	$	(164	)	$	1,165	$	(1,748	)	$	841
Non-GAAP Adjustments:
Interest expense		110			172		211		487			410		303			340		337			354
Depreciation and amortization		132			243		266		647			683		759			755		806			1,077
Income tax expense (benefit)		2			242		1,222		(318	)		1,352		(231	)		501		(1,007	)		615
Stock-based compensation and related tax reimbursements		—			—		—		2,408			303		302			318		726			705
Litigation settlement		—			—		—		—			—		2,588			—		—			—
Restructuring		—			—		—		—			—		551			255		—			—
Acquisition related and de novo start-up expenses		18			85		93		49			15		—			—		—			—
Adjusted EBITDA	$	259		$	1,053	$	3,286	$	2,570		$	5,002	$	4,108		$	3,334	$	(886	)	$	3,592

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(2) Includes client census at all of our owned or leased inpatient facilities, including FitRx, as well as beds obtained through contractual arrangements to meet demand exceeding capacity. For additional information about contracted beds, see “Revenues” under Note 3 to our audited financial statements included elsewhere in this prospectus.

(3) Average daily revenue is calculated as total revenues during the period divided by the product of the number of days in the period multiplied by average daily census.

(4) Average net daily revenue is calculated as total revenues less provision for doubtful accounts during the period divided by the product of the number of days in the period multiplied by average daily census.

(5) Includes total client admissions for the period presented.

(6) Bed count at end of period includes all beds at owned and leased inpatient facilities, including FitRx, but excludes contracted beds as of December 31, 2012. We did not have any contracted beds as of any other period presented. Bed count at the end of the 2012 period and at March 31, 2013 includes 70 beds at our former Leading Edge facility, which was closed in the second quarter of 2013. For additional information regarding the closure of the Leading Edge facility, see Note 13 to our audited financial statements included elsewhere in this prospectus. In the first quarter of 2014, we added two beds at the FitRx facility to accommodate increased client census and eliminated six beds at The Academy facility as a result of an expired housing lease.

(7) Includes $2.6 million for litigation settlement expenses in connection with a consolidated wage and hour class action claim. In the quarter ended June 30, 2013, we determined that the likelihood of an unfavorable outcome was probable and, accordingly, we accrued a litigation settlement liability of $2.6 million. The parties agreed to settle the substantive claims during mediation for $2.6 million, and we made a payment of $2.6 million in the second quarter of 2014 to settle the matter. For additional discussion of this litigation settlement, see Note 16 to our audited financial statements included elsewhere in this prospectus.

(8) Includes $3.5 million for discretionary bonuses to our executive officers in December 2013.

Liquidity and Capital Resources

General

Our primary sources of liquidity are net cash generated from operations, borrowing availability under our revolving line of credit, other bank financings, proceeds from issuances of our common stock, seller financing and the issuance of subordinated debt. We have also utilized operating lease transactions with respect to commercial properties primarily to perform client services and provide space for administrative facilities. For additional information regarding operating leases, see Note 16 to our audited financial statements included elsewhere in this prospectus. We expect that our future funding for working capital needs, capital expenditures, long-term debt repayments and other financing activities will continue to be provided from some or all of these sources and with the proceeds from this offering. Our future liquidity will be impacted by our ability to access capital markets, which may be restricted due to our credit ratings, general market conditions, leverage capacity and by existing or future debt agreements.

We anticipate that our current level of cash on hand, internally generated cash flows and borrowings available under our revolving line of credit together with the net proceeds from this offering will be sufficient to fund our anticipated working capital needs, debt service and repayment obligations, dividend payments to noncontrolling interests and maintenance capital expenditures for at least the next twelve months. Without taking into account the net proceeds from this offering, we anticipate our internally generated cash flows, cash on hand and availability under our revolving line of credit will be sufficient to fund our anticipated working capital needs, debt service and repayment obligations (inclusive of the $3.6 million Academy Loan due July 14, 2014), dividend payments to noncontrolling interests and maintenance capital expenditures for at least the next twelve months, except with respect to the $10.4 million construction loan for the expansion of our Greenhouse facility that matures in October 2014.

We intend to convert the $10.4 million construction loan related to the Greenhouse facility construction to a permanent loan upon completion of construction in the second half of 2014 as permitted in the agreement, which would provide approximately $9.7 million additional liquidity in the next twelve months. Pursuant to the terms of the Greenhouse construction loan, the loan may be converted to a permanent term loan with an extended maturity of October 31, 2019 provided (i) there is no default, (ii) the construction of the Greenhouse facility is complete, (iii) there shall have occurred no material adverse change, as determined by the financial institution in its sole discretion, in our financial condition and (iv) other terms and conditions are satisfied. While we expect to

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be able to convert the Greenhouse construction loan to a permanent term loan, we cannot provide any assurances that we will be successful in doing so.

One element of our business strategy is to selectively pursue facility acquisitions, consisting of both existing operating facilities and properties purchased for remodeling which may be closed for operations at the time of acquisition. We are currently evaluating potential facility acquisitions consistent with the normal course of our business and have one property under contract. These and other potential acquisitions are in various stages of evaluation and there can be no assurance as to whether or when any of these acquisitions will be completed. Our ability to complete acquisitions is subject to a number of risks and variables, including our ability to negotiate mutually agreeable terms with the counterparties and our ability to finance the purchase price. Any acquisitions may result in the incurrence of, or assumption by us, of additional indebtedness. We continually assess our capital needs and may seek additional financing, including debt or equity as considered necessary to fund capital expenditures (inclusive of facility expansions), de novo facilities, potential acquisitions and for other corporate purposes. We intend to fund the development of our recently acquired properties in Riverview, Florida, Arlington, Texas and Las Vegas, Nevada through future bank financings secured by the properties, utilizing our revolving line of credit and/or cash on hand.

We cannot provide assurance that our operating performance will continue to generate sufficient cash flows from operations or that future borrowings will be available under existing or future financing arrangements or otherwise to enable us to grow our business, service or repay our debt or make anticipated capital expenditures. Our future capital requirements and the adequacy of available funds will depend on many factors, including those set forth under “Risk Factors” in this prospectus. We may not be able to secure additional financing to finance anticipated acquisition or development costs or to meet our debt service or repayment requirements on acceptable terms, or at all. If we raise additional funds by issuing additional shares of common stock, the ownership of our existing stockholders will be diluted. If we raise additional financing by incurring new indebtedness, we will be subject to increased fixed payment obligations and could also be subject to restrictive covenants, such as limitations on our ability to incur additional debt and other operating restrictions that could adversely impact our ability to conduct our business. If we are unable to obtain necessary additional funds, we will have to reduce our operating costs, which could impair our growth prospects and could otherwise negatively impact our business.

Cash Flow Analysis

Our cash flows are summarized as follows (in thousands):

	Year Ended December 31,						Year over Year Increase (Decrease)			Three Months Ended March 31, (unaudited)						Quarter over Quarter Increase (Decrease)
	2012			2013						2013			2014
Provided by (used in) operating activities	$	69		$	3,443		$	3,374		$	(2,194	)	$	753		$	2,947
Used in investing activities		(7,896	)		(13,144	)		(5,248	)		(808	)		(3,846	)		(3,038	)
Provided by financing activities		8,434			10,973			2,539			9,335			5,421			(3,914	)
Net increase in cash and cash equivalents		607			1,272			665			6,333			2,328			(4,005	)
Cash and cash equivalents at end of period		740			2,012			1,272			7,073			4,340			(2,733	)

Net Cash Provided by Operating Activities

Cash provided by operating activities was $0.8 million for the three months ended March 31, 2014, an increase of $2.9 million compared to cash used in operating activities of $2.2 million for the three months ended March 31, 2013. The increase was primarily attributable to an increase in non-cash charges of $2.7 million, principally resulting from an increase in our provision for doubtful accounts and an increase in depreciation and amortization expense related to the TSN Facilities, the consolidation of certain variable interest entities and our investment in corporate infrastructure and a decreased investment in working capital of $1.7 million, primarily related to our accounts receivable and accounts payable. These increases were offset by a decrease in net income of $1.4 million.

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Cash provided by operating activities was $3.4 million for the year ended December 31, 2013, an increase of $3.4 million compared to cash provided by operating activities of $69,000 for the year ended December 31, 2012. The increase was primarily attributable to an increase in net income of $0.4 million and an increase in non-cash charges of $7.7 million, principally from an increase in our provision for doubtful accounts and depreciation and amortization related to the TSN Facilities, the consolidation of certain variable interest entities and our investment in corporate infrastructure. These increases were offset by our increase in working capital of $4.7 million resulting from the increase in our accounts receivable and a decrease in accrued liabilities.

Net Cash Used in Investing Activities

Cash used in investing activities was $3.8 million for the three months ended March 31, 2014, an increase of $3.0 million compared to cash used in investing activities of $0.8 million for the three months ended March 31, 2013. The increase was primarily related to the investment of $1.8 million related to the expansion of the Greenhouse facility and $0.7 million to complete the purchase of an outpatient facility in Arlington, Texas. In addition, cash used in investing activities includes $0.4 million in advances to our CEO and President.

Cash used in investing activities was $13.1 million for the year ended December 31, 2013, an increase of $5.2 million, or 66.5%, compared to cash used in investing activities of $7.9 million for the year ended December 31, 2012. The increase was primarily related to $5.8 million paid in connection with our purchase of land and a building in Riverview, Florida that we are converting to a treatment facility and an additional $0.6 million in related renovations. We also invested $1.0 million related to construction projects at Greenhouse and $4.7 million for other purchases, mainly furniture, equipment and leasehold improvements.

Net Cash Provided by Financing Activities

Cash provided by financing activities was $5.4 million for the three months ended March 31, 2014, a decrease of $3.9 million compared to cash provided by financing activities of $9.3 million for the three months ended March 31, 2013. The decrease was primarily related to (i) decreased borrowings under our then existing revolving line of credit of $2.8 million, (ii) a decrease in net proceeds raised from issuances of common stock of $2.7 million, (iii) an increase in payments on notes payable and capital leases of $0.2 million and (iv) an increase in distributions to noncontrolling interests of $0.7 million. The net decrease in cash provided by financing activities was primarily offset by (i) an increase in proceeds from notes payable of $1.7 million, (ii) a decrease in payments on notes payable to related parties of $0.4 million and (iii) $0.4 million in proceeds from the offering of preferred stock.

Cash provided by financing activities was $11.0 million for the year ended December 31, 2013, an increase of $2.5 million compared to cash provided by financing activities of $8.4 million for the year ended December 31, 2012. Financing activities in fiscal 2013 included $5.9 million in borrowing under our then existing revolving line of credit, the issuance of notes payable totaling $15.0 million, $7.4 million in proceeds from the sale of our common stock and $2.0 million in contributions by certain variable interest entities, which were offset in part by our debt principal payments of $4.0 million and distributions to and redemptions of BHR interests totaling $4.4 million.

Financing Relationships

Credit Facility

On April 15, 2014, we entered into the Second Amended and Restated Credit Agreement (the “Credit Facility”) with Wells Fargo Bank, National Association. The Credit Facility makes available to us a $15.0 million revolving line of credit, subject to borrowing base limitations, and amended and restated two existing term loans in the outstanding principal amounts of $0.6 million (“Term Loan A”) and $1.5 million (“Term Loan B”). The proceeds of Term Loan B were used to find a portion of the consideration paid in connection with the TSN Acquisition. In June 2014, we repaid the $1.5 million outstanding balance of Term Loan B in full. We intend to use the proceeds of the revolving line of credit for general corporate purposes. The revolving line of credit matures on April 1, 2015 and the outstanding principal balance of Term Loan A is due and payable in full on May 15, 2017.

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The revolving line of credit bears interest at the one-month London Interbank Offered Rate (“LIBOR”), plus an applicable margin that is determined by our leverage ratio, as defined by the agreement, at the end of each quarter. A quarter-end leverage ratio of 4.75 to 1.00 or above results in an applicable margin of 3.0%, a ratio below 4.75 to 1.00 and equal to or above 4.00 to 1.00 results in an applicable margin of 2.75%, and a ratio below 4.00 to 1.00 results in an applicable margin of 2.5%. Term Loan A bears interest at LIBOR plus 3.15%. The borrowing base for the revolving line of credit is 70% of our eligible accounts receivable and was established with the understanding that, among other things, the aggregate of all returns, rebates, discounts, credits and allowances, exclusive of the initial adjustment to record net revenues at the time of billing, for the immediately preceding three months will be less than 20% of gross revenues for such period. If the aggregate of all returns, rebates, discounts, credits and allowances, exclusive of the initial adjustment to record net revenues at the time of billing, for the immediately preceding three months is greater than 20% of gross revenues for such period, or if there exists any other matters, events, conditions or contingencies that Wells Fargo Bank reasonably believes may affect payment of any portion of our accounts, the borrowing base may be reduced to a lower percentage of our eligible accounts receivable.

The Credit Facility requires us to achieve minimum net revenues and adjusted EBITDA for each quarter, determined on a rolling four quarters basis, of no less than 85% of net revenues and adjusted EBITDA for the immediately preceding four quarters. The Credit Facility generally defines adjusted EBITDA as consolidated net income plus (i) interest expense, (ii) depreciation and amortization expense, (iii) tax expense, (iv) non-cash stock compensation, (v) one-time legal and restructuring costs incurred in 2014 in connection with the AAC private placement, the Reorganization Transactions, the BHR preferred equity transactions, and this offering in an amount not to exceed $2.5 million, (vi) one-time legal, accounting and other transaction costs incurred in connection with a permitted acquisition in 2014 or in any subsequent fiscal year in an aggregate amount not to exceed $0.2 million in any fiscal year, (vii) one-time settlement costs paid on or about April 9, 2014, in connection with certain wage and settlement charges in California in an amount not to exceed $2.5 million, (viii) one-time restructuring costs incurred in 2013 in connection with the closing of the Leading Edge operations and the consolidation of call centers in an amount not to exceed $0.8 million and (ix) to the extent approved by Wells Fargo Bank in writing, other one-time and non-recurring charges.

The Credit Facility also requires us to achieve a fixed charge coverage ratio of not less than 1.25 to 1.00 for each quarter, determined on a rolling four quarter basis, and achieve a liquidity covenant (as described in the Credit Agreement) of no less than $9.0 million on and as of July 14, 2014. In June 2014, we entered into a letter amendment with Wells Fargo pursuant to which we agreed to prepay in full the outstanding balance of $1.5 million plus accrued and unpaid interest under Term Loan B. In connection with the June 2014 prepayment of Term Loan B, the parties agreed to remove from the Credit Agreement the covenant of achieving liquidity of no less than $9.0 million as of July 14, 2014. Finally, the Credit Facility includes a maximum leverage ratio covenant, whereby the ratio of funded debt to EBITDA must not be greater than the ratios set forth below on a rolling four quarter basis:

Fiscal Quarter End	Maximum Leverage Ratio
June 30, 2014		5.00:1.00
September 30, 2014		4.75:1.00
December 31, 2014 and thereafter		3.75:1.00

The Credit Facility limits aggregate capital expenditures (as defined in the Credit Agreement and which exclude, among other items, capital expenditures made by BHR and its subsidiaries that are funded with debt permitted under the Credit Agreement or proceeds from this offering and permitted acquisitions under the Credit Agreement) to $3.0 million in each fiscal year and limits capital lease debt and other purchase money debt to $2.3 million.

The Credit Facility also contains customary events of default including, but not limited to, failure to make payments under the Credit Facility, breaches of covenants (subject to a 20 day cure period in the case of certain covenants), cross-default to any other material indebtedness, bankruptcy and insolvency events and change of control.

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We were not in compliance with certain financial covenants contained in our then existing line of credit at the end of each quarter in 2012 and 2013, including as of December 31, 2012 and 2013. Additionally, our capital expenditures, total operating leases and incurrence of additional indebtedness exceeded the limits specified in our then existing line of credit for the year ended December 31, 2013. For the quarter ended March 31, 2014, we were not in compliance with the covenants regarding capital expenditures and the incurrence of additional indebtedness. We obtained a waiver for the covenant defaults for 2012, and the amendment and restatement of our prior credit facility in April 2014 included a waiver for the noncompliance of the financial covenants and negative covenants that occurred in 2013 and the quarter ended March 31, 2014. In addition, the noncompliance under our then existing line of credit created a cross-default with respect to the note under Term Loan B, and we obtained a waiver for the cross-default under Term Loan B. As previously stated, the Credit Facility contains new covenants that were negotiated in consideration of our operating budget over the term of the Credit Facility. Had the financial and negative covenants included in the Credit Facility been in effect for 2013 and for the quarter ended March 31, 2014, we would have been in compliance with all such covenants.

As of April 15, 2014, the revolving line of credit had an outstanding balance of $13.1 million, the interest rate was 3.15%, and the maximum unused available credit was $0.9 million based upon the borrowing base restrictions.

We intend to use a portion of the net proceeds from this offering to repay all amounts outstanding under the revolving line of credit but may re-borrow such amounts in the future.

BHR Debt

In conjunction with the consolidation of our variable interest entities, our March 31, 2014 balance sheet included debt of $23.1 million related to BHR, which owns all of the outstanding equity interests of Concorde Real Estate, LLC, Greenhouse Real Estate, LLC and The Academy Real Estate, LLC, which entities own the Desert Hope, Greenhouse and Riverview, Florida properties, respectively. As a result of the Reorganization Transactions completed in April 2014, we now own 100% of the outstanding common membership interests in BHR. The BHR debt is guaranteed on a joint and several basis by AAC, Mr. Cartwright and Mr. Menz. The floating interest rates on the BHR debt are based upon the one-month LIBOR, as defined by each agreement, plus various percentage points. The terms of each BHR debt agreement are summarized below:

• Concorde Real Estate, LLC: The debt with respect to Concorde Real Estate, LLC (the “Concorde Loan”) is represented by a $9.6 million promissory note used to refinance the indebtedness related to our Desert Hope facility and to redeem the preferred membership interests in Concorde Real Estate, LLC. The note requires monthly principal payments of $53,228 plus monthly interest and a balloon payment of $6.6 million due at maturity. The note is secured by a deed of trust and an assignment of leases and rents. The note contains financial covenants that require us to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00. The note also contains a cross-default provision linking the performance of Concorde Real Estate to the occurrence of a default by its guarantors or affiliates of its guarantors with respect to any other indebtedness. The interest rate at March 31, 2014 was 2.65% and the balance was $9.1 million. The maturity date of the note is May 15, 2018.

• Greenhouse Real Estate, LLC: The debt with respect to Greenhouse Real Estate, LLC (the “Greenhouse Loan”) is represented by a $13.2 million promissory note used to refinance the indebtedness related to our Greenhouse facility in Grand Prairie, Texas and to fund a 60-bed expansion of the Greenhouse facility. Monthly draws may be made against the note based on actual construction costs incurred. The note is secured by a deed of trust and an assignment of leases and rents. We are required to maintain a debt service coverage ratio of not less than 1.25 to 1.00. The note also contains a cross-default provision. The interest rate at March 31, 2014 was 3.15% and the balance was $10.4 million. The maturity date of the note is October 31, 2014, with a conversion option into a permanent term loan, which extends the maturity date to October 31, 2019 and adjusts the interest to a fixed rate of one-month LIBOR (as defined by the agreement) plus 2.5%. Upon completion of the expansion of the Greenhouse facility, we intend to convert the note into a permanent loan that amortizes based on a 15 year term with a balloon payment due at maturity.

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• The Academy Real Estate, LLC: At March 31, 2014, the debt with respect to The Academy Real Estate, LLC (the “Academy Loan”) was represented by a $3.6 million promissory note used to purchase the property in Riverview, Florida. The note is secured by a deed of trust and an assignment of leases and rents. The note contains financial covenants that require us to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00, as well as other restrictive financial covenants. The note also contains a cross-default provision linking the performance of The Academy Real Estate, LLC to the occurrence of a default by its guarantors or affiliates of its guarantors with respect to any other indebtedness. The interest rate at March 31, 2014 was 3.15% and the balance was $3.6 million. The maturity date of the note is July 14, 2014.

At March 31, 2014, the Company was in compliance with the financial covenants of the BHR debt. The instances of noncompliance under the Credit Facility created a cross-default with the Greenhouse Loan, the Concorde Loan and the Academy Loan. The Company obtained a waiver for the covenant defaults under the Credit Facility for 2012, and the amendment and restatement of our prior credit facility in April 2014 included a waiver for the noncompliance of the financial covenants and negative covenants that occurred under the Credit Facility in 2013 and the quarter ended March 31, 2014. We also obtained waivers for the cross-defaults under the Greenhouse Loan, the Concorde Loan and the Academy Loan.

BHR Preferred Equity

In October 2013, BHR amended its limited liability company agreement to permit the issuance of Series A Preferred Units. In the fourth quarter of 2013, BHR received proceeds of $1.4 million from the sale of 28 Series A Preferred Units valued at $50,000 per unit. In January and February 2014, BHR sold 8.5 Series A Preferred Units, valued at $50,000 per unit, with proceeds to BHR of $0.4 million, net of issuance costs of $11,300. As part of this redemption, one of our directors received $250,000 and an entity controlled by the spouse of one of our directors received $200,000. After these transactions, 36.5 Series A Preferred Units were outstanding. The unit holders were entitled to receive a 12% per annum preferred return on their initial investment, payable quarterly in arrears, had no equity appreciation ability and limited voting rights that were conditioned upon BHR’s default on the distribution of the 12% preferred return. The Series A Preferred Units contained certain embedded issuer call and holder put provisions, including the option of BHR to call and redeem all or any portion of the Series A Preferred Units for $50,000 per unit plus any accrued and unpaid preferred return at any time after the twelfth month of issuance. The holders of the Series A Preferred Units had a put right during three periods discussed below that, if exercised, required BHR to redeem 100% of the issued and outstanding Series A Preferred Units by making a payment equal to $50,000 per unit plus the accrued but unpaid preferred return. The holder was able to exercise the put right for a period of 30 days following the 36th month, 48th month and 60th month after the date of issuance. In the event of a sale of a property owned by BHR, the holders of the Series A Preferred Units were entitled to the repayment of their initial capital contribution plus any accrued and unpaid preferred return. We classified the Series A Preferred Units as noncontrolling interest as a part of mezzanine equity because the potential redemption is not within the complete control of BHR until the last put option period has expired. On April 15, 2014, BHR redeemed all 36.5 Series A Preferred Units for $1.8 million. These former holders of Series A Preferred Units used the proceeds from the redemption to purchase 143,017 shares of AAC common stock at $12.76 per share as part of an exempt common stock offering.

On April 15, 2014, BHR amended and restated its limited liability company agreement, which among other things, changed the rights and privileges of holders of Series A Preferred Units. In connection with this amendment and restatement, BHR received $8.0 million in proceeds from the sale to Alcentra of 160 new Series A Preferred Units. Alcentra received a 1% fee at closing and is entitled to receive a 12% per annum preferred return on its initial investment, payable quarterly in arrears. In the event of a non-payment, the preferred return compounds on a quarterly basis. In the event of non-payment for three months, the preferred return increases to 15.0%, and further increases to 18.0% if not paid beginning in the fourth month, with each increase compounding on a quarterly basis.

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The Series A Preferred Units contain certain embedded call and put provisions. BHR has the option to redeem a minimum of 40 Series A Preferred Units and up to 100% of the outstanding Series A Preferred Units for $50,000 per unit plus (i) any accrued and unpaid preferred return and (ii) a call premium of 3.0% through April 15, 2015, 2.0% from April 16, 2015 through April 15, 2017 and no premium any time after April 15, 2017. If an event of default occurs under the limited liability company agreement, the Series A Preferred Unit holders constituting a majority of such holders have the right to demand BHR to redeem all of the issued and outstanding Series A Preferred Units held by such holders equal to the sum of (i) such Series A Preferred Unit holder’s unrecovered capital contribution plus (ii) any accrued but unpaid preferred return. Alcentra may exercise its put right for a period of 30 days following the 36th month or 48th month after the date of issuance and at any time following the 60th month after the date of issuance. In the event of a sale of a property owned by BHR, Alcentra is entitled to the repayment of its initial capital contribution plus (i) any accrued and unpaid preferred return and (ii) any applicable call premium. As long as Alcentra owns at least 60 Series A Preferred Units less any Series A Preferred Units repurchased by BHR, distributions to affiliates of BHR are limited to $3.0 million annually.

The Series A Preferred Units generally have no voting or approval rights regarding the management of BHR. However, the holders of Series A Preferred Units are entitled to vote with respect to (i) any action that would change the rights or restrictions of the Series A Preferred Units in a way that would adversely affect such holders and (ii) the creation or issuance of any other security convertible into or exercisable for any equity security of BHR having rights, preferences or privileges senior to the common units of BHR. In addition, unanimous approval of all BHR members, including the holders of Series A Preferred Units, is required to approve the sale by BHR of more than 50% of its real property, more than 50% of the voting or economic rights of any BHR subsidiary or the merger, consolidation, sale of all or substantially all of the assets of BHR or sale of a majority of the common units of BHR.

In addition, so long as Alcentra owns at least 60 Series A Preferred Units, subject to adjustment for certain BHR redemptions, the manager of BHR may not engage in certain transactions without the approval of a majority of the Series A Preferred Unit holders, including, without limitation, the following: (i) liquidate, dissolve or wind up the business of BHR; (ii) authorize the issuance of additional Series A Preferred Units or any class or series of equity securities with rights, preferences or parity with or senior to that of the Series A Preferred Units; (iii) declare or pay any cash distribution or make any other distribution not permitted under the limited liability company agreement; (iv) pay any management or similar fees; (v) pay rebates or reduce payments payable by any primary tenants; or (vi) make payments to affiliates of BHR in excess of $3.0 million per year in the aggregate.

Related Party Notes Payable

In April 2013, a related party subordinated note with our CEO in the amount of $1.5 million was converted into 182,260 shares of common stock, and a portion of debt outstanding under a related party subordinated note to one of the sellers of the TSN Acquisition in the amount of $0.5 million was converted into 60,753 shares of common stock.

In August 2012, we entered into notes payable with two significant stockholders, resulting from seller financing of the TSN Acquisition. Interest rates on these notes are 3.125% and 5.0%, and the notes mature on August 31, 2015. The aggregate amount outstanding on these borrowings at March 31, 2014 was $4.2 million.

In April 2011, we entered into an agreement with a former director and stockholder for the repurchase of common and preferred shares held by such party. Under the terms of the agreement, we issued a $0.6 million subordinated note to the stockholder and agreed to make other payments totaling $0.2 million to or on behalf of the stockholder in exchange for 526,247 shares of common stock, 100,000 shares of Series B Preferred Stock and 656,586 shares of Series C Preferred Stock of Forterus, Inc. The balance of the note was fully paid in the second quarter of 2013.

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For additional information concerning our related party notes payable, see “Certain Relationships and Related Party Transactions—AAC Related Party Debt” included elsewhere in this prospectus.

Guarantee of Related Party Debt

In October 2013, our CEO, President and CFO, who then owned membership interests in BHR, personally borrowed $1.9 million from a financial institution, and used the proceeds to make a $1.9 million equity contribution to BHR. The balance of this term loan was $1.8 million as of April 15, 2014. In connection with the BHR Acquisition, we assumed this term loan. Subsequent to our assumption of this term loan, we refinanced the term loan with Holdings as the borrower, and it is now guaranteed by our CEO, President, CFO and AAC. The Credit Facility requires that this term loan be repaid with proceeds from this offering.

Subordinated Promissory Notes (Related Party and Non-related Party)

In March 2012 through April 2012, we issued $1.0 million of subordinated promissory notes to certain accredited investors, of which $0.2 million was issued to one of our directors. The notes bear interest at 12% per annum. Interest is payable monthly and the principal amount is due, in full, on the applicable maturity date of the note. Notes in the principal amount of $0.2 million mature on March 31, 2015 and the remaining notes, in the principal amount of $0.8 million, mature on March 31, 2017. In connection with the issuance of these notes, we issued detachable warrants to the lenders to purchase 71,705 shares of AAC common stock at $1.00 per share. The warrants were exercisable at any time up to their expiration on March 31, 2022. We recorded a debt discount of $0.1 million related to the warrants which reduced the carrying value of the subordinated notes. As of March 31, 2014, the outstanding balance, net of the unamortized debt discount of $75,000, was $0.9 million, of which $0.2 million was due to one of our directors. In connection with the Reorganization Transactions, warrants representing 67,931 shares were exercised in March 2014 and the remaining warrants representing 3,774 shares were exercised in April 2014.

Various Third Party Notes Payable

We have various notes payable with third-party creditors primarily for the purchase of vehicles, furniture and office equipment. The outstanding notes have maturity dates ranging from September 2014 to November 2017 and interest rates ranging from 0.0% to 12.3% per annum. Aggregate monthly payments range from $200 to $16,250. As of March 31, 2014, the aggregate balance on these notes was $1.1 million.

Capital Lease Obligations

During 2013 and the first quarter of 2014, we entered into capital leases with third party leasing companies for equipment and office furniture. The capital leases bear interest at rates ranging from 4.0% to 5.2% and have maturity dates from November 2015 through March 2019. Total obligations under capital leases at March 31, 2014 were $1.2 million of which $0.3 million was included in the current portion of long-term debt.

Consolidation of VIEs

Based on our guarantees of certain entities’ debt and our ability to direct the activities that most significantly impact the economic performance of such entities, we began consolidating Concorde Real Estate, LLC on June 27, 2012 and Greenhouse Real Estate, LLC on October 8, 2013. In addition, we included The Academy Real Estate, LLC in historical financial results from May 2013 to December 10, 2013, at which time we sold our membership interests in The Academy Real Estate, LLC to BHR and consolidated it as a VIE.

We have an affiliation with a professional group in each of the five states in which we operate (the “Professional Groups”). These Professional Groups employ physicians and mid-level providers that treat our clients and bill the payor for their services. Upon formation of the Professional Groups, we provided the initial working capital funding for the Professional Groups in return for a receivable. We make additional advances to the Professional Groups during periods in which negative operating cash flow of the Professional Groups is gen-

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erated, thereby increasing the balance of the amounts owed us. Excess cash flow of the Professional Groups is repaid to us, resulting in a decrease in the receivable. We had a receivable from each of the Professional Groups at March 31, 2014. The receivables due to us from each of the Professional Groups are eliminated in the consolidation of the Professional Groups as VIEs. We provide management and other administrative services to the Professional Groups, including billing, collection of accounts receivable, accounting, management and human resource functions and setting policies and procedures in return for a negotiated management fee. Through these arrangements, we are directing the activities that most significantly impact the economic performance of the respective Professional Groups. Based on our ability to direct the activities that most significantly impact the economic performance of the Professional Groups, provide necessary funding and the obligation and likelihood of absorbing all expected gains and losses, we have determined that we are the primary beneficiary, and, therefore, consolidate the five Professional Groups as variable interest entities.

We are currently in the process of entering into written management services agreements (and, in some cases, replacing existing agreements) between AAC and each of the Professional Groups, which we expect to complete prior to the completion of this offering. Under each of the new management services agreements, AAC provides management and other administrative services to the Professional Groups, including billing, collection of accounts receivable, accounting, management and human resource functions, and setting policies and procedures. For additional information related to the Professional Groups, see Note 5 to our audited financial statements included elsewhere in this prospectus.

Off Balance Sheet Arrangements

We have entered into various non-cancelable operating leases expiring through October 2018. Commercial properties under operating leases primarily include space required to perform client services and space for administrative facilities. Rent expense was $4.6 million and $3.6 million for the years ended December 31, 2013 and 2012, respectively, and $0.5 million and $1.3 million for the three months ended March 31, 2014 and 2013, respectively. Included in such amounts were payments made to related parties totaling $1.3 million and $1.2 million for the years ended December 31, 2013 and 2012, respectively, and $0.4 million for the three months ended March 31, 2013. With the consolidation of Greenhouse Real Estate, LLC as a variable interest entity in October 2013, we no longer have lease expense to related parties after such date.

Contractual Obligations

The following table sets forth information regarding our contractual obligations as of December 31, 2013:

	Payments due by period:
	(in thousands)
			Less than			1 to 3		3 to 5		More than
	Total		1 year			years		years		5 years
Contractual Obligations(1)
Term loans	$	7,435	$	2,902		$	4,427	$	106	$	—
Revolving line of credit		12,550		—			12,550		—		—
Subordinated debt		863		—			141		722		—
Consolidated BHR debt		21,548		12,932	(5)		1,278		7,338		—
Interest(2)		3,385		1,295			1,329		634		127
Capital lease obligations(3)		1,112		338			584		190		—
Operating lease obligations		2,779		1,126			1,438		215		—
Litigation settlement		2,588		2,588			—		—		—
Other contractual obligations(4)		23,168		5,047			2,877		2,880		12,364
Total	$	75,428	$	26,228	(5)	$	24,624	$	12,085	$	12,791

(1) For information related to the effects of this offering on our contractual obligations, including to our term loans, revolving line of credit and interest expense, see “Unaudited Pro Forma Consolidated Financial Statements” included elsewhere in this prospectus.

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(2) Interest includes the estimated interest payments under our borrowing agreements assuming no change in LIBOR as of December 31, 2013.

(3) Includes principal and interest.

(4) Represents estimated payments (including interest) associated with (i) the acquisition, development, and financing of properties under contract located in Arlington, Texas ($1.6 million) and Las Vegas, Nevada ($2.8 million), (ii) the remaining construction commitments for the Greenhouse facility expansion ($4.5 million) and (iii) the development of the facility in Riverview, Florida ($13.4 million). Excludes payments related to the acquisition of the property in Ringwood, New Jersey for $6.5 million, as certain conditions precedent under the purchase agreement have not been satisfied. These future payments reflect management’s best estimates of budgeted construction costs and financing arrangements under current market conditions, and as such, actual costs and timing could vary.

(5) Includes $8.7 million principal outstanding under the Greenhouse Loan, which matures on October 31, 2014.

As of March 31, 2014, our contractual obligations decreased by approximately $1.0 million primarily from our purchase of the Arlington, Texas property in March 2014.

Quantitative and Qualitative Disclosures About Market Risk

Our interest expense is sensitive to changes in market interest rates. With respect to our interest-bearing liabilities, our long-term debt outstanding at March 31, 2014 was comprised of $37.6 million of variable rate debt with interest based on LIBOR plus an applicable margin. A hypothetical 1% increase in interest rates would decrease our net income and cash flows by less than $25,000 on an annual basis based upon our borrowing level at March 31, 2014.

Critical Accounting Policies

Our consolidated financial statements have been prepared in accordance with GAAP. In preparing our consolidated financial statements, we are required to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses included in the financial statements. Estimates are based on historical experience and other available information, the results of which form the basis of such estimates. While we believe our estimation processes are reasonable, actual results could differ from our estimates. The following accounting policies are considered critical to our operating performance and involve subjective and complex assumptions and assessments.

Revenue Recognition

We provide services to our clients in both inpatient and outpatient treatment settings. Revenues are recognized when services are performed at the estimated net realizable value amount from clients, third-party payors and others for services provided. We receive the vast majority of payments from commercial payors at out-of-network rates. Client service revenues are recorded at established billing rates less adjustments to estimate net realizable value. Adjustments are recorded to state client service revenues at the amount expected to be collected for the service provided based on historic adjustments for out-of-network services not under contract. Provisions for estimated third party payor reimbursements are provided in the period related services rendered and adjusted in future periods when actual periods are received.

Prior to admission, insurance coverage, as applicable, is verified and the client self-pay amount is determined. The client self-pay portion is generally collected upon admission. In some instances, clients will pay out-of-pocket as services are provided or will make a deposit and negotiate the remaining payments as part of the services. These out-of-pocket payments are included in accrued liabilities in the accompanying consolidated balance sheets and revenues related to these payments are deferred and recognized over the period services are provided. From time to time we may provide scholarships to a limited number of clients. We do not recognize revenues for scholarships provided.

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We recognize revenues from commercial payors at the time services are provided based on our estimate of the amount that payors will pay us for the services performed. We estimate the net realizable value of revenues by adjusting gross client charges using our expected realization and applying this discount to gross client charges. Through December 31, 2013, our expected realization was determined by management after taking into account historical collections received from the commercial payors since our inception compared to the gross client charges billed. Beginning in January 2014, we enhanced the methodology related to our net realizable value to more quickly react to potential changes in reimbursements by facility, by type of service and by payor. As a result, management adjusted the expected realization to reflect a twelve-month historical analysis of reimbursement data by facility in addition to considering the type of services provided, the payors and the gross client charge rates. This change resulted in a decrease in our expected realization for the first quarter of 2014. Estimates of net realizable value are subject to significant judgment and approximation by management. It is possible that actual results could differ from the historical estimates management has used to help determine the net realizable value of revenues. If our actual collections either exceed or are less than the net realizable value estimates, we will record a revenue adjustment, either positive or negative, for the difference between our estimate of the receivable and the amount actually collected in the reporting period in which the collection occurred.

In cases where the demand for our services exceeds our capacity, we have entered into contractual arrangements with other parties to provide corporate support services. Based on criteria outlined in ASC 605, Revenue Recognition, management determined that we are the principal party to the corporate support services provided. As a result, revenues generated through our contractual arrangements are included in revenues at their expected realizable amount while the subcontracted service payments made to the subcontracted parties are included in client expenses. The need for these contractual arrangements decreased as we increased bed capacity in the second half of 2012 and in the first quarter of 2013 as a result of the opening of the Desert Hope facility.

Allowance for Contractual and Other Discounts

We derive the vast majority of our revenue reimbursements from commercial payors at out-of-network rates. Management estimates the allowance for contractual and other discounts based on its historical collections experience. The services authorized and provided and related reimbursement are often subject to interpretation and negotiation that could result in payments that differ from our estimates.

Allowance for Doubtful Accounts

Accounts receivable primarily consist of amounts due from third-party commercial payors and clients and we record accounts receivable net of contractual discounts. Our ability to collect outstanding receivables is critical to our results of operations and cash flows. Accounts receivable are reported net of an allowance for doubtful accounts, which is management’s best estimate of accounts receivable that could become uncollectible in the future. Accordingly, the accounts receivable reported in our consolidated financial statements are recorded at the net amount expected to be received. Our primary collection risks are (i) the risk of overestimating our net revenues at the time of billing that may result in us receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies denying claims, (iii) the risk that clients will fail to remit insurance payments to us when the commercial insurance company pays out-of-network claims directly to the client, (iv) resource and capacity constraints that may prevent us from handling the volume of billing and collection issues in a timely manner, (v) the risk that clients do not pay us for their self-pay balance (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured clients. In evaluating the collectability of accounts receivable and evaluating the adequacy of our allowance for doubtful accounts, management considers a number of factors, including historical experience, the age of the accounts and current economic trends. We continually monitor our accounts receivable balances and utilize retrospective reviews and cash collection data to support our estimates of the allowance for doubtful accounts. Estimates of our allowance for doubtful accounts are determined on a quarterly basis and adjusted monthly thereafter based on actual collections. If actual future collections are less favorable than those projected by management, additional allowances for uncollectible accounts may be required. There can be no guarantee

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that we will continue to experience the same collection rates that we have experienced in the past. We do not believe that there are any significant concentrations of revenues from any particular payor that would subject us to significant credit risks in the event a payor becomes unwilling or unable to pay claims.

Goodwill and Intangible Assets

Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill and intangible assets with indefinite lives are not amortized, but instead tested for impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. We have no intangible assets with indefinite useful lives other than goodwill. We consider the following to be important factors that could trigger an impairment review: significant underperformance relative to historical or projected future operating results; identification of other impaired assets within a reporting unit; significant adverse changes in business climate or regulations; significant changes in senior management; significant changes in the manner of use of the acquired assets or the strategy for our overall business; and significant negative industry or economic trends.

Goodwill is assessed for impairment using a fair value approach at the reporting unit level. The goodwill impairment test is a two-step process, if necessary. The provisions for the accounting standard of goodwill provide an entity with the option to assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This qualitative assessment is referred to as a “step zero” approach. If, based on the qualitative factors, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying value, the entity may skip the two-step impairment test required by accounting guidance. If an entity determines otherwise or, at the option of the entity, if a step zero is not performed, step one of the two-step impairment test is required. Under step one, the fair value of the reporting unit is compared with its carrying value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test (measurement). Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. Impairment shall be recognized to the extent that the carrying amount of goodwill exceeds its implied fair value. In performing step one of the goodwill impairment test, we compare the carrying amount of the reporting unit to the estimated fair value.

In assessing the recoverability of goodwill, we consider historical results, current operating trends and results, and make estimates and assumptions about revenues, margins and discount rates based on our budgets, business plans, economic projections and anticipated future cash flows. Each of these factors contains inherent uncertainties, and management exercises substantial judgment and discretion in evaluating and applying these factors.

The annual goodwill impairment test is performed as of December 31 of each year, utilizing the two-step test. We concluded that the carrying value of the reporting unit as of December 31, 2013 did not exceed its fair value, and thus no indication of impairment was present. The fair value of goodwill exceeded the carrying value by $3.3 million at December 31, 2013.

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Long-Lived Assets and Intangible Assets Subject to Amortization

Long-lived and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. Impairment is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets.

Accounting for Income Taxes

We account for income taxes in accordance with ASC 740, Income Taxes. Under the asset and liability method of ASC 740, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

Under ASC 740, the effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be recovered.

Our practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

Stock-Based Compensation Expense

We measure compensation expense for all stock-based awards at fair value on the date of grant and recognize compensation expense over the service period for the awards expected to vest. Since December 2012, we have obtained periodic valuation analyses prepared by independent third-party valuation firms to assist us with the determination of the fair value of our common stock.

These estimations of fair value are not indicative of future performance and will not be necessary to determine the fair value of new awards after the underlying shares trade on a liquid market.

December 2012 Valuation

We determined the fair value of AAC’s common stock to be $8.23 as of December 15, 2012. In determining the fair value of AAC’s common stock we reviewed an independent third party valuation report, which used a discounted cash flow method applying a discount rate of 17.6%. Other factors considered in our valuation were the TSN Acquisition in August 2012, which provided an indication of a recent value established as a result of negotiation between sophisticated parties with substantial due diligence about both parties, and a market transaction announced in November 2012 involving similar behavioral health companies. Based on the foregoing analysis, the fair value of the December 31, 2012 grants of 170,517 shares of common stock and 85,078 shares of restricted common stock were determined to be $8.23 per share.

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November 2013 Valuation

On November 19, 2013, AAC issued 92,815 shares of restricted common stock to three employees under our 2007 Stock Incentive Plan, or the 2007 Plan, of which 23,203 shares were immediately vested and the remaining 69,612 shares vest ratably over each quarter ending March 31, 2014 through September 30, 2014. The valuation of AAC’s common stock was determined in accordance with the guidelines outlined in the American Institute of Certified Public Accounts Practice Aid, Calculation of Privately-Held Company Equity Securities Issues as Compensation. We engaged a third party valuation firm to construct a probability-weighted expected return model (“PWERM”) and to assist and advise management in determining the appropriate inputs and metrics to the model. Because there was no public market for AAC’s common stock, the board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of AAC’s common stock as of November 14, 2013, including the following factors:

• previous third party valuations of AAC’s common stock;

• the price of AAC’s common stock sold to third-party investors;

• the value of AAC’s common stock issued in the TSN Acquisition in August 2012;

• a market transaction announced in November 2012 involving similar behavioral health companies;

• the valuation of a comparable public company;

• AAC’s operating and financial performance;

• current business conditions and projections;

• AAC’s stage of development;

• the likelihood of achieving a liquidity event for the shares of AAC’s common stock; such as an initial public offering or sale of AAC, given prevailing market conditions; and

• any adjustment necessary to recognize a lack of marketability for common stock.

We used PWERM in determining AAC’s equity value for the November 2013 grant. PWERM is an analysis of future values of a company for several likely liquidity scenarios that may include a strategic sale or merger, an initial public offering or the dissolution of a company, as well as a company’s enterprise value assuming the absence of a liquidity event. For each possible future event, the future values of the company are estimated at certain points in time. This future value is then discounted to a present value using an appropriate risk-adjusted discount rate. Then, a probability is estimated for each possible event based on the facts and circumstances as of the valuation date. Using PWERM, we estimated the value of AAC’s common stock based upon an analysis of varying values for AAC’s common stock assuming (i) the completion of an initial public offering, (ii) a merger or acquisition and (iii) the continuation as a private company. We applied a percentage probability weighting to each of these scenarios based on our expectations of the likelihood of each event. Based on the foregoing PWERM analysis, the fair value of the November 19, 2013 grants of 92,815 shares of restricted common stock was determined to be $10.19 per share.

February 2014 Valuation

We determined the fair value of AAC’s common stock to be $12.76 as of February 12, 2014. In determining the fair value of AAC’s common stock, we reviewed a December 2013 independent third party valuation report, which determined AAC’s implied equity value using a discounted cash flow analysis, a comparison to a selection of precedent merger and acquisition transactions and a comparison to publicly-held companies. In addition, we considered the significant growth for EBITDA and revenues in 2013 compared to 2012, as well as the increased likelihood of an initial public offering of our common stock in 2014. We also considered projected results of operations for the first quarter of 2014 and positive revenue trends. Based on the foregoing analysis, the fair value of the shares of common stock issued in the private placement from February through

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April 2014, compensatory grants to each of our five non-employee directors in March 2014, a compensatory grant made to our recently hired General Counsel and Secretary in April 2014 under the 2007 Plan and a grant in April 2014 to a non-executive employee each were valued at $12.76 per share.

April 2014 Valuation

In April 2014, Holdings issued an aggregate of 671,143 shares of common stock as consideration in connection with the BHR Acquisition and the CRMS Acquisition. In connection with these transactions, we determined the fair value of the shares of Holdings common stock issued in connection with the BHR Acquisition and the CRMS Acquisition to be $13.41 per share as of April 11, 2014. In addition to factoring in the prior valuation analyses described above, we also analyzed a new valuation report prepared by an independent third party with respect to the valuation of Holdings taking into account the Private Share Exchange, BHR Acquisition and CRMS Acquisition. In particular, the valuation report analyzed the potential impact of the then-proposed Reorganization Transactions on the valuation of Holdings, such as the increase in 2013 pro forma net income as a result of BHR results of operations being included for all of 2013. The valuation report also noted that the impact of the BHR Acquisition on the enterprise value would be mixed, as the additional EBITDA generated at the Holdings level due to the recapture of rents and cash and non-cash expenses was not sufficient to overcome the negative impact on enterprise value of BHR’s debt outstanding for the entire year. With respect to CRMS, the analysis determined that it would allow the recapture of additional EBITDA (on a pro forma basis for 2013) due to a combination of recaptured revenues (i.e., commissions no longer paid) and the expected cost savings. In determining the fair value of our common stock, we also considered the improved projected results of operations for the remainder of 2014, positive revenue trends, strong investor demand in the 2014 private placement by AAC and the higher probability of an initial public offering in 2014. Based on the foregoing analysis, we determined the fair value of Holdings common stock as of April 11, 2014 to be $13.41 per share.

Emerging Growth Company Status

Section 107 of the Jumpstart Our Business Startups Act, or JOBS Act, provides that an “emerging growth company” can take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to not take advantage of the extended transition period for complying with new or revised accounting standards is irrevocable.

Recently Issued But Not Yet Effective Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09 Revenue from Contracts with Customers (Topic 606), which supersedes the revenue recognition requirements in ASC 605 (Revenue Recognition). This ASU is based on the principle that revenue is recognized to depict the transfer of goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those good or services. The ASU also requires additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. The effective date of this ASU will be for annual reporting periods beginning after December 15, 2016 using one of two retrospective application methods, and early application is not permitted. The Company is currently evaluating the estimated impact of the adoption of this accounting standard update on its financial statements.

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BUSINESS

Company Overview

We believe we are a leading provider of inpatient substance abuse treatment services for individuals with drug and alcohol addiction. As of March 31, 2014, we operated six substance abuse treatment facilities located throughout the United States, focused on delivering effective clinical care and treatment solutions across our 407 beds, which included 278 licensed detoxification beds. In addition, we have three facilities under development and an additional property under contract that we plan to develop into a new facility. The majority of our 679 employees are highly trained clinical staff who deploy evidence-based treatment programs with structured curricula for detoxification, residential treatment, partial hospitalization and intensive outpatient care. By applying a tailored treatment program based on the individual needs of each client, many of whom require treatment for a co-occurring mental health disorder, such as depression, bipolar disorder and schizophrenia, we believe we offer the level of quality care and service necessary for our clients to achieve and maintain sobriety.

We have made substantial investments in our treatment facilities with a specific focus on providing aesthetically pleasing properties and grounds, numerous amenities, healthy food and a courteous and attentive staff to distinguish us from our competitors. Our commitment to clinical excellence, premium facilities and customer service has allowed us to form relationships across a broad set of key referral sources, including hospitals, other treatment facilities, employers, alumni and employee assistance programs. Our platform is supported by a centralized infrastructure that includes a multi-faceted sales and marketing program, call center operations, a laboratory facility, billing and collection services and support functions. This infrastructure, in conjunction with our premium service offerings, has enabled us to develop a strong national brand. The substantial investments we have made at a corporate level contribute to our operational efficiencies and provide us flexibility to place clients at a variety of our facilities in order to optimize care that best fits both the clients’ clinical needs and their insurance benefits.

We have demonstrated the ability to grow our business organically and generate attractive returns on investments with our de novo development capabilities. Our two de novo developments, Greenhouse and Desert Hope, added 218 total beds on a combined basis, and each achieved profitability within the first year of its respective opening. Our net revenues have increased to $115.7 million in 2013 from $66.0 million in 2012, representing a growth rate of 75.3%. Our revenues for the three months ended March 31, 2014 were $30.1 million compared to $29.4 million for the three months ended March 31, 2013, representing a 2.2% increase. In addition, for the years ended December 31, 2013 and December 31, 2012, we had $11.6 million and $7.2 million in Adjusted EBITDA and $1.5 million and $1.1 million in net income, respectively. For the three months ended March 31, 2014 and 2013, we had $3.6 million and $5.0 million in Adjusted EBITDA and $0.8 million and $2.2 million in net income, respectively. In 2013 and for the three months ended March 31, 2014, approximately 90% and 91% of our revenues, respectively, were reimbursable by commercial payors, including amounts paid by such payors to clients, and the remaining portion was payable directly by our clients. We currently do not receive any revenues from government healthcare payment programs such as Medicare and Medicaid. See “Selected Historical and Pro Forma Consolidated Financial and Operating Data” for a discussion of Adjusted EBITDA and a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP measure.

Industry Overview

Addiction is a chronic disease that affects brain function and behavior. Substance abuse, specifically the abuse of drugs and alcohol, is one of the most common and serious forms of addiction. If left untreated, substance abuse can lead to a variety of destructive social conditions such as problems at home or work, violence, crime and even death. According to the National Institute on Drug Abuse, or NIDA, the total societal cost of substance abuse in the United States is estimated to be over $600 billion annually. The 2012 National Survey on Drug Use and Health estimates that approximately 23.1 million people aged 12 or older needed treatment for a drug or alcohol use problem in the United States in 2012, of which only 2.5 million, or 10.8% of those needing

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treatment, received treatment at a specialty facility. According to a 2008 report by the Substance Abuse and Mental Health Services Administration, or SAMHSA, annual spending on treatment for substance abuse in the United States is expected to grow to $35 billion in 2014.

The National Comorbidity Survey reports that up to 65% of adults with substance abuse addiction also have a co-occurring mental health disorder, defined by SAMHSA as at least one major mental health disorder, such as depression, bipolar disorder and schizophrenia, occurring concurrently with substance abuse. The industry’s focus on diagnosing and treating the primary substance abuse addiction without attempting to uncover a potential mental health disorder can mask the high occurrence of clients with a co-occurring mental health disorder, a highly underserved segment of the mental illness and substance abuse treatment market. According to the President’s New Freedom Commission on Mental Health, only 19% of those who have co-occurring disorders receive treatment for both disorders, and 29% do not receive treatment for either problem. According to the Disease Management and Health Outcomes Journal, integrating treatment for both substance abuse and a co-occurring mental health disorder is believed to result in significantly better outcomes.

The substance abuse treatment industry is highly fragmented and largely consists of small regional operators. We estimate, based on IBISWorld estimates, that there were more than 16,700 individual mental health and substance abuse treatment clinics and centers in the United States in 2013, operated by over 8,100 enterprises, 67% of which were not-for-profits. An estimated 44% of these enterprises have fewer than 20 employees and over 45% operate a single facility. According to SAMHSA’s 2011 annual census of facilities providing substance abuse treatment, approximately 59% of facilities listed substance abuse treatment as the primary focus of their activities, but only 32% of facilities indicated that a mix of mental health and substance abuse treatment services were their primary focus. The majority of facilities in the United States do not offer residential treatment with only 26% of facilities responding to SAMHSA as offering these inpatient services.

The mental health and substance abuse treatment industry is expected to continue to expand as a result of a combination of factors, including increased awareness and de-stigmatization of substance abuse treatment and mental health disorders as more people seek treatment, favorable healthcare legislation and an expanding population. Recent healthcare reform is expected to enable greater access to treatment and services as more people obtain insurance coverage and the scope of coverage is expanded. As a result of the Affordable Care Act, healthcare reform is projected to expand coverage to approximately 25 million currently uninsured people by 2016 according to the Congressional Budget Office. According to the Employee Benefit Research Institute, this includes an estimated 3.1 million young adults who will have coverage as a result of the Adult-Dependent Mandate, which ensures that children under the age of 26 can stay on a parent’s plan. The Mental Health Parity and Addiction Equity Act of 2008, or MHPAEA, is federal legislation that provides for equal coverage between psychiatric or mental health services and conventional medical health services and restricts employers and insurers from placing more stringent limits on mental healthcare compared to other health conditions. According to the U.S. Department of Labor, the MHPAEA has already brought about coverage changes for approximately 103 million individuals, suggesting more comprehensive behavioral insurance coverage benefits for a significant number of individuals in the United States.

In addition to strong industry growth dynamics, the substance abuse treatment sector has several favorable attributes that differentiate it from other healthcare services sectors. Of particular note, as a result of the nature of substance abuse treatment, clients have more control in deciding when to seek treatment and who to select as their treatment provider. Placing a client in an inpatient treatment center can help remove many of the factors that contribute to substance abuse (e.g. access to dealers, negative influences, emotional triggers) and enable clients to better focus on their recovery. Also, clients are typically not limited to their local geographic area in selecting a treatment facility. As a result, providers are able to market and advertise directly to potential clients and their families on a national level.

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Substance abuse addiction is a complex, chronic disease. Research from the NIDA shows that treatment programs tailored to each individual’s drug abuse patterns and any co-occurring mental health disorders can lead to sustained recovery periods. Below are examples of treatment programs at various levels of care according to the American Society of Addiction Medicine:

• Detoxification – Inpatient care with clients medically monitored 24 hours per day, seven days per week by medical professionals who work to alleviate withdrawal symptoms through medication, as appropriate;

• Residential Treatment – Inpatient care provided 24 hours per day, seven days per week, generally including two individual therapy sessions per week and regular group therapy with appropriate medical and psychiatric care provided, as needed;

• Partial Hospitalization – Inpatient care provided in a structured program at least five days a week for no fewer than six hours a day, including a minimum of weekly individual therapy and regular group therapy with appropriate medical and psychiatric care provided, as needed;

• Intensive Outpatient – Outpatient care provided three days per week for three hours per day at a minimum, including weekly individual therapy and group therapy; and

• Outpatient Counseling – Outpatient sessions conducted in individual or group sessions on an as needed basis.

Our Competitive Strengths

We believe the following strengths differentiate us from our competitors and will allow us to successfully operate and grow our business:

• Leading substance abuse treatment platform. We believe we are a leading provider of substance abuse treatment services based on the scale and nationwide reach of our platform, quality of our facilities and breadth of our treatment capabilities. With 407 total beds across six substance abuse treatment facilities as of March 31, 2014, we believe we offer one of the largest for-profit fully licensed programs to treat drug and alcohol addiction regardless of stage or severity. Our premium facilities offer clients aesthetically pleasing properties and grounds, a comfortable environment, high quality and healthy food, numerous amenities and a courteous and attentive staff. We believe our commitment to quality and customer service, as well as our dedication to clinical excellence, results in improved client retention, an important factor in ensuring clients receive the care they need. The combination of these attributes has allowed us to form relationships with key referral sources in the industry, including hospitals, other treatment facilities, employers, alumni and employee assistance programs, further strengthening our competitive position and national brand.

• Comprehensive addiction treatment programs with co-occurring mental health disorder treatment capabilities. Our clinical staff is trained to deploy an evidence-based treatment program with a structured curriculum, particularly focused on identifying and addressing the needs of clients with co-occurring mental health disorders. We address a broad set of client needs through our comprehensive clinical programs that include detoxification, residential treatment, partial hospitalization and intensive outpatient care. Given that up to 65% of adults with substance abuse addiction are estimated to also have at least one co-occurring mental health disorder, we believe our medical and clinical staff’s ability to identify and treat both disorders is critical in helping clients achieve sobriety. Due to the complexity of their cases, clients with co-occurring mental health disorders often require more intensive treatment. We believe our ability to address these complex conditions enhances our reputation with clients, their families and other referral sources.

• Proven ability to develop de novo treatment facilities. We have a successful track record of identifying suitable de novo sites, securing properties, overseeing the licensing and development of facilities and integrating de novo centers into our broader platform. We have successfully transformed acquired properties, such as a luxury spa and an assisted living facility, into substance abuse treatment facilities.

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We believe our skill and experience in executing our de novo development strategy provides us with a competitive advantage in quickly and cost-effectively developing substance abuse treatment facilities and enrolling clients. Our two de novo facilities, Greenhouse and Desert Hope, opened within 12 months of initially acquiring each respective property, and both were profitable within their first year of operation. We believe this is particularly noteworthy given the relative size of the facilities developed. With 148 beds, we believe Desert Hope is one of the largest premium residential substance abuse treatment facilities in the United States today. By focusing on larger facilities, we have the scale to offer a level of treatment services and amenities that otherwise would be cost prohibitive, namely our ability to house an onsite pharmacy and facilitate comprehensive medical services via onsite nurses, nurse practitioners and physicians.

• Multi-faceted sales and marketing program. Our national sales and marketing program provides a competitive advantage compared to treatment facilities that primarily target local geographic areas and use fewer marketing channels to attract clients. Our national team of 36 professional sales representatives develops and maintains relationships with key referral sources such as hospitals, other treatment facilities, employers, alumni and employee assistance programs. In addition, our team of over 60 centralized, trained call center treatment consultants provides coverage and support 24 hours a day, seven days a week. Our coordinated approach to leveraging our sales team, relationships in the industry, internet, television and print advertising and potential client inquiries and our ability to serve clients from our varied facilities across the United States allows us to reach a broad audience of potential clients and build a nationally recognized brand. Given our multi-faceted sales and marketing program, we have been able to attract clients from a diverse set of channels. This nationally branded, multi-channel approach has led to an increase in our number of admitted clients from 2,934 in 2012 to 4,027 in 2013, a 37.3% growth rate. For the three months ended March 31, 2014, the number of admitted clients increased to 1,065 from 889 for the same period in 2013, a growth rate of 19.8%. Our investment in a dedicated call center and supporting technology allows us to evaluate the effectiveness of our various marketing channels. Analyzing this information enables us to adjust sales and marketing efforts to address near-term census levels across our facilities and optimize our spending on sales and marketing.

• Attractive payor mix and diversified client base. We have generated revenues solely from commercial payors and our clients with no reimbursement from government healthcare payment programs such as Medicare and Medicaid, which are typically subject to lower reimbursement rates. The relationships we have developed with our referral sources enhance our interactions with payors and help us achieve our attractive reimbursement profile. For the year ended December 31, 2013 and the three months ended March 31, 2014, approximately 90% and 91% of our revenues, respectively, were reimbursable by commercial payors, including amounts paid by such payors to clients, with the remaining portion of our revenues payable directly by our clients. No single payor in 2013 or the first quarter of 2014 accounted for more than 12.3% and 16.1% of our revenue reimbursements, respectively.

• Strong financial performance and attractive returns on invested capital. We have achieved strong financial performance in terms of recent growth and profitability. Our revenues for the year ended December 31, 2013 were $115.7 million, representing a 75.3% increase over $66.0 million in 2012. Our revenues for the three months ended March 31, 2014 were $30.1 million, representing a 2.2% increase over $29.4 million for the three months ended March 31, 2013. We believe the profitability and modest capital needs of our established substance abuse treatment facilities position us to generate strong cash flows. We have demonstrated the ability to generate attractive returns on investment with our de novo development strategy. Each of our two de novo developments, Greenhouse and Desert Hope, which added 218 total beds on a combined basis, was profitable within its first year of operation.

• Experienced management team with track record of success. Our senior management team, with an average of over 15 years of experience in the healthcare industry, has significant experience developing, operating and growing a variety of behavioral health treatment facilities. During our Chief Executive Officer’s nearly 20 year career in the substance abuse treatment industry, he developed two not-for-profit treatment companies before founding and developing a for-profit substance abuse treatment

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company with multiple operations in California and Tennessee. Our President has spent almost 18 years in the behavioral health industry, also focused on developing de novo substance abuse treatment facilities, including one of our predecessor companies. In addition, our Chief Operating Officer brings 22 years of experience in various senior roles at a leading provider of treatment and educational programs for adults and youth struggling with behavioral issues. We believe the combination of our management team’s skills and experiences provides us with an advantage in developing high quality de novo treatment facilities and quickly integrating them into our broader platform. Our senior management team is committed to utilizing its extensive experience in the execution of our long-term strategic plan.

Our Growth Strategy

We have developed our company and the American Addiction Centers national brand through substantial investment in our facilities, our clinical expertise, our professional staff and our national sales and marketing program. We anticipate a number of factors will accelerate demand for our services, including increased awareness and de-stigmatization of substance abuse treatment and recent healthcare reform improving access to care, particularly for young adults now able to access their parents’ insurance. We seek to extend our position as a leading provider of treatment for drug and alcohol addiction by executing the following growth strategies:

• Improve census at existing facilities. We seek to improve census and client demand by increasing our client leads through our multi-faceted sales and marketing program, consisting of our national sales team, recommendations from alumni and healthcare professionals, internet, television and print advertising and potential client inquiries. By utilizing multiple sales and marketing channels, we generate significant inbound call volume from potential clients and the people close to them, and our consultative call center approach enables us to effectively identify and enroll qualified clients.

• Expand capacity at existing residential facilities. As our client demand increases, we seek opportunities to expand capacity at our existing facilities. When market conditions indicate, we anticipate selectively increasing our number of residential beds, expanding our clinical facility space and hiring additional clinical staff to enable us to provide services to additional clients. Expansion of our Greenhouse location from 70 beds to 130 beds is anticipated to be completed in the second half of 2014.

• Pursue de novo development of residential facilities. We currently operate six residential substance abuse treatment facilities located throughout the United States and have an additional residential facility under development. De novo development plays an important role in the growth of our facility base. Our de novo facility development consists of either building a new facility from the ground up or acquiring an existing facility with an alternative use and repurposing it as a substance abuse treatment facility. In the past two years, we have developed two full-service residential treatment facilities: Greenhouse, a former luxury spa in Dallas, Texas, and Desert Hope, a former assisted living facility in Las Vegas, Nevada. We believe the success of our Greenhouse and Desert Hope facilities provides us with the experience to develop additional premium facilities across the United States with comparable scale, capabilities and quality. Currently, we are developing a new premium facility located in Riverview, Florida that will provide us with an additional 164 beds. We expect this new residential treatment facility to open in the first half of 2015. In addition, we have entered into a purchase agreement to acquire, subject to the satisfaction of certain conditions, a property in Ringwood, New Jersey that we expect to begin developing by early next year into an inpatient facility with approximately 150 beds.

• Opportunistically pursue treatment facility acquisitions. We selectively seek opportunities to expand and diversify our geographic presence and service offerings through facility acquisitions. IBISWorld estimates that there were more than 16,700 mental health and substance abuse treatment facilities in operation in 2013, most of which are small, regional operations. We believe this high level of fragmentation presents us with the opportunity to acquire facilities or small providers and upgrade their treatment programs and facilities to improve client care and as a result improve our operating metrics. We believe that our brand recognition, marketing platform and referral network will enable us to improve census at acquired facilities.

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• Expand outpatient operations. We actively pursue opportunities to add outpatient centers to complement our broader network of residential treatment facilities. For example, in March 2014 we acquired a property in Arlington, Texas, and in May 2014 we acquired a property in Las Vegas, Nevada. We intend to develop each of these properties in 2014 as outpatient treatment facilities to provide additional programming space for our nearby residential facilities. We believe expanding our reach by acquiring or developing premium outpatient facilities of a quality consistent with our inpatient services will further enhance our brand and our ability to provide a more comprehensive suite of services across the spectrum of care. Outpatient centers are expected to be an increasingly important source of leads for our residential programs as we believe a portion of clients receiving outpatient treatment will ultimately need a higher level of care. Moreover, we believe this will position us to better serve those clients whose payors require outpatient treatment as a prerequisite to any inpatient treatment.

• Target complementary growth opportunities. There are additional growth opportunities that we may selectively pursue that are complementary to our current business. These may include, without limitation, providing pharmacy and laboratory services, expanding licensure of existing facilities, treating other mental health and wellness disorders and expanding other ancillary services. We are also aggressively pursuing acquisitions of prospective client databases and other lead sources to improve our referral base.

Our History

In 2004, Jerrod Menz, our President, established a residential drug and alcohol treatment company. In 2008, it was acquired by Forterus, Inc. In 2011, Forterus acquired Performance Revolution (d.b.a. FitRx), which was owned by Michael Cartwright, our Chief Executive Officer. Utilizing Mr. Cartwright’s and Mr. Menz’s skills and prior experiences developing de novo facilities, Forterus began identifying properties to develop into residential treatment centers. In 2011, we purchased Greenhouse, which opened in March 2012, and Desert Hope, which opened in January 2013. In 2012, we consummated the TSN Acquisition, which added three facilities (one of which was subsequently closed) and a national sales and marketing program. In conjunction with the TSN Acquisition, we changed our name to American Addiction Centers, Inc.

Holdings was formed in the first quarter of 2014 and completed the Reorganization Transactions in the second quarter of 2014, which included the Private Share Exchange, the BHR Acquisition and the CRMS Acquisition. As a result of the Reorganization Transactions, Holdings now owns (i) 93.6% of the outstanding common stock of AAC, (ii) 100% of the outstanding common membership interests in BHR, which represents 100% of the voting rights in BHR, and (iii) 100% of the outstanding membership interests in CRMS. See Note 11 to our audited financial statements included elsewhere in this prospectus for a discussion of certain historical corporate actions.

Subsequent to this offering, we expect to conduct a subsidiary short-form merger with AAC whereby the legacy holders who did not participate in the Private Share Exchange, representing 6.4% of the common stock of AAC, would be entitled to receive Holdings shares on a one-for-one basis. We currently expect to register this short-form merger on a Form S-4 registration statement to be filed with the SEC after consummation of this offering. Upon the completion of the short-form merger, Holdings would own 100% of AAC. No assurance can be given that the subsequent short-form merger will occur in a timely manner or at all.

Our Services and Solutions

We provide quality, comprehensive and compassionate care to adults and adolescents struggling with alcohol and/or drug abuse and dependence as well as co-occurring mental health issues. We maintain an evidence-based, disciplined treatment plan for all clients with schedules designed to engage the client in an enriched recovery experience. Our purpose and passion is to empower the individual, their families and the broader community through the promotion of optimal wellness of the mind, body and spirit.

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Our curriculum, which is peer reviewed and research- and evidence-based, has been recognized as one of our program strengths by the Commission on Accreditation of Rehabilitation Facilities, or CARF, a leader in the promotion and accreditation of quality, value and optimal outcomes of service. In particular, research studies show that certain aspects of our treatment programs, such as offering longer treatment stays, are effective for producing long-term recovery. In addition, we offer a variety of forms of therapy types and settings and related services that the National Institute on Drug Abuse has recognized as effective. We offer the following types of therapy: motivational interviewing, cognitive behavioral therapy, rational emotive behavior therapy, dialectical behavioral therapy, solution-focused therapy, seeking safety, eye movement desensitization and reprocessing, and systematic family intervention. Our variety of therapy settings includes individual, group, family, recovery-oriented challenge, expressive (with a focus on music and art) and equine and trauma therapies.

We offer a full spectrum of treatment services to clients, based upon individual needs as assessed through comprehensive evaluations at admission and throughout participation in the program. The assignment to, and frequency of, services corresponds to individualized treatment plans within the context of the level of care and treatment intensity level.

• Detoxification: Detoxification is usually conducted at an inpatient facility for clients with physical or psychological dependence. Detoxification services are designed to clear toxins out of the body so that the body can safely adjust and heal itself after being dependent upon a substance. Clients undergo routine urinalysis screenings and are medically monitored 24 hours per day, seven days per week by experienced medical professionals who work to alleviate withdrawal symptoms through medication, as appropriate. We provide detoxification services for several substances including alcohol, sedatives and opiates.

• Residential Treatment: Residential care is a structured treatment approach designed to prepare clients to return to the general community with a sober lifestyle, increased functionality and improved overall wellness. Treatment is provided on a 24 hours per day, seven days per week basis, and services generally include a minimum of two individual therapy sessions per week, regular group therapy, family therapy, didactic and psycho-educational groups, exercise (if cleared by medical staff), case management, routine urinalysis screenings and recreational activities. Medical and psychiatric care is available to all clients, as needed, through our contracted professional physician groups.

• Partial Hospitalization: Partial hospitalization is a structured program providing care at least five days a week for no fewer than six hours a day. This program is designed for clients who are stable enough physically and psychologically to participate in everyday activities but who still require a degree of medical monitoring. Services include a minimum of weekly individual therapy, regular group therapy, family education and therapy, didactic and psycho-educational groups, exercise (if cleared by medical staff), case management, routine urinalysis screenings and off-site recovery meetings and activities. Medical and psychiatric care is available to all clients, as needed, through our contracted professional physician groups.

• Intensive Outpatient Services: Less intensive than the aforementioned levels of care, intensive outpatient services is a structured program providing care three days a week for three hours per day at a minimum. Designed as a “step down” from partial hospitalization, this program reinforces progress and assists in the attainment of sobriety, reduction of detrimental behaviors and improved overall wellness of clients while they integrate and interact in the community. Services include weekly individual therapy, group therapy, family education and therapy, didactic and psycho-educational groups, case management, frequent urinalysis screenings, off-site recovery meetings and activities and intensive transitional and aftercare planning.

Considering the high level of co-occurring substance abuse, mental health and medical conditions, we offer clients a spectrum of psychiatric, medical and wellness-focused services based upon his or her individual needs as assessed through comprehensive evaluations at admission and throughout his or her participation in the program. To maximize the likelihood of long-term recovery, all program levels provide clients access to the fol-

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lowing services: assessment of individual substance abuse, mental health and medical history and physical within 24 to 72 hours of admission; psychiatric evaluations; psychological evaluations and services based on client needs; follow-up appointments with physicians and psychiatrists; medication monitoring; lab work; educational classes regarding health risks, nutrition, smoking cessation, HIV awareness, life skills, healthy nutritional programs and dietary plans; access to fitness facilities; interactive wellness activities such as swimming, basketball and yoga; and structured daily schedules designed for restorative sleep patterns.

We emphasize clinical treatment, as well as the therapeutic value of overall physical and nutritional wellness. We are committed to providing fresh and nutritious meals throughout a client’s stay in order to promote healthy routines beginning with diet and exercise. Some of our facilities offer comprehensive work-out facilities, and many locations offer various exercise classes and other amenities. We support long-term recovery for clients through evidence-based methodologies and individualized treatment planning while utilizing 12 step programs, which are a set of guiding principles outlining a course of action for recovery.

We believe we have a differentiated ability to manage dual diagnosis cases and coordinate treatment of individuals suffering from the common combination of mental illness and substance abuse simultaneously. These clients participate in education and discussion-oriented groups designed to provide information regarding the psychiatric disorders that co-occur with chemical dependency.

We place a strong emphasis on tracking client satisfaction scores in order to measure our client and staff interaction and overall outcome and reputation. In addition to client satisfaction surveys that we receive after a client’s discharge, we also solicit feedback during a client’s stay at our residential facilities. This allows us to further tailor an individual’s treatment plan to emphasize the programs that have been more impactful and helpful to a particular client.

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Properties

We currently operate six substance abuse treatment facilities located throughout the United States staffed by seasoned professionals and experts in the fields of addiction and behavioral health who are committed to providing the care, support, education and hope needed to treat addiction. In addition, we have three substance abuse treatment facilities under development and an additional property under contract. We also operate an obesity treatment center, FitRx. The following table presents information, as of March 31, 2014, about our network of substance abuse treatment facilities, including current facilities, facilities under development and properties under contract:

Facility Name(1)	Location	Capacity (beds)	First Clients Served	Treatment Certifications(2)	Real Property Leased / Owned
Desert Hope	Las Vegas, NV	148	2013	DTX, RTC, PHP, IOP	Owned
Greenhouse	Grand Prairie, TX (Dallas area)	130(3)	2012	DTX, RTC, PHP, IOP	Owned
Forterus	Temecula, CA	76	2004	DTX, RTC, PHP, IOP	Leased
Singer Island	West Palm Beach, FL	65	2012	PHP, IOP	Leased
San Diego Addiction Treatment Center	San Diego, CA	36	2010	DTX, RTC, PHP, IOP	Leased
The Academy	West Palm Beach, FL	12	2012	PHP, IOP	Leased
TBD	Riverview, FL (Tampa area)	164(4)	Under Development(4)	DTX, RTC, PHP, IOP(4)	Owned
TBD	Arlington, TX (Dallas area)	n/a	Under Development(5)	PHP, IOP(5)	Owned
TBD	Las Vegas, NV	n/a	Under Development(6)	PHP, IOP(6)	Owned
TBD	Ringwood, NJ (New York City area)	150(7)	Under Contract(7)	DTX, RTC, PHP, IOP(7)	n/a

(1) Excluded from this table is our non-substance abuse treatment facility, FitRx, which is a 20-bed leased facility located in Brentwood, Tennessee that provides outpatient treatment services for men and women who struggle with obesity-related behavioral disorders.

(2) DTX: Detoxification; RTC: Residential Treatment; PHP: Partial Hospitalization; IOP: Intensive Outpatient.

(3) This figure includes 60 additional beds anticipated as a result of the ongoing Greenhouse expansion, which we anticipate to be completed in the second half of 2014.

(4) Reflects our current expectations with respect to this facility, which we anticipate will begin construction in the second half of 2014 and open in the first half of 2015.

(5) In March 2014, we acquired an approximately 20,000 square foot property in Arlington, Texas. We intend to begin construction of an outpatient treatment facility at this location in the third quarter of 2014, and we are targeting opening this facility in the second half of 2014. The facility will provide treatment services and additional programming space for our Greenhouse facility. Treatment certifications reflect our expectations.

(6) In May 2014, we acquired an approximately 20,000 square foot property in Las Vegas, Nevada. We intend to begin construction of an outpatient treatment facility at this location in the third quarter of 2014, and we are targeting opening this facility by the end of 2014. The facility will provide treatment services and additional programming space for our Desert Hope facility. Treatment certifications reflect our expectations.

(7) We entered into a purchase agreement to acquire a 96 acre property located fewer than 50 miles from New York City, subject to the satisfaction of certain closing conditions and the arrangement of financing. We anticipate beginning construction of a residential treatment facility at this location by early 2015, and we are targeting opening this facility in 2016 with approximately 150 beds. Treatment certifications reflect our expectations.

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Our leased facilities identified in the table above have entered into third party leases with the following

material terms:

Forterus. The eight properties that comprise the Forterus facility generally have lease terms ranging from one to two years with expiration dates ranging from August 2014 to September 2015. Monthly rent under these leases ranges from $2,000 to $2,750 plus the cost of utilities. One Forterus facility is a multi-tenant property where we provide clinical services and maintain office space. The lease for this property has a three year term that expired in March 2014, but we continue to occupy the premises and make monthly rent payments of $11,000 plus our proportionate share of certain taxes and the costs of operating and maintaining the premises. We are currently negotiating the extension of certain leases with upcoming termination dates and expect to renew such leases on substantially the same terms, though we cannot provide any assurances that we will be successful in doing so.

Singer Island. The Singer Island facility lease has a term of one year that expires in June 2015. As of July 1, 2014, monthly rent under this lease is $30,000 plus the cost of all utilities.

San Diego Treatment Center. The San Diego Treatment Center lease has a term of five years that expires in March 2015. This lease has an option to extend for an additional five-year term. Monthly rent under this lease is approximately $21,000 plus the cost of all utilities.

The Academy. Two leased properties constitute The Academy facility, one with a month-to-month term and the other with a six month term expiring in December 2014. Total monthly payments under these leases are approximately $8,300 plus utilities, certain taxes and our proportionate share of the costs of operating and maintaining the premises. We also lease properties located in West Palm Beach, Florida through which we provide certain clinical services. Certain leases for these clinical spaces have terms of one to two years, with expiration dates ranging from October 2014 to December 2014, and certain leases are month to month. Aggregate monthly rent under these leases is approximately $21,900. We are currently negotiating the extension of certain leases with upcoming termination dates and expect to renew such leases on substantially the same terms, though we cannot provide any assurances that we will be successful in doing so.

FitRx. The FitRx facility currently leases a property under a lease with a term of 66 months that expires in November 2014. Monthly rent under this lease is approximately $9,400 plus our proportionate share of certain taxes and the costs of operating and maintaining the premises. FitRx recently negotiated a new lease for a different property and plans to allow its existing lease to expire in November 2014. The new FitRx lease has a term of three years that expires in April 2017. This lease has an option to extend for two additional two-year periods. Monthly rent under this lease is approximately $21,000 plus our proportionate share of certain taxes and the costs of operating and maintaining the premises.

In addition, we lease approximately 21,800 square feet of office space in Brentwood, Tennessee for our corporate headquarters under a lease expiring in March 2017. Monthly rent under this lease is approximately $37,500 plus our proportionate share of certain taxes and the costs of operating and maintaining the premises.

Current Facilities

Each of our CARF accredited facilities provides a multidisciplinary approach to facilitate recovery from addiction by providing individuals with temporary homes for a long-term comprehensive program. We maintain premium facilities offering clients aesthetically pleasing properties and grounds, a comfortable environment, high quality and healthy food, numerous amenities and a courteous and attentive staff. We are committed to physical and nutritional wellness, and as part of this effort, we maintain advanced fitness facilities with instructors in several of our facilities and nutritious foods with menus approved by registered dietitians and nutritionists. A brief description of each of our facilities is provided below.

• Desert Hope. Located in Las Vegas, Nevada, this facility has a bed capacity of 148, all of which are licensed for detoxification, and provides all levels of care to adults struggling with substance abuse and behavioral health issues. Desert Hope also offers a spirituality program developed by C.C. Nuckols, Eye Movement Desensitization and Reprocessing Therapy, art therapy, personal training, yoga sessions, a 12 step walk and other amenities in a luxurious setting.

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• Greenhouse. A former luxury spa in Dallas, Texas, this facility currently has a bed capacity of 70, all of which are licensed for detoxification, which capacity will increase to 130 beds upon completion of the facility expansion in the second half of 2014. Greenhouse provides all levels of care to adults struggling with substance abuse and behavioral health issues and also offers personal training, yoga sessions, massage therapy and other amenities.

• Forterus. Located in Temecula, California, this center has a 76 bed capacity, 24 of which are licensed for detoxification and provides services to adults at all levels of care. Forterus is our original treatment facility and has been operating since 2004. A core component of its clinical model is community integration.

• Singer Island. Located in West Palm Beach, Florida, this facility has a 65 bed capacity and provides partial hospitalization and intensive outpatient services to adults struggling with substance abuse and behavioral health issues. Additional services include psychological testing, ongoing college and career services and an extended care program.

• San Diego Addiction Treatment Center. Located in San Diego, California, San Diego Addiction Treatment Center has a 36 bed capacity, all of which are licensed for detoxification, for adult males requiring all levels of care. This facility also offers an individualized grief and loss track to clients.

• The Academy. Located in West Palm Beach, Florida, this facility has a 12 bed capacity and provides partial hospitalization and intensive outpatient services to adolescents (ages 13–17) struggling with substance abuse and behavioral health issues. Additional services include equine therapy and a specialized curriculum focusing on peer relationships, family and academics.

• FitRx. Located in Brentwood, Tennessee, FitRx is a 20-bed program offering partial hospitalization and intensive outpatient services to adults who struggle with behavioral health disorders associated with obesity. FitRx’s programs emphasize behavioral, nutritional and physical wellness.

In addition to substance abuse, we believe several other addiction-related diseases represent large underserved markets. Additionally, the treatment model used at our residential facilities to treat substance abuse can also be applied to treat other compulsive behaviors.

New Property Developments

We have recently acquired three properties in Florida, Nevada and Texas and are in the process of acquiring an additional property that we will begin developing later this year. Each of these future facilities represents an important part of our growth strategy.

• Riverview, Florida (Tampa area). We acquired a former boarding school for youths and intend to develop the property into a facility that will provide all levels of care to clients struggling with substance abuse and behavioral health issues. With construction targeted to begin in the second half of 2014, we anticipate opening this residential treatment facility in the first half of 2015 with 164 licensed beds.

• Arlington, Texas (Dallas area). In March 2014, we acquired an approximately 20,000 square foot property in Arlington, Texas. We intend to begin construction of an outpatient treatment facility at this location in the third quarter of 2014, and we are targeting opening this facility in the second half of 2014. The facility will provide treatment services and additional programming space for our Greenhouse facility.

• Las Vegas, Nevada. We acquired an approximately 20,000 square foot property in Las Vegas, Nevada in May 2014. We intend to begin construction of an outpatient treatment facility at this location in the third quarter of 2014, and we are targeting opening this facility by the end of 2014. The facility will provide treatment services and additional programming space for our Desert Hope facility.

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• Ringwood, New Jersey (New York City area). We have entered into a purchase agreement to acquire, subject to certain closing conditions and the arrangement of financing, a former convent on 96 acres located fewer than 50 miles from New York City, with convenient access to LaGuardia and Newark airports. We anticipate beginning construction by early 2015, and we are targeting opening this residential treatment facility in 2016 with 150 licensed beds.

Sales and Marketing

Sales and marketing supports the development of our brand and advances our comprehensive lead-generation platform. Total sales and marketing spend was $24.3 million in 2013 driven by our program’s multi-faceted sales and marketing engine. The primary sources of our new clients include:

• National Sales Force. We deploy and manage a sales force of 35 representatives nationwide that became part of our organization as a result of the TSN Acquisition in August 2012 and focuses primarily on marketing to hospitals, other treatment facilities, employers, alumni and employee assistance programs. In addition, our varied facilities located across the United States allow us to reach a broad audience of potential clients and their families and build a nationally recognized brand. This nationally branded, multi-channel approach has led to an increase in our number of admitted clients from 2,934 in 2012 to 4,027 in 2013, a 37.3% growth rate.

• Recommendations by Alumni. We often receive new clients who were directly referred to our facilities by our alumni as well as their friends and families. As our national brand continues to grow and our business continues to increase, we believe our alumni will become an increasingly important source of business for us.

• Internet/TV/Print Advertising. Advertising through various media represents another important opportunity to obtain new clients as well as to develop our national brand. In September 2012, Mr. Cartwright released a motivational book titled Believable Hope: Five Essential Elements to Beat Any Addiction that chronicles his own personal journey overcoming addiction. Believable Hope represents a valuable marketing tool and serves as a key mechanism for treatment reinforcement. We maintain and run a series of television commercials that promote our facilities and overall capabilities. We also maintain a strong presence on the Internet. We have made further advertising efforts in radio spots, newspaper articles, medical journals and other print media with the intent to build our integrated, national brand.

• Paid Calls and Clicks. We also pay to have potential clients directed to us via telephone or online in order to increase the size of our client and prospect database. Additionally, we are actively focused on obtaining website domain names to bring in additional admissions based on user search histories.

Call Center Operations

We maintain a 24 hours per day, seven days per week call center currently staffed by over 60 employees. Our centralized call center is situated at our corporate headquarters in Brentwood, Tennessee, and focuses on enrolling clients identified by our sales and marketing activities into new client admissions. As part of its role, the call center team conducts benefits verification and handles all communication with insurance companies, completes client assessments, begins the pre-certification process for treatment authorization, chooses the proper treatment facility for the client’s clinical and financial needs and assists clients with arrangements and logistics.

Professional Groups

We have an affiliation with a Professional Group in each of the five states in which we operate. These Professional Groups employ physicians and mid-level providers that treat our clients and bill the payor for their services. Upon formation of the Professional Groups, we provided the initial working capital funding for the Professional Groups in return for a receivable. We make additional advances to the Professional Groups during

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periods in which negative operating cash flow of the Professional Groups is generated, thereby increasing the balance of the receivable. Excess cash flow of the Professional Groups is repaid to us, resulting in a decrease in the receivable. Any receivables due to us from the Professional Groups are eliminated in the consolidation of the Professional Groups as VIEs. We provide management and other administrative services to the Professional Groups, including billing, collection of accounts receivable, accounting, management and human resource functions and setting policies and procedures in return for a negotiated management fee. Through these arrangements, we are directing the activities that most significantly impact the economic performance of the respective Professional Groups. Based on our ability to direct the activities that most significantly impact the economic performance of the Professional Groups, provide necessary funding and the obligation and likelihood of absorbing all expected gains and losses, we have determined that we are the primary beneficiary, and, therefore, consolidate the five Professional Groups as variable interest entities.

We are currently in the process of entering into written management services agreements (and, in some cases, replacing existing agreements) between AAC and each of the Professional Groups, which we expect to complete prior to the completion of this offering. Under each of the new management services agreements, AAC provides management and other administrative services to the Professional Groups, including billing, collection of accounts receivable, accounting, management and human resource functions, and setting policies and procedures. For additional information related to the Professional Groups, see Note 5 to our audited financial statements included elsewhere in this prospectus.

Competition

We believe we are one of the largest for-profit companies focused on substance abuse treatment in the United States. According to IBISWorld, approximately 77% of all substance abuse treatment clinics in the United States have a single location, and approximately 44% of all substance abuse treatment facilities have fewer than 20 employees. Many of the largest for-profit addiction treatment providers operate in the broader behavioral healthcare sector without focusing primarily on substance abuse. We believe our size and core focus on substance abuse treatment provide us with an advantage over competitors in terms of building our brand and marketing our platform to potential clients.

The market for mental health and substance abuse treatment facilities is highly fragmented with approximately 16,700 different facilities providing services to the adult and adolescent population, of which only 33% are operated by for-profit organizations. Our residential treatment facilities compete with several national competitors and many regional and local competitors. Some of our competitors are government entities and supported by tax revenues, and others are non-profit entities that are primarily supported by endowments and charitable contributions. We do not receive financial support from these sources. Some larger companies in our industry, including Acadia Healthcare Company, Inc. and CRC Health Corp., compete with us on a national scale and offer substance abuse treatment services among other behavioral healthcare services. To a lesser extent, we also compete with other providers of substance abuse treatment services, including other inpatient behavioral healthcare facilities and general acute care hospitals.

We believe the primary competitive factors affecting our business include:

• quality of clinical programs and services;

• reputation and brand recognition;

• overall aesthetics of the facilities;

• amenities offered to clients; and

• relationships with payors and referral sources.

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Sources of Revenue

Our revenues primarily consist of service charges related to providing addiction and behavioral health treatment. Our revenues also include charges related to the collection and laboratory testing of urine for controlled substances. For the year ended December 31, 2013 and for the three months ended March 31, 2014, approximately 90% and 91% of our revenues, respectively, were reimbursable by commercial payors, including amounts paid by such payors to clients, with the remaining portion payable directly by our clients. For the year ended December 31, 2013, approximately 12.3% of our revenue reimbursements came from Blue Cross Blue Shield of California, 12.1% came from Aetna and 10.3% came from United Behavioral Health. No other payor accounted for more than 10% of our revenue reimbursements for the year ended December 31, 2013. For the three months ended March 31, 2014, approximately 16.1% of our revenue reimbursements came from Anthem Blue Cross Blue Shield of Colorado, 13.6% came from Blue Cross Blue Shield of California and 12.4% came from Aetna. No other payor accounted for more than 10% of our revenue reimbursements for the three months ended March 31, 2014.

Regulatory Matters

Overview

Substance abuse treatment providers are regulated extensively at the federal, state and local levels. In order to operate our business and obtain reimbursement from third-party payors, we must obtain and maintain a variety of licenses, permits, certifications and accreditations. We must also comply with numerous other laws and regulations applicable to the conduct of business by substance abuse treatment providers. Our facilities are also subject to periodic on-site inspections by the agencies that regulate and accredit them in order to determine our compliance with applicable requirements.

The laws and regulations that affect substance abuse treatment providers are complex, change frequently and require that we regularly review our organization and operations and make changes as necessary to comply with changes in the law or new interpretations of laws or regulations. Significant public attention has focused in recent years on the healthcare industry, directing attention not only to the conduct of industry participants but also to the cost of healthcare services. In recent years, there have been heightened coordinated civil and criminal enforcement efforts relating to the healthcare industry by both federal and state government agencies. The ongoing investigations relate to, among other things, various referral practices, cost reporting, billing practices, credit balances, physician ownership and joint ventures involving hospitals and other healthcare providers. We expect that healthcare costs and other factors will continue to encourage both the development of new laws and regulations and increased enforcement activity.

We believe we are in substantial compliance with all applicable laws and regulations and are not aware of any material pending or threatened investigations involving allegations of wrongdoing. While no such regulatory inquiries have been made, compliance with such laws and regulations can be subject to future government review and interpretation, as well as significant regulatory action including fines, penalties and exclusion from government health programs.

Licensure, Accreditation and Certification

All of our substance abuse treatment facilities are licensed under applicable state laws where licensure is required. Licensing requirements typically vary significantly depending upon the state in which a facility is located and the types of services provided. The types of licensed services that our facilities provide include intensive outpatient, community housing, adult residential, outpatient treatment, partial hospitalization and medical detoxification. In addition, our employed case managers, therapists and medical technicians may be subject to individual state license requirements.

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Our Desert Hope facility is, and any future facilities that store and dispense controlled substances will be, required to register with the U.S. Drug Enforcement Administration, or DEA, and abide by DEA regulations regarding controlled substances. Finally, each of our treatment facilities has a certificate under the Clinical Laboratory Improvement Amendments of 1988, or CLIA, to conduct urinalysis screening for its clients.

Each of our substance abuse treatment facilities has obtained accreditation from the Commission on Accreditation of Rehabilitation Facilities, or CARF, which is the primary accreditation body in the substance abuse treatment industry. CARF accredits behavioral health organizations providing mental health and alcohol and drug use and addiction treatment services, as well as opiate treatment programs, and many other types of programs. This type of accreditation program is intended to improve the quality, safety, outcomes and value of healthcare services provided by accredited facilities. CARF requires an initial application and completion of on-site surveys demonstrating compliance with accreditation requirements. Accreditation is granted for a specified period, typically ranging from one to three years, and renewals of accreditation require completion of a renewal application and an on-site renewal survey.

We believe that all of our facilities and programs are in substantial compliance with current applicable state and local licensure, certification and accreditation requirements. In addition, we believe all of our facilities are in substantial compliance with the standards of CARF. Periodically, state and local regulatory agencies as well as accreditation entities conduct surveys of our facilities and may find from time to time that a facility is not in full compliance with all of the accreditation standards. Upon receipt of any such finding, the facility timely submits a plan of correction and corrects any cited deficiencies.

Fraud, Abuse and Self-Referral Laws

We do not currently bill or accept payments from any federal healthcare programs. Therefore, we are generally not impacted by the anti-kickback provisions of the Social Security Act, and our operations are not subject to the federal prohibition on physician self-referrals, commonly referred to as the Stark Law. However, many states have passed anti-kickback statutes and physician self-referral prohibitions similar to the federal statutes and regulations. These state laws are often drafted broadly to cover all payors (i.e., not restricted to Medicare and other federal healthcare programs) and often lack interpretative guidance. A violation of these laws could result in a prohibition on billing payors for such services, result in civil or criminal penalties and could adversely affect the state license of any program or facility found to be in violation.

Federal prosecutors have broad authority to prosecute healthcare fraud even when federal healthcare programs are not involved. For example, federal law criminalizes the knowing and willful execution or attempted execution of a scheme or artifice to defraud any healthcare benefit program as well as obtaining by false pretenses any money or property owned by any healthcare benefit program. Federal law also prohibits embezzlement of healthcare funds, false statements relating to healthcare and obstruction of the investigation of criminal offenses. All of these federal criminal offenses are enforceable regardless of whether an entity or individual participates in the Medicare program or any other federal healthcare program.

False Claims

We are subject to state and federal laws that govern the submission of claims for reimbursement. These laws generally prohibit an individual or entity from knowingly and willfully presenting a claim (or causing a claim to be presented) for payment from Medicare, Medicaid or other third-party payors that is false or fraudulent. The standard for “knowing and willful” often includes conduct that amounts to a reckless disregard for whether accurate information is presented by claims processors. Penalties under these statutes include substantial civil and criminal fines, exclusion from the Medicare program and imprisonment.

One of the most prominent of these laws is the federal False Claims Act, or FCA, which may be enforced by the federal government directly or by a qui tam plaintiff (or whistleblower) on the government’s

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behalf. When a private plaintiff brings a qui tam action under the FCA, the defendant often will not be made aware of the lawsuit until the government commences its own investigation or determines whether it will intervene. When a defendant is determined by a court of law to be liable under the FCA, the defendant may be required to pay three times the amount of the alleged false claim, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim. As we do not submit claims to any federal healthcare program, the FCA poses minimal risk to our facilities.

Many states have passed false claims acts similar to the FCA. Under these laws, the government may impose a penalty and recover damages, often treble damages, for knowingly submitting or participating in the submission of claims for payment that are false or fraudulent or which contain false or misleading information. These laws may be limited to specific programs (such as state workers’ compensation programs) or may apply to all payors. In many cases, alleged violations of these laws may be brought by a whistleblower who may be an employee, a referring physician, a competitor, a client or other individual or entity, and who may be eligible for a portion of any recovery. Further, like the federal law, state false claims act laws generally protect employed whistleblowers from retribution by their employers.

Although we believe that we have procedures in place to ensure the accurate completion of claims forms and requests for payment, the laws, regulations and standards defining proper billing, coding and claim submission are complex and have not been subjected to extensive judicial or agency interpretation. Billing errors can occur despite our best efforts to prevent or correct them, and we cannot assure you that the government or a payor will regard such errors as inadvertent and not in violation of the applicable false claims act laws or related statutes.

Privacy and Security Requirements

There are numerous federal and state regulations that address the privacy and security of client health information. In particular, federal regulations issued under the Drug Abuse Prevention, Treatment and Rehabilitation Act of 1979 strictly restrict the disclosure of client identifiable information related to substance abuse and apply to any of our facilities that receive any federal assistance, which is interpreted broadly to include facilities licensed, certified or registered by a federal agency. Further, the HIPAA privacy and security regulations extensively regulate the use and disclosure of individually identifiable health information (known as “protected health information”) and require covered entities, which include most health providers, to implement and maintain administrative, physical and technical safeguards to protect the security of such information. Additional security requirements apply to electronic protected health information. These regulations also provide clients with substantive rights with respect to their health information.

The HIPAA privacy and security regulations also require our substance abuse treatment programs and facilities to impose compliance obligations by written agreement on certain contractors to whom our programs disclose client information known as “business associates.” The requirements for agreements with business associates changed in 2013, requiring us and other entities subject to HIPAA to revise existing agreements or to enter into new agreements. Compliance with these revised standards was required beginning September 23, 2013, except that existing business associate agreements may qualify for an extended compliance date of September 23, 2014. Covered entities may be subject to penalties as a result of a business associate violating HIPAA if the business associate is found to be an agent of the covered entity. Business associates are now also directly subject to liability under the HIPAA privacy and security regulations. In instances where our programs act as a business associate to a covered entity, there is the potential for additional liability beyond the program’s covered entity status.

Covered entities must report breaches of unsecured protected health information to affected individuals without unreasonable delay but not to exceed 60 days of discovery of the breach by a covered entity or its agents. Notification must also be made to HHS and, in certain situations involving large breaches, to the media. HHS is required to publish on its website a list of all covered entities that report a breach involving more than 500

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individuals. In a 2013 final rule, HHS modified this breach notification requirement by creating a presumption that all non-permitted uses or disclosures of unsecured protected health information are breaches unless the covered entity or business associate establishes that there is a low probability the information has been compromised. Various state laws and regulations may also require us to notify affected individuals in the event of a data breach involving individually identifiable information without regard to whether there is a low probability of the information being compromised.

Violations of the HIPAA privacy and security regulations may result in civil penalties of up to $50,000 per violation for a maximum civil penalty of $1,500,000 in a calendar year for violations of the same requirement. HIPAA also provides for criminal penalties of up to $250,000 and ten years in prison, with the severest penalties for obtaining or disclosing protected health information with the intent to sell, transfer or use such information for commercial advantage, personal gain or malicious harm. In addition, state attorneys general may bring civil actions seeking either injunction or damages in response to violations of the HIPAA privacy and security regulations that threaten the privacy of state residents. HHS is required to impose penalties for violations resulting from willful neglect and is required to perform compliance audits.

Our programs remain subject to any privacy-related federal or state laws that are more restrictive than the HIPAA privacy and security regulations. These laws vary by state and could impose additional requirements and penalties. For example, some states impose strict restrictions on the use and disclosure of health information pertaining to mental health or substance abuse treatment. The Federal Trade Commission also uses its consumer protection authority to initiate enforcement actions in response to data breaches.

We enforce a health information privacy and security compliance plan, which we believe complies with the HIPAA privacy and security regulations and other applicable requirements. Compliance with federal and state privacy and security requirements has required and will continue to require us to expend significant resources.

Mental Health Parity Legislation and the Affordable Care Act

The regulatory framework in which we operate is constantly changing. Both the Mental Health Parity legislation and the Affordable Care Act may require that we make operational changes to comply with such laws and regulations. The Mental Health Parity and Addiction Equity Act of 2008, or MHPAEA, is a federal parity legislation that requires large group health insurance plans that offer mental health and addiction coverage to provide that coverage on par with financial and treatment coverage offered for other illnesses. Health plans that do not already cover mental health treatments will not be required to do so, and health plans are not required to provide coverage for every mental health condition published in the Diagnostic and Statistical Manual of Mental Disorders by the American Psychiatric Association. The MHPAEA also contains a cost exemption that operates to exempt a group health plan from the MHPAEA’s requirements if compliance with the MHPAEA becomes too costly. HHS issued interim rules implementing MHPAEA in February 2010 and final rules in November 2013.

The Affordable Care Act poses both opportunities and risks for us. The Affordable Care Act represents significant change to the healthcare industry, including reforming the health insurance market, adopting a number of payment reform measures, attempting to reduce the overall growth rate of healthcare spending, strengthening fraud and abuse enforcement as well as adopting numerous specific provisions applicable to individual segments of the healthcare industry. The impact of the Affordable Care Act on each of our programs may vary. Further, its overall impact is difficult to determine because of uncertainty around a number of factors, including issues around the timing and manner of implementation, the possibility of amendment, repeal or judicial modification, and our inability to predict how individuals, employers, health plans and providers will react to the requirements of the Affordable Care Act.

We believe that one permanent effect of the Affordable Care Act has been an increase in payment reform efforts by federal and state government payors and commercial payors. These efforts take many forms

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including the growth of ACOs, pay-for-performance bonus arrangements, partial capitation arrangements and the bundling of services into a single payment. The result of these efforts is that more risk of the overall cost of care is being transferred to providers. As institutional providers and their affiliated physicians assume more risk for the cost of care, we expect more services to be furnished within provider networks formed to accept these types of payment reforms. Our ability to compete and retain our traditional sources of clients may be adversely affected by our exclusion from such networks or our inability to be included in such networks.

Overall, the expansion of health insurance coverage under the Affordable Care Act is expected to be beneficial to the substance abuse treatment industry. Beginning January 1, 2014, health insurers are prohibited from denying coverage to individuals because of preexisting conditions. Further, all new small group and individual market health plans are required to cover ten essential health benefit categories, which include mental health and substance abuse disorder services. Likewise, beginning January 1, 2014, the small group and individual market plans are required to comply with the requirements of MHPAEA. According to HHS estimates published in February 2013, these changes are expected to expand coverage for mental health and substance abuse disorders for another 62.5 million Americans.

It is estimated that only 10.8% of those suffering with substance abuse disorders actually seek treatment. Accordingly, the expansion of commercial insurance for substance abuse treatment services may result in a higher demand for services from all providers. It is also likely to bring new competitors to the market, some of which may be better capitalized and have greater market penetration than we do. Further, we expect increased demand for substance abuse treatment services to also increase the demand for case managers, therapists, medical technicians and others with clinical expertise in substance abuse treatment that may make it both more difficult to adequately staff our substance abuse treatment facilities and could significantly increase our costs in delivering treatment, which may adversely affect both our operations and profitability. This increased demand may be tempered somewhat by another provision of the Affordable Care Act that budgets $25 million in grants and assistance to increase the number of mental health and behavioral health professionals.

CLIA and State Lab Licensure

Each of our treatment facilities conducts low complexity urinalysis testing and possesses a federal certification under CLIA and, where necessary, applicable state and local licenses. Under CLIA, we are required to hold a certificate applicable to the type of clinical laboratory tests that we perform, which require compliance with certain CLIA-imposed standards based upon the relative complexity of the level of testing that we are actually performing. CLIA regulates clinical laboratory testing by requiring that laboratories be certified by the federal government and comply with various operational, personnel, facilities administration, quality and proficiency requirements intended to ensure that laboratory testing services are accurate, reliable and timely. CLIA does not preempt state laws that are more stringent than federal law.

Pursuant to CLIA, a review is required to renew the certificates every two years. Additionally, we are regularly subject to survey and inspection to assess compliance with program standards and may be subject to additional random inspections. Standards for testing under CLIA are based on the level of complexity of the tests performed by the laboratory. Laboratories performing high complexity testing are required to meet more stringent requirements than laboratories performing less complex tests. Our facilities currently are certified for waiver testing because they only furnish urinalysis, a low complexity test.

In addition to CLIA requirements, we are subject to various state laws. CLIA provides that a state may adopt laboratory regulations that are more stringent than those under federal law, and a number of states, including California and other states in which we operate, have implemented their own laboratory regulatory requirements. State laws may require that laboratory personnel meet certain qualifications, specify certain quality controls or prescribe record maintenance requirements.

Additionally, many state licensure laws require a laboratory that solicits or tests specimens from individuals within that state to hold a license from that state, even if the testing occurs in another state. In particular, California, Florida and New Jersey require out-of-state laboratories to hold state licenses.

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Health Planning and Certificates of Need

The construction of new healthcare facilities, the expansion of existing facilities, the transfer or change of ownership of existing facilities and the addition of new beds, services or equipment may be subject to state laws that require prior approval by state regulatory agencies under certificate of need laws. These laws generally require that a state agency determine the public need for construction or acquisition of facilities or the addition of new services. Review of certificates of need and other healthcare planning initiatives may be lengthy and may require public hearings. Violations of these state laws may result in the imposition of civil sanctions or revocation of a facility’s license. Currently, no states in which we operate have certificate of need requirements for substance abuse treatment centers applicable to our facilities.

Other State Healthcare Laws

Most states have a variety of laws that may potentially impact our operations and business practices. For instance, many states in which our programs operate prohibit corporations (and other legal entities) from practicing medicine by employing physicians and certain non-physician practitioners. These prohibitions on the corporate practice of medicine impact how our programs structure their relationships with physicians and other affected non-physician practitioners. These arrangements, however, have typically not been vetted by either a court or the affected regulatory body.

Similarly, many states prohibit physicians from sharing a portion of their professional fees with any other person or entity. These so-called fee-splitting prohibitions range from prohibiting arrangements resembling a kickback to broadly prohibiting percentage-based compensation and other variable compensation arrangements with physicians.

If our arrangements with physicians were found to violate a corporate practice of medicine prohibition or a state fee-splitting prohibition, our contractual arrangements with physicians in such states could be adversely affected, which, in turn, may adversely affect both our operations and revenues. Further, we could face sanctions for aiding and abetting the violation of the state’s medical practice act.

Local Land Use and Zoning

Municipal and other local governments also may regulate our treatment programs. Many of our facilities must comply with zoning and land use requirements in order to operate and many of our de novo acquisition targets will be contingent upon zoning and land use approvals. For example, local zoning authorities regulate not only the physical properties of a healthcare facility, such as its height and size, but also the location and activities of the facility. In addition, community or political objections to the placement of treatment facilities can result in delays in the land use permit process and may prevent the operation of facilities in certain areas.

Risk Management and Insurance

The healthcare industry in general continues to experience an increase in the frequency and severity of litigation and claims. As is typical in the healthcare industry, we could be subject to claims that our services have resulted in injury to our clients or had other adverse effects. In addition, resident, visitor and employee injuries could also subject us to the risk of litigation. While we believe that quality care is provided to our clients and that we materially comply with all applicable regulatory requirements, an adverse determination in a legal proceeding or government investigation could have a material adverse effect on our financial condition.

We maintain commercial insurance coverage on an occurrence basis for general and professional liability claims with no deductible, a primary $1 million per claim limit and an annual aggregate primary limit of $3 million with umbrella coverage for an additional $20 million limit.

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Compliance Programs

Compliance with government rules and regulations is a significant concern throughout our industry, in part due to evolving interpretations of these rules and regulations. We seek to conduct our business in compliance with all statutes and regulations applicable to our operations. To this end, we have established an informal compliance program that reviews for regulatory compliance procedures, policies and facilities throughout our business. Our executive management team is responsible for the oversight and operation of our compliance program. We provide periodic and comprehensive training programs to our personnel, which are intended to promote the strict observance of our policies designed to ensure compliance with the statutes and regulations applicable to us. To better focus our compliance efforts, we intend to develop a formal compliance program in 2014.

Environmental Matters

We are subject to various federal, state and local environmental laws that: (i) regulate certain activities and operations that may have environmental or health and safety effects, such as the handling, storage, transportation, treatment and disposal of medical waste products generated at our facilities, the presence of other hazardous substances in the indoor environment and protection of the environment and natural resources in connection with the development or construction of our facilities; (ii) impose liability for costs of cleaning up, and damages to natural resources from, past spills, waste disposals on and off-site or other releases of hazardous materials or regulated substances; and (iii) regulate workplace safety. Some of our facilities generate infectious or other hazardous medical waste due to the illness or physical condition of our clients. The management of infectious medical waste is subject to regulation under various federal, state and local environmental laws, which establish management requirements for such waste. These requirements include record-keeping, notice and reporting obligations. Management believes that our operations are generally in compliance with environmental and health and safety regulatory requirements or that any non-compliance will not result in a material liability or cost to achieve compliance. Historically, the costs of achieving and maintaining compliance with environmental laws and regulations at our facilities have not been material. However, we cannot assure you that future costs and expenses required for us to comply with any new, or changes in existing, environmental and health and safety laws and regulations or new or discovered environmental conditions will not have a material adverse effect on our business, financial condition or results of operations.

Employees

As of June 20, 2014, we employed 679 people, consisting of 606 full-time employees and 73 part-time employees. None of our employees is represented by a labor union or covered by a collective bargaining agreement. We believe that our employee relations are good.

Legal Proceedings

From time to time, we may be engaged in various lawsuits and legal proceedings in the ordinary course of our business. Except as described below, we are currently not aware of any legal proceedings the ultimate outcome of which, in our judgment based on information currently available, would have a material adverse effect on our business, financial condition or results of operations.

American Addiction Centers, Inc. v. James D. Bevell, Jr.

On February 3, 2014, AAC filed an action against James D. Bevell in the U.S. District Court in the Middle District of Tennessee, alleging breach of contract and tortious interference with business practices arising out of Mr. Bevell’s breach of his non-compete agreements. Mr. Bevell is the former Chief Innovation Officer of AAC and owns 4.5% of the outstanding common stock of AAC as of April 15, 2014. AAC’s complaint seeks preliminary and permanent injunctive relief, declaratory judgment, compensatory damages, punitive damages for intentional, fraudulent, reckless or grossly negligent conduct, reasonable attorneys’ fees and costs and such other

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legal, equitable or general relief for the breach of contract and associated wrongs. On March 5, 2014, the court granted a preliminary injunction enjoining Mr. Bevell and his officers, agents, servants, employees, attorneys and all persons in active concert or participation with him from violating the non-competition and non-solicitation provisions contained in his employment agreement with AAC and in the purchase agreement related to the TSN Acquisition.

Horizon Blue Cross Blue Shield of New Jersey v. Avee Laboratories et al.

On September 4, 2013, Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) filed an amended complaint in the Superior Court of New Jersey against several defendants, including Leading Edge Recovery Center, LLC, one of our subsidiaries. Leading Edge Recovery Center, LLC formerly operated a drug and alcohol treatment facility in New Jersey. Horizon alleges the defendants submitted and caused others to submit unnecessary drug tests in violation of New Jersey law and is seeking recovery for monetary and treble damages. We are vigorously defending these claims and believe them to be without merit. We cannot provide any assurance that we will prevail in this matter, nor can we reasonably estimate our potential liability if there is an adverse outcome. Further, we have made a demand for indemnification upon James D. Bevell for the portion of these claims relating to the period prior to the TSN Acquisition. We cannot provide any assurance that we will prevail in our indemnity claim with Mr. Bevell for any portion of these claims.

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MANAGEMENT

Our Board of Directors consists of seven members, including a majority of directors who are independent within the meaning of the listing standards of the NYSE. Each of our directors will be elected by our stockholders at our annual meeting of stockholders to serve until the next annual meeting of our stockholders and until his successor is duly elected and qualified. The first annual meeting of our stockholders after this offering will be held in 2015.

Executive Officers and Directors

The following persons are our directors and executive officers as of the date of this prospectus:

Name	Age	Position
Michael T. Cartwright	46	Chief Executive Officer and Chairman of the Board
Jerrod N. Menz	41	President and Director
Kirk R. Manz	47	Chief Financial Officer
Candance A. Henderson-Grice	46	Chief Operating Officer
Kathryn Sevier Phillips	43	General Counsel and Secretary
Darrell S. Freeman, Sr.	49	Lead Independent Director
Jerry D. Bostelman	45	Director
Lucius E. Burch, III	72	Director
David C. Kloeppel	45	Director
Richard E. Ragsdale	70	Director

Michael T. Cartwright, Chairman and Chief Executive Officer. Mr. Cartwright has served as Chairman of our Board of Directors since 2011 and currently serves as our Chief Executive Officer, a position he has held since June 2013. Mr. Cartwright has almost 20 years of experience in the addiction treatment industry. In 2009, Mr. Cartwright co-founded Performance Revolution, LLC (d/b/a FitRx), a company focused on weight management, and served as its chief executive officer until it merged into Forterus, Inc. in 2011. In 1999, he founded Foundations Recovery Network, LLC, a national alcohol and drug treatment company, and served on its Board of Directors and as its president and chief executive officer until 2009. Additionally, in 1995, Mr. Cartwright founded Foundations Associates, a not-for-profit alcohol and drug treatment center in Nashville, Tennessee, and served on its Board of Directors and as its chief executive officer until its purchase by Foundations Recovery Network, LLC in 2007. While at Foundations Associates, Mr. Cartwright conducted 15 federally funded research studies on dual diagnosis and addiction. Mr. Cartwright also served on the U.S. Senate Help Subcommittee on Substance Abuse and Mental Health Services from 2003 to 2004. Based on his knowledge of our company, its business and his extensive experience in the addiction treatment industry, we have determined that Mr. Cartwright should serve as Chairman of our Board of Directors. Mr. Cartwright is a graduate of Trevecca Nazarene University.

Jerrod N. Menz, President. Mr. Menz currently serves as our President, a position he has held since June 2013, and has almost 18 years of experience in the drug and alcohol treatment industry. He previously served as the chief executive officer of American Addiction Centers, Inc. (formerly Forterus, Inc.) from 2011 until 2013. From 2009 until 2011, he served Forterus, Inc. in the roles of Vice President and Secretary. In 2004, Mr. Menz founded ABTTC, Inc. (d/b/a A Better Tomorrow), an alcohol and drug treatment provider in southern California, until Forterus, Inc. acquired A Better Tomorrow in 2008. Prior to founding A Better Tomorrow, Mr. Menz served as general manager of Wits Inn, a drug and alcohol treatment facility in Southern California, from 1997 through 2003 and as Vice President of Marketing of Chapman House Addiction Facilities, a drug and alcohol treatment facility in Orange, California, from 2003 to 2004. Based on his knowledge of our company, its business and his extensive experience in the addiction treatment industry, we have determined that Mr. Menz should serve as a director. Mr. Menz is a graduate of the University of Pittsburgh.

Kirk R. Manz, Chief Financial Officer. Mr. Manz joined the company as Chief Financial Officer in January 2011. From 2008 through 2010, Mr. Manz served as chief executive officer of GMD Holdings, Inc. (d/b/a Blast Panel),

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a digital media company. From 2006 through 2008, Mr. Manz served as managing member of Private Capital Securities, LLC, a boutique investment banking firm. From 2004 through 2006, Mr. Manz served as vice president of investments for Piper Jaffray & Co. From 2002 through 2004, Mr. Manz worked as a fixed income specialist for Stephens Inc. From 1988 through 2002, Mr. Manz was co-founder or chief executive officer of four communications companies including Igaea, Inc., an international VoIP telecommunications provider. Mr. Manz is a graduate of Vanderbilt University.

Candance A. Henderson-Grice, Chief Operating Officer. Ms. Henderson-Grice joined the company in February 2013 as our Chief Operating Officer and has over 22 years’ experience in the behavioral health industry. From 2001 through 2012, she worked at CRC Health Corporation in various capacities, including president of CRC’s healthy living division which included four eating disorder sites, a residential weight management program, two weight management schools and 12 summer camps; vice president of operations for CRC’s eating disorders, weight management and Florida programs; vice president of operations of CRC’s high-end private pay and Florida facilities which included CRC’s flagship program, Sierra Tucson; and as vice president of CRC’s Southern Region. From 1992 to 2001, she worked for Comprehensive Addiction Programs, which was purchased by CRC in 2003, where she held roles including special projects director, director of operations and chief executive officer of various Comprehensive Addiction Programs facilities. Ms. Henderson-Grice is a graduate of the University of Alabama at Birmingham and Troy State University.

Kathryn Sevier Phillips, General Counsel and Secretary. Ms. Phillips joined the company in December 2013 as General Counsel and Secretary. From 2009 to 2013, Ms. Phillips served as Managing Partner of Sevier Phillips & Associates, a legal, compliance and political consulting practice focused primarily on healthcare clients. From 2004 to 2008, Ms. Phillips was general counsel and secretary of National Renal Alliance, LLC, a national renal disease management and dialysis provider, where Ms. Phillips served as the chief legal and government affairs officer. From 1999 to 2004, Ms. Phillips practiced with the law firm of Stites & Harbison PLLC. In 1999, Ms. Phillips served as general counsel of Alexander for President, the presidential campaign of Senator Lamar Alexander. From 1995 to 1998, Ms. Phillips practiced with the law firm of Bass, Berry & Sims PLC. Ms. Phillips is a graduate of Auburn University, the Harvard Graduate School of Education and Harvard Law School.

Darrell S. Freeman, Sr., Lead Independent Director. Mr. Freeman joined our Board of Directors in January 2013 and was appointed Lead Independent Director in June 2014. Mr. Freeman currently serves as the executive chairman of Zycron, Inc., an information technology services and solutions firm he founded in 1991. Mr. Freeman has served as the executive chairman of Zycron, Inc. since its formation in 1991. Mr. Freeman also is the co-founder and board member of Tennessee-based Reliant Bank where he serves on the audit and compensation committees. Additionally, Mr. Freeman was the co-founder and chairman of Pinnacle Construction Partners, a construction management firm. The Board of Directors believes that Mr. Freeman is qualified to serve as a director as a result of his extensive business and financial experience and insight into risk management from his experience co-founding Reliant Bank and his service on its audit committee. In 2012, Mr. Freeman was appointed to the Tennessee Board of Regents. Mr. Freeman has served two terms as chairman of the Nashville Area Chamber of Commerce, as chairman of the 100 Black Men of Middle Tennessee and is a current board member of the Nashville Entrepreneur Center.

Jerry D. Bostelman, Director. Mr. Bostelman joined our Board of Directors in July 2012. Mr. Bostelman is chief executive officer of Vaco, LLC, a professional staffing firm, which he co-founded in 2002. Prior to co-founding Vaco, Mr. Bostelman was a regional manager for Robert Half International Inc., a provider of staffing services for accounting and finance professionals, where he worked from 1997 through 2001. From 1993 through 1997, Mr. Bostelman served as an auditor for Arthur Anderson. The Board of Directors believes that Mr. Bostelman is qualified to serve as a director as a result of his accounting background and his broad management experience serving as regional manager of a national professional staffing firm. Mr. Bostelman served six years in the Marine Corps Reserves, including a five month active tour of duty in the first Gulf War.

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Lucius E. Burch, III, Director. Mr. Burch joined our Board of Directors in February 2012. Since 1989, Mr. Burch has served as the chairman and chief executive officer of Burch Investment Group, formerly Massey Burch Investment Group. Mr. Burch began his tenure at Massey Investment Company (the predecessor of Massey Burch Investment Group), as a financial analyst and portfolio manager in 1968 and served as president from 1981 until 1989. Mr. Burch is also the chairman and chief executive officer of Collateral Guaranty, a credit enhancement fund. Mr. Burch is the former chairman of Corrections Corporation of America (NYSE:CXW), an operator of private prisons and detention centers and has served on numerous private and public company boards. The Board of Directors believes that Mr. Burch is qualified to serve as a director as a result of his extensive knowledge of and experience in the healthcare industry, his prior extensive board experience, including service on the Boards of Directors of seven New York Stock Exchange companies and his general business and financial acumen.

David C. Kloeppel, Director. Mr. Kloeppel joined our Board of Directors in April 2013. Mr. Kloeppel is chairman of Eventa Global, Inc., a travel services company he founded in 2014, and also serves as chief executive officer of Domus Hospitality, LLC, an operator of hotels in Latin American and the Caribbean he founded in 2013. Mr. Kloeppel served as president and chief operating officer of Gaylord Entertainment Company (NYSE:GET) from 2009 to 2012; as president and chief financial officer from 2008 to 2009; as executive vice president and chief financial officer from 2002 until 2008; and as chief financial officer from 2001 to 2002. Prior to joining Gaylord Entertainment Company he worked in the Mergers and Acquisitions Department at Deutsche Bank in New York, where he served as vice president and was responsible for that department’s activities in the lodging, leisure and real estate sectors. Mr. Kloeppel served as a director of FelCor Lodging Trust Inc. (NYSE:FCH) from 2005 to 2008, and was a member of the audit and compensation committees. The Board of Directors believes that Mr. Kloeppel is qualified to serve as a director as a result of his prior public company executive officer experience, his extensive corporate governance experience as an officer and director of publicly traded companies and his general business and financial acumen. Mr. Kloeppel currently serves on the Executive Committee of the Nashville Area Chamber of Commerce and the Board of Visitors of the Owen Graduate School of Management at Vanderbilt University. He is the current President of the Board of Trustees at University School of Nashville.

Richard E. Ragsdale, Director. Mr. Ragsdale joined our Board of Directors in July 2012. Mr. Ragsdale has co-founded and operated 17 healthcare corporations during his career. After beginning his career with Chase Manhattan Bank in New York, Mr. Ragsdale served as president and treasurer of Hospital Affiliates International, Inc., one of the country’s first hospital management firms, from 1973 to 1977, and served as vice president and chief financial officer of INA Health Care Group from 1977 to 1981. In 1981, he co-founded a hospital management company, Republic Health Corporation, which went public in 1983 and was acquired by an investor group in 1986. In 1985, Mr. Ragsdale co-founded Community Health Systems, Inc. (NYSE:CYH), a rural hospital management company, and served as chairman from 1985 to 1996. In 2000, he co-founded HealthMont Inc., an operator of community hospitals, and served as chairman from its formation in early 2000 until its acquisition by SunLink in October 2003. Mr. Ragsdale has served on the boards of numerous public and private companies and since June 2008, has served as a director of BreatheAmerica, Inc., an operator of allergy, asthma and sinusitis treatment centers. The Board of Directors believes that Mr. Ragsdale is qualified to serve as a director as a result of his extensive knowledge of and experience in the healthcare industry, his prior extensive public company board experience and his general business and financial acumen.

Corporate Governance Profile

We have structured our corporate governance in a manner we believe closely aligns our interests with those of our stockholders. Notable features of our corporate governance structure include the following:

• our Board of Directors is not classified, with each of our directors subject to re-election annually;

• of the seven persons who serve on our Board of Directors, five of our directors satisfy the listing standards for independence of the NYSE and four of our directors satisfy the independence standards of Rule 10A-3 under the Exchange Act;

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• each member of our Audit Committee qualifies as an “audit committee financial expert” as defined by the SEC;

• we intend to comply with the requirements of the NYSE listing standards, including having committees comprised solely of independent directors; and

• we do not have a stockholder rights plan.

Our directors will stay informed about our business by attending meetings of our Board of Directors and its committees and through supplemental reports and communications. Our independent directors meet regularly in executive sessions without the presence of our corporate officers or non-independent directors.

Board Leadership Structure

Our Board of Directors is currently chaired by our Chief Executive Officer, Mr. Cartwright. Our Board of Directors believes that combining the positions of Chief Executive Officer and Chairman helps to ensure that the Board of Directors and management act with a common purpose and provides a single, clear chain of command to execute our strategic initiatives and business plans. In addition, our Board of Directors believes that a combined Chief Executive Officer/Chairman is better positioned to act as a bridge between management and our Board of Directors, facilitating the regular flow of information. Our Board of Directors also believes that it is advantageous to have a Chairman with an extensive history with and knowledge of our company (as is the case with our Chief Executive Officer).

In June 2014, our Board of Directors appointed Mr. Freeman as lead independent director in connection with this offering in order to help reinforce the independence of our Board of Directors as a whole. The lead independent director will serve as an effective balance to a combined Chief Executive Officer/Chairman. The lead independent director is empowered to, among other duties and responsibilities, provide general leadership of the affairs of the independent directors, preside over board meetings in the absence of the Chairman and during independent director closed session portions of the meetings, preside over and establish the agendas for meetings of the independent directors and act as liaison between the Chairman and the independent directors.

Role of the Board in Risk Oversight

One of the key functions of our Board of Directors is informed oversight of our risk management process. Our Board of Directors administers this oversight function directly, with support from its three standing committees, the Audit Committee, the Compensation Committee and the Nominating and Corporate Governance Committee, each of which addresses risks specific to its respective areas of oversight. In particular, our Audit Committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The Audit Committee also monitors compliance with legal and regulatory requirements in addition to oversight of the performance of our internal audit function. Our Compensation Committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking. Our Nominating and Corporate Governance Committee monitors the effectiveness of our corporate governance guidelines, including whether they are successful in preventing illegal or improper liability-creating conduct.

Board Committees and Independence

The NYSE requires a majority of our Board of Directors to consist of independent directors. A director will only qualify as an “independent director” if, in the opinion of our Board of Directors, that person does not have a material relationship with the company that would interfere with the exercise of independent judgment. In addition, in order for a member of the Compensation Committee or the Audit Committee to be considered independent, such committee member may not, other than in his capacity as a member of the Board of Directors or any Board committee: (1) accept, directly or indirectly, any consulting, advisory, or other compensatory fee from us; or (2) be an affiliated person of us.

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In March 2014, our Board of Directors undertook a review of the composition of our Board of Directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our Board of Directors has affirmatively determined that none of our directors other than Mr. Cartwright and Mr. Menz has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of our directors other than Mr. Cartwright and Mr. Menz is “independent” as that term is defined by the NYSE Listed Company Manual. Our Board of Directors also determined that Messrs. Freeman, Kloeppel and Ragsdale, who comprise our Audit Committee, Messrs. Burch, Kloeppel and Freeman, who comprise our Compensation Committee, and Messrs. Bostelman, Burch and Ragsdale, who comprise our Nominating and Corporate Governance Committee, each satisfy the independence standards for such committees established by the SEC and the NYSE. Each of the members of our Compensation Committee is an “outside director” for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and a “non-employee director” for purposes of Rule 16b-3 under the Exchange Act. In making such determination, the Board of Directors considered the relationships that each such non-employee director has with our company and all other facts and circumstances the Board of Directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director.

Board Committees

Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. Each committee will operate under a charter approved by our Board of Directors. Following this offering, copies of each committee’s charter will be posted on the Corporate Governance section of our website, www.americanaddictioncenters.com.

Audit Committee. Our Audit Committee consists of Messrs. Freeman, Kloeppel and Ragsdale, each of whom is a non-employee director. Mr. Kloeppel serves as the chair of our Audit Committee. The functions of this committee include, among other things:

• evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors;

• reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services;

• reviewing our annual and quarterly financial statements and reports and discussing the statements and reports with our independent auditors and management;

• reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation, and matters concerning the scope, adequacy and effectiveness of our financial controls;

• reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments;

• establishing procedures for the receipt, retention and treatment of complaints received by us regarding accounting, internal accounting controls or auditing matters and other matters;

• preparing the report of the audit committee that the SEC requires in our annual proxy statement;

• overseeing risks associated with financial matters such as accounting, internal controls over financial reporting and financial policies;

• reviewing and providing oversight with respect to any related party transactions and monitoring compliance with our code of ethics; and

• reviewing and evaluating, at least annually, the performance of the Audit Committee, including compliance of the Audit Committee with its charter.

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Our Board of Directors has determined that each member of the Audit Committee meets the financial literacy requirements under the NYSE listing standards and that each of Messrs. Kloeppel, Freeman and Ragsdale qualify as an “audit committee financial expert” within the meaning of SEC rules and regulations. In making its determination that each of Messrs. Kloeppel, Freeman and Ragsdale qualify as an “audit committee financial expert,” our Board of Directors has considered the formal education and nature and scope of the previous experience of each of Messrs. Kloeppel, Freeman and Ragsdale, coupled with past and present service on various Audit Committees. Both our independent registered public accounting firm and management personnel periodically meet privately with our Audit Committee.

Compensation Committee. Our Compensation Committee consists of Messrs. Freeman, Kloeppel and Burch. Mr. Burch serves as the chair of our Compensation Committee. The functions of this committee include, among other things:

• reviewing and recommending to our Board of Directors the compensation and other terms of employment of our executive officers;

• reviewing and recommending to our Board of Directors performance goals and objectives relevant to the compensation of our executive officers;

• evaluating and approving the equity incentive plans, compensation plans and similar programs advisable for us, as well as modification or termination of existing plans and programs;

• evaluating and recommending to our Board of Directors the type and amount of compensation to be paid or awarded to Board members;

• administering our equity incentive plans;

• reviewing and recommending to our Board of Directors policies with respect to incentive compensation and equity compensation arrangements;

• reviewing the competitiveness of our executive compensation programs and evaluating the effectiveness of our compensation policy and strategy in achieving expected benefits to us;

• evaluating and overseeing risks associated with compensation policies and practices;

• reviewing and recommending to our Board of Directors the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers and other members of senior management;

• preparing the report of the compensation committee that the SEC requires in our annual proxy statement;

• reviewing the adequacy of its charter on an annual basis; and

• reviewing and evaluating, at least annually, the performance of the Compensation Committee, including compliance of the Compensation Committee with its charter.

Nominating and Corporate Governance Committee. Our Nominating and Corporate Governance Committee consists of Messrs. Bostelman, Burch and Freeman. Mr. Freeman serves as the chair of our Nominating and Corporate Governance Committee. The functions of this committee include, among other things:

• identifying, reviewing and evaluating candidates to serve on our Board of Directors;

• determining the minimum qualifications for service on our Board of Directors;

• evaluating the performance of our Board of Directors and the committees thereof, including compliance of each committee with its charter;

• evaluating, nominating and recommending individuals for membership on our Board of Directors;

• considering nominations by stockholders of candidates for election to our Board of Directors;

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• considering and assessing the independence of members of our Board of Directors;

• developing, as appropriate, a set of corporate governance principles, and reviewing and recommending to our Board of Directors any changes to such principles;

• periodically reviewing our policy statements;

• reviewing, at least annually, the adequacy of its charter; and

• evaluating, at least annually, the performance of the Nominating and Corporate Governance Committee, including compliance of the Nominating and Corporate Governance Committee with its charter.

Compensation Committee Interlocks and Insider Participation

No member of our Compensation Committee has ever been an executive officer or employee of ours. None of our officers currently serves, or has served during the last completed fiscal year, on the Compensation Committee or Board of Directors of any other entity that has one or more officers serving as a member of our Board of Directors or Compensation Committee. Prior to establishing the Compensation Committee, our full Board of Directors made decisions relating to compensation of our officers.

Code of Business Conduct and Ethics

Upon completion of this offering, our Board of Directors will establish a code of business conduct and ethics that applies to our officers, directors and employees. Among other matters, our code of business conduct and ethics will be designed to deter wrongdoing and to promote:

• honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

• full, fair, accurate, timely and understandable disclosure in our SEC reports and other public communications;

• compliance with applicable laws, rules and regulations;

• prompt internal reporting of violations of the code to appropriate persons identified in the code; and

• accountability for adherence to the code of business conduct and ethics.

Any waiver of the code of business conduct and ethics for our executive officers or directors must be approved by a majority of our independent directors, and any such waiver shall be promptly disclosed as required by law or NYSE regulations. Following this offering, a current copy of the code will be posted on the Corporate Governance section of our website, www.americanaddictioncenters.com.

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Director Compensation

As compensation for serving on our Board of Directors, we intend to provide each of our independent directors an annual retainer consisting of a stock award with a grant date fair value of $40,000. In addition, we have historically paid each of our independent directors a fee of $2,000 in cash per meeting. Directors who are also officers or employees of our company will receive no additional compensation for service as directors. In addition, we will reimburse our directors for their reasonable out-of-pocket expenses incurred in attending Board of Directors and committee meetings. The following table reflects the total compensation earned by our non-employee directors in 2013:

Name	Fees earned or paid in cash ($)		Stock Awards ($)(1)		Total ($)
Jerry D. Bostelman		12,000		47,378		59,378
Lucius E. Burch, III		10,000		47,378		57,378
Darrell S. Freeman, Sr.		10,000		47,378		57,378
David C. Kloeppel		8,000		47,378		55,378
Richard E. Ragsdale		12,000		47,378		59,378

(1) Reflects the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, of a March 2014 grant of 3,713 fully vested shares of common stock to each non-employee director as compensation for his service to AAC in 2013. See Note 12 titled “Stock-Based Compensation Plans” to our audited consolidated financial statements included elsewhere in this prospectus for a discussion of the assumptions made by us in determining the grant date fair value of our equity awards.

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EXECUTIVE COMPENSATION

Overview

The primary goal of our executive compensation program is to align executive compensation with our business objectives and individual performance, as well as to enable us to attract, retain and reward executive officers who contribute to our long-term success. The Compensation Committee sets the compensation of our executive officers. Generally, the committee considers and evaluates the company’s performance and goals and our Chief Executive Officer’s recommendations with respect to each officer (other than the Chief Executive Officer) in setting compensation. The compensation of our executive officers consists of a combination of base salary and annual incentive bonuses paid in cash or equity. All employees, including our executive officers, also receive a benefits package.

As an “emerging growth company,” we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies” as such term is defined in the rules promulgated under the Securities Act, which require compensation disclosure for our Chief Executive Officer and the two most highly compensated executive officers other than our Chief Executive Officer, whom we collectively refer to as our “named executive officers” in this prospectus.

2013 Summary Compensation Table

The following table provides information regarding the compensation earned by our named executive officers during the year ended December 31, 2013.

Name and Principal Position	Year		Salary ($)		Bonus ($)		Stock Awards ($)			All Other Compensation ($)			Total ($)
Michael T. Cartwright		2013		635,000		1,270,000		—			23,177	(1)		1,928,177
Chairman and Chief Executive Officer
Jerrod N. Menz		2013		480,000		864,000		—			30,786	(2)		1,374,786
President
Candance A. Henderson-Grice(3)		2013		238,236		105,000		472,887	(4)		95,907	(5)		912,030
Chief Operating Officer

(1) Reflects $20,177 of payments for health insurance premiums and $3,000 of company contributions to a health savings account (HSA).

(2) Reflects $20,177 of payments for health insurance premiums, $7,609 of company contributions to the company’s 401(k) profit sharing plan and $3,000 of company contributions to an HSA.

(3) Ms. Henderson-Grice joined the company in February 2013.

(4) Reflects the aggregate grant date fair value, computed in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718, of a November 2013 grant of 46,407 shares of restricted common stock, which vests in four equal installments on December 31, 2013, March 31, 2014, June 30, 2014 and September 30, 2014. See Note 12 titled “Stock-Based Compensation Plans” to our audited consolidated financial statements included elsewhere in this prospectus for a discussion of the assumptions made by us in determining the grant date fair value of our equity awards.

(5) Reflects $79,467 of additional cash compensation to satisfy the personal tax obligation related to the restricted stock awards, $1,763 of company contributions to the company’s 401(k) profit sharing plan, $11,677 of health insurance premiums and $3,000 of company contributions to an HSA.

2013 Executive Compensation Elements

Each of our named executive officers was provided with the following material elements of compensation in 2013:

Base Salary. We provide a base salary to each named executive officer. The primary goal for base salary is to be market competitive and to compensate an executive’s short-term contributions, as well as to provide current financial stability.

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Annual Incentive Awards. Annual bonuses are a key component of our executive compensation strategy and represented a majority of the total compensation paid to our named executive officers in 2013. In August 2013, the Compensation Committee engaged McDaniel & Associates as its independent compensation consultant to advise the Company on its executive compensation program, including by identifying a peer group of companies and performing a peer group compensation analysis. The peer group recommended by McDaniel & Associates and utilized by the Compensation Committee for 2013 compensation purposes was comprised of 16 publicly traded health care organizations, with annual revenues ranging from $86 million to slightly over $400 million. The companies comprising our 2013 peer group were as follows:

Acadia Healthcare Company, Inc.	HealthStream, Inc.
AdCare Health Systems, Inc.	IntegraMed America, Inc.
Addus Homecare Corporation	LCA-Vision Inc.
Almost Family, Inc.	MedCath Corporation
Arcadia Resources, Inc.	National Research Corporation
Assisted Living Concepts, Inc.	NovaMed, Inc.
Capital Senior Living Corporation	SunLink Health Systems, Inc.
Diversicare Healthcare Services, Inc.	USMD Holdings, Inc.

After reviewing the analysis and recommendations of McDaniel & Associates and taking into account the individual circumstances of each named executive officer, the Compensation Committee approved the target and maximum level of annual incentive bonuses for fiscal year 2013 with respect to each named executive officer. With respect to Michael Cartwright, our Chairman and Chief Executive Officer, and Jerrod Menz, our President, the Compensation Committee determined that their compensation should consist primarily of annual cash incentives because each already owned a substantial amount of equity in the Company. Therefore, the target annual cash incentive award was set at 100% of base salary for Mr. Cartwright and 80% of base salary for Mr. Menz, with proposed maximums of 200% and 160%, respectively, of base salary upon outstanding company and individual performance. With respect to Candance Henderson-Grice, our Chief Operating Officer, the Compensation Committee set her target annual incentive compensation at 60% of her annualized base salary, with a proposed maximum of 160% of annualized base salary upon outstanding company and individual performance. The Compensation Committee retained the ability to apply its discretion to any and all such awards, and it did not set specific performance targets upon which the bonuses would become payable.

The annual incentive bonuses actually awarded to each named executive officer in respect of 2013, including the positive discretion with respect to the bonuses of Mr. Menz and Ms. Henderson-Grice, were ultimately based on a discretionary performance evaluation conducted by our Compensation Committee and Chief Executive Officer, in consultation with other executive officers. The determination involved an analysis of both (i) the Company’s overall performance, including significant growth in revenues in 2013 and (ii) the performance of the individual officer and his or her contributions to the Company. With respect to Ms. Henderson-Grice, in light of her joining the company in February 2013, the Compensation Committee determined that her annual incentive award should be paid primarily as an award of restricted stock to help align her personal long-term interests with our stockholders. Therefore, Ms. Henderson-Grice was awarded a grant of 46,407 restricted shares in November 2013.

Employment Agreements. We currently do not have any employment agreements with our named executive officers.

Retirement Arrangements. We maintain a 401(k) savings plan for eligible employees, including our named executive officers, and provide annual discretionary matching contributions to 401(k) plan participants. We do not maintain a defined benefit pension plan.

Employee Benefits. Eligible employees, including our named executive officers, participate in broad-based and comprehensive employee benefit programs, including medical, dental, vision, life and disability insurance. Our named executive officers participate in these programs on the same basis as eligible employees generally, except that the company covers the full costs of premiums with respect to the medical insurance plan.

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Outstanding Equity Awards at 2013 Fiscal Year-End

The following table provides information with respect to holdings of unvested restricted stock awards held by our named executive officers at December 31, 2013.

				Stock Awards
Name	Grant Date			Number of Shares or Units of Stock That Have Not Vested (#)		Market Value of Shares or Units of Stock That Have Not Vested ($)(1)
Michael T. Cartwright		—			—		—
Jerrod N. Menz		—			—		—
Candance A. Henderson-Grice		11/19/2013	(2)		34,806

(1) The market price for our common stock is based upon the assumed initial public offering price of $         per share, which is the midpoint of the estimated offering price range set forth on the cover page of this prospectus.

(2) Reflects restricted stock that vests in three equal installments on March 31, 2014, June 30, 2014 and September 30, 2014.

2014 Executive Compensation Elements

The Compensation Committee determined the following with respect to our 2014 executive compensation program, which includes the compensation of our named executive officers:

• No Change in Base Salaries: The Compensation Committee determined that there were no increases in base salaries for the named executive officers for 2014. As a result, the 2014 base salaries of our named executive officers will remain the same as disclosed in the 2013 Summary Compensation Table above, except Candance A. Henderson-Grice’s base salary will be reflective of a full year of service ($300,000).

• 2014 Annual Cash Incentive Plan: For 2014 the Compensation Committee approved the 2014 Cash Incentive Plan for certain eligible employees, including our named executive officers. The 2014 Cash Incentive Plan target and maximum bonus amounts for our named executive officers are set forth below.

Executive Officer	2014 Base Salary		2014 Target Bonus (as a percentage of base salary)			2014 Maximum Bonus (as a percentage of base salary)
Michael T. Cartwright	$	635,000		100	%		200	%
Jerrod N. Menz	$	480,000		80	%		160	%
Candance A. Henderson-Grice	$	300,000		60	%		120	%

Bonus awards payable pursuant to the 2014 Cash Incentive Plan with respect to our “Senior Officer Participants,” defined to include Mr. Cartwright, Mr. Menz and Kirk Manz, our Chief Financial Officer, will be calculated based on the Company’s achievement of adjusted EBITDA targets during each quarter of the 2014 fiscal year and the 2014 fiscal year as a whole. The definition of adjusted EBITDA under the 2014 Cash Incentive Plan is consistent with the definition of adjusted EBITDA under our Credit Facility. (For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financing Relationships.”) In order for the Senior Officer Participant to qualify for an award with respect to any quarter, the Company must meet the respective adjusted EBITDA target for such quarter. If the adjusted EBITDA target for a quarter is met, the executive will be entitled to an award in an amount up to 25% of the target bonus amount for such executive. If the adjusted EBITDA target for a quarter is not met, the executive will not be entitled to an award for such quarter (except for any year-end adjustment as described below). If the Company achieves or exceeds the adjusted EBITDA target with respect to the 2014 fiscal year, the executive will be entitled to an award with respect to the fiscal year according to the following formula: (a) the percentage of

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the adjusted EBITDA target that actual adjusted EBITDA for the 2014 fiscal year represents, multiplied by (b) the executive’s target bonus amount, with the product of (a) and (b) reduced (but not below zero) by (c) payments made during the fiscal year with respect to the achievement of the adjusted EBITDA target with respect to each fiscal quarter; provided, that no executive will be entitled to receive more than such executive’s maximum bonus as described above.

With respect to our other executive officers, including Ms. Henderson-Grice, awards will be based on the officer’s achievement of individual goals during each quarter as established by Mr. Cartwright. If the officer meets his or her individual goals with respect to the quarter, the officer will be entitled to an award equal to 25% of his or her target bonus for the year.

Benefit Plans

2007 Stock Incentive Plan

We adopted our 2007 Stock Incentive Plan, or the 2007 Plan, to enable us to attract, retain and reward employees, officers, directors and consultants of us and our affiliates for their services and to motivate such individuals through added incentives to further contribute to our success and the success of our affiliates. Of the 2,500,000 shares of common stock that were eligible for issuance pursuant to awards made under the 2007 Plan, no shares of common stock were subject to outstanding restricted stock awards as of December 31, 2013, other than 69,612 shares previously granted to three of our officers in November 2013, one-third of which vested on March 31, 2014, with the remaining portion vesting in equal amounts on June 30, 2014 and September 30, 2014. Although the 2007 Plan remains in effect for awards granted under the 2007 Plan, we will not make any additional awards under the 2007 Plan.

2014 Equity Incentive Plan

In connection with this offering, we have adopted the 2014 Equity Incentive Plan, or 2014 Plan. The purpose of the 2014 Plan is to attract and retain key officers, employees, directors and consultants, motivate such individuals by means of performance-related incentives to achieve long-range performance goals, enable such individuals to participate in our long-term growth and financial success, encourage ownership of our stock by such individuals, and link such individuals’ compensation to the long-term interests of us and our stockholders. The 2014 Plan is also designed to permit us to make cash-based awards and equity-based awards intended to qualify as “performance-based compensation” under Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code.

This following summary is qualified in its entirety by reference to the text of the 2014 Plan, which is filed as an exhibit to the registration statement of which this prospectus is a part.

Eligibility. Awards may be granted under the 2014 Plan to employees (including officers), directors (including non-employee directors) and consultants of our company or any of our subsidiaries or other affiliates. Only employees of us or any of our subsidiaries or other affiliates are eligible to receive incentive stock options.

Administration, Amendment and Termination. Our Compensation Committee will have the power and authority to administer the 2014 Plan. The Compensation Committee will have the authority to interpret the terms and intent of the 2014 Plan, determine eligibility for and terms of awards for participants and make all other determinations necessary or advisable for the administration of the 2014 Plan. To the extent permitted by the terms of the 2014 Plan, the Compensation Committee charter, and applicable law, our Compensation Committee may delegate certain authority under the 2014 Plan to one or more officers or managers of us or any affiliate, or to a committee of such officers or managers under terms and limitations the Compensation Committee may establish.

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Our Board of Directors may amend, alter, suspend, discontinue or terminate the 2014 Plan at any time. No such action may be taken without the approval of stockholders if such approval is necessary to comply with any tax or regulatory requirement for which or with which the Board of Directors deems it necessary or desirable to comply. Furthermore, subject to the 2014 Plan’s repricing restrictions, the Compensation Committee may waive any conditions or rights under, amend any terms of or alter, suspend, discontinue, cancel or terminate, any award granted under the 2014 Plan, prospectively or retroactively, provided that any such action that would materially and adversely affect the rights of any participant or any holder or beneficiary of any such award shall not to that extent be effective without consent.

Awards. Awards under the 2014 Plan may be made in the form of options, stock appreciation rights, restricted share awards, restricted share units, performance awards, other stock-based awards or any other rights, interest or options relating to shares or other property (including cash), whether singly, in combination, or in tandem.

Shares Subject to the Plan. Following this offering, the aggregate number of shares of our common stock that may be issued initially pursuant to awards under the 2014 Plan is 1,000,000 shares. The maximum number of shares that may be issued pursuant to the exercise of incentive stock options under the 2014 Plan is 1,000,000 shares. No more than 200,000 shares may be issued to any participant during any single calendar year with respect to options and stock appreciation rights. With respect to any “covered employee,” as defined in Section 162(m) of the Code, the maximum annual number of shares in respect of which all performance awards may be granted under the 2014 Plan is 150,000 and the maximum amount of cash-settled performance awards that may be granted under the 2014 Plan in any year is $3,000,000. Shares issued under the 2014 Plan may be authorized but unissued shares or treasury shares. Any shares covered by an award, or portion of an award, granted under the 2014 Plan that are forfeited or canceled, expires or are settled in cash shall again be available for issuance under the 2014 Plan. In the event that withholding tax liabilities arising from an award other than an option or stock appreciation right are satisfied by the tendering of shares or by the withholding of shares by us, the shares so tendered or withheld shall again be available for issuance under the 2014 Plan. Shares that are issued in connection with substitute awards will not reduce the shares available for awards under the 2014 Plan or count against any limits otherwise set forth in the 2014 Plan.

Non-Employee Director Awards. The Board of Directors may provide that all or a portion of a nonemployee director’s annual retainer, meeting fees and/or other awards or compensation as determined by the Board of Directors, be payable (either automatically or at the election of a non-employee director) in the form of non-qualified stock options, restricted shares, restricted share units and/or other stock-based awards under the 2014 Plan, including unrestricted shares. The Board of Directors shall determine the terms and conditions of any such awards, including the terms and conditions which shall apply upon a termination of the non-employee director’s service as a member of the Board of Directors, and shall have full power and authority in its discretion to administer such awards, subject to the terms of the 2014 Plan and applicable law.

Adjustment of Shares Subject to the Plan. In the event of certain changes in our capitalization, the Compensation Committee will adjust, among other award terms, the number and class of shares, other securities or other property that may be delivered in connection with awards and the exercise price, grant price or purchase price relating to any award in such manner as the Compensation Committee determines to be appropriate in an equitable and proportionate manner. Furthermore, the Compensation Committee will adjust the aggregate number and class of shares or other securities (or the number and kind of other property) with respect to which awards may be granted under the 2014 Plan.

Effect of a Change in Control. The discussion below of the effects of a change in control (as defined in the 2014 Plan) applies to outstanding awards unless otherwise provided in an award agreement. In the event of a change in control, if the successor company does not assume or substitute (or continue) outstanding awards, the awards immediately vest and, in the case of options and SARs, become fully exercisable. If outstanding awards are assumed or substituted (or continued) and a participant’s employment terminates within 24 months after a

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change in control (or such other period specified in the award agreement), except to the extent otherwise provided in any award agreement, outstanding awards immediately vest and, in the case of options and SARs, become fully exercisable.

In its discretion, the Compensation Committee may provide that in the event of a change in control (i) outstanding stock options and SARs will terminate within a specified number of days after notice to participants, (ii) participants will receive a payment (in cash, stock or other property) equal to the excess of the fair market value of the common stock immediately prior to the change in control over the exercise price or grant price, as applicable, of the options and SARs, and/or (iii) cancel without payment outstanding stock options and SARs if the fair market value of the common stock as of the change in control date is less than the exercise price of the options and SARs. In its discretion, the Committee may also further provide that in the event of a change in control all performance awards will be considered to be earned and payable (either in full or pro rata based on the portion of performance period completed as of the date of the change in control), and any limitations or other restrictions will lapse and such performance awards will be immediately settled or distributed.

Qualified Performance-Based Compensation. Section 162(m) of the Code limits public companies to an annual deduction for federal income tax purposes of $1,000,000 for compensation paid to their Chief Executive Officer and, based on recent IRS interpretation, the three most highly compensated executive officers, other than the Chief Executive Officer and Chief Financial Officer, determined at the end of each year. Qualified performance-based compensation is excluded from this limitation. The 2014 Plan is designed to permit the Compensation Committee to grant performance awards that qualify as performance-based compensation for purposes of satisfying the conditions of Section 162(m) at such time as the 2014 Plan becomes subject to Section 162(m); provided that our stockholders approve the 2014 prior to the end of the Transition Period, as described below. The Compensation Committee may select performance targets based on one or more of the following performance measures relating to us, our subsidiaries, our operating units, our business segments or our divisions: total sales or revenues; sales or revenue per employee; earnings before interest, taxes, depreciation and/or amortization; operating income or profit (before or after taxes); operating margins, gross margins or cash margin; operating efficiencies; return on equity, assets (or net assets), capital, capital employed or investment; net income (before or after taxes); pre- or after-tax income (before or after allocation of corporate overhead and bonuses); earnings (gross, net, pre-tax, after tax or per share); utilization; improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable; gross or net profit margins; stock price or total stockholder return; cash flow or cash flow per share (before or after dividends); appreciation in and/or maintenance of the price of shares or other publicly-traded securities of the Company; client growth or sales; debt reduction; year-end cash; financial ratios, including those measuring activity, leverage, liquidity or profitability; cost of capital or assets under management; financing and other capital-raising transactions; revenue; market share; strategic business objectives, consisting of one or more objectives based on meeting specified cost targets, business expansion goals or goals relating to acquisitions or divestitures; or any combination thereof. Each performance target may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of us or any subsidiary, operating unit, business segment or division of us and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, stockholders’ equity and/or shares outstanding, or to assets or net assets. The Compensation Committee may appropriately adjust any evaluation of performance under criteria set forth in the 2014 Plan and may make downwards adjustments to the amounts payable pursuant to a performance award.

The Treasury Regulations under Section 162(m) of the Code provide that, in the case of a corporation that was not a publicly held corporation and then becomes a publicly held corporation, the $1,000,000 deduction limit does not apply to any remuneration paid pursuant to a compensation plan or agreement that existed during the period in which the corporation was not publicly held. A corporation may rely on this transition rule during the Transition, Period, which ends upon the earliest of: (i) the expiration of the plan or agreement; (ii) the material modification of the plan or agreement; (iii) the issuance of all employer stock and other compensation that has been allocated under the plan; or (iv) the first meeting of stockholders at which directors are to be elected

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that occurs after the close of the third calendar year following the calendar year in which the initial public offering occurs or, in the case of a privately held corporation that becomes publicly held without an initial public offering, the first calendar year following the calendar year in which the corporation becomes publicly held. The transition relief applies to any compensation received pursuant the exercise of an option or a stock appreciation right, or the substantial vesting of restricted property, if the grant occurs on or before the end of the Transition Period. We will utilize the transition relief provided pursuant to Section 162(m) of the Code to the extent our Board of Directors, in its discretion, determines appropriate.

Limitations on Directors’ Liability and Indemnification Agreements

Our articles of incorporation, which will become effective upon the closing of this offering, limit the liability of directors to the maximum extent permitted by Nevada law. With the exception of limited circumstances, Nevada law provides that directors of a Nevada corporation will not be personally liable to the corporation or its stockholders or creditors for any damages as a result of any act or failure to act in his or her capacity as a director unless it is proven that:

• the director’s act or failure to act constituted a breach of fiduciary duty; and

• the breach involved intentional misconduct, fraud, or a knowing violation of law.

Our articles of incorporation do not eliminate a director’s duty of care and, in appropriate circumstances, equitable remedies, such as injunctive or other forms of non-monetary relief, remain available under Nevada law. These limitations also do not affect a director’s responsibilities under any other laws, such as the federal securities laws or other state or federal laws. Our bylaws, which will become effective upon the closing of this offering, provide that we will indemnify our directors and officers, and may indemnify other officers, employees and other agents, to the fullest extent permitted by law. Our bylaws also provide that we are obligated, subject to certain conditions, to advance expenses incurred by a director or officer in advance of the final disposition of any action or proceeding and also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, regardless of whether our bylaws permit such indemnification. We have obtained a directors’ and officers’ liability insurance policy.

We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and officers, in addition to the indemnification provided for in our articles of incorporation and bylaws. These agreements, among other things, require us to indemnify our directors and officers for certain expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by a director or officer in any action or proceeding arising out of their services as one of our directors or officers, or any of our subsidiaries or any other company or enterprise to which the person provides services at our request. We believe that these articles of incorporation and bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.

The limitation of liability and indemnification provisions in our articles of incorporation and bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. These provisions may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder’s investment may be harmed to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.

At present, there is no pending litigation or proceeding involving any of our directors or officers as to which indemnification is required or permitted, and we are not aware of any threatened litigation or proceeding that may result in a claim for indemnification.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Reorganization Transactions

Private Share Exchange

The following table sets forth the total number of Holdings shares received by certain of our directors, executive officers and other related persons and their affiliates in connection with the Private Share Exchange effected in April 2014, whereby holders representing 93.6% of the outstanding shares of common stock of AAC exchanged their shares on a one-for-one basis for shares of Holdings common stock:

Name	Relationship with Us	Number of Holdings Shares Received in the Private Share Exchange
Michael T. Cartwright	Chief Executive Officer and Chairman of the Board	2,899,243
Jerrod N. Menz	President and Director	2,545,746
Kirk R. Manz	Chief Financial Officer	258,273
Candance A. Henderson-Grice	Chief Operating Officer	26,241
Kathryn Sevier Phillips	General Counsel and Corporate Secretary	32,585
Jerry D. Bostelman	Director	374,969
Lucius E. Burch, III	Director	669,381
Darrell S. Freeman, Sr.	Director	99,731
David C. Kloeppel	Director	125,220
Richard E. Ragsdale	Director	34,090
Tina F. Cartwright	Spouse of Michael T. Cartwright	607,533
Victoria Menz	Spouse of Jerrod N. Menz	607,533

BHR Acquisition

In connection with the BHR Acquisition, Holdings acquired 100% of the outstanding common membership interests in BHR, 45% of which were held by our CEO, 45% of which were held by our President and 10% of which were held by our CFO. Mr. Cartwright received total consideration of $4.5 million, consisting of $1.5 million in cash and 223,714 shares of Holdings common stock, at a fair value of $13.41 per share. Mr. Menz received total consideration of $4.5 million, consisting of $1.5 million in cash, a portion of which he used to fully repay an outstanding note receivable in the amount of $250,000 between himself and AAC, and 223,714 shares of Holdings common stock, at a fair value of $13.41 per share. Mr. Manz received total consideration of $1.0 million, consisting of $3 in cash and 74,571 shares of Holdings common stock, at a fair value of $13.41 per share.

Also in connection with the BHR Acquisition, Holdings assumed and refinanced a $1.8 million term loan that was previously the joint obligation of Messrs. Cartwright, Menz and Manz and guaranteed by AAC. This term loan was entered into in October 2013 by Messrs. Cartwright, Menz and Manz in the amount of $1.9 million with a financial institution. The original proceeds from the term loan were used to repay a loan of Greenhouse Real Estate, LLC, a BHR subsidiary. Messrs. Cartwright, Menz and Manz remain guarantors of this term loan after the BHR Acquisition and Holdings has been added as a borrower and guarantor of this term loan. We intend to repay the outstanding balance of this term loan in connection with this offering.

CRMS Acquisition

In connection with the CRMS Acquisition, Holdings acquired 100% of the outstanding membership interests in CRMS, 50% of which were held by Tina F. Cartwright, the spouse of our CEO, and 50% of which were held by Victoria Menz, the spouse of our President, for total consideration of $0.5 million and 149,144 shares of Holdings common stock. Ms. Cartwright received total consideration of $1.3 million, consisting of $250,000 in cash and 74,572 shares of Holdings common stock at a fair value of $13.41 per share. Ms. Menz received total consideration of $1.3 million, consisting of $250,000 in cash and 74,572 shares of Holdings common stock at a fair value of $13.41 per share.

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For additional information related to the Reorganization Transactions, see “Unaudited Pro Forma Consolidated Financial Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and Note 18 to our audited financial statements included elsewhere in this prospectus.

BHR Series A Preferred Units

From November 2013 through February 2014, BHR sold 36.5 Series A Preferred Units, valued at $50,000 per unit, to certain accredited investors. In connection with these transactions, Jerry D. Bostelman, one of our directors, purchased five Series A Preferred Units for $250,000 and an entity controlled by Gloria J. Freeman, the spouse of one of our directors, purchased four Series A Preferred Units for $200,000.

BHR Series A Preferred Units Redemption

To help facilitate the Reorganization Transactions, BHR redeemed all of the outstanding Series A Preferred Units (36.5 units) from certain accredited investors in April 2014. As part of this redemption, Jerry D. Bostelman, one of our directors, received $250,000 and an entity controlled by Gloria J. Freeman, the spouse of one of our directors, received $200,000.

Earlier Financing Transactions

Prior to the Reorganization Transactions described above, AAC was the ultimate parent company of our business and all previous financing transactions were effected through AAC, including the following financing transactions concluded since 2011:

• From February through April 2014, AAC issued 471,843 shares of common stock to certain accredited investors at a price of $12.76 per share, for aggregate offering proceeds of $6.0 million (the “2014 Offering”); and

• In March and April 2013, AAC issued 918,589 shares of common stock to certain accredited investors at a price of $8.23 per share, for aggregate offering proceeds of $7.5 million (the “2013 Offering”).

The following table summarizes the participation by our officers, directors and their affiliates in the previous AAC financing transactions described above:

		2013 Offering				2014 Offering
Name	Relationship with Us	Shares		Aggregate Consideration Paid to AAC		Shares		Aggregate Consideration Paid to AAC
Michael T. Cartwright(1)	Chief Executive Officer and Chairman of the Board		182,260	$	1,500,000		—		—
Kirk Manz	Chief Financial Officer		3,038	$	25,000		—		—
Candance Henderson-Grice(2)	Chief Operating Officer		3,038	$	25,000		3,918	$	49,994
Kathryn Sevier Phillips	General Counsel and Secretary		—		—		7,837	$	100,000
Michael Blackburn(3)	Vice President		60,753	$	500,000		—		—
Adam Mittelberg	Vice President		3,038	$	25,000		1,959	$	25,000
Jerry D. Bostelman	Director		243,014	$	2,000,000		39,184	$	250,000
Darrell S. Freeman, Sr.(4)	Director		60,753	$	500,000		35,265	$	449,981
David C. Kloeppel	Director		121,507	$	1,000,000		—		—
Richard E. Ragsdale	Director		30,377	$	250,000		—		—

(1) Mr. Cartwright converted a $1.5 million promissory note as consideration for the shares purchased in the 2013 Offering. See “AAC Related Party Debt” below.

(2) The shares presented as beneficially owned by Ms. Henderson-Grice include 3,918 purchased in the 2014 Offering by Alan Grice, Ms. Henderson-Grice’s spouse, through a retirement account controlled by Mr. Grice.

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(3) Mr. Blackburn converted a $0.5 million promissory note as consideration for the shares purchased in the 2013 Offering. See “Other Relationships and Transactions—TSN Acquisition” below.

(4) The shares presented as beneficially owned by Mr. Freeman include 60,754 shares purchased in the 2013 Offering by Zycron, Inc., a corporation that Mr. Freeman controls and 15,673 shares purchased in the 2014 Offering by Milan Investment Group, LLC, an entity controlled by Gloria J. Freeman, Mr. Freeman’s spouse.

AAC Related Party Debt

On April 15, 2014, AAC entered into a Second Amended and Restated Credit Facility with Wells Fargo Bank, National Association. Mr. Cartwright, our CEO, and Mr. Menz, our President, jointly and severally guarantee the Credit Facility.

In November 2012, Mr. Cartwright loaned AAC $1,500,000 and was issued a promissory note that bore interest at 12%, which interest was payable in arrears monthly. In April 2013, Mr. Cartwright converted the entire $1.5 million principal balance of this promissory note into shares of AAC common stock at a conversion price per share of $8.23. The amount of interest paid from November 2012 through April 2013 with respect to this promissory note was $90,000 and no principal payments were made during this period. For additional information related to this conversion, see “Earlier Financing Transactions” above.

In March 2012, Mr. Bostelman, one of our directors, purchased $200,000 in aggregate principal amount of subordinated promissory notes, which mature in full on March 31, 2017. In connection with this transaction, Mr. Bostelman received a warrant to purchase 15,095 shares of AAC common stock at $1.00 per share, which he exercised in full in March 2014. As of March 31, 2014, the outstanding principal amount of Mr. Bostelman’s subordinated promissory notes was $182,265. The amount of interest paid from March 2012 to March 31, 2014 with respect to these subordinated promissory notes was $47,474 and no principal payments were made during this period.

As of December 31, 2013, 2012 and 2011, AAC had a note outstanding from Mr. Menz with a principal balance of $250,000. This note was repaid in full by Mr. Menz to AAC on April 16, 2014. No principal and interest was paid during 2011, 2012 and 2013 with respect to this note receivable. In addition, as of March 31, 2014, AAC had an account receivable from Mr. Menz of $342,000. The balance of this account receivable will be repaid in full by Mr. Menz to AAC prior to the completion of this offering.

In April 2011, we entered into an agreement with Josephine Gann, a former stockholder and director of Forterus, Inc. for the repurchase of common and preferred shares held by Ms. Gann. Under the terms of the agreement we issued a $0.6 million subordinated note to the stockholder and agreed to make other payments totaling $0.2 million to or on behalf of the stockholder in exchange for 526,247 shares of common stock, 100,000 shares of Series B Preferred Stock and 656,586 shares of Series C Preferred Stock of a predecessor entity of AAC. The balance of the note was fully paid in the second quarter of 2013. The amounts of principal and interest paid from April 2011 to June 2013 with respect to this subordinated note were $554,098 and $55,902, respectively.

BHR Transactions

Concorde Real Estate, LLC

In conjunction with the consolidation of Concorde Real Estate, LLC (“Concorde Real Estate”) on June 27, 2012, AAC assumed a $3.5 million promissory note that was refinanced and increased in July 2012 to loans totaling $7.4 million in two tranches. The additional debt in 2012 resulted from borrowings to complete the renovation of the Desert Hope facility. The amount outstanding under the first tranche was $4.4 million at December 31, 2012. The amount outstanding under the second tranche was $3.0 million at December 31, 2012. In May 2013, Concorde Real Estate refinanced these two outstanding loans with a $9.6 million note. The additional debt was used to redeem the outstanding preferred membership interests in Concorde Real Estate. The

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amount outstanding under this note at March 31, 2014 was $9.1 million. The amounts of principal and interest paid from June 2013 to March 31, 2014 were $516,352 and $203,131, respectively. The note is guaranteed by AAC, Mr. Carwright, our CEO, and Mr. Menz, our President.

Greenhouse Real Estate, LLC

Greenhouse Real Estate, LLC (“Greenhouse Real Estate”) entered into a $13.2 million construction loan facility with a financial institution on October 8, 2013 to refinance existing debt related to a 70-bed facility located in Grand Prairie, Texas and to fund the construction of an additional 60 beds at this facility. At March 31, 2014, the outstanding balance of the construction loan facility was $10.4 million. The amount of interest paid from October 2013 to March 31, 2014 was $118,100 and no principal payments were made during this period. The construction loan facility is guaranteed by AAC Messrs. Cartwright and Menz.

The Academy Real Estate, LLC

In May 2013, AAC, through The Academy Real Estate, LLC (“Academy Real Estate”), acquired a property located in Riverview, Florida for a purchase price of $5.8 million. AAC was renovating this property and planned to convert it into a treatment facility. AAC funded the purchase price with $1.6 million from cash on hand and $3.6 million in proceeds from a new bank loan with an existing lender. In addition, a $0.6 million deposit was paid on behalf of AAC by Greenhouse Real Estate in March 2013 and was reimbursed to Greenhouse Real Estate by AAC in the third quarter of 2013. AAC spent $0.6 million on renovations from May 2013 through December 9, 2013 and capitalized $72,000 of interest related to this construction.

On December 10, 2013, AAC sold its membership interests in Academy Real Estate to BHR for $3.1 million plus the assumption of outstanding debt totaling $3.6 million, with AAC remaining a guarantor on the debt. AAC received $0.8 million in cash and a promissory note receivable totaling $2.3 million for the sale to BHR. At the time of this transaction, BHR was controlled by Messrs. Cartwright, Menz and Manz. The principal balance of the third party bank loan at March 31, 2014 remained at $3.6 million.

Other BHR Transactions

In November 2013, AAC entered into purchase agreements to acquire two outpatient centers: one in Arlington, Texas and the other in Las Vegas, Nevada. The purchase price for the Arlington facility is $0.8 million and the purchase price for the Las Vegas facility is $2.0 million. The purchase agreement for the Arlington facility was assigned to a subsidiary of BHR in December 2013, and the purchase agreement for the Las Vegas facility was assigned to a subsidiary of BHR in January 2014. For additional information related to these transactions, see Note 16 to our audited financial statements included elsewhere in this prospectus.

For additional information related to the BHR debt described above, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Financing Relationships” and Note 5 to our audited financial statements included elsewhere in this prospectus.

We have entered into various operating leases with BHR and its predecessor entities. BHR was formerly controlled by Messrs. Cartwright, Menz and Manz. These operating leases expire in October 2018. Commercial properties under the operating leases primarily include space required to perform client services and space for administrative facilities. Total rental payments to BHR and its predecessor entities were $3.9 million, $1.4 million and $0.3 million for 2013, 2012 and 2011, respectively.

Other Relationships and Transactions

CRMS Relationship

In 2012, AAC began to transition its outsourced medical billing and collection process from third-party service providers to CRMS. Prior to the Reorganization Transactions discussed above, CRMS was owned 50%

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by the spouse of our Chief Executive Officer and 50% by the spouse of our President. During 2013 and 2012, AAC paid $2.8 million and $0.6 million in fees to CRMS, respectively. In addition, AAC leased office space and furniture to CRMS under a month to month arrangement in 2013, and total rental income recognized in 2013 was $0.1 million. In connection with the Reorganization Transactions, we acquired 100% of the outstanding membership interests in CRMS, and therefore, CRMS is now a wholly owned subsidiary of Holdings. See “Reorganization Transactions” above.

TSN Acquisition

The following transactions occurred in connection with the TSN Acquisition:

• AAC issued to James D. Bevell, our former Chief Innovation Officer, a subordinated note (the “Bevell Note”) in the principal amount of $3.2 million, payable in two tranches: (i) $1.1 million accrues interest at 5.0% annually and is payable in equal installments of $33,400 per month through September 2015 and (ii) $2.1 million accrues interest at 3.125% annually and is payable in one balloon payment due on August 31, 2015. In addition, we issued 888,868 shares of common stock (662,452 unrestricted shares and 226,416 restricted shares at a fair value of $6.27 per share). The purchase agreement executed in connection with the TSN Acquisition includes provisions that contemplate a potential purchase price adjustment at the maturity of the balloon payment to withhold up to $0.9 million in cash and cause the forfeiture of the 226,416 restricted shares of common stock if certain operational performance metrics are not achieved during the three year term of the Bevell Note. As of March 31, 2014, the outstanding principal amount of the Bevell Note was $2.3 million. The amounts of principal and interest paid from August 2012 to March 31, 2014 with respect to the Bevell Note were $538,431 and $159,413, respectively. In April 2013, AAC redeemed 444,434 shares of common stock from Mr. Bevell, which were issued to Mr. Bevell in connection with the TSN Acquisition, at $8.23 per share, for an aggregate purchase price of $3.7 million.

• AAC issued to Michael Blackburn, Vice President of Business Development of AAC, two separate subordinated notes. The first note was issued in the principal amount of $0.6 million and accrued interest at 3.125% annually. This note was paid in full in March 2013. The second note was issued in the principal amount of $3.1 million payable in two tranches: (i) $1.1 million accrues interest at 5.0% annually and is payable in equal installments of $33,400 per month through September 2015 and (ii) $2.0 million accrues interest at 3.125% annually and is payable in one balloon payment due on August 31, 2015. The purchase agreement executed in connection with the TSN Acquisition includes provisions that contemplate a potential purchase price adjustment at the maturity of the balloon payment to withhold up to $0.6 million in cash if certain operational performance metrics are not achieved during the three year term of the subordinated note. In March 2013, Mr. Blackburn converted $0.5 million of the 3.125% tranche of the note into shares of AAC common stock at a conversion price per share of $8.23. In connection with this conversion, AAC issued to Mr. Blackburn an amended and restated subordinated promissory note in the principal amount of $2.4 million payable in two tranches: (i) $0.9 million accrues interest at 5% annually and is payable in equal installments of $33,418 per month through September 2015 and (ii) $1.5 million accrues interest at 3.125% annually and is payable in one balloon payment due on August 31, 2015. As of March 31, 2014, the outstanding principal amount of the amended and restated note was $1.8 million. The aggregate amounts of principal and interest paid from August 2012 to March 31, 2014 with respect to these subordinated notes were $538,431 and $154,257, respectively.

• AAC entered into a License Agreement, dated August 31, 2012, with AJG Solutions, Inc., an entity principally owned by Mr. Bevell. Under the License Agreement, AJG Solutions, Inc. granted to us a royalty-free license to use certain trademarks and certain other intangible assets related to the operations we acquired in the TSN Acquisition. The license has a three year term, at the end of which period the licensed assets will be assigned to us, subject to the satisfaction of certain conditions.

• AAC entered into an Agreement Among Stockholders with Messrs. Cartwright, Menz and Bevell, dated August 31, 2012. Under the agreement, each of Messrs. Cartwright and Menz agreed to cause

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AAC to offer Mr. Bevell certain rights to participate, on a proportionate basis, in any purchase of securities from AAC by either of Mr. Cartwright or Mr. Menz. In addition, AAC agreed that it would not include any equity securities owned by Mr. Cartwright or Mr. Menz in a registration statement filed with the SEC unless it granted Mr. Bevell the right to participate in such a registration statement on a proportionate basis. Mr. Bevell also has certain co-sale and tag-along rights under the agreement. Except for the provision granting registration rights to Mr. Bevell, which such rights will continue following this offering, this agreement will terminate in connection with this offering.

Vaco Relationship

We are party to certain placement agreements with Vaco Nashville, LLC, an entity substantially owned by Vaco Holdings, LLC. Jerry D. Bostelman, one of our directors, is an executive officer and significant owner of Vaco Holdings, LLC. Vaco Nashville, LLC has provided us accounting professionals to bolster our accounting department and is typically paid 25% of each employee’s first year salary as a placement fee or paid an hourly rate for temporary professional services. We paid aggregate fees to Vaco Nashville, LLC of $67,300 in 2011, $103,750 in 2012 and $116,898 in 2013 and $119,785 for the three months ended March 31, 2014.

Employment

Michael Stetar, who serves as our Chief Technology Officer, was hired in December 2010. Mr. Stetar is the brother-in-law of our President. AAC paid Mr. Stetar $60,000, $121,500 and $184,218 in total compensation in 2011, 2012 and 2013, respectively, and $49,500 for the three months ended March 31, 2014.

Professional Groups

During 2013, AAC had affiliations with the Professional Groups located in each of the five states where our treatment facilities are located. These Professional Groups employ physicians and mid-level providers that treat our clients and bill the payor for their services. Upon formation of the Professional Groups, we provided the initial working capital funding for the Professional Groups. We make additional advances to the Professional Groups during periods in which negative operating cash flow of the Professional Groups is generated, thereby increasing the balance of the amounts owed us. Excess cash flow of the Professional Groups is repaid to us, resulting in a decrease in the amounts owed us. We had a receivable from each of the Professional Groups at March 31, 2014. Total advances to the Professional Groups at March 31, 2014 were $1.2 million. The receivables due to us from each of the Professional Groups are eliminated in the consolidation of the Professional Groups as VIEs.

As of March 31, 2014, three of the five professional groups were owned by Mr. Cartwright, our CEO. Prior to the completion of this offering, Mr. Cartwright’s ownership interest in the Professional Groups will be transferred to licensed physicians of the Professional Groups. The Professional Groups made no payments to AAC in 2013 or the first quarter of 2014. Mr. Cartwright did not receive any separate compensation or financial interest in connection with his ownership in these entities.

Procedure for Approval of Transactions with Related Parties

Our articles of incorporation and our amended and restated bylaws, which we refer to as our bylaws, which will be effective upon the closing of this offering, do not restrict any of our directors, officers, stockholders or affiliates from having a pecuniary interest in an investment or transaction that we have an interest in or from conducting, for their own account, business activities of the type we conduct. However, our Board of Directors recognizes that transactions or relationships between us and our subsidiaries and our directors, executive officers, immediate family members of our executive officers and directors and greater than 5% beneficial owners of our common stock may present a heightened risk of conflicts of interest or the perception thereof. As a result, the Board of Directors has adopted a written Related Party Transaction Policy (the “Policy”) to ensure that all related party transactions shall be subject to approval or ratification in accordance with the procedures set forth in the Policy.

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Prior to the entry of any potential related party transaction, such transaction, arrangement or relationship, together with a summary of all material information concerning such transaction, arrangement or relationship, shall be reported to the General Counsel for evaluation . If the General Counsel determines that the transaction is a related party transaction and is not subject to the exceptions described in the Policy, the General Counsel will submit the transaction to the Audit Committee for consideration. In the event our Chief Executive Officer, President, Chief Financial Officer, Chief Operating Officer, General Counsel or Chief Accounting Officer becomes aware of a related party transaction that has not been previously approved or ratified, the transaction will promptly be submitted to the Audit Committee or its chair, which will evaluate all available options, including ratification, amendment or termination of the transaction. In determining whether to approve or ratify a related party transaction, the Audit Committee will take into account, among other factors it deems appropriate, whether the related party transaction is on terms no less favorable than terms generally available to an unaffiliated third party under the same or similar circumstances and the extent of the related party’s interest in the transaction. The Audit Committee will annually review each new or continuing related party transaction to determine if we should enter into or continue such related party transaction. Despite the existence and application of the Policy, we cannot assure you that the Policy or provisions of law will always be successful in eliminating the influence of conflicts of interest (whether actual or perceived), and if they are not successful, decisions could be made that might fail to reflect fully the interests of all stockholders.

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PRINCIPAL STOCKHOLDERS

The following table sets forth information regarding beneficial ownership of our capital stock outstanding as of June 15, 2014 by:

• each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;

• each of our directors;

• each of our named executive officers; and

• all of our directors and executive officers as a group.

The number of shares and percentage of shares beneficially owned before this offering shown in the table is based upon 9,975,885 shares of common stock outstanding as of June 15, 2014. The number of shares and percentage of shares beneficially owned after this offering also gives effect to the issuance by us of shares of common stock in this offering. The percentage ownership information assumes no exercise of the underwriters’ over-allotment option.

Each individual or entity shown in the table has furnished information with respect to beneficial ownership. We have determined beneficial ownership in accordance with the SEC’s rules. These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities. In addition, the rules include shares of common stock issuable pursuant to the exercise of stock options, warrants, or other rights that are either immediately exercisable or exercisable within 60 days of June 15, 2014. These shares are deemed to be outstanding and beneficially owned by the person holding those options, warrants or other rights for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person. Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them, subject to applicable community property laws.

Except as otherwise noted below, the address for each person or entity listed in the table is c/o AAC Holdings, Inc., 115 East Park Drive, Second Floor, Brentwood, Tennessee 37027.

			Percentage of Shares Outstanding(1)
Beneficial Owner	Number of Shares Beneficially Owned(1)		Before Offering			After Offering		After Offering as Adjusted(2)
Directors and Named Executive Officers
Michael T. Cartwright(3)		3,805,062		38.1	%		%		%
Jerrod N. Menz(4)		3,451,565		34.6	%		%		%
Candance A. Henderson-Grice(5)		53,363		*			%		%
Lucius E. Burch, III		669,381		6.7	%		%		%
Jerry D. Bostelman		374,969		3.8	%		%		%
David C. Kloeppel(6)		125,220		1.3	%		%		%
Darrell S. Freeman, Sr.(7)		99,731		1.0	%		%		%
Richard E. Ragsdale		34,090		*			%		%
All executive officers and directors as a group (10 persons)		9,003,558		90.3	%		%		%

* Represents beneficial ownership of less than 1% of our outstanding common stock.

(1) Under Rule 13d-3, a beneficial owner of a security includes any person who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise has or shares: (i) voting power, which includes the power to vote or to direct the voting of shares; and (ii) investment power,

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which includes the power to dispose or direct the disposition of shares. Certain shares may be deemed to be beneficially owned by more than one person (if, for example, persons share the power to vote or the power to dispose of the shares). In addition, shares are deemed to be beneficially owned by a person if the person has the right to acquire the shares (for example, upon exercise of an option) within 60 days of the date as of which the information is provided. In computing the percentage ownership of any person, the amount of shares outstanding is deemed to include the amount of shares beneficially owned by such person (and only such person) by reason of these acquisition rights. Based upon information furnished to us by the directors and executive officers or obtained from our stock transfer books showing 9,975,885 shares of common stock outstanding as of June 15, 2014.

(2) Ownership percentages presented in this column are adjusted to reflect the subsidiary short-form merger with AAC that we plan to consummate following this offering, whereby the legacy holders representing 6.4% of the common stock of AAC, which holders did not participate in the Private Share Exchange, will be entitled to receive Holdings shares on a one-for-one basis.

(3) Consists of (i) 2,515,424 shares of record held by Mr. Cartwright, (ii) 607,533 shares held of record by the Irrevocable Family Trust of Tina Cartwright of which Mr. Cartwright serves as one of two trustees, (iii) 607,533 shares held of record by the Irrevocable Family Trust of Michael T. Cartwright of which Mr. Cartwright’s family is the beneficiary and (iv) 74,572 shares held of record by Tina F. Cartwright, Mr. Cartwright’s spouse, of which Mr. Cartwright has shared voting and investment power.

(4) Consists of (i) 2,161,927 shares of record held by Mr. Menz, (ii) 607,533 shares held of record by the Irrevocable Family Trust of Victoria Menz, of which Mr. Menz serves as one of two trustees, (iii) 607,533 shares held of record by the Irrevocable Family Trust of Jerrod Menz of which Mr. Menz’s family is the beneficiary and (iv) 74,572 shares held of record by Victoria Menz, Mr. Menz’s spouse. Mr. Menz has shared voting and investment power over the shares held by the Victoria Menz Trust.

(5) Includes 3,918 shares held of record by a retirement account controlled by Alan Grice, Ms. Henderson-Grice’s spouse.

(6) Includes 121,507 shares held of record by David and Ann Kloeppel, as Tenants in Common. Mr. Kloeppel has shared voting power and shared investment power over these shares.

(7) Includes (i) 60,753 shares held of record by Zycron, Inc., of which Mr. Freeman is the Executive Chairman and (ii) 15,673 shares held of record by Milan Investment Group, LLC, which is controlled by Gloria J. Freeman, Mr. Freeman’s spouse.

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DESCRIPTION OF CAPITAL STOCK

Our authorized capital stock consists of 70,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share.

As of June 15, 2014, we had outstanding 9,975,885 shares of our common stock, held by 61 stockholders of record. We have no preferred stock outstanding.

Based on the number of shares of common stock outstanding as of            , 2014, and assuming the issuance by us of            shares of common stock in this offering, there will be            shares of common stock outstanding upon completion of this offering.

The following description of our capital stock and provisions of our articles of incorporation and our amended and restated bylaws, which we refer to as our bylaws, are summaries and are qualified by reference to the articles of incorporation and to the bylaws that will be in effect upon the closing of this offering. Copies of these documents have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part.

Governing Law and Organization Documents

Stockholders’ rights and related matters are governed by the laws of the State of Nevada, our articles of incorporation and our bylaws. Our articles of incorporation may not be amended without the affirmative vote of at least a majority of the shares of our then outstanding common stock. Our bylaws may be amended by either the affirmative vote of a majority of all shares outstanding and entitled to vote generally in the election of directors or by an affirmative vote of a majority of our directors then holding office.

Common Stock

Voting Rights. Each holder of common stock is entitled to one vote for each share of common stock on all matters submitted to a vote of the stockholders, including the election of directors. Our articles of incorporation and bylaws do not provide for cumulative voting rights. Because of this, the holders of a majority of the shares of common stock entitled to vote in any election of directors can elect all of the directors standing for election, if they should so choose.

Dividends. Subject to preferences that may be applicable to any then outstanding preferred stock, the holders of common stock are entitled to receive dividends, if any, as may be declared from time to time by our Board of Directors out of legally available funds.

Liquidation. In the event of our liquidation, dissolution or winding up, holders of common stock will be entitled to share ratably in the net assets legally available for distribution to stockholders after the payment of all of our debts and other liabilities and obligations, subject to the satisfaction of any liquidation preference granted to the holders of any outstanding shares of preferred stock.

Rights and Preferences. Upon effectiveness of this registration statement, holders of common stock will have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to the common stock. The rights, preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that our Board of Directors may designate and issue in the future.

Preferred Stock

Our Board of Directors has the authority, without further action by the stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to

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be included in each such series, to fix the rights, preferences, privileges and restrictions of the shares of each wholly unissued series, including dividend rights, conversion rights, voting rights, terms of redemption, liquidation preference and sinking fund terms, and to increase or decrease the number of shares of any such series (but not below the number of shares of such series then outstanding).

Our Board of Directors may authorize the issuance of preferred stock with voting or conversion rights that could have the effect of restricting dividends on our common stock, diluting the voting power of our common stock, impairing the liquidation rights of our common stock or otherwise adversely affect the rights of holders of our common stock. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions and other corporate purposes, could, among other things, have the effect of delaying, deferring or preventing a change of control and may adversely affect the market price of the common stock. Upon the closing of this offering, no shares of preferred stock will be outstanding, and we have no current plans to issue any shares of preferred stock.

Nevada Anti-Takeover Law and Provisions of Our Articles of Incorporation and Bylaws

Our articles of incorporation and our bylaws contain certain provisions that could have the effect of delaying, deterring or preventing another party from acquiring control of us, and therefore could adversely affect the market price of our common stock. These provisions may also discourage coercive takeover practices and inadequate takeover bids, and are designed, in part, to encourage persons seeking to acquire control of us to negotiate first with our Board of Directors. We believe that the benefits of increased protection of our potential ability to negotiate more favorable terms with an unfriendly or unsolicited acquirer outweigh the disadvantages of potentially discouraging a proposal to acquire us.

Among other things, our articles of incorporation and bylaws:

• permit our Board of Directors to issue up to 5,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change of control);

• provide that the authorized number of directors may be changed only by resolution of our Board of Directors;

• provide that all vacancies, including newly created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;

• provide that stockholders seeking to present proposals at a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide advance notice in writing, and also specify requirements as to the form and content of a stockholder’s notice;

• provide that our stockholders may not take action by written consent, but may only take action at annual or special meetings of our stockholders;

• do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election); and

• provide that special meetings of our stockholders may be called only by the chairman of the Board of Directors, our Chief Executive Officer, the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors or the holders of a majority of the outstanding shares of voting stock.

The amendment of any of these provisions would require the approval by the holders of at least a majority of the shares of our then outstanding common stock for amendments to our articles of incorporation and the approval by holders of a majority of the shares of our then outstanding common stock and entitled to vote generally in the election of directors for amendments to our bylaws.

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The provisions of our articles of incorporation and bylaws could have the effect of discouraging others from attempting hostile takeovers and, as a consequence, they might also inhibit temporary fluctuations in the market price of our common stock that often result from actual or rumored hostile takeover attempts. These provisions might also have the effect of preventing changes in our management. It is possible that these provisions could make it more difficult to accomplish transactions that stockholders might otherwise deem to be in their best interests.

Listing on the New York Stock Exchange

We intend to apply for listing on the NYSE under the symbol “AAC”.

Transfer Agent and Registrar

We intend to engage American Stock Transfer and Trust Company, LLC as the transfer agent and registrar for our common stock.

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SHARES ELIGIBLE FOR FUTURE SALE

Immediately prior to this offering, there has been no public market for our common stock. Future sales of substantial amounts of common stock in the public market could adversely affect prevailing market prices. Furthermore, because only a limited number of shares will be available for sale shortly after this offering because of contractual and legal restrictions on resale described below, sales of substantial amounts of common stock in the public market after the restrictions lapse could adversely affect the prevailing market price for our common stock as well as our ability to raise equity capital in the future.

Based on the number of shares of common stock outstanding as of                , 2014, upon the closing of this offering, shares of common stock will be outstanding, assuming no exercise of the underwriters’ over-allotment option. All of the shares sold in this offering will be freely tradable unless held by an affiliate of ours. Except as set forth below, the remaining            shares of common stock outstanding after this offering will be restricted as a result of securities laws or lock-up agreements. These remaining shares will generally become available for sale in the public market as follows:

• no restricted shares will be eligible for immediate sale upon the closing of this offering;

• 9,975,885 restricted shares will be eligible for sale under Rule 144 or Rule 701 upon expiration of lock-up agreements beginning 181 days after the date of this offering; and

• 630,886 shares of our outstanding common stock will be freely tradeable immediately after the effectiveness of a subsequent Form S-4 registration statement to register the shares to be issued pursuant to our short-form merger with AAC following the completion of this offering.

Rule 144

In general, under Rule 144 as currently in effect, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, any person who is not an affiliate of ours and who has held their shares for at least six months, including the holding period of any prior owner other than one of our affiliates, may sell shares without restriction, provided current public information about us is available. In addition, under Rule 144, any person who is not an affiliate of ours and has held their shares for at least one year, including the holding period of any prior owner other than one of our affiliates, would be entitled to sell an unlimited number of shares immediately upon the closing of this offering without regard to whether current public information about us is available. Beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours and who has beneficially owned restricted securities for at least six months, including the holding period of any prior owner other than one of our affiliates, is entitled to sell a number of restricted shares within any three-month period that does not exceed the greater of:

• 1% of the number of shares of our common stock then outstanding, which will equal approximately             shares immediately after this offering; or

• the average weekly trading volume of our common stock on the NYSE during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale.

Sales of restricted shares under Rule 144 held by our affiliates or persons selling shares on behalf of our affiliates are also subject to requirements regarding the manner of sale, notice and the availability of current public information about us. Rule 144 also provides that affiliates relying on Rule 144 to sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement.

Notwithstanding the availability of Rule 144, the holders of all of our restricted shares have entered into lock-up agreements as described below and their restricted shares will not become eligible for sale until the expiration of the restrictions set forth in those agreements.

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Rule 701

Under Rule 701, shares of our common stock acquired upon the issuance and exercise of options or pursuant to other rights granted under our equity incentive plans may be resold, by:

• persons other than affiliates, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, subject only to the manner-of-sale provisions of Rule 144; and

• our affiliates, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, subject to the manner-of-sale and volume limitations, current public information and filing requirements of Rule 144, in each case, without compliance with the six-month holding period requirement of Rule 144.

As of June 15, 2014, there were no outstanding options to purchase shares of our common stock.

Lock-up Agreements

We, each of our directors, executive officers and stockholders have agreed, and each of the purchasers in the directed share program will agree, without the prior written consent of William Blair & Company, L.L.C. and Wells Fargo Securities, LLC, and subject to certain exceptions, not to, directly or indirectly, offer, sell, issue (in the case of us), contract to sell, pledge or, among other things, dispose of, directly or indirectly, any shares of common stock, options or warrants to purchase any shares of common stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock, held of record or beneficially owned, for a period of 180 days after the date of this prospectus. See “Underwriting” for a description of these lock-up agreements.

Equity Incentive Plans

We intend to file a registration statement on Form S-8 under the Securities Act after the closing of this offering to register the 1,000,000 shares reserved for issuance under our 2014 Equity Incentive Plan. The registration statement is expected to be filed and become effective as soon as practicable after the closing of this offering. Accordingly, shares registered under the registration statement will be available for sale in the open market following its effective date, subject to vesting of such shares, Rule 144 volume limitations and the lock-up agreements described above, if applicable.

Short-Form Merger

We intend to file a Form S-4 registration statement with the SEC to register the 630,886 shares that will be issued pursuant to our short-form merger with AAC following the completion of this offering, whereby the legacy holders who did not participate in the Private Share Exchange, representing 6.4% of the outstanding common stock of AAC, would be entitled to receive Holdings shares on a one-for-one basis. When the registration statement is declared effective by the SEC, and, subject to applicable lock-up agreements, if any, these shares may be resold without restriction in the public marketplace.

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS

The following summary describes the material U.S. federal income tax consequences of the acquisition, ownership and disposition of our common stock acquired in this offering by Non-U.S. Holders (as defined below). This discussion does not address all aspects of U.S. federal income taxes and does not deal with state, local or non-U.S. tax consequences that may be relevant to Non-U.S. Holders in light of their particular circumstances, nor does it address U.S. federal tax consequences other than income taxes. Special rules different from those described below may apply to certain Non-U.S. Holders that are subject to special treatment under the Internal Revenue Code of 1986, as amended, or the Code, such as banks, thrifts, financial institutions, insurance companies, tax-exempt organizations, broker-dealers and traders in securities, U.S. expatriates, “controlled foreign corporations,” “passive foreign investment companies,” corporations that accumulate earnings to avoid U.S. federal income tax, persons that hold our common stock as part of a “straddle,” “hedge,” “conversion transaction,” “synthetic security” or integrated investment or other risk reduction strategy, tax-qualified retirement plans, persons deemed to sell our common stock under the constructive sale provisions of the Code, persons subject to the alternative minimum tax, persons that own, or are deemed to own, more than 5% of our outstanding common stock (except to the extent specifically set forth below), partnerships and other pass-through entities, and investors or partners in such pass-through entities or an entity that is treated as a disregarded entity for U.S. federal income tax purposes (regardless of its place of organization or formation). Such Non-U.S. Holders are urged to consult their own tax advisors to determine the U.S. federal, state, local and other tax consequences that may be relevant to them. Furthermore, the discussion below is based upon the provisions of the Code, the Treasury regulations promulgated thereunder, rulings and judicial decisions thereunder as of the date hereof, and such authorities may be repealed, revoked or modified, perhaps retroactively, so as to result in U.S. federal income tax consequences different from those discussed below. We have not requested a ruling from the Internal Revenue Service, or the IRS, with respect to the statements made and the conclusions reached in the following summary, and there can be no assurance that the IRS or a court will agree with such statements and conclusions. This discussion assumes that the Non-U.S. Holder holds our common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment).

The following discussion is for general information only and is not tax advice. Persons considering the purchase of our common stock pursuant to this offering should consult their own tax advisors concerning the U.S. federal income tax consequences of acquiring, owning and disposing of our common stock in light of their particular situations as well as any consequences arising under the laws of any other taxing jurisdiction, including any state, local or non-U.S. tax consequences or any U.S. federal non-income tax consequences.

For the purposes of this discussion, a “Non-U.S. Holder” is, for U.S. federal income tax purposes, a beneficial owner of our common stock that is not a U.S. Holder. A “U.S. Holder” means a beneficial owner of our common stock that is for U.S. federal income tax purposes (a) an individual who is a citizen or resident of the United States, (b) a corporation (or any other entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (c) an estate the income of which is subject to U.S. federal income taxation regardless of its source or (d) a trust if it (1) is subject to the primary supervision of a court within the United States and one or more U.S. persons have the authority to control all substantial decisions of the trust or (2) has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person. Also, partnerships, or other entities that are treated as partnerships for U.S. federal income tax purposes (regardless of their place of organization or formation) and partners in such partnerships or other entities and entities that are treated as disregarded entities for U.S. federal income tax purposes (regardless of their place of organization or formation) are not addressed by this discussion and are, therefore, not considered to be Non-U.S. Holders for the purposes of this discussion.

Distributions

Subject to the discussion below, distributions, if any, made on our common stock to a Non-U.S. Holder to the extent made out of our current or accumulated earnings and profits (as determined under U.S. federal

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income tax principles) generally will constitute dividends for U.S. tax purposes and will be subject to withholding tax at a rate of 30% of the gross amount of the dividends or such lower rate as may be specified by an applicable income tax treaty. To obtain a reduced rate of withholding under a treaty, a Non-U.S. Holder generally will be required to provide us or our paying agent with a properly executed IRS Form W-8BEN (or applicable successor form), or other appropriate form, certifying the Non-U.S. Holder’s entitlement to benefits under that treaty. If a Non-U.S. Holder holds stock through a financial institution or other agent acting on the holder’s behalf, the Non-U.S. Holder will be required to provide appropriate documentation to such agent. The Non-U.S. Holder’s agent will then be required to provide certification to us or our paying agent, either directly or through other intermediaries. This certification must be provided to us or the relevant paying agent prior to the payment of dividends and must be updated periodically. If you do not provide the relevant paying agent with the required certification but are eligible for a reduced rate of U.S. federal withholding tax under an income tax treaty, you should consult with your own tax advisor to determine if you are able to obtain a refund or credit of any excess amounts withheld by timely filing an appropriate claim for a refund with the IRS.

We generally are not required to withhold tax on dividends paid to a Non-U.S. Holder that are effectively connected with the Non-U.S. Holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment that such Non-U.S. Holder maintains in the United States) if a properly executed IRS Form W-8ECI (or applicable successor form), stating that the dividends are so connected, is furnished to us or our paying agent (or, if stock is held through a financial institution or other agent, to such agent). In general, such effectively connected dividends will be subject to U.S. federal income tax, on a net income basis at the regular graduated U.S. federal income tax rates, unless a specific treaty exemption applies. A corporate Non-U.S. Holder receiving effectively connected dividends may also be subject to an additional “branch profits tax,” which is imposed, under certain circumstances, at a rate of 30% (or such lower rate as may be specified by an applicable treaty) on the corporate Non-U.S. Holder’s effectively connected earnings and profits, subject to certain adjustments. Non-U.S. Holders are urged to consult any applicable income tax treaties that may provide for different rules.

To the extent distributions on our common stock, if any, exceed our current and accumulated earnings and profits, they will first be treated as a non-taxable return of capital reducing your tax basis in our common stock, but not below zero, and thereafter will be treated as gain from the sale of stock, the treatment of which is discussed in the next section.

Gain On Disposition of Our Common Stock

Subject to the discussion below under “Recently Enacted Legislation Affecting Taxation of Our Common Stock Held By Or Through Non-U.S. Entities,” a Non-U.S. Holder generally will not be subject to U.S. federal income tax with respect to gain realized on a sale or other disposition of our common stock unless (a) the gain is effectively connected with the conduct of a trade or business of such Non-U.S. Holder in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment that such Non-U.S. Holder maintains in the United States), (b) the Non-U.S. Holder is a nonresident alien individual and is present in the United States for 183 or more days in the taxable year of the disposition and certain other conditions are met, or (c) our common stock constitutes a “United States real property interest” by reason of our status as a “United States real property holding corporation” within the meaning of Code Section 897(c)(2) at any time within the shorter of the five-year period preceding such disposition or such Non-U.S. Holder’s holding period.

If you are a Non-U.S. Holder described in (a) above, you will be required to pay tax on the net gain derived from the sale at regular graduated U.S. federal income tax rates, unless a specific treaty exemption applies, and corporate Non-U.S. Holders described in (a) above may be subject to the additional branch profits tax at a 30% rate (or such lower rate as may be specified by an applicable income tax treaty) on their effectively connected earnings and profits, subject to certain adjustments.

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If you are an individual Non-U.S. Holder described in (b) above, you will be required to pay a flat 30% tax (or such lower rate specified by an applicable income tax treaty) on the gain derived from the sale, which gain may be offset by U.S. source capital losses (even though you are not considered a resident of the United States).

With respect to (c) above, in general, we would be a United States real property holding corporation if interests in U.S. real estate comprised (by fair market value) at least half of our assets. We believe that we are not, and do not anticipate becoming, a United States real property holding corporation; however, there can be no assurance that we will not become a U.S. real property holding corporation in the future. Even if we are treated as a U.S. real property holding corporation, gain realized by a Non-U.S. Holder on a disposition of our common stock will not be subject to U.S. federal income tax so long as (1) the Non-U.S. Holder owned, directly, indirectly and constructively, no more than 5% of our common stock at all times within the shorter of (i) the five-year period preceding the disposition or (ii) the holder’s holding period and (2) our common stock is “regularly traded,” as defined in applicable Treasury regulations, on an established securities market. We expect our common stock to be “regularly traded” on an established securities market, but there can be no assurance that our common stock will be so traded in the future. If gain on the sale or other taxable disposition of our stock were subject to taxation as described in (c) above, the Non-U.S. Holder would be subject to regular U.S. federal income tax with respect to such gain in generally the same manner as a U.S. person.

Information Reporting Requirements and Backup Withholding

Generally, we or certain financial middlemen must report information to the IRS with respect to any dividends we pay on our common stock, including the amount of any such dividends, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report is sent to the Non-U.S. Holder to whom any such dividends are paid. These information reporting requirements apply even if no withholding was required because the distributions were effectively connected with the Non-U.S. Holder’s conduct of a United States trade or business, or withholding was reduced or eliminated by an applicable income tax treaty. Pursuant to tax treaties or certain other agreements, the IRS may make its reports available to tax authorities in the recipient’s country of residence.

Dividends paid by us (or our paying agents) to a Non-U.S. Holder may also be subject to U.S. backup withholding. U.S. backup withholding generally will not apply to a Non-U.S. Holder who provides a properly executed IRS Form W-8BEN or IRS Form W-8ECI or otherwise establishes an exemption. Notwithstanding the foregoing, backup withholding may apply if the relevant paying agent has actual knowledge, or reason to know, that the holder is a U.S. person who is not an exempt recipient. The current backup withholding rate is 28%.

Under current U.S. federal income tax law, U.S. information reporting and backup withholding requirements generally will apply to the proceeds of a disposition of our common stock effected by or through a U.S. office of any U.S. or non-U.S. broker, except that information reporting and backup withholding requirements may be avoided if the holder provides a properly executed IRS Form W-8BEN or otherwise meets documentary evidence requirements for establishing Non-U.S. Holder status or otherwise establishes an exemption. Except as described in the discussion of recently enacted legislation below, U.S. information reporting and backup withholding requirements will generally not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a non-U.S. broker. Information reporting and backup withholding requirements may, however, apply to a payment of disposition proceeds if the broker has actual knowledge, or reason to know, that the holder is, in fact, a U.S. person. For information reporting purposes, certain brokers with substantial U.S. ownership or operations will generally be treated in a manner similar to U.S. brokers.

Backup withholding is not an additional tax. If backup withholding is applied to you, you should consult with your own tax advisor to determine if you are able to obtain a tax refund or credit with respect to such backup withholding.

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Recently Enacted Legislation Affecting Taxation of Our Common Stock Held By Or Through Non-U.S. Entities

Recently enacted legislation may impose withholding taxes on certain types of payments made to “foreign financial institutions” (as specially defined under those rules) and certain other non-U.S. entities. Under this legislation, the failure to comply with additional certification, information reporting and other specified requirements could result in withholding tax being imposed on payments of dividends and sales proceeds to foreign intermediaries or certain Non-U.S. Holders.

The legislation imposes a 30% withholding tax on dividends on, and gross proceeds from the sale or other disposition of, our common stock paid to a foreign financial institution or to a foreign non-financial entity, unless (i) the foreign financial institution undertakes certain diligence and reporting obligations (ii) the foreign non-financial entity either certifies it does not have any substantial U.S. owners or furnishes identifying information regarding each substantial U.S. owner, or (iii) the foreign financial institution or foreign non-financial entity otherwise qualifies for an exemption from these rules. In addition, if the payee is a foreign financial institution and is subject to the diligence and reporting requirements in clause (i) above, it generally must enter into an agreement with the U.S. Treasury Department that requires, among other things, that it undertake to identify accounts held by certain U.S. persons or U.S.-owned foreign entities, annually report certain information about such accounts, and withhold 30% on payments to non-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing this legislation may be subject to different rules.

Under applicable Treasury regulations, any obligation to withhold under the new legislation with respect to dividends on our common stock will not begin until July 1, 2014, and with respect to gross proceeds on disposition of our common stock, will not begin until January 1, 2017. Because we may not know the extent to which a distribution is a dividend for U.S. federal income tax purposes as the time it is made, for purposes of these withholding rules, we may treat the entire distribution as a dividend.

Non-U.S. Holders of our common stock should consult their tax advisors regarding the effect, if any, of this legislation on their ownership and disposition of our common stock.

THE PRECEDING DISCUSSION OF MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS IS FOR GENERAL INFORMATION ONLY. IT IS NOT TAX ADVICE. EACH PROSPECTIVE INVESTOR SHOULD CONSULT ITS OWN TAX ADVISOR REGARDING THE TAX CONSEQUENCES OF PURCHASING, HOLDING AND DISPOSING OF OUR COMMON STOCK, INCLUDING THE CONSEQUENCES OF ANY PROPOSED CHANGE IN APPLICABLE LAW, AS WELL AS TAX CONSEQUENCES ARISING UNDER ANY STATE, LOCAL, NON-U.S. OR U.S. FEDERAL NON-INCOME TAX LAWS.

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UNDERWRITING

The underwriters named below have severally agreed, subject to the terms and conditions set forth in the underwriting agreement by and among us and William Blair & Company, L.L.C. and Wells Fargo Securities, LLC, as representatives of the underwriters, to purchase from us the respective number of shares of common stock set forth opposite each underwriter’s name in the table below. William Blair & Company, L.L.C. and Wells Fargo Securities, LLC are acting as joint-bookrunning managers, and Raymond James & Associates, Inc. and Avondale Partners, LLC are acting as co-managers for this offering.

Underwriter	Number of Shares
William Blair & Company, L.L.C.
Wells Fargo Securities, LLC
Raymond James & Associates, Inc.
Avondale Partners, LLC
Total

This offering will be underwritten on a firm commitment basis. In the underwriting agreement, the underwriters have agreed, subject to the terms and conditions set forth therein, to purchase the shares of our common stock being sold pursuant to this prospectus at a price per share equal to the public offering price less the underwriting discount specified on the cover of this prospectus. According to the terms of the underwriting agreement, the underwriters either will purchase all of the shares of our common stock being sold pursuant to this prospectus or none of them. In the event of default by any underwriter, in certain circumstances, the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

The representatives of the underwriters have advised us that the underwriters propose to offer our common stock to the public initially at the public offering price set forth on the cover of this prospectus and to selected dealers at such price less a concession of not more than $         per share. The underwriters may allow, and such dealers may re-allow, a concession not in excess of $         per share to certain other dealers. The underwriters will offer the shares of our common stock subject to prior sale and subject to receipt and acceptance of the shares by the underwriters. The underwriters may reject any order to purchase shares of our common stock in whole or in part. The underwriters expect that we will deliver the shares to the underwriters through the facilities of The Depository Trust Company in New York, New York on or about                     , 2014. At that time, the underwriters will pay us for the shares in immediately available funds. After commencement of the public offering, the representatives may change the public offering price and other selling terms.

We have granted the underwriters an option, exercisable within 30 days after the date of this prospectus, to purchase up to an aggregate of                additional shares of common stock at the same price per share to be paid by the underwriters for the other shares offered hereby solely for the purpose of covering over-allotments, if any. If the underwriters purchase any such additional shares pursuant to this option, each of the underwriters will be committed to purchase such additional shares in approximately the same proportion as set forth in the table above. The underwriters may exercise the option only for the purpose of covering excess sales, if any, made in connection with the distribution of the shares of our common stock offered hereby. The underwriters will offer any additional shares of our common stock that they purchase on the terms described in the preceding paragraph.

The underwriters have reserved for sale in a directed share program, at the initial public offering price, up to            shares of common stock in this offering for our employees and other related persons. Purchases of the reserved shares would reduce the number of shares available for sale to the general public. The underwriters

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will offer any reserved shares which are not so purchased to the general public on the same terms as the other shares being sold in this offering. Each of the purchasers in the directed share program will enter into the 180-day lock-up agreement with the underwriters described below.

The following table summarizes the compensation to be paid by us to the underwriters. This information assumes either no exercise or full exercise by the underwriters of their over-allotment option:

	Per Share	Total Without Over-Allotment	Total With Over-Allotment
Public offering price	$	$	$
Underwriting discount	$	$	$
Proceeds, before expenses	$	$	$

We estimate that our total expenses for this offering, excluding the underwriting discount, will be approximately $         million.

We, each of our directors, executive officers and existing stockholders, who in the aggregate hold 100% of the shares of our common stock outstanding immediately prior to this offering (and, after giving effect to the subsidiary short-form merger with AAC that we expect to conduct subsequent to this offering, in the aggregate hold 94.1% of our outstanding shares of common stock) have agreed, and each of the purchasers in the directed share program will agree, subject to limited exceptions described below, for a period of 180 days after the date of this prospectus, not to, directly or indirectly, without the prior written consent of William Blair & Company, L.L.C. and Wells Fargo Securities, LLC:

• offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale, establish an open “put equivalent position” within the meaning of Rule 16a-1(h) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise transfer or dispose of, directly or indirectly, any shares of common stock, options or warrants to purchase any shares of common stock or any securities that are convertible into or exchangeable for, or that represent the right to receive, common stock, held of record or beneficially owned (within the meaning of Rule 13d-3 under the Exchange Act), or publicly disclose the intention to do any of the foregoing;

• enter into any swap or other arrangement that transfers, in whole or in part, any of the economic consequences associated with the ownership of any common stock; or

• make any demand or request for or exercise any right with respect to the registration of any shares of common stock or any securities convertible into or exchangeable for or that represent the right to receive common stock.

The lock-up agreements entered into by our directors, executive officers and existing stockholders and each of the purchasers in the directed share program do not extend to transfers of shares of common stock or securities convertible into or exchangeable for or that represent the right to receive shares of common stock (a) if the securities were acquired in open market transactions after the completion of this offering; (b) in the case of an individual, (i) by will or intestacy to his or her immediate family; or (ii) to a trust the beneficiaries of which are exclusively the transferor and/or a member or members of his or her immediate family; (c) to a charity or educational institution; (d) in the case of an entity or an individual who directly or indirectly controls an entity, to any stockholder, partner or member of, or owner of similar equity interests in, such entity, as the case may be; or (e) in the case of an entity, to another entity that is an affiliate of such entity; provided, however, that, (A) prior to any such transfer pursuant to clauses (b) through (e) above, each transferee shall execute an agreement, satisfactory to the representatives, pursuant to which each transferee shall agree to receive and hold such shares of common stock, or securities convertible into or exchangeable for or that represent the right to receive the common stock, subject to the foregoing restrictions, and there shall be no further transfer except in accordance with the foregoing restrictions, (B) no public disclosure or filing by any party (e.g., transferor or transferee) under the Exchange Act reporting a reduction in beneficial ownership of shares of common stock shall be required or shall

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be voluntarily made during the lock-up period in connection with such transfer and (C) any such transfer pursuant to clauses (b) through (e) above shall not involve a disposition for value. In determining whether to consent to a transaction prohibited by these restrictions, William Blair & Company, L.L.C. and Wells Fargo Securities, LLC will take into account various factors, including the length of time before the lock-up expires, the number of shares requested to be sold, the anticipated manner and timing of sale, the potential impact of the sale on the market for the common stock, the restrictions on publication of research reports that would be imposed by the rules of the Financial Industry Regulatory Authority and market conditions generally. During the lock-up period, we may (1) issue options, restricted stock units, restricted stock or other equity awards to acquire shares of common stock granted pursuant to our equity incentive plans that are described herein, as such plans may be amended, (2) issue shares of common stock upon the exercise of any such options, restricted stock units or other equity awards to acquire shares of common stock, (3) file registration statements on Form S-8 with respect to our benefit plans that are referred to herein and (4) issue of shares of common stock in an amount up to 5% of our outstanding shares of common stock in connection with a merger, acquisition or other transaction; provided, however, that in the case of an issuance pursuant to clauses (1), (2) or (4), the holders of such equity awards or shares of common stock agree to execute a lock-up agreement in the form described above (to the extent such holder has not previously signed a lock-up agreement).

We have agreed to indemnify the underwriters and their controlling persons against certain liabilities for misstatements in the registration statement of which this prospectus forms a part, including liabilities under the Securities Act, or to contribute to payments the underwriters may be required to make in respect thereof.

The representatives have informed us that the underwriters will not confirm, without client authorization, sales to their client accounts as to which they have discretionary authority. The representatives have also informed us that the underwriters intend to deliver all copies of this prospectus via electronic means, via hand delivery or through mail or courier services.

In connection with this offering, the underwriters and other persons participating in this offering may engage in transactions which affect the market price of the common stock. These may include stabilizing and over-allotment transactions and purchases to cover syndicate short positions. Stabilizing transactions consist of bids or purchases for the purpose of pegging, fixing or maintaining the price of the common stock. An over-allotment transaction, or short-sale, involves selling more shares of our common stock in this offering than are specified on the cover of this prospectus, which results in a syndicate short position. A short position may be “covered” or “naked.” In a “covered” short position, the number of shares of common stock created by a short sale is not greater than the number of shares of common stock in the underwriters’ option to purchase additional shares from us in this offering, which may be settled by exercising all or part of their over-allotment option or purchasing shares of common stock in the open market. In a “naked” short position, the number of shares of common stock created by a short sale is greater than the number of shares in the underwriters’ over-allotment option, which may be settled by purchasing shares of common stock in the open market. In addition, the representatives may impose a penalty bid. This allows the representatives to reclaim the selling concession allowed to an underwriter or selling group member if shares of our common stock sold by such underwriter or selling group member in this offering are repurchased by the representatives in stabilizing or syndicate short covering transactions. These transactions, which may be effected on the NYSE or otherwise, may stabilize, maintain or otherwise affect the market price of our common stock and could cause the price to be higher than it would be without these transactions. The underwriters and other participants in this offering are not required to engage in any of these activities and may discontinue any of these activities at any time without notice. We and the underwriters make no representation or prediction as to whether the underwriters will engage in such transactions or choose to discontinue any transactions engaged in or as to the direction or magnitude of any effect that these transactions may have on the price of our common stock.

Prior to this offering, there has been no public market for our common stock. Consequently, we and the representatives of the underwriters have negotiated to determine the initial public offering price. Among the factors considered in determining the initial public offering price of the shares of our common stock, in addition to

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prevailing market conditions, were our historical performance, estimates of our business potential and earnings prospects, an assessment of our management and the consideration of the above factors in relation to market valuation of companies in related businesses.

We intend to apply to list our common stock on the NYSE under the symbol “AAC.”

The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to us and to persons and entities that have relationships with us, for which they received or will receive customary fees and expenses. In particular, an affiliate of Wells Fargo Securities, LLC is a lender under our Credit Facility and provides treasury services to us and mortgage financing, wealth management and other financial advisory services to certain of our executive officers. An affiliate of Avondale Partners, LLC has provided advisory services in connection with the refinancing of certain of our indebtedness. In addition, in the ordinary course of their various business activities, the underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively traded securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to our assets, securities or instruments (directly, as collateral securing other obligations or otherwise) or persons and entities who have relationships with us. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long or short positions in such assets, securities and instruments.

Conflict of Interest

We intend to use a portion of the net proceeds that we receive from this offering to repay the outstanding balance on our revolving line of credit. Wells Fargo Securities, LLC, an underwriter in this offering, is an affiliate of Wells Fargo Bank, National Association, the lender under our revolving line of credit. Because we may use more than 5% of the net proceeds from this offering to reduce the outstanding balance under our revolving line of credit, Wells Fargo Securities, LLC may be deemed to have a “conflict of interest” with us within the meaning of Rule 5121 of the Conduct Rules of FINRA. Accordingly, this offering will be made in compliance with the applicable provisions of Rules 5110 and 5121 of the Conduct Rules regarding the underwriting of securities of a company with a member that has a conflict of interest within the meaning of those rules. Pursuant to Rule 5121, William Blair & Company, L.L.C. has served as the “qualified independent underwriter,” as defined by FINRA, and, in that capacity, has performed due diligence investigations and reviewed and participated in the preparation of the registration statement of which this prospectus forms a part. Wells Fargo Securities, LLC will not execute sales in discretionary accounts without the prior written specific approval of its customers.

Notice to Prospective Investors in the European Economic Area

In relation to each Member State of the European Economic Area (each, a “Relevant Member State”), no offer of shares may be made to the public in that Relevant Member State other than:

A. to any legal entity which is a qualified investor as defined in the Prospectus Directive;

B. to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives; or

C. in any other circumstances falling within Article 3(2) of the Prospectus Directive,

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provided that no such offer of shares shall require the company or the representatives to publish a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.

Each person in a Relevant Member State who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed that it is a “qualified investor” within the meaning of the law in that Relevant Member State implementing Article 2(1)(e) of the Prospectus Directive. In the case of any shares being offered to a financial intermediary as that term is used in Article 3(2) of the Prospectus Directive, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances in which the prior consent of the representatives has been obtained to each such proposed offer or resale.

The company, the representatives and their affiliates will rely upon the truth and accuracy of the foregoing representation, acknowledgment and agreement.

This prospectus has been prepared on the basis that any offer of shares in any Relevant Member State will be made pursuant to an exemption under the Prospectus Directive from the requirement to publish a prospectus for offers of shares. Accordingly any person making or intending to make an offer in that Relevant Member State of shares which are the subject of the offering contemplated in this prospectus may only do so in circumstances in which no obligation arises for the company or any of the underwriters to publish a prospectus pursuant to Article 3 of the Prospectus Directive in relation to such offer. Neither the company nor the underwriters have authorized, nor do they authorize, the making of any offer of shares in circumstances in which an obligation arises for the company or the underwriters to publish a prospectus for such offer.

For the purpose of the above provisions, the expression “an offer to the public” in relation to any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe for the shares, as the same may be varied in the Relevant Member State by any measure implementing the Prospectus Directive in the Relevant Member State and the expression “Prospectus Directive” means Directive 2003/71/EC (including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member States) and includes any relevant implementing measure in the Relevant Member State and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

Notice to Prospective Investors in the United Kingdom

In addition, in the United Kingdom, this prospectus is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Directive) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended (the “Order”) and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order (all such persons together being referred to as “relevant persons”). This prospectus must not be acted on or relied on in the United Kingdom by persons who are not relevant persons. In the United Kingdom, any investment or investment activity to which this prospectus relates is only available to, and will be engaged in with, relevant persons.

144

Notice to Prospective Investors in Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This prospectus has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this prospectus nor any other offering or marketing material relating to the shares or this offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this prospectus nor any other offering or marketing material relating to this offering, the company or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this prospectus will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

145

VALIDITY OF THE COMMON STOCK

The validity of the shares of common stock being offered by this prospectus will be passed upon for us by Ballard Spahr LLP, Las Vegas, Nevada, and certain other legal matters in connection with this offering will be passed upon for us by Bass, Berry & Sims PLC, Nashville, Tennessee. Certain legal matters in connection with this offering will be passed upon for the underwriters by Sidley Austin LLP, Chicago, Illinois.

EXPERTS

The (1) financial statements of American Addiction Centers, Inc. as of December 31, 2012 and 2013 and for the years then ended; (2) the financial statements of AJG Solutions, Inc. and B&B Holdings Intl LLC as of December 31, 2011 and August 31, 2012 and for the year ended December 31, 2011 and the eight months ended August 31, 2012; and (3) the statements of revenue and certain direct operating expenses of Greenhouse Real Estate, LLC for the periods from August 10, 2011 to December 31, 2011, the year ended December 31, 2012, and January 1, 2013 to October 7, 2013, all appearing in this prospectus have been so included in reliance on the reports of BDO USA, LLP, an independent registered public accounting firm, appearing elsewhere herein, given on the authority of said firm as experts in auditing and accounting.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock being offered by this prospectus. This prospectus, which constitutes a part of the registration statement, does not contain all of the information in the registration statement and its exhibits. For further information with respect to us and the common stock offered by this prospectus, you should refer to the registration statement and the exhibits filed as part of that document. Statements contained in this prospectus as to the contents of any contract or any other document referred to are not necessarily complete, and in each instance, we refer you to the copy of the contract or other document filed as an exhibit to the registration statement. Each of these statements is qualified in all respects by this reference.

You can read our SEC filings, including the registration statement, over the Internet at the SEC’s website at http://www.sec.gov. You may also read and copy any document we file with the SEC at its public reference facilities at 100 F Street, N.E., Washington, D.C. 20549. You may also obtain copies of these documents at prescribed rates by writing to the Public Reference Section of the SEC at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference facilities. You may also request a copy of these filings, at no cost, by writing or telephoning us at: 115 East Park Drive, Second Floor, Brentwood, Tennessee 37027 or (888) 300-3332.

Upon the closing of this offering, we will be subject to the information and periodic reporting requirements of the Exchange Act, as amended, and we will file periodic reports, proxy statements and other information with the SEC. These reports, proxy statements and other information will be available for inspection and copying at the public reference room and website of the SEC referred to above. We also maintain a website at www.americanaddictioncenters.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained in, or that can be accessed through, our website is not part of this prospectus.

146

INDEX TO FINANCIAL STATEMENTS

American Addiction Centers, Inc. and Subsidiaries
Audited Financial Statements for the Years Ended December 31, 2012 and 2013
Report of Independent Registered Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2012 and 2013	F-3
Consolidated Statements of Income for the Years Ended December 31, 2012 and 2013	F-5
Consolidated Statement of Stockholders’ Equity for the Years Ended December 31, 2012 and 2013	F-6
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012 and 2013	F-7
Notes to Consolidated Financial Statements	F-9
Condensed Consolidated Financial Statements for the Three Months Ended March 31, 2013 and 2014
Condensed Consolidated Balance Sheets as of December 31, 2013 and March 31, 2014	F-45
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2013 and 2014	F-47
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2013 and 2014	F-48
Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2014	F-50
Notes to Condensed Consolidated Financial Statements	F-51
AJG Solutions, Inc. and B&B Holdings Intl LLC
Independent Auditor’s Report	F-64
Combined Balance Sheets as of December 31, 2011 and August 31, 2012	F-65
Combined Statements of Income and Shareholders’ / Members Equity for the Year Ended December  31, 2011 and the Eight Months Ended August 31, 2012	F-66
Combined Statements of Cash Flows for the Year Ended December  31, 2011 and the Eight Months Ended August 31, 2012	F-67
Notes to the Combined Financial Statements	F-68
Greenhouse Real Estate, LLC
Independent Auditor’s Report	F-74
Historical Statement of Revenues and Certain Direct Operating Expenses for the periods from August  10, 2011 (inception) to December 31, 2011, January 1, 2012 to December 31, 2012, and January 1, 2013 to October 7, 2013	F-75
Notes to Historical Statements of Revenues and Certain Direct Operating Expenses	F-76

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

American Addiction Centers, Inc.

Brentwood, Tennessee

We have audited the accompanying consolidated balance sheets of American Addiction Centers, Inc. and subsidiaries as of December 31, 2012 and 2013, and the related consolidated statements of income, stockholders’ equity, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of American Addictions Centers, Inc. and subsidiaries as of December 31, 2012 and 2013, and the results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

Nashville, Tennessee

May 2, 2014

F-2

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

	December 31,
	2012		2013
Assets
Current assets
Cash and cash equivalents (variable interest entity—2012: $19; 2013: $441)	$	740	$	2,012
Accounts receivable, net of allowances of $4,278 and $13,320, respectively (variable interest entity—2012: $0; 2013: $169)		20,645		24,567
Deferred tax assets		873		676
Prepaid expenses and other current assets (variable interest entity—2012: $147; 2013: $173)		769		2,274
Total current assets		23,027		29,529
Property and equipment, net (variable interest entity—2012: $11,332; 2013: $29,257)		15,327		37,008
Goodwill		10,863		10,863
Intangible assets, net		3,817		3,496
Note receivable – related party		300		250
Other assets (variable interest entity—2012: $0; 2013: $142)		264		492
Total assets	$	53,598	$	81,638

— The assets denoted as assets of the consolidated variable interest entities (VIEs) can only be used to settle obligations of the consolidated VIEs.

See accompanying notes to consolidated financial statements.

F-3

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands, except per share amounts)

	December 31,
	2012			2013
Liabilities, Mezzanine Equity and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,385		$	1,895
Accrued liabilities (variable interest entity—2012: $320; 2013: $172)		6,674			10,455
Current portion of long-term debt (variable interest entity—2012: $170; 2013: $12,932)		8,674			15,164
Current portion of long-term debt – related party		3,104			795
Total current liabilities		19,837			28,309
Deferred tax liabilities (variable interest entity—2012: $0; 2013: $23)		4,026			2,329
Long-term debt, net of current portion (variable interest entity—2012: $7,211; 2013: $8,616)		8,340			23,341
Long-term debt – related party, net of current portion		5,104			3,775
Other long-term liabilities		—			159
Total liabilities		37,307			57,913
Commitments and contingencies (Note 16)
Mezzanine equity including noncontrolling interest (see Note 11)
Series B Preferred Stock		1,000			—
Common stock		10,613			10,442
Noncontrolling interest–Series A Preferred (variable interest entity)		—			1,400
Total mezzanine equity including noncontrolling interest		11,613			11,842
Stockholders’ equity
Common stock, $0.001 par value; 15,000,000 shares authorized; 983,612 and 2,481,114 issued and 983,612 and 2,036,680 outstanding as of December 31, 2012 and 2013, respectively		1			2
Common stock subscribed, net of subscription receivable of $58 in 2013		—			42
Additional paid-in capital (distributions in excess of paid-in-capital)		(677	)		9,450
Treasury stock, at cost		(17	)		(3,671	)
Retained earnings		1,574			2,360
Total stockholders’ equity of American Addiction Centers, Inc.		881			8,183
Noncontrolling interest		3,797			3,700
Total stockholders’ equity including noncontrolling interest		4,678			11,883
Total liabilities, mezzanine equity and stockholders’ equity	$	53,598		$	81,638

— The denoted VIEs’ liabilities are only claims against the general credit of the Company to the extent that the Company is liable under its guarantee of the VIEs’ notes payable to a financial institution of $7,381 and $21,548 at December 31, 2012 and 2013, respectively.

See accompanying notes to consolidated financial statements.

F-4

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share and per share amounts)

	Years ended December 31,
	2012		2013
Revenues	$	66,035	$	115,741
Operating expenses
Salaries, wages and benefits		25,680		46,856
Advertising and marketing		8,667		13,493
Professional fees		5,430		10,277
Client related services		8,389		7,986
Other operating expenses		6,384		11,615
Rentals and leases		3,614		4,634
Provision for doubtful accounts		3,344		10,950
Litigation settlement		—		2,588
Restructuring		—		806
Depreciation and amortization		1,288		3,003
Total operating expenses		62,796		112,208
Income from operations		3,239		3,533
Interest expense		980		1,390
Other expense, net		12		36
Income before income tax expense		2,247		2,107
Income tax expense		1,148		615
Net income		1,099		1,492
Less: net loss (income) attributable to noncontrolling interest		405		(706	)
Net income attributable to American Addiction Centers, Inc.		1,504		786
Deemed contribution-redemption of Series B Preferred		—		1,000
Net income available to American Addiction Centers, Inc. common stockholders	$	1,504	$	1,786
Basic earnings per share	$	0.19	$	0.20
Diluted earnings per share	$	0.19	$	0.20
Weighted-average shares outstanding:
Basic		7,770,359		8,819,062
Diluted		7,869,017		9,096,660

See accompanying notes to consolidated financial statements.

F-5

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

	Common Stock										Additional Paid-in Capital/ (Distributions in Excess of								Total Stockholders’ Equity (Deficit) of American Addiction			Non-			Total Stockholders’
	Shares Outstanding			Amount		Subscribed		Subscriptions Receivable			Paid-in Capital)			Treasury Stock			Retained Earnings		Centers, Inc.			Controlling Interests			Equity (Deficit)
Balance at December 31, 2011		94,744		$	—	$	—	$	—		$	(7,789	)	$	(17	)	$	70	$	(7,736	)	$	—		$	(7,736	)
Warrants issued with subordinated debt		—			—		—		—			143			—			—		143			—			143
Common stock issued in connection with business combination (of which 226,416 shares are restricted)		888,868			1		—		—			5,568			—			—		5,569			—			5,569
Initial consolidation of VIEs		—			—		—		—			—			—			—		—			4,284			4,284
Distribution to noncontrolling interest holders		—			—		—		—			—			—			—		—			(82	)		(82	)
Common stock granted under stock incentive plan		—			—		—		—			1,401			—			—		1,401			—			1,401
Net income (loss)		—			—		—		—			—			—			1,504		1,504			(405	)		1,099
Balance at December 31, 2012		983,612			1		—		—			(677	)		(17	)		1,574		881			3,797			4,678
Common stock issued		906,439			1		100		(58	)		7,428			—			—		7,471			—			7,471
Redemption of mezzanine Series B Preferred Stock		—			—		—		—			1,000			—			—		1,000			—			1,000
Redemption of common stock		—			—		—		—			(1,238	)		—			—		(1,238	)		—			(1,238	)
Common stock granted and issued under stock incentive plan		348,050			—		—		—			937			—			—		937			—			937
Conversion of debt to equity		243,013			—		—		—			2,000			—			—		2,000			—			2,000
Redemption of common stock		(444,434	)		—		—		—			—			(3,654	)		—		(3,654	)		—			(3,654	)
Initial consolidation of VIEs		—			—		—		—			—			—			—		—			3,020			3,020
Redemptions of noncontrolling interest of variable interest entities		—			—		—		—			—			—			—		—			(2,990	)		(2,990	)
Distribution to noncontrolling interest holders, net		—			—		—		—			—			—			—		—			(815	)		(815	)
Net income		—			—		—		—			—			—			786		786			706			1,492
Noncontrolling interest — Series A Preferred Dividend accrued		—			—		—		—			—			—			—		—			(18	)		(18	)
Balance at December 31, 2013		2,036,680		$	2	$	100	$	(58	)	$	9,450		$	(3,671	)	$	2,360	$	8,183		$	3,700		$	11,883

See accompanying notes to consolidated financial statements.

F-6

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Years ended December 31,
	2012			2013
Cash flows from operating activities:
Net income	$	1,099		$	1,492
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for doubtful accounts		3,344			10,950
Depreciation and amortization		1,288			3,003
Loss on disposal of property and equipment		—			395
Equity compensation		1,401			979
Amortization of discount on notes payable		48			32
Deferred income taxes		37			(1,500	)
Decrease in fair value of contingent related-party note payable		—			(91	)
Changes in operating assets and liabilities:
Accounts receivable		(11,879	)		(14,810	)
Prepaid expenses and other assets		(763	)		(1,287	)
Accounts payable		995			510
Accrued liabilities		4,499			3,611
Other long term liabilities		—			159
Net cash provided by operating activities		69			3,443
Cash flows from investing activities:
Acquisitions, net of cash acquired		(2,500	)		—
Cash acquired in consolidation of variable interest entity		—			210
Purchase of property and equipment		(6,264	)		(12,975	)
Proceeds on sale of minority interest investment		150			—
Funding of notes receivable, related party		(50	)		—
Collection of notes receivable, related party		268			50
(Purchase) reimbursement of other assets		500			(429	)
Net cash used in investing activities		(7,896	)		(13,144	)
Cash flows from financing activities:
Proceeds from revolving line of credit, net		2,635			5,851
Proceeds from note payable		6,589			9,150
Proceeds from note payable – related party		1,500			—
Proceeds from sale of subordinated notes payable		990			—
Payments on notes payable and capital leases		(863	)		(2,433	)
Repayment of notes payable – related party		(2,295	)		(1,554	)
Repayment of subordinated notes payable		(40	)		—
Redemption of common stock		—			(5,063	)
Proceeds from sale of common stock		—			7,429
Contributions from noncontrolling interest		—			1,979
Distributions to noncontrolling interest		(82	)		(1,396	)
Redemptions of noncontrolling interest		—			(2,990	)
Net cash provided by financing activities		8,434			10,973
Net increase in cash and cash equivalents		607			1,272
Cash and cash equivalents, beginning of year		133			740
Cash and cash equivalents, end of year	$	740		$	2,012

(continued on next page)

F-7

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

	Year ended December 31,
	2012			2013
Supplemental disclosures of cash flow information:
Cash and cash equivalents paid for:
Interest, net of capitalized interest of $0 and $75 in 2012 and 2013, respectively	$	730		$	1,265
Income taxes, net of refunds of $9 and $251 in 2012 and 2013, respectively	$	53		$	2,870
Supplemental information on non-cash investing and financing transactions:
Acquisitions:
Purchase price	$	14,591		$	—
Seller financed debt		(6,522	)		—
Buyer common stock issued		(5,569	)		—
Cash paid for acquisition	$	2,500		$	—
Consolidation of variable interest entities:
Assets of variable interest entities, excluding cash	$	(7,760	)	$	(17,407	)
Liabilities of variable interest entities and noncontrolling interest, excluding cash		7,760			17,617
Cash of variable interest entities	$	—		$	210
Conversion of notes payable into common stock	$	—		$	2,000
Acquisition of equipment through capital lease	$	—		$	(1,163	)
Sale of property to a variable interest entity	$	—		$	6,708
Notes payable in connection with the sale of property to a consolidated variable interest entity	$	—		$	(6,708	)
Retirement of Series B Preferred Stock	$	—		$	1,000
Noncontrolling interest — Series A Preferred accrued dividends of a variable interest entity	$	—		$	18

See accompanying notes to consolidated financial statements.

F-8

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

American Addiction Centers, Inc. (formerly known as Forterus, Inc.), a Nevada corporation (collectively with its subsidiaries, the “Company”), was incorporated on February 27, 2007. The Company, headquartered in Brentwood, Tennessee, provides substance abuse treatment services for individuals with drug and alcohol addiction. The Company also provides treatment services for clients struggling with behavioral health disorders, including disorders associated with obesity. Currently, the Company, through its subsidiaries, operates six substance abuse treatment facilities located in Texas, California, Florida and Nevada and a facility in Tennessee that provides treatment services for men and women who struggle with obesity-related behavioral disorders. During 2012 the Company had arrangements with four treatment facilities in California to provide addiction and chemical dependency services to clients sourced by the Company. The Company discontinued using three of these treatment facilities in the second half of 2012 and the final arrangement was terminated in April 2013. On March 7, 2012, the Greenhouse treatment facility in Texas obtained its license for 70 residential beds and began accepting clients. On January 1, 2013, the Desert Hope treatment facility in Las Vegas, Nevada obtained its license for 148 residential beds and began accepting clients. In the third quarter of 2013, the Company, through a wholly owned subsidiary, began providing laboratory services to some of the Company’s treatment facilities.

2. Basis of Presentation

Principles of Consolidation

The Company conducts its business through limited liability companies and C-corporations, each of which is a wholly owned subsidiary of the Company. The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, the accounts of variable interest entities (“VIEs”) in which the Company is the primary beneficiary, and certain professional groups through rights granted to the Company by contract to manage and control an entity’s business.

The Company consolidated one real estate VIE in 2012 and consolidated another two VIEs in 2013. All three of these VIEs were acquired in 2013 by Behavioral Healthcare Realty, LLC (“BHR”), which is also a VIE. The Company also consolidated five professional groups (“Professional Groups”) that constitute VIEs in 2013. BHR leases two treatment facilities to the Company under long-term triple net leases and is renovating and constructing additional treatment facilities that it will lease to the Company. The Company is the primary beneficiary as a result of its guarantee of BHR’s debt. The Company has management services arrangements with five Professional Groups that provide medical services to the Company’s treatment facilities. The Professional Groups, which the Company controls, are responsible for the supervision and delivery of medical services. Based on the Company’s ability to direct the activities that most significantly impact the economic performance of the Professional Groups, provide necessary funding and the obligation and likelihood of absorbing all expected gains and losses, the Company has determined that it is the primary beneficiary. The accompanying consolidated balance sheets at December 31, 2012 and December 31, 2013 include assets of $11.5 million and $30.2 million, respectively, and liabilities of $7.7 million and $21.7 million, respectively, related to the VIEs. The accompanying consolidated statements of income for the years ended December 31, 2012 and 2013 include net (loss) income attributable to noncontrolling interest of ($0.4) million and $0.7 million, respectively, related to the VIEs. For the years ended December 31, 2012 and 2013, the VIEs generated the following cash flows:

	Year Ended December 31,
	2012			2013
Net cash provided by (used in) operating activities	$	(196	)	$	1,544
Net cash used in investing activities		(3,697	)		(1,260	)
Net cash provided by financing activities		3,878			11

F-9

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

All significant intercompany balances and transactions are eliminated in consolidation.

3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses at the date and for the periods that the consolidated financial statements are prepared. On an ongoing basis, the Company evaluates its estimates, including those related to insurance adjustments, provisions for doubtful accounts, intangible assets, long-lived assets, deferred revenues and income taxes. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results could materially differ from those estimates.

General and Administrative Costs

The majority of the Company’s expenses are “cost of revenue” items. Costs that could be classified as general and administrative expenses include the Company’s corporate overhead costs, which were $17.3 million and $28.1 million for the years ended December 31, 2012 and 2013, respectively.

Revenues

The Company provides services to its clients in both inpatient and outpatient treatment settings. Revenues are recognized when services are performed at estimated net realizable value from clients, third-party payors and others for services provided. The Company receives the vast majority of payments from commercial payors at out-of-network rates. Client service revenues are recorded at established billing rates less adjustments to estimate net realizable value. Adjustments are recorded to state client service revenues at the amount expected to be collected for the service provided based on historic adjustments for out-of-network services not under contract. Prior to admission, each client’s insurance is verified and the client self-pay amount is determined. The client self-pay portion is generally collected upon admission. In some instances, clients will pay out-of-pocket as services are provided or will make a deposit and negotiate the remaining payments as part of the services. These out-of-pocket payments are included in accrued liabilities in the accompanying consolidated balance sheets and revenues related to these payments are deferred and recognized over the period services are provided. From time to time, scholarships may be provided to a limited number of clients. We do not recognize revenues for care provided via scholarships.

For the year ended December 31, 2012, approximately 16.5% of the Company’s revenues were reimbursed by Blue Cross Blue Shield of California and 11.3% were reimbursed by Aetna. No other payor accounted for more than 10% of revenue reimbursements for the year ended December 31, 2012.

For the year ended December 31, 2013, approximately 12.3% of the Company’s revenues were reimbursed by Blue Cross Blue Shield of California, 12.1% were reimbursed by Aetna, and 10.3% were reimbursed by United Behavioral Health. No other payor accounted for more than 10% of revenue reimbursements for the year ended December 31, 2013.

In cases where the demand for services exceeded capacity, the Company entered into contractual arrangements with other parties to provide services. Management evaluated and determined the Company was the principal party to the services provided. Revenues generated through the Company’s contractual arrangements are included in revenues at their expected realizable amount while the subcontracted service payments

F-10

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

made are included in client related services. The need for these contractual arrangements decreased as the Company increased its bed capacity in the second half of 2012 and further decreased with the increased bed capacity in the first quarter of 2013 as a result of the opening of Desert Hope.

Allowance for Contractual and Other Discounts

The Company derives the vast majority of its revenues from commercial payors at out-of-network rates. Management estimates the allowance for contractual and other discounts based on its historical collection experience. The services authorized and provided and related reimbursement are often subject to interpretation and negotiation that could result in payments that differ from the Company’s estimates.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable primarily consists of amounts due from third-party payors (non-governmental) and private pay clients and is recorded net of contractual discounts. The Company’s ability to collect outstanding receivables is critical to its results of operations and cash flows. Accounts receivable is reported net of an allowance for doubtful accounts, which is management’s best estimate of accounts receivable that could become uncollectible in the future. Accordingly, accounts receivable reported in the Company’s consolidated financial statements is recorded at the net amount expected to be received. The Company’s primary collection risks are (i) the risk of overestimating net revenues at the time of billing that may result in the Company receiving less than the recorded receivable, (ii) the risk of non-payment as a result of commercial insurance companies denying claims, (iii) the risk that clients will fail to remit insurance payments to the Company when the commercial insurance company pays out-of-network claims directly to the client, (iv) resource and capacity constraints that may prevent the Company from handling the volume of billing and collection issues in a timely manner, (v) the risk that clients do not pay the Company for their self-pay balance (including co-pays, deductibles and any portion of the claim not covered by insurance) and (vi) the risk of non-payment from uninsured clients. The Company’s allowance for doubtful accounts is based on historical experience, but management also takes into consideration the age of accounts, creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. An account is written off only after the Company has pursued collection efforts or otherwise determines an account to be uncollectible.

At December 31, 2012, 15.1% of accounts receivable was from Blue Cross Blue Shield of California and 12.6% was from United Behavioral Health. No other payor accounted for more than 10% of accounts receivable at December 31, 2012. At December 31, 2013, 19.5% of accounts receivable was from Blue Cross Blue Shield of California, 12.2% was from Anthem Blue Cross Blue Shield of Colorado and 10.9% was from United Behavioral Health. No other payor accounted for more than 10% of accounts receivable at December 31, 2013.

A summary of activity in the Company’s allowance for doubtful accounts is as follows (in thousands):

Description	Balance at beginning of year		Additions charged to Provision for Doubtful Accounts		Accounts written off, net of recoveries			Balance at end of year
Allowance for doubtful accounts for the year ended:
December 31, 2012	$	1,233	$	3,344	$	(299	)	$	4,278
December 31, 2013		4,278		10,950		(1,908	)		13,320

F-11

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to expense as incurred. The Company capitalizes interest on construction projects and such interest is included in the cost of the related asset. Assets held for development are classified as construction in progress and the Company does not depreciate these assets until they are placed in service. Leasehold improvements are amortized over their estimated useful lives or the remaining lease period, whichever is less. Assets under capital leases are amortized over the lease term or in the event of transfer of ownership at the end of the lease over the economic life of the leased asset. Amortization expense related to assets under capital lease is included with depreciation and amortization expense in the consolidated statements of income. Depreciation is calculated using the straight-line method over the estimated economic useful lives of the assets, as follows:

	Range of Lives
Computer software and equipment		3 years
Buildings		36 years
Furniture, fixtures and equipment		5 years
Vehicles		5 years
Equipment under capital lease		3–5 years
Leasehold improvements		Life of the asset or lease, whichever is less

Goodwill and Intangible Assets

The Company has only one operating segment, substance abuse/behavioral healthcare treatment services, for segment reporting purposes. The substance abuse/behavioral healthcare treatment services operating segment represents one reporting unit for purposes of the Company’s goodwill impairment test. Goodwill represents the excess of the purchase price over the fair value of the identifiable net assets acquired. Goodwill and intangible assets with indefinite lives are not amortized, but instead tested for impairment at least annually or whenever events or changes in circumstances indicate the carrying value may not be recoverable. The Company has no intangible assets with indefinite useful lives other than goodwill. The Company considers the following to be important factors that could trigger an impairment review: significant underperformance relative to historical or projected future operating results; identification of other impaired assets within a reporting unit; significant adverse changes in business climate or regulations; significant changes in senior management; significant changes in the manner of use of the acquired assets or the strategy for the Company’s overall business; and significant negative industry or economic trends.

Goodwill is assessed for impairment using a fair value approach at the reporting unit level. The goodwill impairment test is a two-step process, if necessary. The provisions for the accounting standard of goodwill provide an entity with the option to assess qualitative factors to determine whether the existence of events or circumstances leads to the determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. This qualitative assessment is referred to as a “step zero” approach. If based on the qualitative factors, an entity determines it is not more likely than not that the fair value of a reporting unit is less than its carrying value, the entity may skip the two-step impairment test required by prior accounting guidance. If an entity determines otherwise or, at the option of the entity, if a step zero is not performed, step one of the two-step impairment test is required. Under step one, the fair value of the reporting unit is compared with its carrying

F-12

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

value (including goodwill). If the fair value of the reporting unit is less than its carrying value, an indication of goodwill impairment exists for the reporting unit and the entity must perform step two of the impairment test. Under step two, an impairment loss is recognized for any excess of the carrying amount of the reporting unit’s goodwill over the implied fair value of that goodwill. The implied fair value of goodwill is determined by allocating the fair value of the reporting unit in a manner similar to a purchase price allocation and the residual fair value after this allocation is the implied fair value of the reporting unit goodwill. Fair value of the reporting unit is determined using a discounted cash flow analysis. If the fair value of the reporting unit exceeds its carrying value, step two does not need to be performed. Impairment shall be recognized to the extent that the carrying amount of goodwill exceeds its implied fair value. In performing step one of the goodwill impairment test, the Company compares the carrying amount of the reporting unit to the estimated fair value.

In assessing the recoverability of goodwill, the Company considers historical results, current operating trends and results and makes estimates and assumptions about revenues, margins and discount rates based on the Company’s budgets, business plans, economic projections and anticipated future cash flows. Each of these factors contains inherent uncertainties, and management must exercise substantial judgment and discretion in evaluating and applying these factors.

The annual goodwill impairment test is performed December 31 each year, utilizing the two-step test. The Company concluded the carrying value of the reporting unit as of December 31, 2013 did not exceed its fair value, and thus no indication of impairment was present. The fair value of goodwill exceeded the carrying value by $3.3 million at December 31, 2013.

The Company’s other intangible assets principally relate to trademarks and marketing intangibles and non-compete agreements. Trademarks and marketing intangibles are amortized over a period of ten years. Non-compete agreements are amortized over the five-year term of the agreements.

Long-Lived Asset Impairment

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. Impairment is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets. The Company did not identify any indicators of impairment as of December 31, 2012 and 2013.

Accrued Liabilities

The Company’s accrued liabilities, reflected as a current liability in the accompanying consolidated balance sheet, consist of the following (in thousands):

	Year Ended December 31,
	2012		2013
Accrued payroll liabilities	$	1,263	$	4,685
Accrued litigation settlement		—		2,588
Accrued legal fees		190		706
Income taxes payable		1,003		53
Accrued expenses – related party		—		33	(a)
Other		4,218		2,390
Total accrued liabilities	$	6,674	$	10,455

(a) Accrued expenses payable to the Company’s Chief Executive Officer.

F-13

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Segments

The focus of all Company operations is centered on a single service, substance abuse/behavioral healthcare treatment. The Company is organized and operates as one reportable segment, comprised of various treatment facilities located in the United States. The treatment facilities operate in the same industry and have similar economic characteristics, services and clients. Management has the ability to direct and serve clients in any of these facilities, which allows management to operate the Company’s business and analyze its revenues on a system-wide basis rather than focusing on any individual facility. The Company’s chief operating decision maker evaluates performance and manages resources based on the results of the consolidated operations as a whole.

Advertising Expenses

Advertising costs are expensed as the related activity occurs.

Stock-Based Compensation

The Company accounts for stock-based compensation to employees and consultants using a fair-value based method for costs related to all share-based payments. The Company estimates the fair value of employee restricted stock awards on the date of grant based on the appraised fair value. The Company uses the Black-Scholes valuation model to determine grant date fair value for stock option awards. The fair value of the portion of the award that is ultimately expected to vest is recognized as expense on a straight-line basis over the requisite service periods in the Company’s consolidated statements of income.

Earnings Per Share

Basic and diluted earnings per share are calculated based on the weighted-average number of shares outstanding in each period and dilutive stock options, non-vested shares and warrants, to the extent such securities have a dilutive effect on earnings per share using the treasury stock method. The two-class method determines earnings per share for each class of common stock and participating preferred stock and their respective participation rights in undistributed earnings. Effective with the elimination of the Series B Preferred Stock in the first quarter of 2013, the Company no longer has two classes of stock.

Income Taxes

The Company accounts for income taxes using the asset and liability method. Under the asset and liability method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.

The effect on the deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is provided for significant deferred tax assets when it is more likely than not that such assets will not be recovered.

The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense.

For the years ended December 31, 2012 and 2013, the Company had no accrued interest or penalties related to income tax matters in income tax expense.

F-14

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

VIEs included in the accompanying consolidated financial statements consist of various corporations and partnerships. Tax benefits, expenses, assets and liabilities have been applied to the corporations following the same methodology described above. However, because partnerships are characterized as flow through entities for federal and certain state income tax purposes, taxes for the VIEs that are considered partnerships are not recorded in the accompanying consolidated financial statements, except for certain state taxes imposed at the entity level. Taxes that are imposed on the partners of these partnerships are not included in the accompanying consolidated financial statements. The Company is not a partner in any of these VIEs, therefore none of the flow through taxes from these VIEs are the responsibility of the Company.

Fair Value Measurements

Fair value, for financial reporting purposes, is defined as an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

Disclosure is required about how fair value was determined for assets and liabilities and following a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: Level 1—quoted prices in active markets for identical assets or liabilities; Level 2—quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or Level 3—unobservable inputs for the asset or liability, such as discounted cash flow models or valuations. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Concentration of Credit Risk

Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. All of the non-interest bearing cash balances were fully insured at December 31, 2012 as a result of a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there was no limit to the amount of insurance for eligible accounts. In 2013, insurance coverage reverted to $250,000 per depositor at each financial institution. At December 31, 2012 and 2013, the Company had $0 and $1.4 million, respectively, on deposit with banks in excess of federally insured limits.

Comprehensive Income

As of December 31, 2012 and 2013, the Company did not have any components of other comprehensive income. As such, comprehensive income equaled net income for each of the periods presented in the accompanying consolidated statements of income.

Recent Accounting Standards

There are no recently issued accounting pronouncements that are expected to have a material impact on the Company’s financial condition, results of operations or cash flows.

Reclassifications

Certain reclassifications have been made to the 2012 consolidated financial statements to conform to the 2013 presentation. The reclassifications had no impact on the Company’s financial position, results of operations or cash flows.

F-15

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. Earnings Per Share

Earnings per share (“EPS”) is calculated using the two-class method required for participating securities. Series B Preferred Stock was entitled to dividends at the rate equal to that of common stock.

Undistributed earnings allocated to these participating securities are subtracted from net income in determining net income attributable to common stockholders. Net losses, if any, are not allocated to these participating securities. Basic EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Common shares outstanding include both the common shares classified as mezzanine equity and those classified as equity.

For the calculation of diluted EPS, net income attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities, including awards under stock-based payment arrangements and 150,944 shares issued in connection with the TSN Acquisition (see Note 5). Diluted EPS attributable to common stockholders is computed by dividing net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding during the period.

The following tables reconcile the numerator and denominator used in the calculation of basic and diluted EPS for the years ended December 31, 2012 and 2013 (in thousands except share and per share amounts):

	Year Ended December 31,
	2012		2013
Numerator
Net income attributable to American Addiction Centers, Inc.	$	1,504	$	786
Less: Redemption of Series B Preferred deemed contribution		—		1,000
Net income attributable to common shares	$	1,504	$	1,786
Denominator
Weighted-average shares outstanding – basic		7,770,359		8,819,062
Dilutive securities		98,658		277,598
Weighted-average shares outstanding – diluted		7,869,017		9,096,660
Basic earnings per share	$	0.19	$	0.20
Diluted earnings per share	$	0.19	$	0.20

The Company has included common stock that is classified as mezzanine equity in the denominator for both basic and diluted EPS calculations in 2012 and 2013.

5. Acquisitions

Acquisition of AJG Solutions, Inc. and B&B Holdings Intl LLC

On August 31, 2012, the Company acquired certain assets of AJG Solutions, Inc. (d/b/a Treatment Solutions Network) and its subsidiaries (collectively, “AJG”) and the equity of B&B Holdings Intl LLC (“B&B”, and collectively with the acquisition of the AJG assets, the “TSN Acquisition”). AJG provides referral services for addiction rehabilitation services and centers and B&B provides addiction rehabilitation services through treatment facilities in Florida and a treatment facility in New Jersey (until its closure in June 2013). At the time of the TSN Acquisition, AJG and B&B were jointly owned by two individuals (the “TSN Sellers”), each of whom became employees of the Company following the acquisition. In connection with the TSN Acquisition, the Company issued 888,868 shares of common stock (662,452 unrestricted shares and 226,416 restricted shares (at a fair value of $6.27 per share as estimated by the Company’s management)), valued collectively at $5.6 million;

F-16

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

paid cash of $2.5 million from proceeds received from bank financing; and issued $6.5 million of subordinated seller notes to the TSN Sellers. The purchase agreement includes contingent provisions for a subsequent purchase price adjustment at the maturity of the seller debt financing to withhold at settlement up to $1.5 million in cash and the 226,416 restricted shares of common stock (with an aggregate value of $1.4 million at the time the TSN Acquisition closed) if certain operational performance metrics are not achieved during the three-year term of the seller note. The aggregate purchase price, including the fair value of the contingent consideration, was $14.6 million. The Company consummated the TSN Acquisition to expand the scope of the Company’s services geographically and gain synergies in obtaining leads for new clients.

The purchase price was based upon arms-length negotiations between the Company and the TSN Sellers that resulted in a premium to the fair value of the net assets acquired (including identifiable intangible assets) and, correspondingly, the recognition of goodwill. The amount recorded for goodwill is consistent with the Company’s intentions for the acquisition.

The acquisition was accounted for as a business combination. The Company recorded the transaction based upon the fair value of the consideration paid to the TSN Sellers. This consideration was allocated to the assets acquired and liabilities assumed at the acquisition date based on their fair values as follows (in thousands):

Accounts receivable	$	5,408
Prepaid expenses and other assets		273
Property and equipment		379
Goodwill		8,536
Intangible assets		3,939
Total Assets acquired		18,535
Accrued liabilities		345
Deferred tax liabilities		3,599
Total liabilities assumed		3,944
Net assets acquired	$	14,591

In connection with the TSN Acquisition, the Company entered into a license agreement with AJG. Under the license agreement, AJG granted the Company a royalty-free license to use certain trademarks and certain other intangible assets related to the operations acquired in the TSN Acquisition. The license has a three-year term, at the end of which period the licensed assets will be assigned to the Company, subject to the satisfaction of certain conditions.

The goodwill and identifiable intangible assets recognized are not deductible for income tax purposes. Acquisition related costs total $0.1 million and were expensed in other operating expenses in the consolidated statement of income for the year ended December 31, 2012. There was no adjustment to the purchase price allocation in 2013 as the result of finalizing certain TSN Acquisition tax returns.

The following provides a breakdown of the identifiable intangible assets, valuation method applied in arriving at fair value, their assigned values and expected lives (in thousands, except years):

Intangible Asset	Valuation Method	Assigned Value		Estimated Life In Years
Non-compete agreements	With and without method (1)	$	1,257		5
Trademarks and marketing intangibles	Relief from royalty (2)		2,682		10
Total identified intangible assets		$	3,939

F-17

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(1) The with and without method estimates an intangible asset’s value based on the business value “with” the non-compete in place and “without” the non-compete in place.

(2) The relief from royalty method is an earnings approach that assesses the royalty savings the entity realizes as a result of owning the asset and not having to pay a third party a license fee for its use.

Some of the more significant estimates and assumptions inherent in the estimate of the fair value of the identifiable acquired intangible assets include all those associated with forecasting cash flows and profitability. The primary assumptions used for the determination of the fair value of the purchased intangible assets were generally based upon the present value of anticipated cash flows discounted at rates generally ranging from 16.1% to 19.0%. Estimated years of future cash flows and earnings generally follow the range of estimated remaining useful lives for each intangible asset.

The results of operations for AJG and B&B from the acquisition date of August 31, 2012 are included in the consolidated statement of income for the year ended December 31, 2012, and include revenues of $11.0 million and income before income taxes of $5.8 million. The following presents the unaudited pro forma revenues and income before income taxes of the combined entity had the TSN Acquisition occurred on the first day of the period presented (in thousands):

	Revenues		Income before income taxes
Combined pro forma from January 1, 2012 – December 31, 2012	$	84,512	$	6,288

Consolidation of Concorde Real Estate, LLC

In December 2011, the Company entered into a purchase agreement to acquire a vacant facility located in Las Vegas, Nevada for a purchase price of $4.8 million in order to relocate and expand the Company’s current client service capacity. Pursuant to the purchase agreement, initial total deposits of $0.5 million were paid in 2011, an additional $0.8 million in cash was paid at closing in 2012 and the remaining $3.5 million was funded by seller financing. In January 2012, the Company assigned its rights to the purchase agreement to Concorde Real Estate, LLC (“Concorde Real Estate”). The Company’s CEO, President and CFO at that time collectively owned approximately 51% of the membership interests of Concorde Real Estate, with the remainder of the membership interests represented by holders of preferred membership interests. The Company was repaid the deposits by Concorde Real Estate at the closing in 2012. As of December 31, 2013, the Company had no equity interest in Concorde Real Estate.

On June 27, 2012, Concorde Real Estate refinanced the original seller financing with a note payable to a financial institution. In connection with this financing arrangement, the Company guaranteed the debt of Concorde Real Estate. Based on the Company’s guarantee of Concorde Real Estate’s debt and its ability to direct the activities that most significantly impact the economic performance of Concorde Real Estate, the Company has determined that Concorde Real Estate is a VIE and that the Company is the primary beneficiary. Accordingly, the Company began consolidating Concorde Real Estate as of June 27, 2012.

The Company, through a wholly owned subsidiary, Concorde Treatment Center, LLC (“Concorde Treatment”), entered into a triple net operating lease with Concorde Real Estate. The lease commenced on November 1, 2012 and has a term of six years with three options to renew the lease for five years each. Payments under the lease are $0.2 million per month for the first year and increase annually on January 1 based on the annual change in the Consumer Price Index. Because Concorde Real Estate is a consolidated VIE, the rental payments since June 27, 2012 between the Company and Concorde Real Estate are eliminated in the Company’s consolidated financial statements.

F-18

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The initial consolidation of Concorde Real Estate was accounted for as a business combination. The Company recorded the amounts that are associated with Concorde Real Estate’s interests in the VIE based upon the fair values of the assets and liabilities as follows as of June 27, 2012 (in thousands):

Property and equipment, net	$	7,720
Other receivables		40
Total assets consolidated	$	7,760
Notes payable	$	3,500
Noncontrolling interest equity		4,260
Total liabilities and noncontrolling interest consolidated	$	7,760

On June 12, 2013, Concorde Real Estate redeemed all of the outstanding preferred membership interests for $3.0 million in cash. Concorde Real Estate made periodic distributions to its members from cash available for distribution.

Consolidation of Behavioral Healthcare Realty, LLC

On October 8, 2013, the Company’s CEO, President and CFO formed Behavioral Healthcare Realty, LLC (“BHR”) and acquired all the membership interests in Concorde Real Estate (a VIE the Company has consolidated since June 27, 2012), and all the membership interests in Greenhouse Real Estate, LLC (“Greenhouse Real Estate”). Prior to being acquired by BHR, Greenhouse Real Estate was owned by the Company’s CEO, President and CFO.

Greenhouse Real Estate owns the real estate that is leased to one of the Company’s treatment facilities as discussed below. In connection with the formation of BHR, Greenhouse Real Estate obtained a $13.2 million credit facility from a bank that is guaranteed by the Company and its CEO and President. Based on the Company’s guarantee of BHR’s debt and its ability to direct the activities that most significantly impact the economic performance of BHR, the Company has determined that BHR is a VIE and that the Company is the primary beneficiary. Accordingly, the Company began consolidating BHR, which resulted in Greenhouse Real Estate being included in the Company’s consolidated financial statements, as of October 8, 2013. As of December 31, 2013, the Company has no equity interest in BHR.

In May 2013, the Company, through a wholly owned subsidiary, The Academy Real Estate, LLC (“Academy Real Estate”), acquired a property located in Riverview, Florida (just outside of Tampa, Florida) for a purchase price of $5.8 million. The Company was renovating this property and planned on converting it into a treatment facility. The Company funded the purchase price with $1.6 million from cash on hand and $3.6 million in proceeds from a new bank loan with an existing lender. In addition, a $0.6 million deposit was paid on behalf of the Company by Greenhouse Real Estate in March 2013 and was reimbursed to Greenhouse Real Estate by the Company in the third quarter of 2013. The Company spent $0.6 million on renovations from May 2013 through December 9, 2013 and capitalized $72,000 of interest related to this construction.

On December 10, 2013, the Company sold its membership interest in Academy Real Estate to BHR for $3.1 million plus the assumption of outstanding debt totaling $3.6 million which the Company has guaranteed. The Company received $0.8 million in cash and a promissory note receivable totaling $2.3 million. No gain or loss was recognized as a result of the transaction. Based on the Company’s guarantee of Academy Real Estate’s debt and its ability to direct the activities that most significantly impact the economic performance of Academy Real Estate, the Company has determined that it is a VIE and that the Company is the primary beneficiary. The

F-19

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

assets and liabilities of Academy Real Estate and the results of its operations were consolidated on December 10, 2013, and thus the results of Academy Real Estate have been included in the consolidated financial statements since its acquisition in May 2013. The sale of Academy Real Estate to BHR and the consolidation of Academy Real Estate immediately after the sale had no effect on the Company’s cash flows after eliminating intercompany transactions.

BHR made periodic distributions to its members from cash available for distribution during the year ended December 31, 2013.

Professional Groups

During 2013, the Company managed the Professional Groups. These Professional Groups employ physicians that treat the Company’s clients and bill the payor for their services. The Company provides management and administrative services to the Professional Groups in return for a management fee. The Company also provided the initial working capital to each Professional Group and in return recorded accounts receivable from the Professional Groups and will continue to provide additional funding required for operating purposes. The Professional Groups were formed at various dates in 2012 and 2013. As of December 31, 2013, three of the five Professional Groups are owned by the Company’s CEO. The remaining Professional Groups are 100% owned by a physician who is employed by the Company. Based on the Company’s ability to direct the activities that most significantly impact the economic performance of the Professional Groups, provide necessary funding and the obligation and likelihood of absorbing all expected gains and losses, the Company has determined that each of the Professional Groups is a VIE and the Company is the primary beneficiary. Although the Company was the primary beneficiary of the Professional Groups from their respective dates of formation, the Company did not consolidate the Professional Groups until October 1, 2013 because the results of operations prior to that date were not material.

The initial consolidations of the assets and liabilities of Greenhouse Real Estate and the Professional Groups were accounted for as business combinations. The initial consolidation of Academy Real Estate was accounted for as an asset purchase as Academy Real Estate’s assets are held for development and Academy Real Estate does not have any operations. The Company recorded the amounts that are associated with Greenhouse Real Estate, the Professional Groups and Academy Real Estate interests in the VIEs based upon the fair values of the assets and liabilities on the respective dates of the transactions as follows (in thousands):

	Greenhouse Real Estate as of October 8, 2013		Professional Groups as of October 1, 2013		Academy Real Estate as of December 10, 2013		Total
Cash	$	71	$	139	$	—	$	210
Accounts receivable		—		62		—		62
Prepaids and other current assets		218		—		—		218
Property and equipment, net		10,400		—		6,708		17,108
Other assets		19		—		—		19
Total assets consolidated		10,708		201		6,708		17,617
Notes payable		7,734		—		6,708		14,442
Accounts payable		104		51		—		155
Noncontrolling interest equity		2,870		150		—		3,020
Total liabilities and noncontrolling interest consolidated	$	10,708	$	201	$	6,708	$	17,617

F-20

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The results of operations for Concorde Real Estate from the consolidation date of June 27, 2012 are included in the consolidated statement of income for the year ended December 31, 2012 and include no revenues and loss before income taxes of $0.7 million. The results of operations for Greenhouse Real Estate from the consolidation date of October 8, 2013 are included in the consolidated statement of income for the year ended December 31, 2013 and include no revenues and loss before income taxes of $0.3 million. The results of operations for Academy Real Estate have been included in the consolidated statement of operations since the Company acquired the Riverview, Florida property in May 2013 and include no revenues or income before income taxes. The revenues of Concorde Real Estate and Greenhouse Real Estate consist of rental income from the Company and are eliminated in consolidation. The following table presents the unaudited pro forma revenues and income before income taxes had Concorde Real Estate Greenhouse Real Estate, Academy Real Estate and the Professional Groups been consolidated as of January 1, 2012 (in thousands):

	Revenues		Income before income taxes
Combined pro forma from January 1, 2012 – December 31, 2012	$	66,035	$	2,393
Combined pro forma from January 1, 2013 – December 31, 2013		115,712		2,548

6. Notes Receivable – Related Party

The Company has a note receivable from the Company’s President that totaled $250,000 and $250,000 as of December 31, 2012 and 2013, respectively. The note is non-interest bearing and there are no payment terms or a maturity date associated with this note. Accordingly, this note receivable is classified as noncurrent in the consolidated balance sheet. The outstanding balance was repaid in full in April 2014. The Company also had a note receivable from the Company’s CEO that totaled $50,000 at December 31, 2012. This note was repaid in full in 2013.

7. Property and Equipment, net

Property and equipment consisted of the following at December 31, 2012 and 2013 (in thousands):

	2012			2013
Computer equipment and software	$	1,268		$	2,267
Furniture and fixtures		5,587			4,212
Vehicles		819			835
Equipment under capital leases		—			1,163
Leasehold improvements		1,520			3,099
Construction in progress		8			8,718
Buildings		6,908			17,918
Land		743			2,538
Total property and equipment		16,853			40,750
Less accumulated depreciation and amortization		(1,526	)		(3,742	)
Net property and equipment	$	15,327		$	37,008

Depreciation and amortization expense for the years ended December 31, 2012 and 2013 was $1.1 million and $2.5 million, respectively.

F-21

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. Goodwill and Intangible Assets

Changes to goodwill during 2012 and 2013 were as follows (in thousands):

Balance at December 31, 2011	$	2,327
TSN Acquisition (see Note 5)		8,536
Balance at December 31, 2012		10,863
2013 activity		—
Balance at December 31, 2013	$	10,863

Other identifiable intangible assets and related accumulated amortization consisted of the following as of December 31, 2012 and 2013 (in thousands):

	Gross Carrying Amount				Accumulated Amortization
	December 31,				December 31,
	2012		2013		2012		2013
Trademarks and marketing intangibles	$	2,682	$	2,682	$	89	$	358
Non-compete agreements		1,257		1,257		84		335
Other		51		271		—		21
	$	3,990	$	4,210	$	173	$	714

Changes to the carrying value of identifiable intangible assets during 2012 and 2013 were as follows (in thousands):

Balance at December 31, 2011	$	—
TSN Acquisition (See Note 5)		3,939
Amortization expense		(173	)
Other additions		51
Balance at December 31, 2012		3,817
Amortization expense		(541	)
Other additions		220
Balance at December 31, 2013	$	3,496

The weighted-average amortization periods of the acquired intangible assets are as follows:

	Weighted-Average Amortization Period (in Years)
Trademarks and marketing intangibles		10
Non-compete agreements		5
Other		10

F-22

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

At December 31, 2013, all intangible assets are amortized using a straight-line method. Amortization expense expected to be recognized during fiscal years subsequent to December 31, 2013 is as follows (in thousands):

Year ended December 31,
2014	$	547
2015		547
2016		547
2017		463
2018		295
Thereafter		1,097
Total	$	3,496

9. Debt

A summary of the Company’s debt obligations, net of unamortized discounts, is as follows (in thousands):

	December 31,
	2012			2013
Non-related party debt:
Revolving line of credit	$	6,699		$	12,550
Variable interest entity debt		7,381			21,548
Acquisition-related debt		1,500			1,500
Asset purchases		777			1,203
Subordinated debt		657			682
Capital lease obligations		—			1,022
Total non-related party debt		17,014			38,505
Less current portion		(8,674	)		(15,164	)
Total non-related party debt, long-term	$	8,340		$	23,341
Related party debt:
Acquisition-related debt	$	6,141		$	4,389
Subordinated debt		175			181
Share repurchases		1,892			—
Total related party debt		8,208			4,570
Less current portion		(3,104	)		(795	)
Total related party debt, long-term	$	5,104		$	3,775

Revolving Line of Credit

In August 2011, the Company entered into a revolving line of credit (the “Revolving Line”) with a financial institution expiring on August 15, 2013 that permitted borrowings up to $4.5 million, subject to certain restrictions. The Revolving Line bore interest of the sum of one-month LIBOR plus 3.15% per annum. In March 2012, the borrowing limit was increased from $4.5 million to $10.0 million.

During the second quarter of 2013, the Revolving Line was amended to extend the maturity date to April 1, 2015 and to increase the maximum borrowing limit to the lesser of (i) $20.0 million or (ii) 70% of the Company’s eligible accounts receivable, subject to adjustment if the aggregate of all returns, rebates, discounts,

F-23

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

credits and allowances for the immediately preceding three months is less than 15% of the Company’s gross revenues for such period. The amended Revolving Line bears interest at one-month LIBOR, as defined in the agreement, plus 2.5% per annum (2.75% as of December 31, 2013). Interest is payable monthly and is calculated on a 360 day year.

In August 2013, the Company amended the Revolving Line’s borrowing base to permit borrowings up to the lesser of (i) $20.0 million or (ii) 80% of the Company’s eligible accounts receivable at any time prior to February 1, 2014, and 70% of the Company’s eligible accounts receivable at any time on or after February 1, 2014, subject to adjustment if the aggregate of all returns, rebates, discounts, credits and allowances for the immediately preceding three months is less than 8% of the Company’s gross revenues for such period. The Revolving Line is secured by the Company’s accounts receivable, deposit accounts and other rights to payment, inventory, and equipment, and is guaranteed jointly and severally by all of the Company’s subsidiaries that have significant operations and/or assets and the Company’s CEO and President. The outstanding balance under the Revolving Line was $6.7 million at December 31, 2012 and $12.6 million at December 31, 2013. The maximum unused available credit under the amended Revolving Line as of December 31, 2013 was $2.2 million based upon borrowing base restrictions.

The Revolving Line, as amended, requires the Company to maintain a tangible net worth ratio not greater than 2.50 to 1.00, a fixed charge coverage ratio not less than 1.25 to 1.00, and net income of at least $1.00, all determined as of each quarter end. The Revolving Line limits capital expenditures to $0.1 million in each fiscal year unless approved by the financial institution, limits additional borrowing to $50,000 during the term of the agreement unless approved by the financial institution, limits operating lease expense to $0.1 million in each fiscal year and prohibits the payment of dividends in cash or stock. The Revolving Line also contains a cross-default clause linking a default under the Revolving Line to the occurrence of a default by the Company under any other debt agreement, material lease commitment, contract, instrument or obligation.

The Company was not in compliance with certain financial covenants contained in the Revolving Line at the end of each quarter in 2012 and 2013, including as of December 31, 2012 and 2013, which created a cross-default with the Greenhouse Real Estate, Concorde Real Estate and Academy Real Estate debt agreements with the same lender, but for which the Company obtained waivers. The Company obtained a waiver for the covenant defaults for 2012. Additionally, the Company’s expenditures for capital expenditures, total operating leases and the incurring of additional indebtedness exceeded the limits specified in the Revolving Line for the year ended December 31, 2013. For the quarter ended March 31, 2014, the Company was not in compliance with the covenants regarding capital expenditures and additional indebtedness.

On April 15, 2014, the Revolving Line was amended and restated and included a waiver for the noncompliance of the financial covenants and negative covenants described in the preceding paragraph. The amended and restated revolving line contains new covenants that were negotiated in consideration of the Company’s operating budget over the term of the amended and restated revolving line. The amendment decreased the maximum borrowing limit to the lesser of (i) $15.0 million or (ii) 70% of the Company’s eligible accounts receivable, and also modified the borrowing base contingency, interest rate, certain covenants and limits for capital expenditures and additional debt. This amended and restated credit facility is discussed in more detail in Note 18.

Variable Interest Entity Debt

In conjunction with the consolidation of Concorde Real Estate in 2012 and the remaining BHR VIEs that were consolidated in 2013 (see Note 5), the Company’s variable interest entity debt totaled $7.4 million at December 31, 2012 and $21.6 million at December 31, 2013. The terms of the debt are discussed below.

F-24

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Concorde Real Estate

In conjunction with the consolidation of Concorde Real Estate on June 27, 2012, the Company assumed a $3.5 million promissory note which was refinanced in July 2012 and replaced with loans totaling $7.4 million in two tranches. The first tranche totaled $4.4 million and bore interest at 3.0% plus one-month LIBOR, with interest payable monthly, and required a lump sum principal payment in July 2013. The amount outstanding under the first tranche was $4.4 million at December 31, 2012. The second tranche totaled $3.0 million, bore interest at 2.0% plus the lender’s prime rate (3.25% at December 31, 2012), with interest payable monthly, and required a lump sum principal payment in July 2013. The amount outstanding under the second tranche was $3.0 million at December 31, 2012. The additional debt in 2012 resulted from borrowings to complete the renovation of the Desert Hope facility.

In May 2013, Concorde Real Estate refinanced these two outstanding loans with a $9.6 million note payable that matures on May 15, 2018. The additional debt in 2013 was used to redeem the preferred membership interests in Concorde Real Estate. The note requires monthly principal payments of $53,228 plus interest and a balloon payment of $6.6 million due at maturity. Interest is calculated based on a 360 day year and accrues at the Company’s option of either (i) one-month LIBOR (as defined in the agreement) plus 2.5%, with such rate fixed until the next monthly reset date, or (ii) floating at one-month LIBOR (as defined in the agreement) plus 2.5%. In the event that the Company elects the floating option for either two consecutive periods or a total of three periods, the floating rate increases by 0.25%. The interest rate at December 31, 2013 was 2.75%, and the amount outstanding at December 31, 2013 was $9.3 million.

The note is guaranteed by the Company and its CEO and President and is secured by a deed of trust and the assignment of certain leases and rents. The note contains financial covenants that require the Company to maintain a fixed charge coverage ratio of not less than 1.25 to 1.00. The note also contains a cross-default clause linking a default under the note to the occurrence of a default by any guarantor or an affiliate of a guarantor with respect to any other indebtedness.

Greenhouse Real Estate

Greenhouse Real Estate (the “Borrower”) entered into a $13.2 million construction loan facility (the “Construction Facility”) with a financial institution on October 8, 2013 to refinance existing debt related to a 70-bed facility and to fund the construction of an additional 60 beds at this facility located in Grand Prairie, Texas. Monthly draws may be made against the Construction Facility based on actual construction costs incurred. Interest, which is payable monthly, is calculated based on a 360 day year and accrues at the Company’s option of either (i) one-month LIBOR (as defined in the agreement) plus 3.0%, with such rate fixed until the next monthly reset date, or (ii) floating at one-month LIBOR (as defined in the agreement) plus 3.0%. In the event that the Company elects the floating option for either two consecutive periods or a total of three periods, the floating rate increases by 0.25%. At December 31, 2013 the outstanding Construction Facility was $8.7 million and the interest rate was 3.25%. The Construction Facility matures on October 31, 2014. The Company capitalized interest totaling $3,000 related to this Construction Facility during 2013.

At the Borrower’s option, the Construction Facility can be converted to a permanent term loan with an extended maturity of October 31, 2019 provided (i) there is no default, (ii) the construction is 100% complete, (iii) there shall have occurred no material adverse change, as determined by the financial institution in its sole discretion, in the financial condition of the Borrower and (iv) other terms and conditions are satisfied. The maximum amount that may be converted is 65% of the appraised value at the time of the conversion. If at the time of the conversion the loan value exceeds the 65% loan-to-value ratio, the Borrower is permitted to make principal payments to reduce the loan-to-value to the 65% threshold. In the event the Borrower does not elect to or is unable to convert the Construction Facility to a permanent term loan the Borrower is required to pay an exit

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AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

fee equal to 3.0% of the then outstanding balance. Principal payments at the time of the conversion are to be calculated based on a 15-year amortization schedule, and monthly principal and interest payments are required with a balloon payment at maturity. The permanent loan will bear interest at one-month LIBOR (as defined in the agreement) plus 2.5%, with such rate fixed for that monthly interest period. The Company intends to convert the Construction Facility to a permanent loan upon completion of construction as permitted in the agreement. Because the permanent loan contains contingencies other than the completion of the construction, the Company has classified the entire $8.7 million outstanding balance at December 31, 2013 as current.

The Construction Facility is secured by a deed of trust and the assignment of certain leases and rents and is guaranteed by the Company and two of BHR’s members who are also the CEO and President of the Company. The Borrower is required to maintain a minimum debt service coverage ratio of 1.25 to 1.00. The note also contains a cross-default clause linking a default under the Greenhouse Real Estate loan to the occurrence of a default by any guarantor or an affiliate of a guarantor with respect to any other indebtedness.

Academy Real Estate

In May 2013, the Company, through Academy Real Estate, obtained a $3.6 million note payable from a financial institution to fund a portion of the acquisition of the property located in Riverview, Florida (just outside of Tampa, Florida). The note payable matured on November 10, 2013 and was renewed under identical terms. As discussed in Note 5, in connection with the Company’s sale to BHR of its membership interests of Academy Real Estate on December 10, 2013, BHR assumed the $3.6 million note payable. Interest, which is payable monthly, is calculated based on a 360 day year and accrues at the Company’s option of either (i) one-month LIBOR (as defined in the agreement) plus 3.0%, with such rate fixed until the next monthly reset date or (ii) floating at one-month LIBOR (as defined in the agreement) plus 3.0%. In the event that the Company elects the floating option for either two consecutive periods or a total of three periods, the floating rate increases by 0.25%. The interest rate at December 31, 2013 was 3.165%. The note matured on February 10, 2014 and was renewed under the same terms described above, with an extended maturity date of July 14, 2014. The agreement requires the Company to maintain a minimum fixed charge coverage ratio of 1.25 to 1.00 and contains other restrictive financial covenants. The agreement also contains a cross-default clause linking a default under the Academy Real Estate note to the occurrence of a default by any guarantor or an affiliate of a guarantor with respect to any other indebtedness.

At December 31, 2013, the Company was in compliance with the financial covenants of the BHR debt. The instances of noncompliance under the Revolving Line created a cross-default with the Greenhouse Loan, the Concorde Loan and the Academy Loan. The Company obtained a waiver for the covenant defaults under the Revolving Line for 2012, and the amendment and restatement of our prior credit facility in April 2014 included a waiver for the noncompliance of the financial covenants and negative covenants that occurred under the Revolving Line in 2013 and the quarter ended March 31, 2014. We also obtained waivers for the cross-defaults under the Construction Facility, the Concorde Real Estate note payable and the Academy Real Estate note payable.

Acquisition Related Debt

TSN Acquisition – Related Party

The Company financed a portion of the TSN Acquisition consummated on August 31, 2012 with the following sources of debt. The Company entered into a $6.2 million subordinated note payable with the TSN Sellers. Under the terms of the agreement, the note is separated into the following tranches: (i) $2.2 million paid in equal monthly principal installments over 36 months, bearing interest at 5% per annum, (ii) $2.5 million due on August 31, 2015 (the “Balloon Payment”), bearing interest at 3.125% per annum and (iii) a contingent balloon payment of up to $1.5 million due on August 31, 2015 (the “Contingent Payment”), bearing interest at 3.125% per annum. The Contingent Payment is contingent on the achievement of certain performance metrics

F-26

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

over the term of the note. Due to the contingent nature of the Contingent Payment, a discount of approximately 13% was applied to the Contingent Payment to reflect the weighted-average probability the Contingent Payment would not be made. In April 2013, $0.5 million outstanding under the Balloon Payment was converted into 60,753 shares of the Company’s common stock at a conversion price of $8.23 per share. The Company estimates the fair value of the Contingent Payment each reporting period through an analysis of the TSN Sellers’ estimated achievement of the performance metrics specified in the agreement. Based upon this analysis, the Company determined a claw back of $0.5 million of the Contingent Payment exists at December 31, 2013 and, accordingly, has adjusted the outstanding balance of the Balloon Payment to $3.0 million at that date. In addition to the claw back on the Contingent Payment, the Company has included a reduction of 75,472 shares of common stock in the computation of its earnings per share for the year ended December 31, 2013 to reflect the claw back of those shares based upon this analysis. As of December 31, 2012 and 2013, the outstanding balance related to the seller subordinated notes payable was $5.8 million and $4.3 million, respectively.

The Company also entered into a $0.6 million subordinated promissory note with one of the TSN Sellers that matured on March 1, 2013. At December 31, 2012, the outstanding balance was $0.3 million. The note bore interest at 3.125% per annum and required monthly principal and interest payments of $0.1 million. The note was fully repaid in March 2013.

TSN Acquisition – Non-Related Party

The Company also entered into an agreement with a financial institution to borrow $2.5 million to fund a portion of the TSN Acquisition that matures on July 1, 2014. The note bears interest, which is payable monthly, at 5.0% plus one-month LIBOR (5.25% at December 31, 2013) and requires a lump sum payment on July 1, 2014. The agreement contains certain restrictive financial covenants, including a maximum ratio of total liabilities to tangible net worth. The Company prepaid $1.0 million in 2012. As of December 31, 2012 and 2013, the outstanding balance was $1.5 million.

Other

In connection with an acquisition in 2011, the Company entered into separate notes payable with the former owners. Under the terms of the agreement, the notes bear interest at 12% per annum, with interest payable monthly. The notes mature in November 2014. As of December 31, 2012 and 2013, the outstanding balance was $50,000.

Asset Purchases

The Company has various notes payable with third-party creditors primarily for the purchase of vehicles, furniture, and office equipment. The notes have maturity dates ranging from March 2014 to November 2017, with terms ranging from 36 to 72 months and interest rates ranging from 0.0% to 12.3% per annum. Monthly payments range from $200 to $4,600. As of December 31, 2012 and 2013, aggregate balances on these notes were $0.8 million and $0.5 million, respectively.

In June 2013 the Company borrowed $0.8 million from an existing lender to fund the purchase of equipment. The note bears interest, which is payable monthly, at one-month LIBOR plus 3.15% (which was 3.4% at December 31, 2013) and requires monthly principal payments of $16,250 commencing June 15, 2013, with final installment of unpaid principal due on May 15, 2017. At December 31, 2013, the outstanding balance was $0.7 million.

F-27

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other – Related Party

In November 2012, the Company received proceeds from a $1.5 million subordinated debt agreement with the Company’s CEO. The note bore interest at 12% per annum, with a lump sum payment due in November 2013. As of December 31, 2012, the outstanding balance was $1.5 million. In April 2013, the entire balance of this subordinated debt was converted into 182,260 shares of common stock at a conversion price of $8.23 per share, which management estimated to be fair value.

On April 28, 2011, the Company entered into an agreement with a former officer and stockholder of the Company for the repurchase of common and preferred shares held by the stockholder. Under the terms of the agreement, the Company issued a $0.6 million subordinated note payable and guaranteed other payments totaling $0.2 million to the stockholder. The outstanding balance of the note payable and guaranteed other payments at December 31, 2012 was $0.4 million, net of imputed interest. The balance of the note payable and the guaranteed other payments was fully paid in the second quarter of 2013.

Subordinated Debt Issued with Detachable Warrants (Related Party and Non-related Party)

In March and April 2012 the Company issued $1.0 million of subordinated promissory notes, of which $0.2 million was issued to a director of the Company. The notes bear interest at 12% per annum. The notes mature at various dates throughout 2015 and 2017. Interest is payable monthly and the principal amount is due, in full, on the applicable maturity date of the note. In connection with the issuance of these notes, the Company issued detachable warrants to the lenders to purchase a total of 71,705 shares of common stock at $1.00 per share. The warrants are exercisable at any time up to their expiration on March 31, 2022. The Company recorded a debt discount of $0.1 million related to the warrants which reduced the carrying value of the subordinated notes. As of December 31, 2012, the outstanding balance of the notes, net of the unamortized debt discount of $0.1 million, was $0.8 million, of which $0.2 million was owed to a director of the Company. As of December 31, 2013, the outstanding balance of the notes, net of the unamortized debt discount of $83,000, was $0.9 million, of which $0.2 million was owed to a director of the Company.

The Company calculated the fair value of warrants issued with the subordinated notes using the Black-Scholes valuation method. The following assumptions were used to value the warrants: a stock price of $2.13, an exercise price of $1.00, expected life of 10 years, expected volatility of 20%, risk free interest rates ranging from 2.1% to 4.0% and no expected dividend yield. In March 2014, warrants representing the right to purchase 67,931 shares of common stock were exercised and a total of 67,931 shares of common stock were issued to the exercising warrant holders, including 15,095 shares to a Company director.

Capital Lease Obligations

In August 2013, the Company entered into a $0.5 million capital lease with a third party leasing company for lab equipment and office furniture. The capital lease bears interest at 5.1% per annum and requires 36 monthly payments of $13,667. At the end of the lease term the Company may buy the equipment for $1. The outstanding balance under this capital lease at December 31, 2013 was $0.4 million.

In November 2013, the Company entered into a $0.3 million capital lease with a third party leasing company for equipment. The capital lease requires 60 monthly payments of $5,366 and the annual interest rate is 5.1%. At the end of the lease term the Company may buy the equipment for $1. The outstanding balance under this capital lease was $0.3 million at December 31, 2013.

During 2013, the Company entered into various other capital leases with third party leasing companies totaling $0.4 million for laboratory and other equipment. These leases have terms ranging from 36 to 60 months, with maturity dates ranging from November 2015 to November 2018, and interest rates ranging from 4.0% to

F-28

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5.1% per annum. Monthly payments range from $300 to $2,700. As of December 31, 2013, the aggregate balance of these notes was $0.3 million.

As of December 31, 2013, total assets under capital leases, net of accumulated amortization, were $1.0 million. Total obligations under capital leases at December 31, 2013 were $1.0 million of which $0.3 million was included in the current portion of long-term debt. There were no capital lease obligations outstanding at December 31, 2012.

A summary of future maturities of long-term debt, as of December 31, 2013, is as follows (in thousands):

Years ending December 31,	Non- Related Party			Related Party			Capital Lease Obligations			Total
2014	$	14,892		$	942		$	338		$	16,172
2015		13,749			3,719			338			17,806
2016		922			6			246			1,174
2017		1,280			181			123			1,584
2018		6,705			—			67			6,772
Thereafter		—			—			—			—
Total		37,548			4,848			1,112			43,508
Unamortized discount		(65	)		(278	)		—			(343	)
Amounts representing interest		—			—			(90	)		(90	)
Total, net of unamortized discount and interest	$	37,483		$	4,570		$	1,022		$	43,075

10. Brand Promise Guarantee

The Company established a Brand Promise guarantee program in September 2012. Under this promise the Company guarantees recovery for clients who successfully complete 90 consecutive days of treatment. In the event of a relapse following treatment, the client may return for an additional 30 days of treatment free of charge. The Company provides a provision for estimated future guarantee costs based on the number of eligible clients, the expected number of clients that will seek additional treatment (based on industry data) and the estimated costs to provide treatment for the guarantee period.

The following table details the changes in the accrued guarantee balances (in thousands):

	For the Year ended December 31,
	2012		2013
Balance at beginning of year	$	—	$	—
Guarantee provision		—		70
Guarantee claims		—		(10	)
Total	$	—	$	60

11. Stockholders’ Equity and Mezzanine Equity

During 2013 the Company sold 906,439 shares of its common stock in an exempt offering at $8.23 per share, which the Company’s management estimated to be fair value. Included in the total shares issued were 455,651 shares sold to directors of the Company and 3,038 shares sold to each of the CFO, Chief Operating Officer (“COO”) and the Vice President of Marketing. The Company issued 852,137 of these shares in March 2013

F-29

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

and 54,302 in April 2013. Additionally, 182,260 shares were issued to the Company’s CEO upon conversion of $1.5 million in subordinated debt and 60,753 shares were issued to a Vice President of the Company upon conversion of $0.5 million under the Balloon Payment issued by the Company (see Note 9).

In connection with the exempt offering described above, a Company employee subscribed for 12,150 shares of common stock at $8.23 per share, which the Company’s management estimated to be fair value. As consideration for the shares, the employee issued to the Company a subscription note receivable in the amount of $0.1 million. The Company is forgiving this subscription note receivable over a 12-month period ending on July 1, 2014. During 2013 the Company recorded $42,000 in compensation expense and additional paid-in capital related to this forgiveness.

In April 2013, the Company redeemed 444,434 shares of common stock from one of the TSN Sellers at $8.23 per share, which the Company’s management estimated to be fair value, for an aggregate purchase price of $3.7 million.

Mezzanine Equity

Share Imperfections

In 2008 preferred shares were issued by the Company’s previous board of directors prior to the timely filing of a Certificate of Designation with the Secretary of State of Nevada. Additionally, in 2008 certain common shares were issued by the previous board of directors of the Company that were in excess of the number of shares duly authorized by the Company’s Articles of Incorporation. The Company has classified these preferred and common shares as mezzanine equity at the original purchase price in the consolidated balance sheets because they do not meet the definition of permanent equity as a result of these legal imperfections.

To address these issues, AAC Holdings, Inc., a newly formed Nevada corporation (“Holdings”), conducted a voluntary private share exchange with certain stockholders of AAC, whereby holders representing 93.4% of the outstanding shares of common stock of AAC, that was classified in both Mezzanine Equity and Stockholders’ Equity, exchanged their shares on a one-for-one basis for shares of Holdings common stock (the “Private Share Exchange”). The Private Share Exchange was conditioned upon, among other things, a release by each exchanging stockholder of any and all potential claims arising from corporate actions that were not conducted in compliance with Nevada law. The Private Share Exchange was completed in the second quarter of 2014 (see Note 18).

Statement of Mezzanine Equity

Changes to mezzanine amounts during 2012 and 2013 were as follows (dollars in thousands):

	Noncontrolling Interest				American Addiction Centers, Inc.
	Series A Preferred				Series B Preferred						Common Shares
	Units		Amount		Shares			Amount			Shares			Amount
Balance at December 31, 2011		—	$	—		10,000		$	1,000			7,452,523		$	10,613
2012 activity		—		—		—			—			—			—
Balance at December 31, 2012		—		—		10,000			1,000			7,452,523			10,613
Stock buy-back		—		—		(10,000	)		(1,000	)		(171,240	)		(171	)
Issuance of preferred stock		28		1,400		—			—			—			—
Balance at December 31, 2013		28	$	1,400		—		$	—			7,281,283		$	10,442

In April 2013, the Company redeemed 171,240 common shares from the Company’s President at $8.23 per share, which the Company’s management estimated to be fair value, for an aggregate purchase price of $1.4

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

million. The redemption of these shares is reflected as a reduction to mezzanine equity at its carrying value, with the $1.3 million gain on the redemption of the shares reflected as a reduction in additional paid-in capital.

AAC Series B Preferred Stock

The Series B Preferred Stock (“Series B”) had no conversion or annual dividend rights; however, the Series B would participate in dividends in the same manner and amount of any dividend issued to common stockholders. The Series B had voting rights equal to 100 votes per share of Series B and voted together with common stockholders. The Series B had a liquidation value of $100 per share. As of December 31, 2012, the Company had 14,000 authorized shares of Series B. In the first quarter of 2013, the Company’s Board of Directors eliminated the Series B and all outstanding shares were repurchased for a de minimis amount.

BHR Series A Preferred (Variable Interest Entity)

In October 2013, BHR amended its limited liability company agreement to permit the issuance of Series A Preferred Units. In the fourth quarter of 2013, BHR received proceeds of $1.4 million from the sale of 28 Series A Preferred Units valued at $50,000 per unit. An entity controlled by the spouse of one of the Company’s directors purchased $200,000 of the Series A Preferred Units. The unit holders are entitled to receive a 12% per annum preferred return on their initial investment, payable quarterly in arrears, have no equity appreciation ability and limited voting rights that are conditioned upon BHR’s default on the distribution of the 12% preferred return. The Series A Preferred Units contain certain embedded issuer call and holder put provisions. BHR has the option to call and redeem all or any portion of the Series A Preferred Units for $50,000 per unit plus any accrued and unpaid preferred return at any time after the twelfth month of issuance. The holders of the Series A Preferred Units have a put right during three periods discussed below, that, if exercised, requires BHR to redeem 100% of the issued and outstanding Series A Preferred Units by making a payment equal to $50,000 per unit plus the accrued but unpaid preferred return. The holder may exercise the put right on the 36th month, 48th month and 60th month following the date of issuance for a 30-day period. In the event of a sale of a property owned by BHR, the holders of the Series A Preferred Units are entitled to the repayment of their initial capital contribution plus any accrued and unpaid preferred return. The Company has classified the Series A Preferred Units as noncontrolling interest as a part of mezzanine equity because the potential redemption is not within the complete control of BHR until the last put option period has expired. All of the outstanding Series A Preferred Units were redeemed in April 2014 (see Note 18).

12. Stock-Based Compensation Plans

The Company adopted the 2007 Stock Incentive Plan (“Incentive Plan”) in 2007. An aggregate of 2,500,000 shares of common stock are reserved for issuance pursuant to the Incentive Plan. The Incentive Plan is administered by the Board of Directors, which determines, subject to the provisions of the Incentive Plan, the employees, directors or consultants to whom incentives are awarded. The Board of Directors may award (i) “incentive stock options” within the meaning of Section 422 of the Internal Revenue Code of 1986, (ii) “non-qualified stock options” (options which do not meet the requirements of Section 422), (iii) shares of “restricted stock”, (iv) stock grants and (v) “stock bonuses.” Subject to the terms of the Incentive Plan, the Board of Directors may also determine the prices, expiration dates and other material features of any incentive award. As of December 31, 2013, no stock options had been granted under the Incentive Plan and no options were outstanding.

In December 2012, the Company awarded 170,157 shares of its common stock, at a fair market value of $8.23 per share, which the Company’s management estimated to be fair value, to the CFO of the Company. The Company issued these shares in March 2013. As a result of the award, the Company recorded $1.4 million of compensation expense and $1.0 million of additional compensation expense to satisfy the employee’s personal tax obligation related to the vesting of the grant during the year ended December 31, 2012. On December 31,

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2012, the Company also awarded 85,078 of unvested common stock, at a fair market value of $8.23 per share, which the Company’s management estimated to be fair value, to this same executive. These shares vested ratably at the end of each quarter in 2013. During the year ended December 31, 2013, the Company recorded $0.7 million of compensation expense and $0.5 million of additional compensation expense to satisfy the employee’s tax obligation related to the vesting of the grant. Such expenses are included on the Company’s consolidated statements of income under the caption “salaries, wages and benefits.”

In determining the fair value of the Company’s common stock the Company reviewed an independent third party valuation report, which used a discounted cash flow method applying a discount rate of 17.6%. Other factors considered in the Company’s valuation were the TSN Acquisition in August 2012, which provided an indication of a recent value established as a result of negotiation between sophisticated parties with substantial due diligence about both parties and a market transaction announced in November 2012 involving similar behavioral health companies.

In November 2013 the Company issued a total of 92,815 shares of restricted common stock to its COO, Vice President of Business Development and Vice President of Marketing under the Incentive Plan, of which 23,203 shares vested on December 31, 2013, and the remaining 69,612 shares vest ratably at the end of each of the first three quarters in 2014. The fair value on the award date was $10.19 per share, which the Company’s management estimated to be fair value. As a result of the award, the Company recorded $0.2 million of compensation expense and $0.1 million of additional compensation expense to satisfy the employees’ personal tax obligations related to the vesting of the grant during the fourth quarter of 2013. Such expenses are included on the Company’s consolidated statements of income under the caption “salaries, wages and benefits.”

The valuation of the Company’s common stock for the November stock award was determined in accordance with the guidelines outlined in the American Institute of Certified Public Accounts Practice Aid, Calculation of Privately-Held Company Equity Securities Issues as Compensation. The Company engaged a third party valuation firm to construct a probability-weighted expected return model (“PWERM”) and to assist and advise management in determining the appropriate inputs and metrics to the model. Because there was no public market for the Company’s common stock, the board of directors, with input from management, exercised significant judgment and considered numerous objective and subjective factors to determine the fair value of the Company’s common stock as of the November 14, 2013, including the following factors:

• previous third party valuations of the Company’s common stock;

• the price of the Company’s common stock sold to third-party investors;

• the value of the Company’s common stock issued in the TSN Acquisition in August 2012;

• a market transaction announced in November 2012 involving similar behavioral health companies;

• the valuation of a comparable public company;

• the Company’s operating and financial performance;

• current business conditions and projections;

• the Company’s stage of development;

• the likelihood of achieving a liquidity event for the shares of the Company’s common stock; such as an initial public offering or sale of the Company, given prevailing market conditions; and

• any adjustment necessary to recognize a lack of marketability for common stock.

The Company used PWERM in determining the Company’s equity value for the November 2013 grant. PWERM is an analysis of future values of a company for several likely liquidity scenarios that may include a

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

strategic sale or merger, an initial public offering or the dissolution of a company, as well as a company’s enterprise value assuming the absence of a liquidity event. For each possible future event, the future values of the company are estimated at certain points in time. This future value is then discounted to a present value using an appropriate risk-adjusted discount rate. Then, a probability is estimated for each possible event based on the facts and circumstances as of the valuation date. Using PWERM, the Company estimated the value of the Company’s common stock based upon an analysis of varying values for the Company’s common stock assuming (i) the completion of an initial public offering, (ii) a merger or acquisition and (iii) the continuation as a private company. The Company applied a percentage probability weighting to each of these scenarios based on the Company’s expectations of the likelihood of each event. Based on the foregoing PWERM analysis, the fair value of the November 19, 2013 grants of 92,815 shares of restricted common stock was determined to be $10.19 per share, as estimated by the Company’s management.

A summary of share activity under the Incentive Plan is set forth below:

	Shares			Weighted- average Grant Date Fair Value
Unvested at December 31, 2011		—			—
Granted		255,235		$	8.23
Vested		(170,157	)		8.23
Unvested at December 31, 2012		85,078			8.23
Granted		92,815			10.19
Vested		(108,281	)		8.65
Unvested at December 31, 2013		69,612		$	10.19

13. Restructuring Expenses

During the first half of 2013, the Company implemented restructuring plans to centralize its call centers and to close one of the facilities that was acquired in the TSN Acquisition. Restructuring and exit charges of $0.8 million were expensed in 2013 related to these restructuring activities.

Leading Edge, the New Jersey treatment facility that was acquired in the TSN Acquisition, was closed in June 2013. Management made the decision to exit the facility because the amenities and the service offerings at the facility were inconsistent with the Company’s long-term strategy. As a result of the facility closure, the Company recorded restructuring charges of $0.5 million, including payroll, severance and other employee related costs of $0.2 million and facility exit charges of $0.3 million. The facility exit costs include ongoing lease obligations directly related to closing the facility. We estimate that approximately $0.1 million of cash payments related to lease obligations will be made from 2014 through January 2017 as the related leases expire.

Restructuring expenses related to centralizing the call centers totaled $0.3 million in 2013, which included $0.1 million related to payroll, severance and other employee related costs associated with a headcount reduction of 22 employees, employee relocation costs of $0.1 million and $0.1 million of facility exit costs (net of $0.1 million in sublease income). The facility exit costs relate to an ongoing lease obligation. The Company estimates that approximately $0.2 million of total cash payments related to this obligation, excluding $0.1 million in sublease income on this lease, will be made from 2014 through October 2015 as the related lease expires. To determine the facility exit costs certain assumptions were made related to sublease rates and common area maintenance charges.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following table summarizes the restructuring liability (in thousands):

	Payroll, Severance and Other Employee Related Costs			Relocation Costs			Facility Costs			Total
Leading Edge Facility Closure
January 1, 2013 Liability	$	—		$	—		$	—		$	—
Charges		184			—			292			476
Payments		(184	)		—			(114	)		(298	)
December 31, 2013 Liability	$	—		$	—		$	178		$	178
Call Centers Consolidation
January 1, 2013 Liability	$	—		$	—		$	—		$	—
Charges		90			113			127			330
Payments		(90	)		(113	)		(26	)		(229	)
December 31, 2013 Liability	$	—		$	—		$	101		$	101
Summary for Call Center and Leading Edge
January 1, 2013 Liability	$	—		$	—		$	—		$	—
Costs accrued		274			113			419			806
Cash payments		(274	)		(113	)		(140	)		(527	)
December 31, 2013 Liability	$	—		$	—		$	279		$	279

The remaining restructuring liability at December 31, 2013 is classified in the consolidated balance sheet as accrued liabilities of $0.1 million and other long-term liabilities of $0.2 million.

14. Income Taxes

Income tax expense consisted of the following for the years ended December 31, 2012 and 2013 (in thousands):

	2012		2013
Current:
Federal	$	879	$	1,587
State		232		528
Total current tax expense		1,111		2,115
Deferred:
Federal		5		(675	)
State		32		(825	)
Total deferred tax expense		37		(1,500	)
Total income tax expense	$	1,148	$	615

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AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s effective income tax rate for the years ended December 31, 2012 and 2013 reconciles with the federal statutory rate as follows:

	2012			2013
Federal statutory rate		35.0	%		35.0	%
State income taxes, net of federal tax benefit		6.7			4.4
Non-deductible expenses		4.2			8.1
Change in valuation allowance		—			4.1
Uncertain tax positions		—			2.8
Other differences		(1.6	)		0.4
Effective income tax rate on income applicable to American Addiction Centers, Inc.		44.3			54.8
Loss (income) attributable to noncontrolling interest from consolidated VIEs		6.8			(25.6	)
Effective income tax rate on income before income taxes		51.1	%		29.2	%

The decrease in the Company’s effective tax rate for 2013 compared to 2012 resulted primarily from the impact of the VIEs included within the Company’s financial statements. The VIEs consist primarily of flow-through entities and are thus not taxable for federal income tax purposes.

Deferred income tax assets (liabilities) are comprised of the following at December 31, 2012 and 2013 (in thousands):

	2012			2013
Accounts receivable	$	290		$	—
Employee compensation		198			540
Operating loss carryforwards		706			1,211
Accrued litigation		—			959
Other		133			142
Valuation allowances		(678	)		(989	)
Total deferred tax assets		649			1,863
Property, equipment and amortization		(2,304	)		(2,480	)
Accounts receivable		(1,498	)		(1,036	)
Total deferred tax liabilities		(3,802	)		(3,516	)
Net deferred tax liabilities	$	(3,153	)	$	(1,653	)

The balance sheet classification of deferred tax assets (liabilities) at December 31, 2012 and 2013 was as follows (in thousands):

	2012			2013
Current	$	873		$	676
Long-term		(4,026	)		(2,329	)
Total	$	(3,153	)	$	(1,653	)

During 2013 the Company’s valuation allowance increased by $0.3 million to $1.0 million at December 31, 2013, as the Company determined that it was more likely than not that certain of its state operating loss carryforwards will not be realized.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The statutes of limitations applicable for federal income tax purposes and for substantially all states with which the Company has a nexus have expired through 2009. However, the Company has net operating loss carryforwards from closed tax years which could be adjusted upon an audit. The Company has not been notified of any federal or state income tax examinations. As of December 31, 2012 and 2013, the Company has $0 and $0.1 million of uncertain tax positions, respectively. At December 31, 2013, the Company had $17.6 million in state net operating losses which expire at various dates beginning in 2027.

15. Fair Value of Financial Instruments

The carrying amounts reported at December 31, 2012 and 2013 for cash and cash equivalents, accounts receivable, prepaid expenses and other current assets, accounts payable and accrued liabilities approximate fair value because of the short-term maturity of these instruments and are categorized as Level 1 within the GAAP fair value hierarchy. The fair value of the Company’s revolving line of credit is categorized as Level 2. The carrying amount of the Company’s debt approximates fair value because interest rates approximate the current rates available to the Company.

The Company has debt with variable and fixed interest rates. The fair value of debt with fixed interest rates was determined using the quoted market prices of debt instruments with similar terms and maturities, which are considered Level 2 inputs. The fair value of debt with variable interest rates was also measured using Level 2 inputs, including good faith estimates of the market value for the particular debt instrument, which represent the amount an independent market participant would provide, based upon market observations and other factors relevant under the circumstances. The carrying value of such debt approximated its estimated fair value at December 31, 2012 and 2013.

Intangible assets are measured at fair value on a nonrecurring basis. These assets are classified in Level 3 of the fair value hierarchy. Goodwill and other indefinite-lived intangibles are tested for impairment at least annually, or more frequently if circumstances indicate that the carrying amount exceeds fair value.

The Company estimates the fair values of goodwill and other indefinite-lived intangibles utilizing multiple measurement techniques. The estimation is primarily determined based on an estimate of future cash flows (income approach) discounted at a market derived weighted-average cost of capital. The income approach has been determined to be the most representative of fair value because the Company’s equity does not have an active trading market. Other unobservable inputs used in these valuations include management’s cash flow projections and estimated terminal growth rates. The valuation of indefinite-lived intangible assets also includes an unobservable input for royalty rate, which is based on rates used by comparable industries.

The useful lives of definite-lived intangible assets (customer relationships) are evaluated whenever events or circumstances warrant a revision to the remaining amortization period. The fair value of definite-lived intangible assets is based on estimated cash flows from the future use of the asset, discounted at a market derived weighted-average cost of capital.

No impairment charges were recorded related to goodwill or other intangible assets for the years ended December 31, 2012 and 2013.

Long-lived assets are measured at fair value on a nonrecurring basis and are classified in Level 3 of the fair value hierarchy. The fair value is estimated utilizing unobservable inputs, including appraisals on real estate as well as evaluations of the marketability and potential relocation of other assets in similar condition and similar market areas. The Company analyzes long-lived assets on an annual basis for any triggering events that would necessitate an impairment test. No impairment charges were recorded in 2012 or 2013.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

16. Commitments and Contingencies

Operating Leases

The Company has entered into various operating leases expiring through October 2018. Commercial properties under operating leases primarily include space required to perform client services and space for administrative facilities. Rent expense was $3.6 million and $4.6 million for the years ended December 31, 2012 and 2013, respectively. Included in such amounts were related party rent expenses totaling $1.2 million and $1.3 million for the years ended December 31, 2012 and 2013, respectively.

Concorde Real Estate

As discussed in Note 5, the Company, through Concorde Treatment Center, leased property under a triple net operating lease with Concorde Real Estate. Lease payments commenced in August 2012 and these rental payments have been eliminated in consolidation.

Greenhouse Real Estate

The Company leased a treatment facility from Greenhouse Real Estate. Certain of the Company’s common stockholders and the Company’s CEO, President and CFO collectively owned approximately 55% of Greenhouse Real Estate until 2013, at which time the Company’s CEO, President and CFO acquired all the outstanding membership interests of Greenhouse Real Estate. The initial lease was for a period of five years and the Company had an option to extend the lease for an additional five years.

On October 1, 2012, the Company executed an amendment to the lease agreement to provide for an increase in the rent payable by the Company from $90,000 per month to $135,000 per month. The Company further amended the lease on October 1, 2013 to provide for an annual adjustment to the base rent on January 1, based upon the difference in the Consumer Price Index from the prior year. As discussed in Note 5, on October 8, 2012 Greenhouse Real Estate was acquired by BHR, a consolidated VIE of the Company. Rental expense under the lease for 2012 was $1.2 million and was $1.3 million for the period from January 1, 2013 through October 8, 2013. The Greenhouse Real Estate lease transactions have been eliminated in consolidation since October 8, 2013.

The future minimum lease payments under non-cancelable operating leases (exclusive of leases with consolidated VIEs) with remaining terms of one or more years as of December 31, 2013 consisted of the following (in thousands):

Years ending December 31,	Annual Payments
2014	$	1,126
2015		809
2016		629
2017		192
2018		23
Thereafter		—
Total	$	2,779

The Company recognizes rent expense on a straight line basis with the difference between rent expense and rent paid recorded as deferred rent. Such amount is included in accrued liabilities in the accompanying consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Litigation

In April 2013, two wage and hour claims were filed against the Company in the State of California and were subsequently consolidated into a class action. In June 2013 the parties agreed to settle the substantive claims for $2.6 million during mediation. Once the settlement became probable, the Company established a $2.6 million reserve during the second quarter of 2013 for this matter. Subsequently, on April 9, 2014 and following court approval, the Company settled this matter with payment of $2.6 million. The total amount of the litigation settlement of $2.6 million is reflected in accrued liabilities at December 31, 2013 and classified as litigation settlement in the consolidated statement of income for the year ended December 31, 2013.

American Addiction Centers, Inc. v. James D. Bevell, Jr.

On February 3, 2014, AAC filed an action against James D. Bevell in the U.S. District Court in the Middle District of Tennessee, alleging breach of contract and tortious interference with business practices arising out of Mr. Bevell’s breach of his non-compete agreements. Mr. Bevell is the former Chief Innovation Officer of AAC and owns 4.5% of the outstanding common stock of AAC as of April 15, 2014. AAC’s complaint seeks preliminary and permanent injunctive relief, declaratory judgment, compensatory damages, punitive damages for intentional, fraudulent, reckless or grossly negligent conduct, reasonable attorneys’ fees and costs and such other legal, equitable or general relief for the breach of contract and associated wrongs. On March 5, 2014, the court granted a preliminary injunction enjoining Mr. Bevell and his officers, agents, servants, employees, attorneys and all persons in active concert or participation with him from violating the non-competition and non-solicitation provisions contained in his employment agreement with AAC and in the purchase agreement related to the TSN Acquisition.

Horizon Blue Cross Blue Shield of New Jersey v. Avee Laboratories et al.

On September 4, 2013, Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) filed an amended complaint in the Superior Court of New Jersey against several defendants, including Leading Edge Recovery Center, LLC, one of the Company’s subsidiaries. Leading Edge Recovery Center, LLC formerly operated a drug and alcohol treatment facility in New Jersey. Horizon alleges the defendants submitted and caused others to submit unnecessary drug tests in violation of New Jersey law and is seeking recovery for monetary and treble damages. The Company is vigorously defending these claims and believes them to be without merit. The Company cannot provide any assurance that it will prevail in this matter, nor can it reasonably estimate its potential liability if there is an adverse outcome. Further, the Company has made a demand for indemnification upon James D. Bevell for the portion of these claims relating to the period prior to the TSN Acquisition. The Company cannot provide any assurance that it will prevail in its indemnity claim with Mr. Bevell for any portion of these claims.

The Company is aware of various other legal matters arising in the ordinary course of business. To cover these types of claims, the Company maintains insurance it believes to be sufficient for its operations, although, some claims may potentially exceed the scope of coverage in effect. Plaintiffs in these matters may request punitive or other damages that may not be covered by insurance. After taking into consideration the evaluation of such matters by the Company’s legal counsel, the Company’s management believes the outcome of these matters will not have a material impact on the Company’s consolidated financial position, results of operations and cash flows.

401(k) Plan

The Company has a qualified 401(k) savings plan (the “Plan”) which provides for eligible employees (as defined) to make voluntary contributions to the Plan. The Company makes contributions to the Plan based upon the participants’ level of participation, which is fully vested at the time of contribution. For the year ended December 31, 2012 and 2013, the Company contributions under this Plan were $40,000 and $0.2 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Other

In April 2013, the Company entered into a purchase agreement to acquire a vacant facility located in Ringwood, New Jersey for a purchase price of $6.5 million with the intent to convert the existing building into a 150-bed treatment facility. The Company paid $0.3 million in earnest money that will be applied to the purchase price if the purchase is consummated. The purchase agreement provides an extended due diligence period that ends 45 days after the Company has obtained all necessary regulatory and zoning approvals to use the property as a drug and alcohol rehabilitation center. The Company is still in the process of obtaining the necessary regulatory and zoning approvals and there are no assurances that the Company will be successful in obtaining these approvals.

In October 2013, the CEO, President and CFO of the Company, who also own membership interests in BHR, personally borrowed $1.9 million from a financial institution and used the proceeds to make a $1.9 million equity contribution to BHR. The balance of this term loan was $1.8 million at December 31, 2013. In connection with the BHR Acquisition, the Company assumed this term loan, which was subsequently refinanced effective April 15, 2014 with a new term loan facility with Reliant Bank with the Company as borrower and guarantor. This term loan matures in April 2015. The Company’s amended and restated revolving line of credit requires that this term loan be repaid with proceeds in the event of an initial public offering.

In November 2013, the Company entered into purchase agreements to acquire two outpatient centers; one in Arlington, Texas and the other in Las Vegas, Nevada. The purchase price of the Arlington facility is $0.8 million. Earnest money of $0.1 million was deposited pursuant to that agreement, which will be deducted from the purchase price at closing if the purchase is consummated. On March 28, 2014, the Company completed the purchase of this property (see Note 18). A non-refundable fee of $10,000 was also paid in accordance with the Arlington facility purchase agreement. The Las Vegas facility purchase price is $2.0 million. Earnest money of $0.1 million was deposited pursuant to the Las Vegas purchase agreement, which will be deducted from the purchase price at closing if the purchase is consummated. The purchase agreement for the Arlington facility was assigned to a subsidiary of BHR in December 2013, and the purchase agreement for the Las Vegas facility was assigned to a subsidiary of BHR in January 2014.

17. Related Parties

In addition to the related party transactions discussed elsewhere in the notes to the consolidated financial statements, the consolidated financial statements include the following related party transactions. The Company has at times received advances from or made advances to current significant stockholders. These amounts have been included in the consolidated balance sheets and notated as “related party accounts” (see Notes 3, 6 and 9).

In 2012, the Company transitioned its outsourced medical billing and collection process from third-party service providers to Clinical Revenue Management Services, LLC (“CRMS”), an alternative service provider. The two owners and officers of CRMS are the spouses of the CEO and President of the Company. Pursuant to a written service agreement, CRMS is paid (i) the greater of $0.1 million per month or 5.0% of the monthly collected revenues and (ii) 7.0% of the Professional Groups collected revenues. The service agreement includes a one year term with automatic renewals unless one party terminates the agreement with 90 days’ notice. Total amounts paid to CRMS under the service agreement during the years ended December 31, 2012 and 2013 were $0.6 million and $2.8 million, respectively. The Company recognized expense of $0.6 million in 2012 and $3.4 million in 2013 associated with this service agreement. Amounts included in accounts payable at December 31, 2012 and 2013 were $0 and $0.6 million, respectively. The Company leased office space and furniture to CRMS under a month to month arrangement in 2013, and total rental income recognized in 2013 was $0.1 million. During 2012 CRMS occupied space in the Company’s building but no rents were charged by the Company. The Company classifies these sublease proceeds as an offset to rents and leases in the consolidated statements of income.

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AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company is a party to certain placement agreements with Vaco, LLC (“Vaco”). One of the Company’s directors, who is also a stockholder and debt holder, is an executive officer and an equity owner of Vaco. Vaco provides the Company with accounting professionals and other staff, either on a temporary or permanent basis. Vaco is typically paid 25% of each employee’s first year salary as a placement fee or paid an hourly rate for temporary professional services. Total payments and expense recognized related to this agreement in 2012 and 2013 were $0.1 million and $0.1 million, respectively.

From March 2013 through April 2013, the Company issued 906,089 shares of common stock, at a price of $8.23 per share, which the Company’s management estimated to be fair value, to certain accredited investors, for an aggregate offering price of $7.5 million. In addition, as part of this offering, an employee of the Company subscribed for 12,150 shares of common stock at $8.23 per share. As consideration for the shares, the employee issued the Company a subscription note receivable in the amount of $0.1 million. The Company is forgiving this subscription note receivable over a 12-month period.

18. Subsequent Events

The Company has evaluated subsequent events through May 2, 2014, the date the financial statements were available to be issued. In addition to the subsequent events discussed in Notes 6, 9, 11 and 16 to the consolidated financial statements, the following events have occurred subsequent to December 31, 2013.

From February through April 2014, the Company received proceeds of $6.0 million, net of $12,500 in issuance costs, from the sale of 471,843 shares of its common stock at $12.76 per share, which the Company’s management estimated to be fair value, in an exempt common stock offering. Included within the total shares sold in the Company’s 2014 private placement were 74,449 shares sold to directors of the Company, 7,837 shares sold to the Company’s General Counsel and Secretary, 3,918 shares sold to the Company’s COO and 1,959 shares sold to one of the Company’s Vice Presidents. The share price was based, in part, on a December 2013 independent valuation analysis.

In January and February of 2014, BHR sold 8.5 units of Series A Preferred Units, valued at $50,000 per unit, with proceeds to BHR of $0.4 million, net of issuance costs of $11,300. A director of the Company purchased 5 Series A Preferred Units for $0.3 million at $50,000 per unit. After the sale, 36.5 Series A Preferred Units were outstanding totaling $1.8 million. On April 15, 2014, BHR redeemed all 36.5 outstanding Series A Preferred Units for $1.8 million.

On April 15, 2014, BHR amended and restated its Limited Liability Company Agreement which among other things to change the rights and privileges of the Series A Preferred Units. On April 15, 2014, BHR received $7.7 million in net proceeds from the sale of 160 ($50,000 per unit) of its non-controlling Series A Preferred Units to BNY Alcentra Group Holdings, Inc. (“Alcentra”). Alcentra received a 1% fee at closing and is entitled to receive a 12% per annum preferred return on its initial investment, payable quarterly in arrears. In the event of a non-payment, the preferred return compounds on a quarterly basis computed on an actual/360 day basis. In the event of non-payment for three months, the preferred return increases to 15.0%, and further increases to 18.0% if not paid beginning in the fourth month, with each increase compounding on a quarterly basis computed on an actual/360 day basis. The Series A Preferred Units contain certain embedded issuer call and holder put provisions. BHR has the option to redeem a minimum of 40 Series A Preferred Units and up to 100% of the outstanding Series A Preferred Units for $50,000 per unit, plus (i) any accrued and unpaid preferred return and (ii) a call premium of (a) 3.0% through April 15, 2015, (b) 2.0% from April 16, 2015 through April 15, 2017 and (c) no premium any time after April 15, 2017. Alcentra has a put right that, if exercised, requires BHR to redeem all of the issued and outstanding Series A Preferred Units by making a payment equal to $50,000 per unit plus the accrued but unpaid preferred return. Alcentra may exercise its put right for a period of 30 days following the 36th

F-40

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

month or 48th month after the date of issuance and at any time following the 60th month after the date of issuance. In the event of a sale of a property owned by BHR, Alcentra is entitled to the repayment of its initial capital contribution plus (i) any accrued and unpaid preferred return and (ii) any applicable call premium. As long as Alcentra owns at least 60 Series A Preferred Units less any Series A Preferred Units repurchased by BHR, distributions to affiliates of BHR are limited to $3.0 million annually.

The Series A Preferred Units generally have no voting or approval rights regarding the management of BHR. However, the holders of Series A Preferred Units are entitled to vote with respect to (i) any action that would change the rights or restrictions of the Series A Preferred Units in a way that would adversely affect such holders and (ii) the creation or issuance of any other security convertible into or exercisable for any equity security of BHR having rights, preferences or privileges senior to the common units of BHR. In addition, unanimous approval of all BHR members, including the holders of Series A Preferred Units, is required to approve the sale by BHR of more than 50% of its real property, more than 50% of the voting or economic rights of any BHR subsidiary or the merger, consolidation, sale of all or substantially all of the assets of BHR or sale of a majority of the common units of BHR.

In addition, so long as Alcentra owns at least 60 Series A Preferred Units, subject to adjustment for certain BHR redemptions, the manager of BHR may not engage in certain transactions without the approval of a majority of the Series A Preferred Unit holders, including, without limitation, the following: (i) liquidate, dissolve or wind up the business of BHR; (ii) authorize the issuance of additional Series A Preferred Units or any class or series of equity securities with rights, preferences or parity with or senior to that of the Series A Preferred Units; (iii) declare or pay any cash distribution or make any other distribution not permitted under the limited liability company agreement; (iv) pay any management or similar fees; (v) pay rebates or reduce payments payable by any primary tenants or (vi) make payments to affiliates of BHR in excess of $3.0 million per year in the aggregate.

In March 2014, the Company granted 3,713 shares of fully vested common stock to each of its five non-employee directors. The Company will recognize $0.2 million of compensation expense in the first quarter of 2014 as a result of these grants. On April 11, 2014 the Company granted 49,496 shares of restricted common stock to its General Counsel and Secretary under the Incentive Plan, of which 24,748 shares vested immediately with the remaining 24,748 shares vesting on April 10, 2015. The fair value on the award date was $12.76 per share, as estimated by the Company’s management. As a result of the award, the Company will record $0.3 million of compensation expense, $0.2 million of additional compensation expense to satisfy the employee’s personal tax obligation related to the vesting of the grant during the second quarter of 2014, and $0.3 million ratably over the one-year vesting period. Additionally, on April 11, 2014, the Company granted 3,019 shares of its common stock to a non-executive employee. The Company will record $39,000 of compensation expense and $30,000 of additional compensation expense to satisfy the employee’s personal tax obligation related to the stock grant during the second quarter of 2014. On April 17, 2014, the Company redeemed a total of 9,113 shares of its common stock at $12.76 per share, which the Company’s management estimates to be fair value, for an aggregate redemption price of $0.1 million.

On March 28, 2014, the Company completed the purchase of a property in Arlington, Texas for $0.7 million.

On April 15, 2014, the Company entered into a Second Amended and Restated Credit Facility (the “Credit Facility”) with Wells Fargo Bank, National Association (the “Agent”). The Credit Facility makes available to the Company a $15.0 million revolving line of credit (the “Amended Revolving Line”) and two term loans in the outstanding principal amounts of $0.6 million (“Term Loan A”) and $1.5 million (“Term Loan B”).

F-41

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Amended Revolving Line bears interest at one-month LIBOR, plus an applicable margin that is determined by the Company’s leverage ratio, as defined by the agreement, at the end of each quarter. A quarter-end leverage ratio of 4.75 to 1.00 or above results in an applicable margin of 3.00%, a ratio below 4.75 to 1.00 and equal to or above 4.00 to 1.00 results in an applicable margin of 2.75%, and a ratio below 4.00 to 1.00 results in an applicable margin of 2.50%. Term Loan A bears interest at LIBOR plus 3.15%, and Term Loan B bears interest at LIBOR plus 5.00%. The borrowing base for the Amended Revolving Line is 70% of the Company’s eligible accounts receivable and was established with the understanding that, among other things, the aggregate of all returns, rebates, discounts, credits and allowances, exclusive of the initial adjustment to record net revenues at the time of billing, for the immediately preceding three months will be less than 20% of gross revenues for such period (up from the previous restriction of 8%). If the aggregate of all returns, rebates, discounts, credits and allowances, exclusive of the initial adjustment to record net revenues at the time of billing, for the immediately preceding three months is greater than 20% of gross revenues for such period, or if there exists any other matters, events, conditions or contingencies that the Agent reasonably believes may affect payment of any portion of the Company’s accounts, the Agent may reduce the borrowing base from 70% of the Company’s eligible accounts receivable to a lower percentage.

The amendment and restatement removed the previous covenants that required the Company to maintain a minimum tangible net worth ratio and minimum net income. The Credit Facility requires the Company to achieve minimum net revenues and adjusted EBITDA for each quarter, determined on a rolling four quarters basis, of no less than 85% of net revenues and adjusted EBITDA for the immediately preceding four quarters. The Credit Facility generally defines adjusted EBITDA as consolidated net income plus (i) interest expense, (ii) depreciation and amortization expense, (iii) tax expense, (iv) non-cash stock compensation, (v) one-time legal and restructuring costs incurred in 2014 in connection with the AAC private placement, the Reorganization Transactions, the BHR preferred equity transactions, and this offering in an amount not to exceed $2.5 million, (vi) one-time legal, accounting and other transaction costs incurred in connection with a permitted acquisition in 2014 or in any subsequent fiscal year in an aggregate amount not to exceed $0.2 million in any fiscal year, (vii) one-time settlement costs paid on or about April 9, 2014, in connection with certain wage and settlement charges in California in an amount not to exceed $2.5 million, (viii) one-time restructuring costs incurred in 2013 in connection with the closing of the Leading Edge operations and the consolidation of call centers in an amount not to exceed $0.8 million, and (ix) to the extent approved by Wells Fargo Bank in writing, other one-time and non-recurring charges.

The Credit Facility also requires the Company to achieve a fixed charge coverage ratio of not less than 1.25 to 1.00 for each quarter, determined on a rolling four quarter basis, and achieve a liquidity covenant (as described in the agreement) of no less than $9.0 million on and as of July 14, 2014. Finally, the Credit Facility includes a maximum leverage ratio covenant, whereby the ratio of funded debt to EBITDA must not be greater than the ratios set forth below on a rolling four quarter basis:

Fiscal Quarter End	Maximum Leverage Ratio
June 30, 2014		5.00:1.00
September 30, 2014		4.75:1.00
December 31, 2014 and thereafter		3.75:1.00

The Credit Facility limits aggregate capital expenditures (as defined by the agreement and which exclude, among other items, capital expenditures made by BHR and its subsidiaries that are funded with debt permitted under the agreement or proceeds from this offering and permitted acquisitions under the agreement) to $3.0 million in each fiscal year and limits capital lease debt and other purchase money debt to $2.3 million.

F-42

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Credit Facility also contains customary events of default including, but not limited to, failure to make payments under the Credit Facility, materially incorrect representations, breaches of covenants (subject to a 20 day cure period in the case of certain covenants), cross-default to any other material indebtedness, bankruptcy and insolvency events, change of control, and the failure of guarantees or security to remain in full force and effect.

As of April 15, 2014, the Amended Revolving Line had an outstanding balance of $13.1 million, the interest rate was 3.15%, and the maximum unused available credit was $0.9 million based upon the borrowing base restrictions.

As discussed in Note 11, certain common shares issued in 2008 under the previous Board of Directors exceeded the number of shares duly authorized by the Company’s Articles of Incorporation. These common shares are classified as mezzanine equity in the consolidated balance sheets because they do not meet the definition of permanent equity as a result of these legal imperfections. To cure these legal imperfections and in preparation for an initial public offering, in the first quarter of 2014, Holdings initiated a voluntary private share exchange with certain of the Company’s stockholders whereby Holdings offered to certain of the Company’s stockholders the opportunity to receive one share of Holdings common stock for (i) each share of the Company’s common stock held by such stockholders and (ii) a release from claims arising from or related to the share imperfections described in Note 11 (collectively, the “Private Share Exchange”). The Private Share Exchange was conditioned upon, among other things, holders of the Company’s common stock who participated in the Share Exchange validly assigning and transferring to Holdings at least 90% of the outstanding shares of the Company prior to the expiration of the Private Share Exchange. The Private Share Exchange expired in April 2014, and at the expiration of the Private Share Exchange 93.6% of the holders of the Company’s common stock had exchanged their shares for shares of common stock of Holdings, and the Company became a majority-owned subsidiary of Holdings. The transaction between the Company and Holdings was accounted for similar to a common control transaction resulting in the assets, liabilities and equity of the Company being carried over at their historical basis.

Substantially concurrent with the Private Share Exchange, Holdings acquired all of the outstanding common membership interests of BHR by issuing 521,999 shares of Holdings common stock and $3.0 million in cash and the assumption of a $1.8 million term loan from a financial institution to our CEO, President and CFO (collectively, the “BHR Acquisition”). The original proceeds from this loan were used to repay a loan related to Greenhouse Real Estate, LLC and was accounted for as an additional capital contribution in BHR. Holdings refinanced the assumed loan and is required to make monthly principal payments of $35,855 to a financial institution, plus 5.0% interest and a balloon payment of $1.4 million in April 2015. In the event of an initial public offering (“IPO”), prior to April 2015 the Credit Facility requires that the Company immediately repay the $1.8 million assumed and refinanced term loan with proceeds from the IPO. Prior to the BHR Acquisition, BHR was controlled by the CEO, President and CFO of the Company. BHR owns the real property associated with treatment facilities, which are leased to the Company, as well as other properties that are currently in development or are being held for future development. The acquisition of BHR was accounted for as an acquisition of additional ownership interests in a variable interest entity that does not result in a change of control of that subsidiary, as BHR was already being consolidated as a VIE in accordance with ASC 810 (Consolidation) and, accordingly, we recognized $4.7 million of the $11.8 million in fair value of consideration transferred (consisting of $3.0 million cash consideration, the $1.8 million term loan assumed and the net deferred tax assets of $0.1 million). The Company eliminated the noncontrolling interest attributable to BHR of $4.3 million with the excess of fair value over the carrying value of noncontrolling interest recorded as a reduction to additional paid-in capital of $0.9 million.

Additionally, substantially concurrent with the Private Share Exchange and the BHR Acquisition, Holdings acquired all of the outstanding membership interests of CRMS in exchange for $0.5 million in cash and

F-43

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

149,144 shares of Holdings common stock (collectively, the “CRMS Acquisition”, and collectively with the Private Share Exchange and BHR Acquisition, the “Reorganization Transactions”). Holdings accounted for the CRMS Acquisition as a business combination based on the fair value of the consideration transferred. While the purchase price allocation is preliminary, Holdings expects to recognize approximately $2.4 million of goodwill in connection with the CRMS Acquisition.

The Company’s management estimated the fair value of shares of restricted common stock of Holdings issued in connection with the BHR Acquisition and the CRMS Acquisition to be $13.41 per share as of April 11, 2014. In addition to factoring in the prior valuation analyses described above, the Company also analyzed a new valuation report prepared by an independent third party with respect to the valuation of Holdings taking into account the Private Share Exchange, CRMS Acquisition and BHR Acquisition. In particular, the valuation report analyzed the potential impact of the then-proposed Reorganization Transactions on the valuation of Holdings, such as the increase in 2013 pro forma net income as a result of BHR results of operations being included for all of 2013. The valuation report also noted that the impact of the BHR Acquisition on the enterprise value would be mixed, as the additional EBITDA generated at the Holdings level due to recapture rents and cash and non-cash expenses was not sufficient to overcome the negative impact on enterprise value of BHR’s debt outstanding for the entire year. With respect to CRMS, the analysis determined that it would allow the recapture of additional EBITDA (on a pro forma basis for 2013) due to a combination of recapture revenues (commissions no longer paid) and the expected cost savings. In determining the fair value of our common stock, the Company also considered the strong investor demand in the recent private placement of AAC common stock from February 2014 through April 2014 at $12.76 per share, the improved projected results of operations for the remainder of 2014, positive revenue trends and the higher probability of an initial public offering in 2014. Based on the foregoing analysis, the Company determined the fair value of Holdings common stock as of April 11, 2014 to be $13.41 per share.

As a result of the Reorganization Transactions, Holdings now owns (i) 93.6% of the outstanding common stock of the Company, (ii) 100% of the outstanding common membership interests in BHR and (iii) 100% of the outstanding membership interests in CRMS.

F-44

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31, 2013		(Unaudited) March 31, 2014
	(in thousands except share amounts)
Assets
Current assets
Cash and cash equivalents (variable interest entity—2013: $441; 2014: $145)	$	2,012	$	4,340
Accounts receivable, net of allowances of $13,320 and $16,623, respectively (variable interest entity—2013: $169; 2014: $280)		24,567		26,576
Notes and other receivables – related party		—		664
Deferred tax assets		676		751
Prepaid expenses and other current assets (variable interest entity—2013: $173; 2014: $118)		2,274		2,727
Total current assets		29,529		35,058
Property and equipment, net (variable interest entity—2013: $29,257; 2014: $31,662)		37,008		39,702
Goodwill		10,863		10,863
Intangible assets, net		3,496		3,345
Note receivable – related party		250		—
Other assets (variable interest entity—2013: $142; 2014: $222)		492		589
Total assets	$	81,638	$	89,557

— The assets denoted as assets of the consolidated variable interest entity (VIE) can only be used to settle obligations of the consolidated VIE.

See accompanying notes to condensed consolidated financial statements.

F-45

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	December 31, 2013			(Unaudited) March 31, 2014
	(in thousands except share amounts)
Liabilities, Mezzanine Equity and Stockholders’ Equity
Current liabilities
Accounts payable	$	1,895		$	3,119
Accrued liabilities (variable interest entity—2013: $172; 2014: $289)		10,455			10,412
Current portion of long-term debt (variable interest entity—2013: $12,932; 2014: $14,614)		15,164			16,981
Current portion of long-term debt—related party		795			813
Total current liabilities		28,309			31,325
Deferred tax liabilities (variable interest entity—2013: $23; 2014: $0)		2,329			2,092
Long-term debt, net of current portion (variable interest entity—2013: $8,616; 2014: $8,456)		23,341			23,648
Long-term debt – related party, net of current portion		3,775			3,573
Other long-term liabilities		159			133
Total liabilities		57,913			60,771
Commitments and contingencies (Note 14)
Mezzanine equity including noncontrolling interest (see Note 10)
Common stock		10,442			10,442
Noncontrolling interest–Series A Preferred (variable interest entity)		1,400			1,825
Total mezzanine equity including noncontrolling interest		11,842			12,267
Stockholders’ equity
Common stock, $0.001 par value: 15,000,000 shares authorized; 2,481,114 and 2,919,640 shares issued 2,036,680 and 2,452,002 outstanding at December 31, 2013 and March 31, 2014, respectively		2			3
Common stock subscribed, net of subscription receivable of $58 in 2013 and $33 in 2014		42			67
Additional paid-in capital		9,450			14,185
Treasury stock, at cost		(3,671	)		(3,671	)
Retained earnings		2,360			3,379
Total stockholders’ equity of American Addiction Centers, Inc.		8,183			13,963
Noncontrolling interest		3,700			2,556
Total stockholders’ equity including noncontrolling interest		11,883			16,519
Total liabilities, mezzanine equity and stockholders’ equity	$	81,638		$	89,557

— The denoted VIE liabilities are only claims against the general credit of the Company to the extent that the Company is liable under its guarantee of the VIE note payable to a financial institution of $21,548 and $23,070 at December 31, 2013 and March 31, 2014, respectively.

See accompanying notes to condensed consolidated financial statements.

F-46

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

	Three Months Ended March 31,
	2013			2014
	(in thousands, except share and per share amounts)
Revenues	$	29,438		$	30,083
Operating expenses
Salaries, wages and benefits		10,911			11,544
Advertising and marketing		3,148			3,290
Professional fees		2,055			2,497
Client related services		1,897			2,457
Other operating expenses		2,806			2,723
Rentals and leases		1,335			470
Provision for doubtful accounts		2,640			4,173
Depreciation and amortization		683			1,077
Total operating expenses		25,475			28,231
Income from operations		3,963			1,852
Interest expense		410			354
Other (income) expense		(38	)		42
Income before income tax expense		3,591			1,456
Income tax expense		1,352			615
Net income		2,239			841
Less: net loss (income) attributable to noncontrolling interest		(146	)		178
Net income attributable to American Addiction Centers, Inc.		2,093			1,019
Deemed contribution-redemption of Series B Preferred		1,000			—
Net income available to American Addiction Centers, Inc. common stockholders	$	3,093		$	1,019
Basic earnings per share	$	0.36		$	0.11
Diluted earnings per share	$	0.36		$	0.11
Weighted average shares outstanding:
Basic		8,503,928			9,175,580
Diluted		8,566,920			9,225,073

See accompanying notes to condensed consolidated financial statements.

F-47

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three Months Ended March 31,
	2013			2014
	(in thousands)
Cash flows from operating activities:
Net income	$	2,239		$	841
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for doubtful accounts		2,640			4,173
Depreciation and amortization		683			1,077
Equity compensation		176			496
Amortization of discount on notes payable		8			8
Deferred income taxes		(651	)		(312	)
Decrease in fair value of contingent related-party note payable		(91	)		—
Changes in operating assets and liabilities:
Accounts receivable		(7,155	)		(6,182	)
Prepaid expenses and other assets		(815	)		(453	)
Accounts payable		760			1,224
Accrued liabilities		12			(93	)
Other long term liabilities		—			(26	)
Net cash provided by (used in) operating activities		(2,194	)		753
Cash flows from investing activities:
Purchase of property and equipment		(556	)		(3,335	)
Collection (payment) of notes receivable, related party		50			(414	)
Purchase of other assets		(302	)		(97	)
Net cash used in investing activities		(808	)		(3,846	)
Cash flows from financing activities:
Proceeds from revolving line of credit, net		3,301			500
Proceeds from note payable		—			1,682
Payments on notes payable and capital leases		(84	)		(350	)
Payments on notes payable – related party		(610	)		(185	)
Proceeds from sale of common stock		6,982			4,264
Proceeds from offering of preferred stock		—			425
Distributions to noncontrolling interest		(254	)		(915	)
Net cash provided by financing activities		9,335			5,421
Net increase in cash and cash equivalents		6,333			2,328
Cash and cash equivalents, beginning of the period		740			2,012
Cash and cash equivalents, end of the period	$	7,073		$	4,340

(continued on next page)

F-48

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

	Three months ended March 31,
	2013			2014
	(in thousands)
Supplemental disclosures of cash flow information:
Cash and cash equivalents paid for:
Interest, net of capitalized interest of $0 and $41 in 2013 and 2014, respectively	$	252		$	322
Income taxes, net of refunds of $35 and $30 in 2013 and 2014, respectively	$	418		$	26
Supplemental information on non-cash investing and financing transactions:
Acquisition of equipment through capital lease	$	(238	)	$	(285	)
Retirement of Series B Preferred Stock	$	1,000		$	—
Accrued dividends of a variable interest entity	$	—		$	51

See accompanying notes to condensed consolidated financial statements.

F-49

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands except per share amounts)	Common Stock									Additional Paid-in Capital/ (Distributions in Excess of Paid-in Capital)		Treasury Stock			Retained Earnings		Total Stockholders’ Equity (Deficit) of American Addiction Centers, Inc.		Non- Controlling Interests			Total Stockholders’ Equity (Deficit)
	Shares Outstanding		Amount		Subscribed		Subscriptions Receivable
Balance at December 31, 2013		2,036,680	$	2	$	100	$	(58	)	$	9,450	$	(3,671	)	$	2,360	$	8,183	$	3,700		$	11,883
Common stock issued		328,826		1		—		25			4,196		—			—		4,222		—			4,222
Exercise of common stock warrants		67,931		—		—		—			68		—			—		68		—			68
Common stock granted and issued under stock incentive plan		18,565		—		—		—			471		—			—		471		—			471
Accrued dividends to mezzanine noncontrolling interests		—		—		—		—			—		—			—		—		(51	)		(51	)
Distribution to noncontrolling interest holders, net		—		—		—		—			—		—			—		—		(915	)		(915	)
Net income		—		—		—		—			—		—			1,019		1,019		(178	)		841
Balance at March 31, 2014		2,452,002	$	3	$	100	$	(33	)	$	14,185	$	(3,671	)	$	3,379	$	13,963	$	2,556		$	16,519

See accompanying notes to condensed consolidated financial statements.

F-50

AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

American Addiction Centers, Inc., a Nevada corporation (collectively with its subsidiaries, the “Company”), was incorporated on February 27, 2007. The Company, headquartered in Brentwood, Tennessee, provides substance abuse treatment services for individuals with drug and alcohol addiction. The Company also provides treatment services for clients struggling with behavioral health disorders, including disorders associated with obesity. Currently, the Company, through its subsidiaries, operates six substance abuse treatment facilities located in Texas, California, Florida and Nevada and a facility in Tennessee that provides treatment services for men and women who struggle with obesity-related behavioral disorders.

2. Basis of Presentation

Principles of Consolidation

The Company conducts its business through limited liability companies and C-corporations, each of which is a wholly owned subsidiary of the Company. The accompanying consolidated financial statements include the accounts of the Company, its wholly owned subsidiaries, the accounts of variable interest entities (“VIEs”) in which the Company is the primary beneficiary, and certain professional groups through rights granted to the Company by contract to manage and control an entity’s business.

During the quarter ended March 31, 2013, the Company consolidated one real estate VIE and consolidated three real estate VIEs during the quarter ended March 31, 2014. Each of these VIEs were acquired in 2013 by Behavioral Healthcare Realty, LLC (“BHR”), which is also a VIE. The Company also consolidated five professional groups (“Professional Groups”) that constitute VIEs as of March 31, 2014 and none as of March 31, 2013. BHR leases two treatment facilities to the Company under long-term triple net leases and is renovating and constructing additional treatment facilities that it will lease to the Company. The Company is the primary beneficiary as a result of its guarantee of BHR’s debt. The Company has management services arrangements with five Professional Groups that provide medical services to the Company’s treatment facilities. The Professional Groups, which the Company controls, are responsible for the supervision and delivery of medical services. Based on the Company’s ability to direct the activities that most significantly impact the economic performance of the Professional Groups, provide necessary funding and the obligation and likelihood of absorbing all expected gains and losses, the Company has determined that it is the primary beneficiary. The accompanying consolidated balance sheets as of December 31, 2013 and March 31, 2014 include assets of $30.2 million and $32.4 million, respectively, and liabilities of $21.7 million and $23.4 million, respectively, related to the VIEs. The accompanying consolidated statements of income for the three months ended March 31, 2013 and 2014 include net (loss) income attributable to noncontrolling interest of ($0.1) million and $(0.2) million, respectively, related to the VIEs.

All significant intercompany accounts and transactions within the Company have been eliminated in consolidation.

The accompanying condensed consolidated financial statements are unaudited, with the exception of the December 31, 2013 balance sheet which was derived from audited financial statements. These consolidated condensed financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim reporting. Certain disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) have been condensed or omitted pursuant to such rules and regulations.

In presenting the consolidated condensed financial statements in accordance with US GAAP, management makes estimates and assumptions that affect the amounts reported and related disclosures. Estimates, by their nature, are based on judgments and available information. Accordingly, actual results could differ from

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those estimates. In management’s opinion, the consolidated condensed financial statements contain all normal recurring adjustments necessary for a fair presentation of interim results reported. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These financial statements should be read in conjunction with the audited financial statements of the Company included elsewhere in this prospectus.

Certain reclassifications have been made to prior period to conform to the current period presentation.

3. General and Administrative Costs

The majority of the Company’s expenses are “cost of revenue” items. Costs that could be classified as general and administrative expenses include the Company’s corporate overhead costs, which were $7.0 million and $5.2 million for the three months ended March 31, 2013 and 2014, respectively.

4. Earnings Per Share

Earnings per share (“EPS”) is calculated using the two-class method required for participating securities. Series B Preferred Stock was entitled to dividends at the rate equal to that of common stock.

Undistributed earnings allocated to these participating securities are subtracted from net income in determining net income attributable to common stockholders. Net losses, if any, are not allocated to these participating securities. Basic EPS is computed by dividing net income attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period. Common shares outstanding include both the common shares classified as mezzanine equity and those classified as equity.

For the calculation of diluted EPS, net income attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities, including awards under stock-based payment arrangements. Diluted EPS attributable to common stockholders is computed by dividing net income attributable to common stockholders by the weighted-average number of fully diluted common shares outstanding during the period.

The following tables reconcile the numerator and denominator used in the calculation of basic and diluted EPS for the three months ended March 31, 2013 and 2014 (in thousands except share and per share amounts):

	Three Months Ended March 31,
	2013		2014
Numerator
Net income attributable to American Addiction Centers, Inc.	$	2,093	$	1,019
Plus: redemption of Series B Preferred deemed contribution		1,000		—
Net income available to common shares	$	3,093	$	1,019
Denominator
Weighted-average shares outstanding – basic		8,503,928		9,175,580
Dilutive securities		62,992		49,493
Weighted-average shares outstanding – diluted		8,566,920		9,225,073
Basic earnings per share	$	0.36	$	0.11
Diluted earnings per share	$	0.36	$	0.11

The Company has included common stock that is classified as mezzanine equity in the denominator for both basic and diluted EPS calculations in 2013 and 2014.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

5. Accounts Receivable and Allowance for Doubtful Accounts

A summary of activity in the Company’s allowance for doubtful accounts is as follows (in thousands):

Balance at December 31, 2013	$	13,320
Additions charged to provision for bad debts		4,173
Accounts written off, net of recoveries		(870	)
Balance at March 31, 2014	$	16,623

For the three months ended March 31, 2013, approximately 12.1% of the Company’s revenues were reimbursed by Blue Cross Blue Shield of California. No other payor accounted for more than 10% of revenue reimbursements for the three months ended March 31, 2013.

For the three months ended March 31, 2014, approximately 16.1% of the Company’s revenues were reimbursed by Anthem Blue Cross Blue Shield of Colorado, 13.6% were reimbursed by Aetna and 12.4% were reimbursed by United Behavioral Health. No other payor accounted for more than 10% of revenue reimbursements for the three months ended March 31, 2014.

6. Notes and Other Receivables – Related Party

The Company has a note receivable from the Company’s President that totaled $250,000 as of December 31, 2013 and March 31, 2014. The note is non-interest bearing and the Company and the President agreed during the three month period ending March 31, 2014 that the note receivable would be repaid in April 2014 in connection with the acquisition of BHR (see Note 15). The outstanding balance was repaid in full in April 2014. Accordingly, this note receivable as of March 31, 2014 was classified as current in the consolidated balance sheets. The Company also has other non-interest bearing accounts receivable from the Company’s President totaling approximately $342,000 and $72,000 from the Company’s CEO at March 31, 2014 ($0 and $0 at December 31, 2013). In March 2014, both parties agreed that these accounts receivable would be repaid prior to the initial public offering (the “IPO”) of AAC Holdings, Inc. (“Holdings”), a newly formed Nevada corporation, expected to occur in 2014. All amounts due from the Company’s CEO and President are classified as current assets in notes and other receivables – related party in the condensed consolidated balance sheets.

7. Property and Equipment, net

Property and equipment consisted of the following (in thousands):

	December 31, 2013			March 31, 2014
Computer equipment and software	$	2,267		$	3,141
Furniture and fixtures		4,212			4,059
Vehicles		835			835
Equipment under capital lease		1,163			1,448
Leasehold improvements		3,099			3,107
Construction in progress		8,718			11,324
Building		17,918			17,918
Land		2,538			2,538
Total property and equipment		40,750			44,370
Less accumulated depreciation and amortization		(3,742	)		(4,668	)
	$	37,008		$	39,702

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Acquired Property

In November 2013, the Company entered into a purchase agreement to acquire an outpatient center in Arlington, Texas for $0.8 million. Earnest money of $0.1 million was deposited pursuant to that agreement. On March 28, 2014, the Company completed the purchase of this property by paying the $0.7 million balance of the purchase price. The Company has accounted for the transaction as an asset purchase.

8. Goodwill and Intangible Assets

The Company’s business comprises a single reporting unit for impairment test purposes. For the purposes of these analyses, the Company’s estimates of fair value are based on the income approach, which estimates the fair value of the Company based on its future discounted cash flows. In addition to the annual impairment reviews, impairment reviews are performed whenever circumstances indicate a possible impairment may exist. The Company performed its most recent goodwill impairment testing as of December 31, 2013 and did not incur an impairment charge. The Company’s goodwill balance was $10.9 million at December 31, 2013 and March 31, 2014.

Other identifiable intangible assets and related accumulated amortization consisted of the following as of December 31, 2013 and March 31, 2014 (in thousands):

	Gross Carrying Amount				Accumulated Amortization
	December 31, 2013		March 31, 2014		December 31, 2013		March 31, 2014
Trademarks and marketing intangibles	$	2,682	$	2,682	$	358	$	425
Non-compete agreements		1,257		1,257		335		398
Other		271		271		21		42
	$	4,210	$	4,210	$	714	$	865

Changes to the carrying value of identifiable intangible assets during the quarter ended March 31, 2014 were as follows (in thousands):

Balance at December 31, 2013		3,496
Amortization expense		(151	)
Balance at March 31, 2014	$	3,345

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

9. Notes Payable and Revolving Line of Credit

A summary of the Company’s debt obligations, net of unamortized discounts, is as follows (in thousands):

	December 31, 2013			March 31, 2014
Non-related party debt:
Revolving line of credit	$	12,550		$	13,050
Variable interest entity debt		21,548			23,070
Acquisition-related debt		1,500			1,500
Asset purchases		1,203			1,086
Subordinated debt		682			689
Capital lease obligations		1,022			1,234
Total non-related party debt		38,505			40,629
Less current portion		(15,164	)		(16,981	)
Total non-related party debt, long-term	$	23,341		$	23,648
Related party debt:
Acquisition-related debt	$	4,389		$	4,204
Subordinated debt		181			182
Total related party debt		4,570			4,386
Less current portion		(795	)		(813	)
Total related party debt, long-term	$	3,775		$	3,573

Revolving Line of Credit

In August 2011, the Company entered into a revolving line of credit (the “Revolving Line”) with a financial institution expiring on August 15, 2013. During the second quarter of 2013, the Revolving Line was amended to extend the maturity date to April 1, 2015 and to increase the maximum borrowing limit to the lesser of (i) $20.0 million or (ii) 70% of the Company’s eligible accounts receivable, subject to adjustment if the aggregate of all returns, rebates, discounts, credits and allowances for the immediately preceding three months is less than 15% of the Company’s gross revenues for such period. The amended Revolving Line bears interest at one-month LIBOR, as defined in the agreement, plus 2.5% per annum (2.75% as of December 31, 2013 and March 31, 2014, respectively). Interest is payable monthly and is calculated on a 360 day year.

In August 2013, the Company amended the Revolving Line’s borrowing base to permit borrowings up to the lesser of (i) $20.0 million or (ii) 80% of the Company’s eligible accounts receivable at any time prior to February 1, 2014, and 70% of the Company’s eligible accounts receivable at any time on or after February 1, 2014, subject to adjustment if the aggregate of all returns, rebates, discounts, credits and allowances for the immediately preceding three months is less than 8% of the Company’s gross revenues for such period. The Revolving Line is secured by the Company’s accounts receivable, deposit accounts and other rights to payment, inventory, and equipment, and is guaranteed jointly and severally by all of the Company’s subsidiaries that have significant operations and/or assets and the Company’s CEO and President. The outstanding balance under the Revolving Line was $12.6 million at December 31, 2013 and $13.1 million at March 31, 2014. The maximum unused available credit under the amended Revolving Line as of March 31, 2014 was $1.8 million based upon borrowing base restrictions.

The Revolving Line, as amended, requires the Company to maintain a tangible net worth ratio not greater than 2.50 to 1.00, a fixed charge coverage ratio not less than 1.25 to 1.00, and net income of at least

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

$1.00, all determined as of each quarter end. The Revolving Line limits capital expenditures to $0.1 million in each fiscal year unless approved by the financial institution, limits additional borrowing to $50,000 during the term of the agreement unless approved by the financial institution, limits operating lease expense to $0.1 million in each fiscal year and prohibits the payment of dividends in cash or stock. The Revolving Line also contains a cross-default clause linking a default under the Revolving Line to the occurrence of a default by the Company under any other debt agreement, material lease commitment, contract, instrument or obligation.

The Company was not in compliance with certain financial covenants contained in the Revolving Line as of December 31, 2013 and March 31, 2014. Additionally, the Company’s expenditures for capital expenditures, total operating leases and the incurring of additional indebtedness exceeded the limits specified in the Revolving Line for the year ended December 31, 2013. For the quarter ended March 31, 2014, the Company was not in compliance with the covenants regarding capital expenditures and additional indebtedness.

These covenant violations created a cross-default with the Greenhouse Real Estate, LLC, Concorde Real Estate, LLC and The Academy Real Estate, LLC debt agreements with the same lender, but for which the Company obtained waivers.

On April 15, 2014, the Revolving Line was amended and restated and included a waiver for the noncompliance of the financial covenants and negative covenants described in the following paragraphs.

On April 15, 2014, the Company entered into the Second Amended and Restated Credit Agreement (the “Credit Facility”) with Wells Fargo Bank, National Association. The Credit Facility makes available to the Company a $15.0 million revolving line of credit, subject to borrowing base limitations (the “Amended Revolving Line”), and amended and restated two existing term loans in the outstanding principal amounts of $0.6 million (“Term Loan A”) and $1.5 million (“Term Loan B”). In June 2014, the Company repaid in full the $1.5 million outstanding balance of Term Loan B.

The Amended Revolving Line bears interest at one-month LIBOR, plus an applicable margin that is determined by the Company’s leverage ratio, as defined by the agreement, at the end of each quarter. A quarter-end leverage ratio of 4.75 to 1.00 or above results in an applicable margin of 3.00%, a ratio below 4.75 to 1.00 and equal to or above 4.00 to 1.00 results in an applicable margin of 2.75%, and a ratio below 4.00 to 1.00 results in an applicable margin of 2.50%. Term Loan A bears interest at LIBOR plus 3.15%. The borrowing base for the Amended Revolving Line is 70% of the Company’s eligible accounts receivable and was established with the understanding that, among other things, the aggregate of all returns, rebates, discounts, credits and allowances, exclusive of the initial adjustment to record net revenues at the time of billing, for the immediately preceding three months will be less than 20% of gross revenues for such period (up from the previous restriction of 8%). If the aggregate of all returns, rebates, discounts, credits and allowances, exclusive of the initial adjustment to record net revenues at the time of billing, for the immediately preceding three months is greater than 20% of gross revenues for such period, or if there exists any other matters, events, conditions or contingencies that the Agent reasonably believes may affect payment of any portion of the Company’s accounts, the Agent may reduce the borrowing base from 70% of the Company’s eligible accounts receivable to a lower percentage.

The amendment and restatement removed the previous covenants that required the Company to maintain a minimum tangible net worth ratio and minimum net income. The Credit Facility requires the Company to achieve minimum net revenues and adjusted EBITDA for each quarter, determined on a rolling four quarters basis, of no less than 85% of net revenues and adjusted EBITDA for the immediately preceding four quarters. The Credit Facility generally defines adjusted EBITDA as consolidated net income plus (i) interest expense, (ii) depreciation and amortization expense, (iii) tax expense, (iv) non-cash stock compensation, (v) one-time legal and restructuring costs incurred in 2014 in connection with the Company’s private placement, the reorganization transactions (see Note 15), the BHR preferred equity transactions (see Note 15), and the IPO of Holdings in an

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

amount not to exceed $2.5 million, (vi) one-time legal, accounting and other transaction costs incurred in connection with a permitted acquisition in 2014 or in any subsequent fiscal year in an aggregate amount not to exceed $0.2 million in any fiscal year, (vii) one-time settlement costs paid on or about April 9, 2014, in connection with certain wage and settlement charges in California in an amount not to exceed $2.5 million, (viii) one-time restructuring costs incurred in 2013 in connection with the closing of the Leading Edge operations and the consolidation of call centers in an amount not to exceed $0.8 million, and (ix) to the extent approved by Wells Fargo Bank in writing, other one-time and non-recurring charges.

The Credit Facility also requires the Company to achieve a fixed charge coverage ratio of not less than 1.25 to 1.00 for each quarter, determined on a rolling four quarter basis, and achieve a liquidity covenant (as described by the agreement) of no less than $9.0 million on and as of July 14, 2014. In connection with the June 2014 prepayment of Term Loan B, the parties to the Credit Facility agreed to permanently waive this liquidity covenant (see Note 15). Finally, the Credit Facility includes a maximum leverage ratio covenant, whereby the ratio of funded debt to EBITDA must not be greater than the ratios set forth below on a rolling four quarter basis:

Fiscal Quarter End	Maximum Leverage Ratio
June 30, 2014		5.00:1.00
September 30, 2014		4.75:1.00
December 31, 2014 and thereafter		3.75:1.00

The Credit Facility limits aggregate capital expenditures (as defined by the agreement and which exclude, among other items, capital expenditures made by BHR and its subsidiaries that are funded with debt permitted under the agreement or proceeds from this offering and permitted acquisitions under the agreement) to $3.0 million in each fiscal year and limits capital lease debt and other purchase money debt to $2.3 million.

The Credit Facility also contains customary events of default including, but not limited to, failure to make payments under the Credit Facility, materially incorrect representations, breaches of covenants (subject to a 20 day cure period in the case of certain covenants), cross-default to any other material indebtedness, bankruptcy and insolvency events, change of control, and the failure of guarantees or security to remain in full force and effect.

In March 2014, the Company entered into a $0.3 million capital lease with a third party leasing company for lab equipment. The capital lease bears interest at 5.2% per annum and requires 60 monthly payments of $5,368. At the end of the lease term, the Company may buy the equipment for $1. The outstanding balance under this capital lease at March 31, 2014 was $0.3 million.

10. Mezzanine Equity

Share Imperfections

In 2008, preferred shares were issued by the Company’s previous board of directors prior to the timely filing of a Certificate of Designation with the Secretary of State of Nevada. Additionally in 2008, certain common shares were issued by the previous board of directors of the Company that were in excess of the number of shares duly authorized by the Company’s Articles of Incorporation. The Company has classified these preferred and common shares as mezzanine equity at the original purchase price in the condensed consolidated balance sheets because they do not meet the definition of permanent equity as a result of these legal imperfections.

To address these issues, in April 2014, Holdings conducted a voluntary private share exchange with certain stockholders of the Company, whereby holders representing 93.6% of the outstanding shares of common stock of the Company, that was classified in both Mezzanine Equity and Stockholders’ Equity, exchanged their shares on a one-for-one basis for shares of Holdings common stock (the “Private Share Exchange”). The Private

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Share Exchange was conditioned upon, among other things, a release by each exchanging stockholder of any and all potential claims arising from corporate actions that were not conducted in compliance with Nevada law (see Note 15).

Statement of Mezzanine Equity

Changes to mezzanine amounts during the quarter ended March 31, 2014 were as follows (dollars in thousands):

	Noncontrolling Interest				American Addiction Centers, Inc.
	Series A Preferred				Common Shares
	Units		Amount		Shares		Amount
Balance at December 31, 2013		28.0	$	1,400		7,281,283	$	10,442
Proceeds from offering of preferred stock		8.5		425		—		—
Balance at March 31, 2014		36.5	$	1,825		7,281,283	$	10,442

In January and February of 2014, BHR sold 8.5 units of Series A Preferred Units, valued at $50,000 per unit, with net proceeds to BHR of $0.4 million. A director of the Company purchased 5 Series A Preferred Units for $0.3 million at $50,000 per unit. After the sale, 36.5 Series A Preferred Units were outstanding totaling $1.8 million. On April 15, 2014, BHR redeemed all 36.5 outstanding Series A Preferred Units for $1.8 million.

11. Stockholders’ Equity

Common Stock

In February and March 2014 the Company received net proceeds of $4.2 million from the sale of 328,826 shares of its common stock at $12.76 per share, which the Company’s management estimated to be fair value, in an exempt common stock offering. Included within the total shares sold in the Company’s 2014 private placement were 39,184 shares sold to directors of the Company, 7,837 shares sold to the Company’s General Counsel and Secretary, 3,918 shares sold the Company’s COO and 1,959 shares sold to one of the Company’s Vice Presidents. The share price was based, in part, on an independent valuation analysis obtained in December 2013 independent valuation analysis.

In connection with the issuance of subordinated notes in 2012, the Company issued detachable warrants to the lenders to purchase a total of 71,705 shares of common stock at $1.00 per share. The warrants were exercisable at any time up to their expiration on March 31, 2022. In March 2014, 67,931 of the outstanding warrants were exercised and a total of 67,931 shares of common stock was issued to the exercising warrant holders, including 15,095 shares to a Company director.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

12. Stock Based Compensation Plans

In March 2014, the Company granted 3,713 shares of fully vested common stock to each of its five non-employee directors. The Company recognized $0.2 million of compensation expense in the first quarter of 2014 as a result of these grants. The fair value on the award date was $12.76 per share, as estimated by the Company’s management.

A summary of share activity under the Incentive Plan is set forth below:

	Shares			Weighted- average Grant Date Fair Value
Unvested at December 31, 2013		69,612		$	10.19
Granted		18,565			12.76
Vested		(41,768	)		11.33
Unvested at March 31, 2014		46,409			10.19

13. Income Taxes

The provision for income taxes for the three months ended March 31, 2014 and 2013 reflects effective tax rates of 42.2% and 37.6%, respectively. The increase in the effective tax rate for the three months ended March 31, 2014 was primarily attributable to an increase in the valuation allowance related to net losses of the Professional Groups and to the forecasted net taxable income of the Company.

14. Commitments and Contingencies

Litigation

In April 2013, two wage and hour claims were filed against the Company in the State of California and were subsequently consolidated into a class action. In June 2013, the parties agreed to settle the substantive claims for $2.6 million during mediation. Once the settlement became probable, the Company established a $2.6 million reserve during the second quarter of 2013 for this matter. Subsequently, on April 9, 2014 and following court approval, the Company settled this matter with payment of $2.6 million. The total amount of the litigation settlement of $2.6 million is reflected in accrued liabilities at December 31, 2013 and March 31, 2014.

American Addiction Centers, Inc. v. James D. Bevell, Jr.

On February 3, 2014, the Company filed an action against James D. Bevell in the U.S. District Court in the Middle District of Tennessee, alleging breach of contract and tortious interference with business practices arising out of Mr. Bevell’s breach of his non-compete agreements. Mr. Bevell is the former Chief Innovation Officer of the Company and owns 4.5% of the outstanding common stock of the Company as of March 31, 2014. The Company’s complaint seeks preliminary and permanent injunctive relief, declaratory judgment, compensatory damages, punitive damages for intentional, fraudulent, reckless or grossly negligent conduct, reasonable attorneys’ fees and costs and such other legal, equitable or general relief for the breach of contract and associated wrongs. On March 5, 2014, the court granted a preliminary injunction enjoining Mr. Bevell and his officers, agents, servants, employees, attorneys and all persons in active concert or participation with him from violating the non-competition and non-solicitation provisions contained in his employment agreement with the Company and in the purchase agreement related to the TSN Acquisition.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

Horizon Blue Cross Blue Shield of New Jersey v. Avee Laboratories et al.

On September 4, 2013, Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) filed an amended complaint in the Superior Court of New Jersey against several defendants, including Leading Edge Recovery Center, LLC, one of the Company’s subsidiaries. Leading Edge Recovery Center, LLC formerly operated a drug and alcohol treatment facility in New Jersey. Horizon alleges the defendants submitted and caused others to submit unnecessary drug tests in violation of New Jersey law and is seeking recovery for monetary and treble damages. The Company is vigorously defending these claims and believes them to be without merit. The Company cannot provide any assurance that it will prevail in this matter, nor can it reasonably estimate its potential liability if there is an adverse outcome. Further, the Company has made a demand for indemnification upon James D. Bevell for the portion of these claims relating to the period prior to the TSN Acquisition. The Company cannot provide any assurance that it will prevail in its indemnity claim with Mr. Bevell for any portion of these claims.

The Company is aware of various other legal matters arising in the ordinary course of business. To cover these types of claims, the Company maintains insurance it believes to be sufficient for its operations, although, some claims may potentially exceed the scope of coverage in effect. Plaintiffs in these matters may request punitive or other damages that may not be covered by insurance. After taking into consideration the evaluation of such matters by the Company’s legal counsel, the Company’s management believes the outcome of these matters will not have a material impact on the Company’s consolidated financial position, results of operations and cash flows.

15. Subsequent Events

The Company has evaluated subsequent events through June 24, 2014. In addition to the subsequent events discussed in Notes 6, 9, 10 and 14 to the consolidated financial statements, the following events have occurred subsequent to March 31, 2014.

In April 2014, the Company received net proceeds of $1.8 million from the sale of 143,017 shares of its common stock at $12.76 per share, which the Company’s management estimated to be fair value, in an exempt common stock offering. Included within the total shares sold in the offering were 19,592 shares sold to directors of the Company. The share price was based, in part, on an independent valuation analysis obtained in December 2013.

On April 11, 2014 the Company granted 49,496 shares of restricted common stock to its General Counsel and Secretary under the Incentive Plan, of which 24,748 shares vested immediately with the remaining 24,748 shares vesting on April 10, 2015. The fair value on the award date was $12.76 per share, as estimated by the Company’s management. As a result of the award, the Company will record $0.3 million of compensation expense, $0.2 million of additional compensation expense to satisfy the employee’s personal tax obligation related to the vesting of the grant during the second quarter of 2014, and $0.3 million ratably over the one-year vesting period. Additionally, on April 11, 2014, the Company granted 3,019 shares of its common stock to a non-executive employee. The Company will record $39,000 of compensation expense and $30,000 of additional compensation expense to satisfy the employee’s personal tax obligation related to the stock grant during the second quarter of 2014. On April 17, 2014, the Company redeemed a total of 9,113 shares of its common stock at $12.76 per share, which the Company’s management estimates to be fair value, for an aggregate redemption price of $0.1 million.

In April 2014, the holder of the remaining warrants representing the right to purchase 3,774 shares of the Company’s common stock exercised such warrants, and the Company issued 3,774 shares of common stock upon such holder’s exercise.

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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

On April 15, 2014, BHR amended and restated its Limited Liability Company Agreement which among other things changed the rights and privileges of the Series A Preferred Units. On April 15, 2014, BHR received $7.7 million in net proceeds from the sale of 160 ($50,000 per unit) of its non-controlling Series A Preferred Units to BNY Alcentra Group Holdings, Inc. (“Alcentra”). Alcentra received a 1% fee at closing and is entitled to receive a 12% per annum preferred return on its initial investment, payable quarterly in arrears. In the event of a non-payment, the preferred return compounds on a quarterly basis computed on an actual/360 day basis. In the event of non-payment for three months, the preferred return increases to 15.0%, and further increases to 18.0% if not paid beginning in the fourth month, with each increase compounding on a quarterly basis computed on an actual/360 day basis. The Series A Preferred Units contain certain embedded issuer call and holder put provisions. BHR has the option to redeem a minimum of 40 Series A Preferred Units and up to 100% of the outstanding Series A Preferred Units for $50,000 per unit, plus (i) any accrued and unpaid preferred return and (ii) a call premium of (a) 3.0% through April 15, 2015, (b) 2.0% from April 16, 2015 through April 15, 2017 and (c) no premium any time after April 15, 2017. Alcentra has a put right that, if exercised, requires BHR to redeem all of the issued and outstanding Series A Preferred Units by making a payment equal to $50,000 per unit plus the accrued but unpaid preferred return. Alcentra may exercise its put right for a period of 30 days following the 36th month or 48th month after the date of issuance and at any time following the 60th month after the date of issuance. In the event of a sale of a property owned by BHR, Alcentra is entitled to the repayment of its initial capital contribution plus (i) any accrued and unpaid preferred return and (ii) any applicable call premium. As long as Alcentra owns at least 60 Series A Preferred Units less any Series A Preferred Units repurchased by BHR, distributions to affiliates of BHR are limited to $3.0 million annually.

The Series A Preferred Units generally have no voting or approval rights regarding the management of BHR. However, the holders of Series A Preferred Units are entitled to vote with respect to (i) any action that would change the rights or restrictions of the Series A Preferred Units in a way that would adversely affect such holders and (ii) the creation or issuance of any other security convertible into or exercisable for any equity security of BHR having rights, preferences or privileges senior to the common units of BHR. In addition, unanimous approval of all BHR members, including the holders of Series A Preferred Units, is required to approve the sale by BHR of more than 50% of its real property, more than 50% of the voting or economic rights of any BHR subsidiary or the merger, consolidation, sale of all or substantially all of the assets of BHR or sale of a majority of the common units of BHR.

In addition, so long as Alcentra owns at least 60 Series A Preferred Units, subject to adjustment for certain BHR redemptions, the manager of BHR may not engage in certain transactions without the approval of a majority of the Series A Preferred Unit holders, including, without limitation, the following: (i) liquidate, dissolve or wind up the business of BHR; (ii) authorize the issuance of additional Series A Preferred Units or any class or series of equity securities with rights, preferences or parity with or senior to that of the Series A Preferred Units; (iii) declare or pay any cash distribution or make any other distribution not permitted under the limited liability company agreement; (iv) pay any management or similar fees; (v) pay rebates or reduce payments payable by any primary tenants or (vi) make payments to affiliates of BHR in excess of $3.0 million per year in the aggregate.

As discussed in Note 10, certain common shares issued in 2008 under the previous Board of Directors exceeded the number of shares duly authorized by the Company’s Articles of Incorporation. These common shares are classified as mezzanine equity in the consolidated balance sheets because they do not meet the definition of permanent equity as a result of these legal imperfections. To cure these legal imperfections and in preparation for an initial public offering, in the first quarter of 2014, Holdings initiated a voluntary private share exchange with certain of the Company’s stockholders whereby Holdings offered to certain of the Company’s stockholders the opportunity to receive one share of Holdings common stock for (i) each share of the Company’s common stock held by such stockholders and (ii) a release from claims arising from or related to the share

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AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

imperfections described in Note 10 (collectively, the “Private Share Exchange”). The Private Share Exchange was conditioned upon, among other things, holders of the Company’s common stock who participated in the Share Exchange validly assigning and transferring to Holdings at least 90% of the outstanding shares of the Company prior to the expiration of the Private Share Exchange. The Private Share Exchange expired in April 2014, and at the expiration of the Private Share Exchange 93.6% of the holders of the Company’s common stock had exchanged their shares for shares of common stock of Holdings, and the Company became a majority-owned subsidiary of Holdings. The transaction between the Company and Holdings was accounted for similar to a common control transaction resulting in the assets, liabilities and equity of the Company being carried over at their historical basis.

Substantially concurrent with the Private Share Exchange, Holdings acquired all of the outstanding common membership interests of BHR by issuing 521,999 shares of Holdings common stock and $3.0 million in cash and assuming a $1.8 million term loan from a financial institution to the Company’s CEO, President and CFO (collectively, the “BHR Acquisition”). The original proceeds from this loan were used to repay a loan related to Greenhouse Real Estate, LLC and was accounted for as an additional capital contribution in BHR. Holdings refinanced the assumed loan and is required to make monthly principal payments of $35,855 to a financial institution, plus 5.0% interest and a balloon payment of $1.4 million in April 2015. In the event of an IPO prior to April 2015, the Credit Facility requires that the Company immediately repay the $1.8 million assumed and refinanced term loan with proceeds from the IPO. Prior to the BHR Acquisition, BHR was controlled by the CEO, President and CFO of the Company. BHR owns the real property associated with treatment facilities, which are leased to the Company, as well as other properties that are currently in development or are being held for future development. The acquisition of BHR was accounted for as an acquisition of additional ownership interests in a variable interest entity that does not result in a change of control of that subsidiary as BHR was already being consolidated as a VIE in accordance with ASC 810 (Consolidation) and, accordingly, the Company recognized $4.7 million of the $11.8 million in fair value of consideration transferred (consisting of $3.0 million cash consideration, the $1.8 million term loan assumed and the net deferred tax assets of $0.1 million). The Company eliminated the noncontrolling interest attributable to BHR of $4.3 million with the excess of fair value over the carrying value of noncontrolling interest recorded as a reduction to additional paid-in capital of $0.4 million.

Additionally, substantially concurrent with the Private Share Exchange and the BHR Acquisition, Holdings acquired all of the outstanding membership interests of Clinical Revenue Management Services, LLC (“CRMS”) in exchange for $0.5 million in cash and 149,144 shares of Holdings common stock (collectively, the “CRMS Acquisition”, and collectively with the Private Share Exchange and BHR Acquisition, the “Reorganization Transactions”). Holdings accounted for the CRMS Acquisition as a business combination based on the fair value of the consideration transferred. While the purchase price allocation is preliminary, Holdings expects to recognize approximately $1.8 million of goodwill in connection with the CRMS Acquisition.

The Company’s management estimated the fair value of shares of restricted common stock of Holdings issued in connection with the BHR Acquisition and the CRMS Acquisition to be $13.41 per share as of April 11, 2014. In addition to factoring in the prior valuation analyses described above, the Company also analyzed a new valuation report prepared by an independent third party with respect to the valuation of Holdings taking into account the Private Share Exchange, CRMS Acquisition and BHR Acquisition. In particular, the valuation report analyzed the potential impact of the then-proposed Reorganization Transactions on the valuation of Holdings, such as the increase in 2013 pro forma net income as a result of BHR results of operations being included for all of 2013. The valuation report also noted that the impact of the BHR Acquisition on the enterprise value would be mixed, as the additional EBITDA generated at the Holdings level due to recapture rents and cash and non-cash expenses was not sufficient to overcome the negative impact on enterprise value of BHR’s debt outstanding for the entire year. With respect to CRMS, the analysis determined that it would allow the recapture of additional

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AMERICAN ADDICTION CENTERS, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

EBITDA (on a pro forma basis for 2013) due to a combination of recapture revenues (commissions no longer paid) and the expected cost savings. In determining the fair value of our common stock, the Company also considered strong investor demand in the recent private placement of AAC common stock from February 2014 through April 2014 at $12.76 per share, the improved projected results of operations of the remainder of 2014, positive revenue trends and the higher probability of an initial public offering in 2014. Based on the foregoing analysis, the Company determined the fair value of Holdings common stock as of April 11, 2014 to be $13.41 per share.

As a result of the Reorganization Transactions, Holdings now owns (i) 93.6% of the outstanding common stock of the Company, (ii) 100% of the outstanding common membership interests in BHR and (iii) 100% of the outstanding membership interests in CRMS.

On May 19, 2014, the Company completed the purchase of an approximately 20,000 square foot property in Las Vegas, Nevada for approximately $2.0 million, of which $1.9 million was paid at closing and a $0.1 million deposit was applied to the purchase price at closing. The Company will account for this transaction as an asset purchase.

In June 2014, the Company entered into a letter amendment with Wells Fargo Bank, National Association pursuant to which the Company agreed to prepay in full the outstanding balance of $1.5 million plus accrued and unpaid interest under Term Loan B. In connection with the June 2014 prepayment of Term Loan B, the parties agreed to remove from the Credit Facility the covenant of achieving liquidity of no less than $9.0 million as of July 14, 2014.

F-63

INDEPENDENT AUDITOR’S REPORT

Board of Directors

AJG Solutions, Inc. and B&B Holdings Intl LLC

Ft. Lauderdale, Florida

We have audited the accompanying combined balance sheets of AJG Solutions, Inc. and B&B Holdings Intl LLC (collectively the “Company”) as of December 31, 2011 and August 31, 2012, and the related combined statements of income and stockholders’ / members’ equity, and cash flows for the year ended December 31, 2011 and the eight months ended August 31, 2012. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of AJG Solutions, Inc. and B&B Holdings Intl LLC at December 31, 2011 and August 31, 2012, and the combined results of its operations and its cash flows for the year ended December 31, 2011 and the eight months ended August 31, 2012 in conformity with accounting principles generally accepted in the United States of America.

/s/ BDO USA, LLP

Nashville, Tennessee

June 20, 2013

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AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

COMBINED BALANCE SHEETS

	December 31, 2011		August 31, 2012
Assets
Current assets:
Cash and cash equivalents	$	769,235	$	1,876,903
Accounts receivable, net of allowances		2,909,891		5,460,310
Prepaid expenses and other		74,977		77,786
Total current assets		3,754,103		7,414,999
Property and equipment, net		244,637		453,447
Intangibles		75,000		75,000
Other assets		38,174		280,424
Total assets	$	4,111,914	$	8,223,870
Liabilities and Stockholders’ / Members’ Equity
Current liabilities
Accounts payable	$	251,404	$	555,529
Accrued liabilities		678,108		796,790
Capital lease obligations, current portion		26,942		42,759
Notes payable		127,646		76,521
Notes payable—related party		—		150,030
Total current liabilities		1,084,100		1,621,629
Long term liabilities
Capital lease obligations, net of current portion		61,344		56,326
Total liabilities		1,145,444		1,677,955
Commitments and contingencies (Note 9)
Stockholders’ / members’ equity (Note 8)		2,966,470		6,545,915
Total liabilities and stockholders’ / members’ equity	$	4,111,914	$	8,223,870

See accompanying notes to combined financial statements.

F-65

AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

COMBINED STATEMENTS OF INCOME AND SHAREHOLDERS’ / MEMBERS’ EQUITY

	Year Ended December 31, 2011			Eight Months Ended August 31, 2012
Revenues	$	15,041,250		$	18,477,207
Operating expenses
Client related services		3,610,961			5,214,276
Salaries, wages, and benefits		4,600,135			4,653,879
Professional fees		1,709,804			1,325,426
Rents and leases		241,947			251,638
Advertising and marketing		593,375			541,369
Other operating expenses		1,189,482			1,536,437
Provision for doubtful accounts		205,653			646,308
Depreciation and amortization		72,781			81,973
Total operating expenses		12,224,138			14,251,306
Income from operations		2,817,112			4,225,901
Other income, net
Interest income (expense), net		(31,132	)		(21,908	)
Total other income (expense), net		(31,132	)		(21,908	)
Income before income tax expense		2,785,980			4,203,993
State income tax expense		4,960			1,000
Net income	$	2,781,020		$	4,202,993
Stockholders’ / members’ equity, beginning of the period		509,726			2,966,470
Distributions		(324,276	)		(623,548	)
Stockholders’ / members’ equity, end of the period	$	2,966,470		$	6,545,915

See accompanying notes to combined financial statements.

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AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

COMBINED STATEMENTS OF CASH FLOWS

	Year Ended December 31, 2011			Eight Months Ended August 31, 2012
Cash flows from operating activities:
Net income	$	2,781,020		$	4,202,993
Adjustments to reconcile net income to net cash provided by operating activities:
Bad debt expense		205,653			646,308
Depreciation and amortization		72,781			81,973
Changes in assets and liabilities:
Accounts receivable		(2,274,696	)		(3,196,727	)
Prepaid expenses and other assets		(31,379	)		(2,810	)
Accounts payable		(16,811	)		304,126
Accrued liabilities		565,488			119,984
Net cash provided by operating activities		1,302,056			2,155,847
Cash flows from investing activities:
Purchase of property and equipment		(103,159	)		(249,061	)
Purchase of other assets		(16,941	)		(242,250	)
Net cash used in investing activities		(120,100	)		(491,311	)
Cash flows from financing activities:
Payments on capital lease obligations		(36,649	)		(30,923	)
Proceeds from notes payable		351,103			117,935
Repayment of notes payable		(443,994	)		(170,362	)
Proceeds from note payable—related party		—			150,030
Distributions		(324,276	)		(623,548	)
Net cash used in financing activities		(453,816	)		(556,868	)
Net increase in cash and cash equivalents		728,140			1,107,668
Cash and cash equivalents, beginning of year		41,095			769,235
Cash and cash equivalents, end of period	$	769,235		$	1,876,903
Supplemental disclosures of cash flow information:
Non-cash transactions:
Property and equipment acquired via capital leases	$	77,851		$	41,722
Cash and cash equivalents paid for:
Interest	$	35,528		$	20,447
Income taxes	$	4,960		$	1,000

See accompanying notes to combined financial statements.

F-67

AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

1. Description of Business

AJG Solutions, Inc., a Florida corporation (“AJG”), was incorporated as a Subchapter S corporation in December 2005. AJG, headquartered in Ft. Lauderdale, Florida, provides referral services for addiction rehabilitation services and centers.

B&B Holdings Intl LLC (“B&B”), a Florida limited liability company, was organized in February 2010. B&B, headquartered in Ft. Lauderdale, Florida, provides addiction rehabilitation services through centers in Florida and New Jersey.

On August 31, 2012, American Addiction Centers, Inc. (“AAC”) acquired certain assets of AJG and the equity of B&B. AJG and B&B were both jointly owned by two individuals. AAC intends for the acquisition to expand the scope of its services geographically and gain synergies in obtaining leads for new clients. AAC, headquartered in Brentwood, Tennessee, develops and operates substance abuse, addiction and chemical dependency, mental disorder, weight loss and other behavioral treatment centers.

2. Basis of Presentation

Principles of Combination

The combined financial statements presented herein represent the combination of AJG and B&B (collectively the “Company”) due to the common ownership between the two entities. In addition, as a result of the acquisition of the Company on August 31, 2012 by AAC, the 2012 financial statements are presented as of August 31, 2012 and the eight months then ended. Effective September 1, 2012, future operations of the Company will be reported within AAC’s consolidated financial statements.

The accompanying combined financial statements include the accounts of AJG, B&B and their wholly owned subsidiaries which include Leading Edge Recovery Center, LLC, Hamilton Medically Assisted Treatment Associates, LLC, The Heights Supportive Housing, LLC, Singer Island Recovery Center, LLC, and Island Supportive Housing, LLC.

All significant intercompany accounts and transactions within the Company have been eliminated in combination.

3. Summary of Significant Accounting Policies

Use of Estimates

The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses at the date and for the periods that the combined financial statements are prepared. On an ongoing basis, the Company evaluates its estimates, including those related to insurance adjustments, provisions for doubtful accounts, intangible assets, and long-lived assets. The Company bases its estimates on historical experience and on various other assumptions that it believes to be reasonable under the circumstances. Actual results could materially differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.

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AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are reported net of an allowance for doubtful accounts, which is management’s best estimate of potential credit losses. The Company’s allowance for doubtful accounts is based on historical experience, but management also takes into consideration the age of the accounts, creditworthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts.

The Company does not believe that there are any significant concentrations of revenues from any particular payor that would subject it to any significant credit risks in the collection of its accounts receivable.

Property and Equipment

Property and equipment are stated at cost, net of accumulated depreciation and amortization. Expenditures for maintenance and repairs are charged to expense as incurred. Leasehold improvements are amortized over their estimated useful lives or the remaining lease period, whichever is less. Depreciation is provided by use of the straight-line method over the estimated useful lives of the assets.

Estimated useful lives were as follows:

	Range of Lives
Computer software and equipment		3–5 years
Furniture, fixtures, and equipment		5–7 years
Vehicles		5 years
Leasehold improvements		life of the asset or lease, whichever is less

Intangibles

Intangible assets at December 31, 2011 and August 31, 2012 represented a trademark and website domain acquired for $75,000 in November 2010. The life of such intangibles was deemed to be indefinite. Indefinite intangibles are tested annually for impairment, or when events or changes in circumstances indicate the potential for impairment.

Long-Lived Asset Impairment

Accounting Standards Codification (“ASC”) 360 addresses financial accounting and reporting requirements for the impairment or disposal of long-lived assets. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. Impairment is measured by the amount by which the carrying value of the assets exceeds the fair value of the assets. The Company did not identify any indicators of impairment as of December 31, 2011 and August 31, 2012.

Revenues

The Company provides services to its clients in both inpatient and outpatient treatment settings. Client service revenues are recognized when services are performed. Client service revenues are recorded at established billing rates less contractual adjustments. Contractual adjustments are recorded to state client service revenues at the amount expected to be collected for the service provided based on amounts due at contractually determined rates or expected amounts based on historic adjustments for out-of-network services not under contract.

Prior to admission, each client’s insurance is verified and the client self-pay amount is determined. The client self-pay portion is generally collected upon admission. In some instances, clients will pay out-of-pocket as

F-69

AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

services are provided or will make a deposit and negotiate the remaining payments as part of the services. The client service revenues are deferred and recognized over the period the services will be provided. If a client leaves prior to utilizing the total payment, the balance is accounted for as a liability and is included in accrued liabilities in the accompanying consolidated balance sheets until refunded.

Referral Service Revenues

The Company provides referral services for addiction rehabilitation services and centers. Services are billed using either a flat monthly rate or on a per referral basis. Revenues are recorded as the services are performed. Payments received prior to the services being performed are deferred and recognized over the period in which the service is provided.

Advertising Expenses

Advertising costs are expensed as the related activity occurs.

Income Taxes

The Company’s stockholders’ have elected to be taxed under sections of the federal income tax laws which provided that, in lieu of corporation income taxes, the stockholders separately account for their pro rata shares of the Company’s items in income, deductions, losses and credits. Therefore, these statements do not include any provision for Federal corporate income taxes.

The Company has no uncertain tax positions. The Company’s practice is to recognize interest and/or penalties related to income tax matters in income tax expense. For the year ended December 31, 2011 and the eight months ended August 31, 2012, the Company had no accrued interest or penalties related to income tax matters in income tax expense.

The Company is no longer subject to federal income tax examinations for years prior to fiscal 2008. The Company is subject to examination by various State Franchise Tax Boards for fiscal years after 2007. There are no current tax examinations in progress.

Fair Value Measurements

ASC 820 Fair Value Measurements and Disclosures (“ASC 820”) establishes a framework for measuring fair value and requires enhanced disclosures about fair value measurements. ASC 820 clarifies that fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants.

ASC 820 requires disclosure about how fair value is determined for assets and liabilities and establishes a hierarchy for which these assets and liabilities must be grouped, based on significant levels of inputs as follows: Level 1—quoted prices in active markets for identical assets or liabilities; Level 2—quoted prices in active markets for similar assets and liabilities and inputs that are observable for the asset or liability; or Level 3—unobservable inputs for the asset or liability, such as discounted cash flow models or valuations. The determination of where assets and liabilities fall within this hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

Concentration of Credit Risk

Cash and cash equivalents are maintained at financial institutions and, at times, balances may exceed federally insured limits. The Company has never experienced any losses related to these balances. All of the

F-70

AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

Company’s cash balances were fully insured at December 31, 2011 and August 31, 2012 as a result of a temporary federal program in effect from December 31, 2010 through December 31, 2012. Under the program, there is no limit to the amount of insurance for eligible accounts.

4. Accounts Receivable, net

Accounts receivable consists of the following:

	December 31, 2011			August 31, 2012
Accounts receivable	$	6,263,745		$	8,279,597
Less allowance for doubtful accounts		(3,353,854	)		(2,819,287	)
	$	2,909,891		$	5,460,310

5. Property and Equipment, net

Property and equipment consists of the following:

	December 31, 2011			August 31, 2012
Computer software and equipment	$	112,452		$	159,274
Furniture, fixtures and equipment		86,963			156,023
Vehicles		146,978			227,333
Leasehold improvements		—			77,879
Total property and equipment		346,393			620,509
Less accumulated depreciation and amortization		(101,756	)		(167,062	)
	$	244,637		$	453,447

6. Notes Payable

Asset Purchase

In June 2012, the Company entered into a $150,030 note payable agreement with a stockholder and chief executive officer of the Company. The note bears interest at 5% per annum and is payable in 12 equal monthly payments. As of August 31, 2012, $150,030 remained outstanding on the note. The proceeds of the note payable were used by the Company to make investments in two other entities. As of August 31, 2012, the $150,000 investment was recorded within other assets on the accompanying combined balance sheet.

Operating

During 2010, the Company entered into a $150,882 note payable with an individual to fund operations. Under the terms of the agreement, the note incurred an interest rate of 17% per annum and was payable in four equal monthly installments of $40,181 commencing in February 2011.

In April 2011, the Company entered into a new note agreement with the individual totaling $230,000. The $230,000 consisted of new proceeds of $150,220 and $79,780 in principal and accrued interest rolled over from the 2010 note discussed above. Under the terms of the new agreement, the note incurred interest at 15% per annum with six monthly payments commencing in June 2011 ranging from $19,663 to $63,375. As of December 31, 2011, $30,763 was outstanding on the note.

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AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

In March 2012, the Company entered into a $150,000 note payable with the individual above to fund operations. The $150,000 consisted of new proceeds of $117,935 and $32,065 in principal and accrued interest rolled over from the April 2011 note discussed above. Under the terms of the agreement, the note incurs interest at a rate of 15% per annum and was payable in six monthly installments of $26,105 commencing in April 2012. As of August 31, 2012, $76,521 was due under the note. The note was satisfied in full subsequent to August 31, 2012.

In January 2011, the Company entered into a verbal agreement with a third party to borrow $50,000 to fund operations. Under the terms of the agreement, the amounts were due on demand and did not incur interest. As of December 31, 2011, $8,000 was outstanding under the agreement. The obligation was satisfied in full during the eight months ended August 31, 2012.

In July 2011, the Company entered into a $150,000 note payable with a third party to fund operations. Under the terms of the agreement, the note bears an interest rate of 5.25% per annum and was payable in twelve months installments of $12,858 beginning in August 2011. The note was guaranteed by a stockholder of the Company. As of December 31, 2011, $88,883 was outstanding on the note. The note was satisfied in full during the eight months ended August 31, 2012.

7. Capital Lease Obligations

At various times through August 31, 2012, the Company entered into capital leases with third-party creditors for the purchase of vehicles which have maturity dates ranging from February 2013 to June 2016. The lease terms range from 10 to 48 months and have interest rates ranging from 0.00% to 10.5% per annum. Monthly payments range from $312 to $1,267.

As of August 31, 2012, the five year minimum payments on capital lease obligations are as follows:

Years ending December 31,	Total
Four months ended December 31, 2012:	$	17,639
2013		42,785
2014		28,896
2015		17,930
2016		2,705
Total minimum lease payments		109,955
Less: amount representing interest		(10,870	)
Present value of minimum lease payments		99,085
Less: current portion		(42,759	)
Obligation under capital lease, long term	$	56,326

As of December 31, 2011, the gross carrying value and accumulated amortization of assets acquired under capital leases was $146,978 and $27,942, respectively. As of August 31, 2012, the gross carrying value and accumulated amortization of assets acquired under capital leases was $198,700 and $54,091, respectively.

8. Stockholders’ and Members’ Equity

Common Stock—AJG

As of December 31, 2011 and August 31, 2012, AJG had 500 shares authorized and outstanding with $1 par value.

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AJG SOLUTIONS, INC. AND B&B HOLDINGS INTL LLC

NOTES TO COMBINED FINANCIAL STATEMENTS

Membership Units—B&B

As of December 31, 2011 and August 31, 2012, B&B had 100 membership units authorized and outstanding with no par value.

9. Commitments and Contingencies

Operating Leases

The Company has entered into various operating leases with third parties expiring through January 2017. Properties under operating leases mostly include space required for corporate offices, space to perform facility services and space for administrative facilities. Rent expense was $241,947 and $251,638 for the year ended December 31, 2011 and the eight months ended August 31, 2012, respectively.

The future minimum lease payments under non-cancelable operating leases with remaining terms of one or more years as of August 31, 2012 consist of the following:

Years ending December 31,	Total
Four months ended December 31, 2012	$	17,639
2013		40,251
2014		28,903
2015		17,937
2016		2,707
Total	$	107,437

The Company has certain leases which have escalating payment clauses. As of December 31, 2011 and August 31, 2012, the difference between actual payments under these leases and rent expense on a straight line basis was not material.

Litigation

The Company is aware of various legal matters arising in the ordinary course of business. After considering the evaluation by the Company’s legal counsel of such matters, as well as taking into consideration insurance coverage and relevant deductible levels, the Company’s management is of the opinion that the outcome of these matters will not have a material effect on the Company’s combined financial position, results from operations and cash flows as of and for the periods ended December 31, 2011 and August 31, 2012.

401(k) Plan

The Company has a qualified 401(k) savings plan (the “Plan”) which provides for eligible employees (as defined) to make voluntary contributions to the Plan. The Company makes contributions to the Plan based upon the participants’ level of participation, which is fully vested at the time of contribution. For the year ended December 31, 2011 and the eight months ended August 31, 2012, the Company contributions under this Plan were not material.

10. Subsequent Events

The Company has evaluated subsequent events through June 20, 2013, which is the date that these combined financial statements were available to be issued.

F-73

INDEPENDENT AUDITOR’S REPORT

Board of Directors and Stockholders

American Addiction Centers, Inc.

Brentwood, Tennessee

We have audited the accompanying Historical Statements of Revenues and Certain Direct Operating Expenses of Greenhouse Real Estate, LLC and the related notes (“Historical Statements”), for the periods from August 10, 2011 (inception) to December 31, 2011, January 1, 2012 to December 31, 2012, and January 1, 2013 to October 7, 2013.

Management’s Responsibility for the Historical Statements

Management is responsible for the preparation and fair presentation of the Historical Statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Historical Statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these Historical Statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the Historical Statements are free from material misstatement.

An audit involves performing procedures to obtain evidence about the amounts and disclosures in the Historical Statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Historical Statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Historical Statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Historical Statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Historical Statements referred to above present fairly, in all material respects, the revenues and certain direct operating expenses of Greenhouse Real Estate, LLC for the periods from August 10, 2011 (inception) to December 31, 2011, January 1, 2012 to December 31, 2012, and January 1, 2013 to October 7, 2013, in accordance with accounting principles generally accepted in the United States of America.

Emphasis of Matter

The accompanying Historical Statements were prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X, as described in Note 2, and is not intended to be a complete presentation of Greenhouse Real Estate, LLC’s revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ BDO USA, LLP

Memphis, Tennessee

April 24, 2014

F-74

GREENHOUSE REAL ESTATE, LLC

HISTORICAL STATEMENTS OF REVENUES AND CERTAIN DIRECT OPERATING EXPENSES

FOR THE PERIODS FROM AUGUST 10, 2011 (INCEPTION) TO DECEMBER 31, 2011,

JANUARY 1, 2012 TO DECEMBER 31, 2012,

AND JANUARY 1, 2013 TO OCTOBER 7, 2013.

(DOLLARS IN THOUSANDS)

	Period from August 10, 2011 (inception) to December 31, 2011		Period from January 1, 2012 to December 31, 2012		Period from January 1, 2013 to October 7, 2013
Rental income	$	382	$	1,195	$	1,265
Certain direct operating expenses		—		—		—
Revenues in excess of certain direct operating expenses	$	382	$	1,195	$	1,265

See accompanying notes to historical statements of revenues and certain direct operating expenses.

F-75

GREENHOUSE REAL ESTATE, LLC

NOTES TO HISTORICAL STATEMENTS OF REVENUES AND CERTAIN DIRECT OPERATING EXPENSES

1. Business

Greenhouse Real Estate, LLC (the Company) was formed on August 10, 2011 and owns real estate and improvements (the Property) known as The Greenhouse located in Grand Prairie, Texas. The Property is subject to a triple-net lease to Greenhouse Treatment Center, LLC, a subsidiary of American Addiction Centers, Inc., which commenced on August 1, 2011 for five years with initial payments of $90,000 per month and annual fixed rent escalators. The lease was amended in October 2012 to increase the monthly lease payment to $135,000. The lease expires in July 2016 and includes one 5-year optional renewal term. On October 1, 2013, the old lease was replaced with a new lease agreement with a term of fifteen years and monthly payments of $135,000 which escalate annually based on CPI. There were no direct operating expenses recorded in the books of the Company under the triple-net lease.

2. Basis of Presentation

The accompanying Combined Historical Statements of Revenues and Certain Direct Operating Expenses have been prepared for the purpose of complying with Rule 3-14 of the Securities and Exchange Commission Regulation S-X and are not intended to be a complete presentation of the Company’s revenues and expenses. The financial statements have been prepared on the accrual basis of accounting and require management of the Company to make estimates and assumptions that affect the reported amounts of the revenues and expenses during the reporting period. Actual results may differ from those estimates.

3. Rental Income

The lease agreement is accounted for as an operating lease. Rental income is recognized as earned over the life of the lease agreement on a straight-line basis.

Future minimum lease payments due from Greenhouse Treatment Center, LLC as of October 7, 2013 were as follows (in thousands):

Remainder of 2013	$	355
2014		1,620
2015		1,620
2016		1,620
2017		1,620
2018		1,620
2019 and thereafter		15,795
Total	$	24,250

4. Subsequent Events

The Company has evaluated subsequent events through April 24, 2014.

F-76

Shares

AAC Holdings, Inc.

Common Stock

Prospectus

                    , 2014

William Blair

Wells Fargo Securities

Raymond James

Avondale Partners

Until                     , 2014, all dealers that effect transactions in shares of our common stock, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth all costs and expenses, other than underwriting discounts and commissions, paid or payable by us in connection with the sale of the common stock being registered. All amounts shown are estimates except for the SEC registration fee, the FINRA filing fee and the listing fee for the NYSE.

	Amount Paid or to be Paid
SEC registration fee	$
FINRA filing fee
NYSE listing fee
Blue sky qualification fees and expenses		*
Printing and engraving expenses		*
Legal fees and expenses		*
Accounting fees and expenses		*
Transfer agent and registrar fees and expenses		*
Miscellaneous expenses		*
Total	$	*

* To be provided by amendment

Item 14. Indemnification of Directors and Officers

Nevada law provides that a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the corporation (i.e., a “non-derivative proceeding”), by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding if he or she:

• is not liable under Section 78.138 of the Nevada Revised Statutes for breach of his or her fiduciary duties to the corporation; or

• acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

In addition, a Nevada corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor (i.e., a “derivative proceeding”) by reason of the fact that he or she is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and reasonably incurred by him or her in connection with the defense or settlement of the action or suit if he or she:

• is not liable under Section 78.138 of the Nevada Revised Statute for breach of his or her fiduciary duties to the corporation; or

• acted in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation.

II-1

Under Nevada law, indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any non-derivative proceeding or any derivative proceeding, or in defense of any claim, issue or matter therein, the corporation shall indemnify him or her against expenses, including attorneys’ fees, actually and reasonably incurred in connection with the defense.

Further, Nevada law permits a Nevada corporation to purchase and maintain insurance or to make other financial arrangements on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise for any liability asserted against him or her and liability and expenses incurred by him or her in his or her capacity as a director, officer, employee or agent, or arising out of his or her status as such, whether or not the corporation has the authority to indemnify him or her against such liability and expenses.

Under our current articles of incorporation and our amended and restated bylaws, which we refer to as our bylaws, which bylaws will be effective upon the closing of this offering, we are obligated to indemnify any director, officer, employee or agent of the company to the fullest extent permitted by Nevada law as described above.

In addition, indemnification is required to continue as to a person who has ceased to be a director or officer and inures to the benefit of his or her heirs, executors and administrators. However, subject to the exceptions detailed below, we may indemnify a person seeking indemnification in connection with a proceeding (or part thereof) initiated by the person seeking indemnification only if the proceeding (or part thereof) was authorized by our Board of Directors. We may indemnify any employee or agent of us to an extent greater than required by law only if and to the extent that our directors, in their discretion, may determine.

If we do not pay a claim for indemnification (following the final disposition of the proceeding with respect to which indemnification is sought, including any settlement of such action, suit or proceeding) or advancement of expenses under our bylaws in full within 30 days after a written claim has been received by us, the claimant may bring suit against us to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant also will be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by applicable law. We may defend against an action brought for this purpose that the claimant has not met the standards of conduct that make it permissible under Chapter 78 of the Nevada Revised Statutes for us to indemnify the claimant for the amount claimed, but the burden of proving such defense is on us. Neither our failure (including the failure of our Board of Directors, independent legal counsel or our stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in Chapter 78 of the Nevada Revised Statutes, nor an actual determination by us (including our Board of Directors, independent legal counsel or our stockholders) that the claimant has not met such applicable standard of conduct is a defense to the action or creates a presumption that the claimant has not met the applicable standard of conduct.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that in the opinion of the SEC this indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

II-2

Item 15. Recent Sales of Unregistered Securities

Set forth below is information regarding securities sold by Holdings or AAC within the past three fiscal years that were not registered under the Securities Act. Also included is information relating to the section of the Securities Act, or rule of the SEC, under which exemption from registration was claimed.

Reorganization Transactions

In connection with the Reorganization Transactions, on April 15, 2014 Holdings issued to certain directors, executive officers, and certain other persons and their affiliates an aggregate of 9,975,885 shares of common stock. Also in connection with the Reorganization Transactions, Holdings assumed the 2007 Plan, which resulted in 71,156 shares of unvested restricted common stock of AAC previously issued to certain of our executive officers being automatically converted into 71,156 shares of unvested restricted common stock of Holdings.

Prior Exempt Transactions by AAC

In April 2014, AAC issued 3,109 shares of common stock to a non-executive employee under the 2007 Plan. Also in April 2014, AAC issued 49,496 of restricted shares of common stock to an executive employee under the 2007 Plan. AAC received no payments from the employees upon issuance of the shares, which had a fair value of $12.76 per share.

In March 2014, AAC issued an aggregate of 18,565 shares of common stock to its non-employee directors, each of whom is an accredited investor, in consideration for their service to the Board in 2013. AAC received no payments from the non-employee directors upon issuance of the shares, which had a fair value of $12.76 per share.

From February 2014 through April 2014, AAC issued 471,843 shares of common stock, at a price of $12.76 per share, to certain accredited investors, for an aggregate offering price of $6,020,717.

From March 2013 through April 2013, AAC issued 918,589 shares of common stock, at a price of $8.23 per share, to certain accredited investors, for total consideration of $7,559,987. As part of this offering, AAC issued an additional 243,013 shares of common stock to two accredited investors, at a price of $8.23 per share, in connection with the partial conversion of outstanding promissory notes in the aggregate principal amount of approximately $2,000,000.

During 2013, AAC issued 272,638 shares of common stock to certain executive officers. AAC received no payments from these executive officers upon issuance of the shares, which had fair values of $8.23 per share and $8.63 per share.

In August 2012, AAC issued 888,868 shares of common stock, which had a fair value of $6.27 per share, to one accredited investor in connection with the acquisition of certain assets of AJG Solutions, Inc. and the equity of B&B Holdings Intl LLC.

From March 2012 through April 2012, in connection with the purchase by certain accredited investors of $950,000 in total principal amount of 12% subordinated promissory notes, AAC issued to such purchasers warrants to purchase 7,548 shares of common stock per $100,000 principal amount of notes purchased. In March and April 2014, each warrant holder from this offering exercised such holder’s warrant(s), resulting in the issuance by AAC of a total of 71,705 shares of common stock.

On July 1, 2011, in connection with AAC’s merger with Performance Revolution, LLC, AAC issued 3,018,900 shares of common stock, which had a fair value of $0.01 per share, and 4,000 shares of Series B Preferred Stock, which had a fair value of $0.01 per share, to certain accredited investors who were the owners of the membership interests of Performance Revolution, LLC.

II-3

On June 2, 2011, AAC issued 685,388 shares of common stock to two accredited investors as payment of accrued Series C Preferred Stock dividends in lieu of cash payments of $1,043,972.69. AAC also issued 5,909,280 shares of common stock to two accredited investors upon the conversion of all of the outstanding shares of Series C Preferred Stock.

None of the transactions set forth in this Item 15 involved any underwriters, underwriting discounts or commissions or any public offering. These transactions were made in reliance upon Section 4(a)(2) of the Securities Act (or Rule 506 of Regulation D promulgated thereunder) as transactions by an issuer not involving a public offering or Rule 701 promulgated under Section 3(b) of the Securities Act pursuant to a compensatory benefit plan approved by AAC’s board of directors. The recipient of the securities in each of these transactions represented his, her or its intentions to acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof, and appropriate legends were placed upon the stock certificates or book-entry positions representing the shares issued in each of these transactions. In each case, the recipient had adequate access, through his, her or its relationship with AAC, to information about AAC. All share amounts in the transactions described in this Item 15 reflect the effect of a 100-to-1 reverse split of all AAC capital stock that became effective August 27, 2012.

Item 16. Exhibits and Financial Statement Schedules

See Exhibit Index following the signature page to this Registration Statement.

Item 17. Undertakings

The undersigned registrant hereby undertakes to provide to the underwriters at the closing specified in the underwriting agreement certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.

(2) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

II-4

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Brentwood, State of Tennessee, on the     day of                     , 2014.

AAC HOLDINGS, INC.
By:
	Michael T. Cartwright
	Chief Executive Officer and Chairman

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael T. Cartwright, Kirk R. Manz, and Kathryn Sevier Phillips and each of them, his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him or her and in his or her name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this registration statement, and to sign any registration statement for the same offering covered by the registration statement that is to be effective upon filing pursuant to Rule 462(b) promulgated under the Securities Act, and all post-effective amendments thereto, and to file the same, with all exhibits thereto and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he or she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them, his, hers or their substitute or substitutes, may lawfully do or cause to be done or by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities and on the dates indicated.

SIGNATURE	TITLE	DATE
Michael T. Cartwright	Chief Executive Officer and Chairman (principal executive officer)	, 2014
Kirk R. Manz	Chief Financial Officer (principal financial and accounting officer)	, 2014
Jerrod N. Menz	President and Director	, 2014
Darrell S. Freeman, Sr.	Lead Independent Director	, 2014
Jerry D. Bostelman	Director	, 2014
Lucius E. Burch, III	Director	, 2014
David C. Kloeppel	Director	, 2014
Richard E. Ragsdale	Director	, 2014

II-5

EXHIBIT INDEX

Exhibit No.	Description
1.1*	Form of Underwriting Agreement
2.1†**	Contribution Agreement by and among AAC Holdings, Inc., Michael T. Cartwright, Jerrod N. Menz and Kirk R. Manz, dated as of April 15, 2014
2.2†**	Contribution Agreement by and among Tina F. Cartwright, Victoria Menz, AAC Holdings, Inc. and, solely for the purposes of Section 4.6, Clinical Revenue Managements Services, LLC, dated as of April 15, 2014
2.3†**	Asset and Equity Purchase Agreement by and among American Addiction Centers, Inc., AJG Solutions, Inc., Member Assistance Solutions, LLC, James D. Bevell, Jr., and Michael Blackburn, dated as of August 31, 2012
2.4†**	Purchase and Sale Agreement by and between American Addiction Centers, Inc. and the Sisters of Saint Francis of Philadelphia, dated as of April 17, 2013
3.1	Articles of Incorporation of AAC Holdings, Inc.
3.2	Form of Amended and Restated Bylaws of AAC Holdings, Inc.
4.1*	Form of Certificate of Common Stock of AAC Holdings, Inc.
4.2**	Agreement Among Stockholders by and among Michael Cartwright, Jerrod Menz, James D. Bevell, Jr. and American Addiction Centers, Inc., dated as of August 31, 2012
5.1*	Opinion of Ballard Spahr LLP
10.1+	2007 Stock Incentive Plan
10.2+	AAC Holdings, Inc. 2014 Equity Incentive Plan
10.3**	Amended and Restated Limited Liability Company Agreement of Behavioral Healthcare Realty, LLC, dated as of April 15, 2014
10.4+	Form of Non-Restricted Share Award Agreement under the 2007 Stock Incentive Plan
10.5+	Form of Restricted Share Award Agreement under the 2007 Stock Incentive Plan
10.6+*	Form of Restricted Share Award under the AAC Holdings, Inc. 2014 Equity Incentive Plan
10.7+**	Form of Indemnification Agreement between AAC Holdings, Inc. and its directors and officers
10.8	Second Amended and Restated Credit Agreement by and among AAC Holdings, Inc., American Addiction Centers, Inc., the lenders party thereto from time to time (the “Lenders”), and Wells Fargo Bank, National Association, as administrative agent and collateral agent for the Lenders, dated as of April 15, 2014
10.9	Promissory Note by and between American Addiction Centers, Inc. and Wells Fargo Bank, National Association, dated as of July 31, 2013
10.10	Term Note by and between American Addiction Centers, Inc. and Wells Fargo Bank, National Association, dated as of May 1, 2013
10.11	Term Loan Agreement by and between AAC Holdings, Inc., Guarantor and Reliant Bank, dated as of May 2, 2014
10.12	Continuing Guaranty by American Addiction Centers, Inc., in favor of Reliant Bank, dated as of May 2, 2014
10.13	Continuing Guaranty by Michael T. Cartwright in favor of Reliant Bank, dated as of May 2, 2014
10.14	Continuing Guaranty by Jerrod N. Menz in favor of Reliant Bank, dated as of May 2, 2014
10.15	Continuing Guaranty by Kirk R. Manz in favor of Reliant Bank, dated as of May 2, 2014

II-6

Exhibit No.	Description
10.16	Building Loan Agreement by and between Greenhouse Real Estate, LLC and Wells Fargo Bank, National Association, dated as of October 8, 2013
10.17	Promissory Note Secured by Deed of Trust by and between Greenhouse Real Estate, LLC and Wells Fargo Bank, National Association, dated as of October 8, 2013
10.18	Repayment Guaranty by and among Behavioral Healthcare Realty, LLC, Michael Cartwright, Jerrod Menz and Wells Fargo Bank, National Association, dated as of October 8, 2013
10.19	Consent and First Amendment to Loan Agreement by and among Greenhouse Real Estate, LLC, Michael T. Cartwright, Jerrod N. Menz, American Addiction Centers, Inc., Behavioral Healthcare Realty, LLC and Wells Fargo Bank, National Association, dated as of April 15, 2014
10.20	Loan Agreement by and between Concorde Real Estate, LLC and Wells Fargo Bank, National Association, dated as of May 15, 2013
10.21	Promissory Note Secured by Deed of Trust by and between Concorde Real Estate, LLC and Wells Fargo Bank, National Association, dated as of May 15, 2013
10.22	Repayment Guaranty by and among Michael Cartwright, Jerrod Menz, American Addiction Centers, Inc. and Wells Fargo Bank, National Association, dated as of May 15, 2013
10.23	Consent and First Amendment to Loan Agreement by and among Concorde Real Estate, LLC, Michael T. Cartwright, Jerrod N. Menz, American Addiction Centers, Inc., Behavioral Healthcare Realty, LLC and Wells Fargo Bank, National Association, dated as of April 15, 2014
10.24	Loan Agreement by and between The Academy Real Estate, LLC and Wells Fargo Bank, National Association, dated as of May 10, 2013
10.25	Promissory Note Secured by Mortgage by and between The Academy Real Estate, LLC and Wells Fargo Bank, National Association, dated as of May 10, 2013
10.26	Repayment Guaranty by and among Michael Cartwright, Jerrod Menz, American Addiction Centers, Inc. and Wells Fargo Bank, National Association, dated as of May 10, 2013
10.27	Modification Agreement by and between The Academy Real Estate, LLC and Wells Fargo Bank, National Association, dated as of November 7, 2013
10.28	Consent and Amendment to Loan Agreement and Note by and among The Academy Real Estate, LLC, Michael T. Cartwright, Jerrod N. Menz, American Addiction Centers, Inc., Behavioral Healthcare Realty, LLC and Wells Fargo Bank, National Association, dated as of April 15, 2014
10.29**	Amended and Restated Subordinated Promissory Note in the principal amount of $2,355,331 made by American Addiction Centers, Inc. in favor of Michael Blackburn, dated as of April 2, 2013
10.30	License Agreement by and between AJG Solutions, Inc. and American Addiction Centers, Inc., dated as of August 31, 2012
10.31**	Subordinated Promissory Note in the principal amount of $3,170,000 made by American Addiction Centers, Inc. in favor of James D. Bevell, dated as of August 31, 2012
10.32**	Subordinated Promissory Note in the principal amount of $600,000 made by American Addiction Centers, Inc. in favor of Michael Blackburn, dated as of August 31, 2012
10.33**	Form of 12% Secured Subordinated Note by and among American Addiction Centers, Inc. and certain accredited investors
10.34+	American Addiction Centers, Inc. 2014 Cash Incentive Plan
10.35	Letter Agreement re: Second Amended and Restated Credit Agreement dated April 15, 2014 by and among AAC Holdings, Inc., American Addiction Centers, Inc., the lenders party thereto from time to time and Wells Fargo Bank, National Association, as administrative agent and collateral agent for the Lenders, dated as of June 13, 2014

II-7

Exhibit No.	Description
10.36	Term Loan Promissory Note by and between AAC Holdings, Inc. and Reliant Bank, dated as of May 2, 2014
10.37*	Form of Management Services Agreement
21.1*	List of subsidiaries
23.1*	Consent of BDO USA, LLP
23.2*	Consent of Ballard Spahr LLP (included in Exhibit 5.1)
24.1	Power of Attorney (included on signature page)

* To be filed by amendment.

** Previously submitted.

† Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. AAC Holdings, Inc. hereby undertakes to furnish supplementally copies of any of the omitted schedules and exhibits upon request by the Securities and Exchange Commission.

+ Denotes a management contract or compensatory plan or arrangement.

II-8

EX-3

Exhibit 3.1

ARTICLES OF INCORPORATION

OF

AAC HOLDINGS, INC.

Pursuant to the provisions of Section 78.030 of the Nevada Revised Statutes, the undersigned adopts the following Articles of Incorporation:

ARTICLE I.

NAME

The name of the corporation (which is hereinafter called the “Corporation”) shall be AAC Holdings, Inc.

ARTICLE II.

REGISTERED AGENT

The address of the registered office of the Corporation in the State of Nevada is 4625 West Nevso Drive, Suite 2, Las Vegas, Nevada 89103. The name of its registered agent at such address is Registered Agent Solutions, Inc.

ARTICLE III.

CAPITAL STOCK

Section 1. AUTHORIZED SHARES. The aggregate number of shares which the Corporation shall have authority to issue is 75,000,000 shares consisting of 70,000,000 shares of common stock, par value $0.001 per share and 5,000,000 shares of preferred stock, par value $0.001 per share.

Section 2. ISSUANCE AND RIGHTS OF PREFERRED SHARES. The shares of preferred stock may be issued and reissued from time to time in one or more series. The Board of Directors of the Corporation (the “Board”) is hereby authorized to fix or alter the dividend rights, dividend rate, conversion rights, voting rights, rights and terms of redemption (including sinking fund provisions), the redemption price or prices, the liquidation preference, and any other rights, preferences, privileges, attributes or other matters which may be reserved to the Board by law, of any wholly-unissued series of preferred stock, and the number of shares constituting any such series and the designation thereof; and to increase the number of shares of any series at any time. In case the outstanding shares of any series shall be reacquired or shall not be issued, such shares may be designated or redesignated and altered, and issued or reissued, hereunder, by action of the Board.

Section 3. CUMULATIVE VOTING FOR DIRECTORS. No stockholder of the Corporation shall be entitled to cumulative voting of his or her shares for election of director.

Section 4. PREEMPTIVE RIGHTS. No stockholder of the Corporation shall have any preemptive rights.

ARTICLE IV.

DIRECTORS

Section 1. DIRECTORS. The business and affairs of the Corporation shall be managed under the direction of the Board. The number of directors may be changed from time to time in such manner as shall be provided in the Bylaws of the Corporation. The initial directors are:

Michael T. Cartwright, 115 East Park Drive, Second Floor, Brentwood, TN 37027

Jerrod N. Menz, 115 East Park Drive, Second Floor, Brentwood, TN 37027

Lucius E. Burch, III, 115 East Park Drive, Second Floor, Brentwood, TN 37027

David C. Kloeppel, 115 East Park Drive, Second Floor, Brentwood, TN 37027

Richard E. Ragsdale, 115 East Park Drive, Second Floor, Brentwood, TN 37027

Darrell S. Freeman, 115 East Park Drive, Second Floor, Brentwood, TN 37027

Jerry Bostelman, 115 East Park Drive, Second Floor, Brentwood, TN 37027

Section 2. LIMITATION OF LIABILITY. The liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the Nevada Revised Statutes. If the Nevada Revised Statutes are amended to further eliminate or limit or authorize corporate action to further eliminate or limit the liability of directors or officers, the liability of directors and officers of the Corporation shall be eliminated or limited to the fullest extent permitted by the Nevada Revised Statutes, as so amended from time to time.

Section 3. REPEAL AND CONFLICTS. Any repeal or modification of Section 2 above approved by the stockholders of the Corporation shall be prospective only, and shall not adversely affect any limitation on the liability of a director or officer of the Corporation existing as of the time of such repeal or modification. In the event of conflict between Section 2 above and any other Article of the Articles of Incorporation, the terms and provisions of Section 2 above shall control.

ARTICLE V.

PURPOSE

The purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Nevada Revised Statutes.

ARTICLE IX.

ARTICLES

Subject to Section 78.390 of the Nevada Revised Statutes, the Corporation reserves the right to repeal, alter, amend or rescind any provision contained in these Articles of Incorporation, in the manner now or hereinafter prescribed by statute, and all rights conferred on stockholders herein are granted subject to this reservation.

IN WITNESS WHEREOF, these Articles of Incorporation has been executed on behalf of AAC Holdings, Inc. by the undersigned officer, thereunto duly authorized, this 11^th day of February, 2014.

AAC Holdings, Inc.
By	/s/ Kathryn Sevier Phillips
Name:	Kathryn Sevier Phillips
Title:	General Counsel and Secretary

EX-3

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

AAC HOLDINGS, INC.

(the “Corporation”)

ARTICLE I

OFFICES

The Corporation may have offices at such places, both within and without the State of Nevada, as the Board of Directors of the Corporation (the “Board”) may from time to time determine or the business of the Corporation may require.

ARTICLE II

CORPORATE SEAL

2.1 Corporate Seal. The Corporation may have a corporate seal, which may be adopted by resolution of the Board, and the Corporation may use such seal by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.

ARTICLE III

STOCKHOLDERS’ MEETINGS

3.1 Place of Meetings. Meetings of the stockholders of the Corporation may be held at such place, either within or without the State of Nevada, as may be determined from time to time by the Board, or, if not so designated, then at the principal executive office of the Corporation maintained pursuant to Article I of these Amended and Restated Bylaws (as the same may be amended or restated from time to time, the “Bylaws”).

3.2 Annual Meetings.

(a) The annual meeting of the stockholders of the Corporation, for the purpose of election of directors and for such other business as may lawfully come before it, shall be held on such date and at such time as may be designated from time to time by the Board. The Board may postpone, reschedule or cancel any annual meeting of stockholders previously scheduled by the Board. Nominations of persons for election to the Board and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders: (i) pursuant to the Corporation’s notice with respect to such meeting; (ii) by or at the direction of the Board; or (iii) by any stockholder of the Corporation who was a stockholder of record at the time of giving the stockholder’s notice provided for in the following subsection (b), who is entitled to vote at the meeting and who complied with the notice procedures set forth below in this Section 3.2. The foregoing clause (a)(iii) shall be the exclusive means for a stockholder to make a nomination or propose business (other than business included in the Corporation’s proxy materials pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, as amended (such act, and the rules and regulations promulgated thereunder, the “1934 Act”)) at an annual meeting of stockholders.

(b) At an annual meeting of the stockholders, only such business shall be conducted as shall have been properly brought before the meeting. For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to Section 3.2(a)(iii) above, (i) the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, (ii) such other business must be a proper matter for stockholder action under the Nevada Revised Statutes (“NRS”), and (iii) if the stockholder, or the beneficial owner on whose behalf any such proposal or nomination is made, has provided the Corporation with a Solicitation Notice (as defined below in Section 3.2(d)(iii)(C)(2)), such

stockholder or beneficial owner must, in the case of a proposal, have delivered a proxy statement and form of proxy to holders of at least the percentage of the Corporation’s voting shares required under applicable law or the Corporation’s Articles of Incorporation (as the same may be amended and/or restated from time to time, the “Articles of Incorporation”) or these Bylaws to carry any such proposal, or, in the case of a nomination or nominations, have delivered a proxy statement and form of proxy to holders of a percentage of the Corporation’s voting shares reasonably believed by such stockholder or beneficial owner to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder, and must, in either case, have included in such materials the Solicitation Notice.

(c) To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90^th) day, nor earlier than the close of business on the one hundred twentieth (120^th) day, prior to the first anniversary of the date of the proxy statement delivered to stockholders in connection with the preceding year’s annual meeting; provided, however, that in the event (i) the date of the annual meeting is advanced more than thirty (30) days prior to or delayed by more than thirty (30) days after the anniversary of the preceding year’s annual meeting, (ii) no proxy statement was made available to stockholders in connection with the preceding year’s annual meeting, or (iii) the Corporation did not hold an annual meeting in the preceding year, notice by the stockholder to be timely must be so delivered not earlier than the close of business on the ninetieth (90^th) day prior to such annual meeting and not later than the close of business on the later of the sixtieth (60^th) day prior to such annual meeting or the tenth (10^th) day following the day on which public announcement of the date of such meeting is first made. In no event shall the public announcement of an adjournment of an annual meeting commence a new time period for the giving of a stockholder’s notice as described above.

(d) Such stockholder’s notice shall set forth:

(i) as to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the 1934 Act (including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected);

(ii) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and

(iii) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made:

(A) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner,

(B)(1) the class and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (2) any option, warrant, convertible security, stock appreciation right, or similar right with an exercise or conversion privilege or a settlement payment or mechanism at a price related to any class or series of shares of the Corporation or with a value derived in whole or in part from the value of any class or series of shares of the Corporation, whether such instrument or right shall be subject to settlement in the underlying class or series of capital stock of the Corporation or otherwise (a “Derivative Instrument”) directly or indirectly owned beneficially by such stockholder and such beneficial owner and any other direct or indirect opportunity to

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profit or share in any profit derived from any increase or decrease in the value of shares of the Corporation, (3) any proxy, contract, arrangement, understanding, or relationship pursuant to which such stockholder has a right to vote any shares of any security of the Corporation, (4) any short interest in any security of the Corporation (for purposes of this Bylaw a person shall be deemed to have a short interest in a security if such person directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has the opportunity to profit or share in any profit derived from any decrease in the value of the subject security) held directly or indirectly by such stockholder and such beneficial owner, (5) any rights to dividends on the shares of the Corporation owned beneficially and of record by such stockholder and such beneficial owner that are separated or separable from the underlying shares of the Corporation, (6) any proportionate interest in shares of the Corporation or Derivative Instruments held, directly or indirectly, by a general or limited partnership in which such stockholder or such beneficial owner is a general partner or, directly or indirectly, beneficially owns an interest in a general partner and (7) any performance-related fees (other than an asset-based fee) that such stockholder or such beneficial owner is entitled to based on any increase or decrease in the value of shares of the Corporation or Derivative Instruments, if any, as of the date of such notice, in each case including without limitation any such interests held by members of such stockholder’s or such beneficial owner’s immediate family sharing the same household (which information shall be supplemented by such stockholder and beneficial owner, if any, not later than 10 days after the record date for the meeting to disclose such ownership as of the record date),

(C) any other information relating to such stockholder and beneficial owner, if any, that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in a contested election pursuant to Section 14 of the 1934 Act and the rules and regulations promulgated thereunder, including:

(1) a description of all arrangements or understandings between the stockholder or beneficial owner and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such stockholder, and

(2) whether either such stockholder or beneficial owner intends to deliver a proxy statement and form of proxy to holders of, in the case of the proposal, at least the percentage of the Corporation’s voting shares required under applicable law or the Articles of Incorporation or these Bylaws to carry the proposal or, in the case of a nomination or nominations, a sufficient number of holders of the Corporation’s voting shares to elect such nominee or nominees (an affirmative statement of such intent, a “Solicitation Notice”).

(e) Notwithstanding anything in Section 3.2(c) of these Bylaws to the contrary, in the event that the number of directors to be elected to the Board is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board made by the Corporation at least seventy (70) days prior to the first anniversary of the preceding year’s annual meeting (or, if the annual meeting is held more than thirty (30) days before or thirty (30) days after such anniversary date, at least seventy (70) days prior to such annual meeting) a stockholder’s notice required by this Section 3.2 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.

(f) Only such persons who are nominated in accordance with the procedures set forth in this Section 3.2 shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth

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in this Section 3.2. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made, or proposed, as the case may be, in accordance with the procedures set forth in these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, to declare that such defective proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded.

(g) Notwithstanding the foregoing provisions of this Section 3.2, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, stockholders must provide notice as required by the regulations promulgated under the 1934 Act. Nothing in these Bylaws shall be deemed to affect any rights of stockholders to request inclusion of proposals and director nominees in the Corporation’s proxy statement pursuant to Regulation 14A under the 1934 Act.

(h) For purposes of these Bylaws, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press, PR Newswire, Reuters or comparable national news service or in a document publicly filed by the Corporation with the U.S. Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act.

3.3 Special Meetings.

(a) Special meetings of the stockholders of the Corporation may be called, for any purpose or purposes by the Chairman of the Board or the Chief Executive Officer, and shall be called by the President or Secretary at the request in writing of a majority of the Board or the holders of a majority of the shares of voting stock of the Corporation.

(b) If a special meeting is properly called by any person or persons other than the Board, the request shall be in writing, specifying the general nature of the business proposed to be transacted, and shall be delivered personally or sent by certified or registered mail, return receipt requested, to the Secretary of the Corporation. No business may be transacted at such special meeting otherwise than specified in such notice. The Board shall determine the time and place of such special meeting, which shall be held not less than thirty-five (35) nor more than one hundred twenty (120) days after the date of the receipt of the request. Upon determination of the time and place of the meeting, the Secretary shall cause notice to be given to the stockholders entitled to vote, in accordance with the provisions of Section 3.4 of these Bylaws. Nothing contained in this subsection (b) shall be construed as limiting, fixing, or affecting the time when a meeting of stockholders called by action of the Board may be held.

(c) Nominations of persons for election to the Board may be made at a special meeting of stockholders at which directors are to be elected pursuant to the Corporation’s notice of meeting (i) by or at the direction of the Board or (ii) by any stockholder of the Corporation who is a stockholder of record at the time of giving notice provided for in these Bylaws who shall be entitled to vote at the meeting and who complies with the notice procedures set forth in this Section 3.3(c). The foregoing clause (ii) shall be the exclusive means for a stockholder to make a nomination at a special meeting of stockholders. In the event the Corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board, any such stockholder may nominate a person or persons (as the case may be), for election to such position(s) as specified in the Corporation’s notice of meeting, if the stockholder’s notice otherwise required by Section 3.2 of these Bylaws shall be delivered to the Secretary at the principal executive offices of the Corporation not earlier than the close of business on the one hundred twentieth (120th) day prior to such special meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such meeting or the tenth (10th) day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board to be elected at such meeting. In no event shall the public announcement of an adjournment of a special meeting commence a new time period for the giving of a stockholder’s notice as described above.

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(d) Unless the Articles of Incorporation provide otherwise, any special meeting of the stockholders may be cancelled by resolution duly adopted by a majority of the directors then in office upon public notice given prior to the date previously scheduled for such meeting of stockholders.

3.4 Notice Of Meetings. Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, date and hour of the meeting, the means of remote communication(s), if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting (as authorized by the Board in its sole discretion pursuant to Section 78.320 of the NRS), and, in the case of a special meeting, the purpose or purposes of the meeting. Notice of any meeting of stockholders, if mailed, is given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation and otherwise is given when delivered. Notice of the time, place, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his or her attendance thereat in person or by proxy, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders need be specified in any written waiver of notice or any waiver by electronic transmission.

3.5 Quorum; Vote Required. At all meetings of stockholders, except where otherwise provided by law, the Articles of Incorporation or these Bylaws, the presence, in person or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business. In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting. The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Except as otherwise provided by law or by applicable stock exchange rules, or by the Articles of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person or represented by proxy at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders. Except as otherwise provided by law, the Articles of Incorporation or these Bylaws, directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy at the meeting and entitled to vote generally on the election of directors. Where a separate vote by a class or classes or series is required, except where otherwise provided by law or by the Articles of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by law or by the Articles of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of votes cast at the meeting shall be the act of such class or classes or series.

3.6 Adjournment And Notice Of Adjourned Meetings. Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person or represented by proxy at the meeting. When a meeting

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is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof, and the means of remote communication(s), if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such adjourned meeting (as authorized by the Board in its sole discretion pursuant to Section 78.320 of the NRS), are announced at the meeting at which the adjournment is taken. At the adjourned meeting, the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

3.7 Voting Rights. For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the Corporation on the record date, as provided in Section 7.4 of these Bylaws, shall be entitled to vote at any meeting of stockholders. Every person entitled to vote shall have the right to do so either in person or by an agent or agents authorized by a proxy granted in accordance with the NRS. An agent so appointed need not be a stockholder. No proxy shall be valid after the expiration of six (6) months from its date of creation unless the proxy provides for a longer period, which may not exceed seven (7) years from the date of its creation.

3.8 Joint Owners of Stock. If shares or other securities having voting power stand of record in the names of two (2) or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two (2) or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one (1) votes, his or her act binds all; (b) if more than one (1) votes, the act of the majority so voting binds all; (c) if more than one (1) votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally. If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of clauses (b) and (c) shall be a majority or even-split in interest.

3.9 List of Stockholders. The Secretary shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the Corporation. In the event the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. The list shall be open to examination of any stockholder during the time of the meeting as provided by law.

3.10 No Action Without A Meeting. Except as otherwise expressly provided by the terms of any series of preferred stock then outstanding permitting the holders of such series of preferred stock to act by written consent, no action shall be taken by the stockholders of the Corporation except at an annual or special meeting of the stockholders called and noticed in the manner required by these Bylaws. The stockholders may not in any circumstance take action by written consent without a meeting.

3.11 Organization.

(a) At every meeting of stockholders, (i) the Chairman of the Board or, if a Chairman of the Board has not been appointed or is absent, (ii) the Chief Executive Officer or, if the Chief Executive

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Officer is absent, (iii) the President or, if the President is absent, (iv) such person as the Chairman of the Board shall appoint or, if such Chairman has not been appointed, (v) any officer of the Corporation chosen by the Board, shall act as chairman of the meeting. The Secretary, or, in his or her absence, such person appointed by the chairman of the meeting, shall act as secretary of the meeting.

(b) The Board may, in advance of any meeting of stockholders, appoint one (1) or more inspector(s), who may include individual(s) who serve the Corporation in other capacities, including without limitation as officers, employees or agents, to act at the meeting of stockholders and make a written report thereof. The Board may designate one (1) or more persons as alternate inspector(s) to replace any inspector who fails to act. If no inspector or alternate has been appointed or is able to act at a meeting of stockholders, the chairman of the meeting shall appoint one (1) or more inspector(s) to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath to faithfully execute the duties of inspector with strict impartiality and according to the best of his or her ability.

(c) The Board shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient. Subject to such rules and regulations of the Board, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the Corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot. The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting. Unless and to the extent determined by the Board or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.

ARTICLE IV

DIRECTORS

4.1 Number and Term of Office. The Board shall consist of at least one (1) individual and not more than eleven (11) individuals, with the number of directors within the foregoing fixed minimum and maximum established and changed from time to time solely by resolutions adopted by the Board without amendment to these Bylaws or the Articles of Incorporation. Directors need not be stockholders unless so required by the Articles of Incorporation. Each director shall serve until his or her successor is duly elected and qualified or until his or her earlier death, resignation, disqualification or removal. No decrease in the number of directors shall have the effect of removing any director prior to the expiration of his or her term of office.

4.2 Powers. The powers of the Corporation shall be exercised, its business conducted and its property controlled by the Board, except as may be otherwise provided by law or by the Articles of Incorporation.

4.3 Election of Directors. At each annual meeting of the stockholders, the stockholders of the Corporation shall elect a Board in accordance with Section 3.2.

4.4 Vacancies. Unless otherwise provided in the Articles of Incorporation and subject to the rights of the holders of any series of preferred stock then outstanding, any vacancies on the Board

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resulting from death, resignation, retirement, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless the Board determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even if less than a quorum of the Board. Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified. A vacancy in the Board shall be deemed to exist under this Section 4.4 in the case of the death, removal, disqualification or resignation of any director.

4.5 Resignation. Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time, upon receipt by the Secretary or at the pleasure of the Board. If no such specification is made, it shall be deemed effective at the pleasure of the Board. When one or more directors shall resign from the Board effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have the power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his or her successor shall have been duly elected and qualified.

4.6 Removal. Subject to the rights of the holders of any series of preferred stock then outstanding, any director may be removed from the Board, with or without cause by the affirmative vote of the holders of not less than two-thirds of the voting power of all then outstanding shares of capital stock of the Corporation then entitled to vote in the election of directors, voting together as a single class.

4.7 Meetings.

(a) Any member of the Board, or of any committee thereof, may participate in a meeting by means of conference telephone or other communications equipment pursuant to which all persons participating in the meeting can hear each other, and participation in a meeting by such means shall constitute presence in person at such meeting.

(b) Regular meetings of the Board may be held at any time or date and at any place within or without the State of Nevada which has been designated by the Board and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means. No further notice shall be required for regular meetings of the Board.

(c) Special meetings of the Board may be held at any time and place within or without the State of Nevada. Special meetings of the Board may be called by the Chairman of the Board or the Chief Executive Officer upon twenty-four hours’ notice to each director; special meetings shall be called by the Chairman, the Chief Executive Officer or the Secretary in like manner and on like notice on the written request of two directors unless the Board consists of only one director; in which case special meetings shall be called by the Chairman of the Board, the Chief Executive Officer or Secretary in like manner or on like notice on the written request of the sole director.

(d) Notice of the time and place of all special meetings of the Board shall be given to each director (i) by giving notice to such director in person or by telephone, including a voice messaging system or other system designed to record and communicate messages, during normal business hours, at least twenty-four (24) hours before the meeting, (ii) by sending a telegram or delivering notice by facsimile transmission, by electronic mail or by hand, to such director at his or her last known business or

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home address, during normal business hours, at least twenty-four (24) hours before the meeting, or (iii) by mailing notice, via first class United States mail, to such director at his or her last known business or home address at least three (3) days in advance of the meeting. Notice of any meeting may be waived in writing, or by electronic transmission, at any time before or after the meeting and will be waived by any director by attendance at such meeting, except when the director attends the meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Notice of a special meeting of the Board need not specify the purpose of the meeting.

(e) The transaction of all business at any meeting of the Board, or any committee thereof, shall be as valid as though it had taken place at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission. All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board need be specified in any written waiver of notice or any waiver by electronic transmission.

4.8 Quorum And Voting.

(a) Unless the Articles of Incorporation require a greater number, a quorum of the Board shall consist of a majority of the directors then in office. In the event one or more directors shall be disqualified to vote at any meeting, then the required quorum shall be reduced by one for each such director so disqualified; provided, however, that in no case shall less than one-third (¹/₃) of the total number of directors constitute a quorum. At any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board, without notice other than by announcement at the meeting.

(b) Unless a different vote be required by law, the Articles of Incorporation or these Bylaws, at each meeting of the Board at which a quorum is present, the affirmative vote of a majority of the directors present is the act of the Board.

4.9 Action Without Meeting. Unless otherwise restricted by the Articles of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board, or of any committee thereof, may be taken without a meeting, if all members of the Board or committee, as the case may be, consent thereto in writing or by electronic transmission. The written consent shall be filed with the minutes of the proceedings of the Board or committee.

4.10 Fees And Compensation. Directors shall be entitled to such compensation for their services as directors, and such additional compensation for their services as members of any committee of the Board as may be approved by the Board. Nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.

4.11 Committees.

(a) The Board may, by resolution passed by a majority of the Board, designate one or more committees, each committee to consist of one or more directors of the Corporation. Subject to applicable law and to the extent provided in the resolutions of the Board, any such committee shall have and may exercise all such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board. The committees shall keep regular minutes of their proceedings and report the same to the Board when required.

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(b) The Board may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board to act at the meeting in the place of any such absent or disqualified member.

4.12 Organization. At every meeting of the directors, the Chairman of the Board, or, if a Chairman of the Board has not been appointed or is absent, the Chief Executive Officer (if a director), or if the Chief Executive Officer is absent, the President (if a director), or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting. The Secretary, or in his or her absence, such person appointed by the chairman of the meeting, shall act as secretary of the meeting.

4.13 Interested Directors. Contracts or transactions between the Corporation and one or more of its directors or officers, or between the Corporation and another corporation, firm or association in which one or more of the Corporation’s directors or officers are directors or officers or are financially interested shall not be void or voidable if one of the circumstances provided for in Section 78.140(2) of the NRS exists.

ARTICLE V

OFFICERS

5.1 Officers Designated. The officers of the Corporation shall be designated by the Board, and shall include the Chairman of the Board, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, and the Chief Financial Officer. The Board may also appoint one or more Assistant Secretaries and such other officers and agents with such powers and duties as it shall deem necessary. The Board may assign such additional titles to one or more of the officers as it shall deem appropriate. Any one person may hold any number of offices of the Corporation at any one time unless specifically prohibited therefrom by law. The salaries and other compensation of the officers of the Corporation shall be fixed by or in the manner designated by the Board or a committee thereof.

5.2 Tenure And Duties Of Officers.

(a) All officers shall hold office at the pleasure of the Board and until their successors shall have been duly elected and qualified, unless sooner removed. Any officer elected or appointed by the Board may be removed at any time by the Board, subject to the rights, if any, of an officer under contract of employment. If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board.

(b) The Chairman of the Board, if such an officer be elected, shall, if present, preside at meetings of the Board and stockholders and exercise and perform such other powers and duties as may from time to time be assigned to him or her by the Board or as may be prescribed by these Bylaws. If there is no Chief Executive Officer or President, then the Chairman of the Board shall also be the Chief Executive Officer of the Corporation and as such shall also have the powers and duties prescribed in Section 5.2(c) below.

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(c) Subject to such supervisory powers, if any, as the Board may give to the Chairman of the Board, the Chief Executive Officer, if any, shall, subject to the control of the Board, have general supervision, direction, and control of the business and affairs of the Corporation and shall report directly to the Board. All other officers, officials, employees and agents shall report directly or indirectly to the Chief Executive Officer. The Chief Executive Officer shall see that all orders and resolutions of the Board are carried into effect. In the absence of a Chairman of the Board, the Chief Executive Officer shall preside at all meetings of the Board.

(d) In the absence or disability of the Chief Executive Officer, the President shall perform all the duties of the Chief Executive Officer. When acting as the Chief Executive Officer, the President shall have all the powers of, and be subject to all the restrictions upon, the Chief Executive Officer. The President shall have such other powers and perform such other duties as from time to time may be prescribed for him or her by the Board, these Bylaws, the Chief Executive Officer or the Chairman of the Board.

(e) In the absence or disability of the President, the Vice President(s), if any, in order of their rank as fixed by the Board or, if not ranked, a Vice President designated by the Board, shall perform all the duties of the President and, when so acting, shall have all the powers of, and be subject to all the restrictions upon, the President. The Vice President(s) shall have such other powers and perform such other duties as form time to time may be prescribed for them respectively by the Board, these Bylaws, the Chairman of the Board, the Chief Executive Officer or, in the absence of a Chief Executive Officer, the President.

(f) The General Counsel, if any, shall serve as the Corporation’s primary in-house legal counsel and shall discharge such other duties as may from time to time be assigned by the Board, the Chief Executive Officer or the President.

(g) The Secretary shall keep or cause to be kept, at the principal executive office of the Corporation, or such other place as the Board may direct, a book of minutes of all meetings and actions of directors, committees of directors, and stockholders. The minutes shall show the time and place of each meeting, whether regular or special (and, if special, how authorized and the notice given), the names of those present at directors’ meetings or committee meetings, the number of shares present or represented at stockholders’ meetings, and the proceedings thereof.

The Secretary shall keep, or cause to be kept, at the principal executive office of the Corporation or at the office of the Corporation’s transfer agent or registrar, as determined by resolution of the Board, a share register, or a duplicate share register, showing the names of all stockholders and their addresses, the number and classes of shares held by each, the number and date of certificates evidencing such shares, and the number and date of cancellation of every certificate surrendered for cancellation.

The Secretary shall give, or cause to be given, notice of all meetings of the stockholders, the Board and any committee(s) of the Board, required to be given by law or by these Bylaws. The Secretary shall keep the seal of the Corporation, if one be adopted, in safe custody and shall have such other powers and perform such other duties as may be prescribed by the Board or by these Bylaws.

(h) The Chief Financial Officer shall keep and maintain, or cause to be kept and maintained, adequate and correct books and records of accounts of the properties and business transactions of the Corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, capital and retained earnings.

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The Chief Financial Officer shall deposit all money and other valuables in the name and to the credit of the Corporation with such depositaries as may be designated by the Board or Chief Executive Officer. The Chief Financial Officer shall disburse the funds of the Corporation as may be ordered by the Board, shall render to the Board and Chief Executive Officer, or in the absence of a Chief Executive Officer, the President, whenever they request, an account of all of his or her transactions as Chief Financial Officer and of the financial condition of the Corporation, and shall have such other powers and perform such other duties as may be prescribed by the Board or these Bylaws.

(i) The Assistant Secretary(ies), if any, in the order determined by the Board (or if there be no such determination, then in the order of their election) shall, in the absence of the Secretary or in the event of his or her inability or refusal to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board may from time to time prescribe.

5.3 Delegation Of Authority. The Board may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.

5.4 Resignations. Any officer may resign at any time by giving notice in writing or by electronic transmission to the Company. Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time. Any resignation shall be without prejudice to the rights, if any, of the Corporation under any contract with the resigning officer.

5.5 Removal. Subject to the rights, if any, of an officer under contract of employment, any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time or by any committee or superior officers upon whom such power of removal may have been conferred by the Board.

ARTICLE VI

EXECUTION OF CORPORATE INSTRUMENTS AND VOTING

OF SECURITIES OWNED BY THE CORPORATION

6.1 Execution of Corporate Instruments. Contracts and other instruments in the normal course of business may be executed on behalf of the Corporation by the Chief Executive Officer, the President or any Vice President of the Corporation, or any other person authorized by resolution of the Board. All checks and drafts drawn on banks or other depositaries on funds to the credit of the Corporation or in special accounts of the Corporation shall be signed by such person or persons as the Board shall authorize so to do.

6.2 Voting of Securities Owned by the Corporation. All stock and other securities of other corporations owned or held by the Corporation shall be voted, and all proxies with respect thereto shall be executed, by the person authorized to do so by resolution of the Board, or, in the absence of such authorization, by the Chairman of the Board, the Chief Executive Officer, the President, or any Vice President.

ARTICLE VII

SHARES OF STOCK

7.1 Form And Execution Of Certificates. Shares of stock of the Corporation shall be represented by Certificates, or shall be uncertificated, as determined by the Board. Certificates for the shares of stock of the Corporation, if any, shall be in such form as is determined by the Board and is

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consistent with the Articles of Incorporation and applicable law. Every holder of stock of the Corporation that is represented by a certificate shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board, or the President or any Vice President and by the Secretary or Assistant Secretary, certifying the number of shares owned by such holder in the Corporation. Any or all of the signatures on the certificates may be facsimiles. In case any officer, transfer agent, or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he or she were such officer, transfer agent, or registrar at the date of issue.

7.2 Lost Certificates. A new certificate or certificate shall be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed. The Corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the Corporation in such manner as it shall require or to give the Corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.

7.3 Transfers.

(a) Transfers of record of shares of stock of the Corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.

(b) The Corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the Corporation to restrict the transfer of shares of stock of the Corporation of any one or more classes owned by such stockholders in any manner not prohibited by the NRS.

7.4 Fixing Record Dates.

(a) In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board, and which record date shall, subject to applicable law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If no record date is fixed by the Board, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board may fix a new record date for the adjourned meeting and must fix a new record date if the meeting is adjourned to a date more than sixty (60) days later than the date set for the original meeting.

(b) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than sixty

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(60) days prior to such action. If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board adopts the resolution relating thereto.

7.5 Registered Stockholders. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by applicable law.

ARTICLE VIII

DIVIDENDS

8.1 Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Articles of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting. Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Articles of Incorporation and applicable law.

ARTICLE IX

FISCAL YEAR

9.1 Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board.

ARTICLE X

INDEMNIFICATION AND ADVANCEMENT OF EXPENSES

10.1 Right To Indemnification.

(a) The Corporation shall indemnify any person (a “Covered Person”) who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Corporation, by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise, against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding if he or she either is not liable pursuant to NRS 78.138 or acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, does not, of itself, create a presumption that the Covered Person is liable pursuant to NRS 78.138 or did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Corporation, or, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.

(b) The Corporation shall indemnify any Covered Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he or she is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and attorneys’ fees actually and

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reasonably incurred by him or her in connection with the defense or settlement of the action or suit if he or she either is not liable pursuant to Section 78.138 of the NRS or acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the Corporation. Indemnification shall not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Corporation or for amounts paid in settlement to the Corporation unless and only to the extent that the court in which such action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

(c) Indemnification pursuant to this Section shall continue as to a Covered Person who has ceased to be a director or officer of the Corporation and shall inure to the benefit of his or her heirs, executors and administrators.

(d) With respect to any action, suit or proceeding initiated by a director or officer, the Corporation shall indemnify such director or officer only if the action, suit or proceeding was authorized by the Board, except with respect to a suit for the enforcement of rights to indemnification or advancement of expenses in accordance with Section 10.2 hereof.

10.2 Pre-Payment of Expenses. The Corporation shall to the fullest extent not prohibited by applicable law pay the expenses (including attorneys’ fees) incurred by a Covered Person in defending any action, suit or proceeding in advance of its final disposition; provided, however, that such payment of expenses in advance of the final disposition of the action, suit or proceeding shall be made only upon receipt of an undertaking by the Covered Person to repay all amounts advanced if it should be ultimately determined by a court of competent jurisdiction that the Covered Person is not entitled to be indemnified by the Corporation under this Article X or otherwise.

10.3 Claims. If a claim for indemnification (following the final disposition of the action, suit or proceeding with respect to which indemnification is sought, including any settlement of such action, suit or proceeding) or advancement of expenses under this Article X is not paid in full within thirty days after a written claim therefor by the Covered Person has been received by the Corporation, the Covered Person may file suit to recover the unpaid amount of such claim and, if successful in whole or in part, shall be entitled to be paid the expense of prosecuting such claim to the fullest extent permitted by applicable law. In any such action the Corporation shall have the burden of proving that the Covered Person is not entitled to the requested indemnification or advancement of expenses under this Article X and applicable law.

10.4 Non-Exclusivity Of Rights. The rights conferred on any Covered Person by this Article X shall not be exclusive of any other rights which such Covered Person may have or hereafter acquire under any law, any other provision of the Articles of Incorporation, these Bylaws, or any agreement, vote of stockholders or disinterested directors or otherwise.

10.5 Insurance. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust, enterprise or nonprofit entity, including service with respect to employee benefit plans, against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the Corporation would have the power to indemnify such person against such liability under this Article X, the NRS or otherwise.

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10.6 Amendment or Repeal. Any right to indemnification or to advancement of expenses of any Covered Person arising hereunder shall not be eliminated or impaired by an amendment to or repeal of this Article X after the occurrence of the act or omission that is the subject of the civil, criminal, administrative or investigative action, suit or proceeding for which indemnification or advancement of expenses is sought.

10.7 Saving Clause. If this Article X or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Corporation shall nevertheless indemnify each director, officer, employee and agent to the fullest extent not prohibited by any applicable portion of this Article X that shall not have been invalidated, or by any other applicable law. If this Article X shall be invalid due to the application of the indemnification provisions of another jurisdiction, then the Corporation shall indemnify each director, officer, employee and agent to the fullest extent under any other applicable law.

10.8 Amendment. The provisions of this Article X relating to indemnification shall constitute a contract between the Corporation and each of its directors and officers which may be modified as to any director or only with that person’s consent or as specifically provided in this Section 10.8. Notwithstanding any other provisions of these Bylaws relating to their amendment generally, any repeal or amendment of this Article X which is adverse to any director or officer shall apply to such director or officer only on a prospective basis, and shall not limit the rights of a Covered Person to indemnification with respect to any action or failure to act occurring prior to the time of such repeal or amendment. Notwithstanding any other provisions of these Bylaws (including, without limitation, Article XII), no repeal or amendment of these Bylaws shall affect any or all of this Article X so as to limit or reduce the indemnification in any manner unless adopted by (i) the unanimous vote of the directors of the Corporation then serving, or (ii) by the stockholders as set forth in Article XII; provided that no such amendment shall have a retroactive effect inconsistent with the preceding sentence.

ARTICLE XI

NOTICES

11.1 Notices.

(a) Written notice to stockholders of stockholder meetings shall be given as provided in Section 3.4 herein. Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by United States mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.

(b) Notice to directors of special meetings shall be given as provided in Section 4.7(d) herein. Subject to the preceding sentence and except as expressly stated otherwise herein, notice may otherwise be given by the methods stated in subsection (a) above.

(c) An affidavit of mailing specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.

(d) It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more recipients, and any other permissible method or methods may be employed in respect of any other or others.

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(e) Whenever notice is required to be given, under any provision of the NRS, the Articles of Incorporation or these Bylaws, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person. Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given. In the event the action taken by the Corporation is such as to require the filing of a certificate under any provision of the NRS, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.

(f) Whenever notice is required to be given, under any provision of the NRS, the Articles of Incorporation or these Bylaws, to any stockholder to whom (i) notice of two (2) consecutive annual meetings, or (ii) all, and at least two (2), payments (if sent by first-class mail) of dividends or interest on securities during a twelve (12) month period, have been mailed addressed to such person at such person’s address as shown on the records of the Corporation and have been returned undeliverable, the giving of such notice to such person shall not be required. Any actions or meeting which shall be taken or held without notice to such person shall have the same force and effect as if such notice had been duly given. If any such person shall deliver to the Corporation a written notice setting forth such person’s then current address, the requirement that notice be given to such person shall be reinstated. In the event that the action taken by the Corporation is such as to require the filing of a certificate under any provision of the NRS, the certificate need not state that the Corporation did not give notice to persons not required to be given notice pursuant to Section 78.370(6)(b) of the NRS. The exception in clause (i) above to the requirement that notice be given shall not be applicable to any notice returned as undeliverable if the notice was given by electronic transmission.

(g) Except as otherwise prohibited under the NRS, any notice given under the provisions of the NRS, the Articles of Incorporation or these Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall be deemed to have been given if such stockholder fails to object in writing to the Corporation within 60 days of having been given notice by the Corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the Corporation.

(h) Without limiting the manner by which notice otherwise may be given effectively to stockholders, any notice to stockholders given by the Corporation under any provision of the NRS, the Articles of Incorporation or these Bylaws shall be effective if given by a form of electronic transmission previously consented to by the stockholder to whom the notice is given.

Notice given pursuant to the above paragraph shall be deemed given (i) if by facsimile telecommunication, when directed to a number at which the stockholder has consented to receive notice, (ii) if by electronic mail, when directed to an electronic mail address at which the stockholder has consented to receive notice, (iii) if by a posting on an electronic network together with a separate notice to the stockholder of such specific posting, upon the later of (A) such posting and (B) the giving of such separate notice, and (iv) if by any other form of electronic transmission, when directed to the stockholder. An affidavit of the Secretary or Assistant Secretary, the transfer agent or other agent of the Corporation that the notice has been given by a form of electronic transmission shall in the absence of fraud, be prima facie evidence of the facts stated therein.

For purposes of these Bylaws, “electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process.

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ARTICLE XII

AMENDMENTS

12.1 Amendments. Any amendment or repeal of the Bylaws of the Corporation by the Board shall require the approval of a majority of the directors then in office and the affirmative vote of the holders of a majority of the voting power of all of the then-outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class.

ARTICLE XIII

RECORDS AND REPORTS

13.1 Maintenance And Inspection Of Records.

(a) The Corporation shall, either at its principal executive office or at such place or places as designated by the Board, keep a record of its stockholders listing their names and addresses and the number and class of shares held by each stockholder, a copy of these Bylaws, minute books, accounting books and other records.

(b) Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the Corporation’s stock ledger, a list of its stockholders, and its other books and records and to make copies or extracts therefrom. A proper purpose shall mean a purpose reasonably related to such person’s interest as a stockholder. In every instance where an attorney or other agent is the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing that authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the Corporation at its registered office in Nevada or at its principal place of business.

13.2 Inspection By Directors. Any director shall have the right to examine the Corporation’s stock ledger, a list of its stockholders, and its other books and records for a purpose reasonably related to his or her position as a director.

ARTICLE XIV

CONSTRUCTION

14.1 Construction. Unless the context requires otherwise, the general provisions, rules of construction and definitions in the NRS shall govern the construction of these Bylaws. The singular number includes the plural, and the plural number includes the singular. All pronouns used in these Bylaws shall be deemed to refer to the masculine, feminine and/or neuter, as the identity of the person or persons so designated may require.

Adopted as of June     , 2014.

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EX-10

Exhibit 10.1

AAC HOLDINGS, INC.

2007 STOCK INCENTIVE PLAN

ARTICLE I. - PREAMBLE

1.1 This 2007 Stock Incentive Plan of AAC Holdings, Inc. is intended to secure for the Company and its Affiliates the benefits arising from ownership of the Company’s Common Stock by the Employees, Officers, Directors and Consultants of the Company and its Affiliates, all of whom are and will be responsible for the Company’s future growth. The Plan is designed to help attract and retain for the Company and its Affiliates personnel of superior ability for positions of exceptional responsibility, to reward Employees, Officers, Directors and Consultants for their services and to motivate such individuals through added incentives to further contribute to the success of the Company and its Affiliates. With respect to persons subject to Section 16 of the Act, transactions under this Plan are intended to satisfy the requirements of Rule 16b-3 of the Act.

1.2 Awards under the Plan may be made to an Eligible Person in the form of (i) Incentive Stock Options (to Eligible Employees only); (ii) Nonqualified Stock Options; (iii) Restricted Stock; (iv) Stock Awards; (v) Performance Shares; or (vi) any combination of the foregoing.

1.3 The Company’s Board of Directors adopted the Plan on June 7, 2007 (the “Effective Date”), subject to approval by the shareholders of the Company to the extent necessary to satisfy the requirements of the Code, the Act, or other applicable federal or state law. Unless sooner terminated as provided elsewhere in this Plan, this Plan shall terminate upon the close of business on the day next preceding the tenth (10th) anniversary of the Effective Date. Award Agreements outstanding on such date shall continue to have force and effect in accordance with the provisions thereof.

1.4 Capitalized terms shall have the meaning provided in Article II unless otherwise provided in this Plan or any related Award Agreement.

ARTICLE II. - DEFINITIONS

Except where the context otherwise indicates, the following definitions apply:

2.1 “Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended.

2.2 “Affiliate” means any parent corporation or subsidiary corporation of the Company, whether now or hereinafter existing, as those terms are defined in Sections 424 (e) and (f), respectively, of the Code.

2.3 “Award” means an award granted to a Participant in accordance with the provisions of the Plan, including, but not limited to, Stock Options, Restricted Stock, Stock Awards, Performance Shares, or any combination of the foregoing.

2.4 “Award Agreement” means the separate written agreement evidencing each Award granted to a Participant under the Plan.

2.5 “Board of Directors” or “Board’’ means the Board of Directors of the Company, as constituted from time to time.

2.6 “Change of Control” means (a) the adoption of a plan of merger or consolidation of the Company with any other corporation or association as a result of which the holders of the voting capital stock of the Company as a group would receive less than 50% of the voting capital stock of the surviving or resulting corporation; (b) the approval by the Board of Directors of an agreement providing for the sale or transfer (other than as security for obligations of the Company) of substantially all the assets of the Company; or (c) in the absence of a prior expression of approval by the Board of Directors, the acquisition of more than 20% of the Company’s voting capital stock by any person within the meaning of Rule 13d-3 under the Act (other than the Company or a person that directly or indirectly controls, is controlled by, or is under common control with, the Company).

2.7 “Code” means the Internal Revenue Code of 1986, as amended, and the regulations and interpretations promulgated thereunder.

2.8 “Committee” means a committee of two or more members of the Board appointed by the Board in accordance with Section 3.2 of the Plan.

2.9 “Common Stock” means the Company’s common stock.

2.10 “Company” means AAC Holdings, Inc., a Nevada corporation.

2.11 “Consultant” means any person, including an advisor engaged by the Company or an Affiliate to render bona fide consulting or advisory services to the Company or an Affiliate, other than as an Employee, Director or Non-Employee Director.

2.12 “Director” means a member of the Board of Directors of the Company.

2.13 “Disability” means the permanent and total disability of a person within the meaning of Section 22 (e) (3) of the Code.

2.14 “Effective Date” shall be the date set forth in Section 1.3 of the Plan.

2.15 “Eligible Employee” means an Eligible Person who is an Employee of the Company or any Affiliate.

2.16 “Eligible Person” means any Employee, Officer, Director, Non-Employee Director or Consultant of the Company or any Affiliate, except for instances where services are in connection with the offer or sale of securities in a capital-raising transaction, or they directly or indirectly promote or maintain a market for the Company’s securities, subject to any other limitations as may be provided by the Code, the Act, or the Board. In making such determinations, the Board may take into account the nature of the services rendered by such person, his or her present and potential contribution to the Company’s success, and such other factors as the Board in its discretion shall deem relevant.

2.17 “Employee” means an individual who is a common-law employee of the Company or an Affiliate including employment as an Officer. Mere service as a Director or payment of a director’s fee by the Company or an Affiliate shall not be sufficient to constitute “employment” by the Company or an Affiliate.

2.18 “ERISA” means the Employee Retirement Income Security Act of 1974, as now in effect or as hereafter amended.

2.19 “Fair Market Value” means:

(a) for purposes of an Incentive Stock Option, if there is a market for the Company’s stock, on a stock exchange or in an over-the-counter market, or otherwise, the Fair Market Value shall be the mean between the highest and lowest quoted selling prices on the valuation date of the Incentive Stock Option, or if there were no sales of the Company’s Common Stock on the valuation date, the Fair Market Value shall be the weighted average of the means between the highest and lowest sales on the nearest date before and the nearest date after the valuation date. If a valuation pursuant to this paragraph is not available, the appropriate method described in Section 20.2031-2 of the Treasury Regulations adopted under the Code shall be used for the Fair Market Value, and

(b) for all other purposes, the mean between the highest and lowest quoted selling prices of the Common Stock (if actual sales price information on such trading day is not available, the mean between the bona fide bid and asked prices on such trading day shall be used) on the trading day immediately prior to the date on which a determination is being made pursuant to this Section 2.19 (the “Mean Selling Price”), as reported by the National Association of Securities Dealers Automated Quotation System (“NASDAQ”), or if the Common Stock is not traded on NASDAQ, the Mean Selling Price in the over-the- counter market; provided, however, that if the Common Stock is listed on a stock exchange, the Fair Market Value shall be the Mean Selling Price on such exchange; and, provided further, that if the Common Stock is not quoted or listed by any organization, the fair value of the Common Stock, as determined by the Board, whose determination shall be conclusive, shall be used. In no event shall the Fair Market Value of any share of Common Stock be less than its par value.

2.20 “Grant Date” means, as to any Award, the latest of:

(a) the date on which the Board authorizes the grant of the Award; or

(b) the date the Participant receiving the Award becomes an Employee or a Director of the Company or its Affiliate, to the extent employment status is a condition of the grant or a requirement of the Code or the Act; or

(c) such other date (later than the dates described in (a) and (b) above) as the Board may designate and as set forth in the Participant’s Award Agreement.

2.21 “Immediate Family” means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in- law, daughter-in-law, brother-in-law or sister-in-law and shall include adoptive relationships.

2.22 “Incentive Stock Option” means a Stock Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code and is granted under Article IV of the Plan and designated as an Incentive Stock Option in a Participant’s Award Agreement.

2.23 “Non-Employee Director” shall have the meaning set forth in Rule 16b-3 under the Act.

2.24 “Nonqualified Stock Option” means a Stock Option not intended to qualify as an Incentive Stock Option and is not so designated in the Participant’s Award Agreement.

2.25 “Officer” means a person who is an officer of the Company within the meaning of Section 16 of the Act.

2.26 “Option Period” means the period during which a Stock Option may be exercised from time to time, as established by the Board and set forth in the Award Agreement for each Participant who is granted a Stock Option.

2.27 “Option Price” means the purchase price for a share of Common Stock subject to purchase pursuant to a Stock Option, as established by the Board and set forth in the Award Agreement for each Participant who is granted a Stock Option.

2.28 “Outside Director” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162 (m) of the Code), is not a former employee of the Company or an “affiliated corporation” receiving compensation for prior services (other than benefits under a tax qualified pension plan), was not an officer of the Company or an “affiliated corporation” at any time and is not currently receiving direct or indirect remuneration from the Company or an “affiliated corporation” for services in any capacity other than as a Director or (ii) is otherwise considered an “outside director” for purposes of Section 162 (m) of the Code.

2.29 “Participant” means an Eligible Person to whom an Award has been granted and who has entered into an Award Agreement evidencing the Award or, i applicable, such other person who holds an outstanding Award.

2.30 “Performance Objectives” shall have the meaning set forth in Article IX of the Plan.

2.31 “Performance Period” shall have the meaning set forth in Article IX of the Plan.

2.32 “Performance Share” means an Award under Article IX of the Plan of a unit valued by reference to the Common Stock, the payout of which is subject to achievement of such Performance Objectives, measured during one or more Performance Periods, as the Board, in its sole discretion, shall establish at the time of such Award and set forth in a Participant’s Award Agreement.

2.33 “Plan” means AAC Holdings, Inc. 2007 Stock Incentive Plan, as it may be amended from time to time.

2.34 “Reporting Person” means a person required to file reports under Section 16(a) of the Act.

2.35 “Restricted Stock” means an Award under Article VII of the Plan of shares of Common Stock that are at the time of the Award subject to restrictions or limitations as to the Participant’s ability to sell, transfer, pledge or assign such shares, which restrictions or limitations may lapse separately or in combination at such time or times, in installments or otherwise, as the Board, in its sole discretion, shall determine at the time of such Award and set forth in a Participant’s Award Agreement.

2.36 “Restriction Period” means the period commencing on the Grant Date with respect to such shares of Restricted Stock and ending on such date as the Board, in its sole discretion, shall establish and set forth in a Participant’s Award Agreement.

2.37 “Retirement” means retirement as determined under procedures established by the Board or in any Award, as set forth in a Participant’s Award Agreement.

2.38 “Rule 16b-3” means Rule 16b-3 promulgated under the Act or any successor to Rule 16b-3, as in effect from time to time. Those provisions of the Plan which make express reference to Rule 16b-3, or which are required in order for certain option transactions to qualify for exemption under Rule 16b-3, shall apply only to a Reporting Person.

2.39 “Stock Award” means an Award of shares of Common Stock under Article VIII of the Plan.

2.40 “Stock Option” means an Award under Article IV or Article V of the Plan of an option to purchase Common Stock. A Stock Option may be either an Incentive Stock Option or a Nonqualified Stock Option.

2.41 “Ten Percent Stockholder” means an individual who owns (or is deemed to own pursuant to Section 424 (d) of the Code), at the time of grant, stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of the Company or any of its Affiliates.

2.42 “Termination of Service” means (i) in the case of an Eligible Employee, the discontinuance of employment of such Participant with the Company or its Subsidiaries for any reason other than a transfer to another member of the group consisting of the Company and its Affiliates and (ii) in the case of a Director who is not an Employee of the Company or any Affiliate, the date such Participant ceases to serve as a Director. The determination of whether a Participant has discontinued service shall be made by the Board in its sole discretion. In determining whether a Termination of Service has occurred, the Board may provide that service as a Consultant or service with a business enterprise in which the Company has a significant ownership interest shall be treated as employment with the Company.

ARTICLE III. - ADMINISTRATION

3.1 The Plan shall be administered by the Board of Directors of the Company. The Board shall have the exclusive right to interpret and construe the Plan, to select the Eligible Persons who shall receive an Award, and to act in all matters pertaining to the grant of an Award and the determination and interpretation of the provisions of the related Award Agreement, including, without limitation, the determination of the number of shares subject to Stock Options and the Option Period(s) and Option Price(s) thereof, the number of shares of Restricted Stock or shares subject to Stock Awards or Performance Shares subject to an Award, the vesting periods (if any) and the form, terms, conditions and duration of each Award, and any amendment thereof consistent with the provisions of the Plan. The Board may adopt, establish, amend and rescind such rules, regulations and procedures as it may deem appropriate for the proper administration of the Plan, make all other determinations which are, in the Board’s judgment, necessary or desirable for the proper administration of the Plan, amend the Plan or a Stock Award as provided in Article XI, and terminate or suspend the Plan as provided in Article XI. All acts, determinations and decisions of the Board made or taken pursuant to the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan or any Award Agreement, including the severability of any and all of the provisions thereof, shall be conclusive, final and binding upon all persons.

3.2 The Board may, to the full extent permitted by and consistent with applicable law and the Company’s Bylaws, and subject to Subparagraph 3.2(b) hereinbelow, delegate any or all of its powers with respect to the administration of the Plan to a Committee consisting of not fewer than two members of the Board each of whom shall qualify (at the time of appointment to the Committee and during all periods of service on the Committee) in all respects as a Non- Employee Director and as an Outside Director.

(a) If administration is delegated to a Committee, the Committee shall have, in connection with the administration of the Plan, the powers theretofore possessed by the Board, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in the Plan to the Board shall thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not consistent with the provisions of the Plan, as may be adopted from time to time by the Board.

(b) The Board may abolish the Committee at any time and reassume all powers and authority previously delegated to the Committee.

(c) In addition to, and not in limitation of, the right of any Committee so designated by the Board to administer this Plan to grant Awards to Eligible Persons under this Plan, the full Board of Directors may from time to time grant Awards to Eligible Persons pursuant to the terms and conditions of this Plan, subject to the requirements of the Code, Rule 16b-3 under the Act or any other applicable law, rule or regulation. In connection with any such grants, the Board of Directors shall have all of the power and authority of the Committee to determine the Eligible Persons to whom such Awards shall be granted and the other terms and conditions of such Awards.

3.3 Without limiting the provisions of this Article III, and subject to the provisions of Article X, the Board is authorized to take such action as it determines to be necessary or advisable, and fair and equitable to Participants and to the Company, with respect to an outstanding Award in the event of a Change of Control as described in Article X or other similar event. Such action may include, but shall not be limited to, establishing, amending or waiving the form, terms, conditions and duration of an Award and the related Award Agreement, so as to provide for earlier, later, extended or additional times for exercise or payments, differing methods for calculating payments, alternate forms and amounts of payment, an accelerated release of restrictions or other modifications. The Board may take such actions pursuant to this Section 3.3 by adopting rules and regulations of general applicability to all Participants or to certain categories of Participants, by including, amending or waiving terms and conditions in an Award and the related Award Agreement, or by taking action with respect to individual Participants from time to time.

3.4 Subject to the provisions of Section 3.9, the maximum aggregate number of shares of Common Stock which may be issued pursuant to Awards under the Plan shall be Two Hundred and Fifty Million (250,000,000) shares. Such shares of Common Stock shall be made available from authorized and unissued shares of the Company.

(a) For all purposes under the Plan, each Performance Share awarded shall be counted as one share of Common Stock subject to an Award.

(b) If, for any reason, any shares of Common Stock (including shares of Common Stock subject to Performance Shares) that have been awarded or are subject to issuance or purchase pursuant to Awards outstanding under the Plan are not delivered or purchased, or are reacquired by the Company, for any reason, including but not limited to a forfeiture of Restricted Stock or failure to earn Performance Shares or the termination, expiration or cancellation of a Stock Option, or any other termination of an Award without payment being made in the form of shares of Common Stock (whether or not Restricted Stock), such shares of Common Stock shall not be charged against the aggregate number of shares of Common Stock available for Award under the Plan and shall again be available for Awards under the Plan. In no event, however, may Common Stock that is surrendered or withheld to pay the exercise price of a Stock Option or to satisfy tax withholding requirements be available for future grants under the Plan.

(c) The foregoing subsections (a) and (b) of this Section 3.4 shall be subject to any limitations provided by the Code or by Rule 16b-3 under the Act or by any other applicable law, rule or regulation.

3.5 Each Award granted under the Plan shall be evidenced by a written Award Agreement, which shall be subject to and shall incorporate (by reference or otherwise) the applicable terms and conditions of the Plan and shall include any other terms and conditions (not inconsistent with the Plan) required by the Board.

3.6 The Company shall not be required to issue or deliver any certificates for shares of Common Stock under the Plan prior to:

(a) any required approval of the Plan by the shareholders of the Company; and

(b) the completion of any registration or qualification of such shares of Common Stock under any federal or state law, or any ruling or regulation of any governmental body that the Company shall, in its sole discretion, determine to be necessary or advisable.

3.7 The Board may require any Participant acquiring shares of Common Stock pursuant to any Award under the Plan to represent to and agree with the Company in writing that such person is acquiring the shares of Common Stock for investment purposes and without a view to resale or distribution thereof. Shares of Common Stock issued and delivered under the Plan shall also be subject to such stop-transfer orders and other restrictions as the Board may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed and any applicable federal or state laws, and the Board may cause a legend or legends to be placed on the certificate or certificates representing any such shares to make appropriate reference to any such restrictions. In making such determination, the Board may rely upon an opinion of counsel for the Company.

3.8 Except as otherwise expressly provided in the Plan or in an Award Agreement with respect to an Award, no Participant shall have any right as a shareholder of the Company with respect to any shares of Common Stock subject to such Participant’s Award except to the extent that, and until, one or more certificates representing such shares of Common Stock shall have been delivered to the Participant. No shares shall be required to be issued, and no certificates shall be required to be delivered, under the Plan unless and until all of the terms and conditions applicable to such Award shall have, in the sole discretion of the Board, been satisfied in full and any restrictions shall have lapsed in full, and unless and until all of the requirements of law and of all regulatory bodies having jurisdiction over the offer and sale, or issuance and delivery, of the shares shall have been fully complied with.

3.9 The total amount of shares with respect to which Awards may be granted under the Plan and rights of outstanding Awards (both as to the number of shares subject to the outstanding Awards and the Option Price(s) or other purchase price(s) of such shares, as applicable) shall be appropriately adjusted for any increase or decrease in the number of outstanding shares of Common Stock of the Company resulting from payment of a stock dividend on the Common Stock, a stock split or subdivision or combination of shares of the Common Stock, or a reorganization or reclassification of the Common Stock, or any other change in the structure of shares of the Common Stock. The foregoing adjustments and the manner of application of the foregoing provisions shall be determined by the Board in its sole discretion. Any such adjustment may provide for the elimination of any fractional shares which might otherwise become subject to an Award. All adjustments made as the result of the foregoing in respect of each Incentive Stock Option shall be made so that such Incentive Stock Option shall continue to be an Incentive Stock Option, as defined in Section 422 of the Code.

3.10 No director or person acting pursuant to authority delegated by the Board shall be liable for any action or determination under the Plan made in good faith. The members of the Board shall be entitled to indemnification by the Company in the manner and to the extent set forth in the Company’s Articles of Incorporation, as amended, Bylaws or as otherwise provided from time to time regarding indemnification of Directors.

3.11 The Board shall be authorized to make adjustments in any performance based criteria or in the other terms and conditions of outstanding Awards in recognition of unusual or nonrecurring events affecting the Company (or any Affiliate, if applicable) or its financial statements or changes in applicable laws, regulations or accounting principles. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement in the manner and to the extent it shall deem necessary or desirable to reflect any such adjustment. In the event the Company (or any Affiliate, if applicable) shall assume outstanding employee benefit awards or the right or obligation to make future such awards in connection with the acquisition of another corporation or business entity, the Board may, in its sole discretion, make such adjustments in the terms of outstanding Awards under the Plan as it shall deem appropriate.

3.12 Subject to the express provisions of the Plan, the Board shall have lull power and authority to determine whether, to what extent and under what circumstances any outstanding Award shall be terminated, canceled, forfeited or suspended. Notwithstanding the foregoing or any other provision of the Plan or an Award Agreement, all Awards to any Participant that are subject to any restriction or have not been earned or exercised in full by the Participant shall be terminated and canceled if the Participant is terminated for cause, as determined by the Board in its sole discretion.

ARTICLE IV. - INCENTIVE STOCK OPTIONS

4.1 The Board may, in its sole discretion, from time to time on or after the Effective Date grant Incentive Stock Options to Eligible Employees, subject to the provisions of this Article IV and Articles III and VI and subject to the following conditions:

(a) Incentive Stock Options shall be granted only to Eligible Employees, each of whom may be granted one or more of such Incentive Stock Options at such time or times determined by the Board.

(b) The Option Price per share of Common Stock for an Incentive Stock Option shall be set in the Award Agreement, but shall not be less than (i) one hundred percent (100%) of the Fair Market Value of the Common Stock at the Grant Date, or (ii) in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, one hundred ten percent (110%) of the Fair Market Value of the Common Stock at the Grant Date.

(c) An Incentive Stock Option may be exercised in full or in part from time to time within ten (10) years from the Grant Date, or such shorter period as may be specified by the Board as the Option Period and set forth in the Award Agreement; provided, however, that, in the case of an Incentive Stock Option granted to a Ten Percent Stockholder, such period shall not exceed five (5) years from the Grant Date; and further, provided that, in any event, the Incentive Stock Option shall lapse and cease to be exercisable upon a Termination of Service or within such period following a Termination of Service as shall have been determined by the Board and set forth in the related Award Agreement; and provided, further, that such period shall not exceed the period of time ending on the date three (3) months following a Termination of Service, unless employment shall have terminated:

(i) as a result of Disability, in which event such period shall not exceed the period of time ending on the date twelve (12) months following a Termination of Service; or

(ii) as a result of death, or if death shall have occurred following a Termination of Service (other than as a result of Disability) and during the period that the Incentive Stock Option was still exercisable, in which event such period may not exceed the period of time ending on the earlier of the date twelve (12) months after the date of death;

(iii) and provided, further, that such period following a Termination of Service or death shall in no event extend beyond the original Option Period of the Incentive Stock Option.

(d) The aggregate Fair Market Value of the shares of Common Stock with respect to which any Incentive Stock Options (whether under this Plan or any other plan established by the Company) are first exercisable during any calendar year by any Eligible Employee shall not exceed One Hundred Thousand Dollars ($100,000.00), determined based on the Fair Market Value(s) of such shares as of their respective Grant Dates; provided, however, that to the extent permitted under Section 422 of the Code, if the aggregate Fair Market Values of the shares of Common Stock with respect to which Stock Options intended to be Incentive Stock Options are first exercisable by any Eligible Employee during any calendar year (whether such Stock Options are granted under this Plan or any other plan established by the Company) exceed one hundred thousand dollars ($100,000.00), the Stock Options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as Nonqualified Stock Options.

(e) No Incentive Stock Options may be granted more than ten (10) years from the Effective Date.

(f) The Award Agreement for each Incentive Stock Option shall provide that the Participant shall notify the Company if such Participant sells or otherwise transfers any shares of Common Stock acquired upon exercise of the Incentive Stock Option within two (2) years of the Grant Date of such Incentive Stock Option or within one (1) year of the date such shares were acquired upon the exercise of such Incentive Stock Option.

4.2 Subject to the limitations of Section 3.4, the maximum aggregate number of shares of Common Stock subject to Incentive Stock Option Awards shall be the maximum aggregate number of shares available for Awards under the Plan.

4.3 The Board may provide for any other terms and conditions which it determines should be imposed for an Incentive Stock Option to qualify under Section 422 of the Code, as well as any other terms and conditions not inconsistent with this Article IV or Articles III or VI, as determined in its sole discretion and set forth in the Award Agreement for such Incentive Stock Option.

4.4 Each provision of this Article IV and of each Incentive Stock Option granted hereunder shall be construed in accordance with the provisions of Section 422 of the Code, and any provision hereof that cannot be so construed shall be disregarded.

ARTICLE V. - NONQUALIFIED STOCK OPTIONS

5.1 The Board may, in its sole discretion, from time to time on or after the Effective Date grant Nonqualified Stock Options to Eligible Persons, subject to the provisions of this Article V and Articles III and VI and subject to the following conditions:

(a) Nonqualified Stock Options may be granted to any Eligible Person, each of whom may be granted one or more of such Nonqualified Stock Options, at such time or times determined by the Board.

(b) The Option Price per share of Common Stock for a Nonqualified Stock Option shall be set in the Award Agreement and may be less than one hundred percent (100%) of the Fair Market Value of the Common Stock at the Grant Date; provided, however, that the exercise price of each Nonqualified Stock Option granted under the Plan shall in no event be less than the par value per share of the Company’s Common Stock.

(c) A Nonqualified Stock Option may be exercised in full or in part from time to time within the Option Period specified by the Board and set forth in the Award Agreement; provided, however, that, in any event, the Nonqualified Stock Option shall lapse and cease to be exercisable upon a Termination of Service or within such period following a Termination of Service as shall have been determined by the Board and set forth in the related Award Agreement.

5.2 The Board may provide for any other terms and conditions for a Nonqualified Stock Option not inconsistent with this Article V or Articles III or VI, as determined in its sole discretion and set forth in the Award Agreement for such Nonqualified Stock Option.

ARTICLE VI. - INCIDENTS OF STOCK OPTIONS

6.1 Each Stock Option shall be granted subject to such terms and conditions, if any, not inconsistent with this Plan, as shall be determined by the Board and set forth in the related Award Agreement, including any provisions as to continued employment as consideration for the grant or exercise of such Stock Option and any provisions which may be advisable to comply with applicable laws, regulations or rulings of any governmental authority.

6.2 Except as hereinafter described, a Stock Option shall not be transferable by the Participant other than by will or by the laws of descent and distribution, and shall be exercisable during the lifetime of the Participant only by the Participant or the Participant’s guardian or legal representative. In the event of the death of a Participant, any unexercised Stock Options may be exercised to the extent otherwise provided herein or in such Participant’s Award Agreement by the executor or personal representative of such Participant’s estate or by any person who acquired the right to exercise such Stock Options by bequest under the Participant’s will or by inheritance. The Board, in its sole discretion, may at any time permit a Participant to transfer a Nonqualified Stock Option for no consideration to or for the benefit of one or more members of the Participant’s Immediate Family (including, without limitation, to a trust for the benefit of the Participant and/or one or more members of such Participant’s Immediate Family or a corporation, partnership or limited liability company established and controlled by the Participant and/or one or more members of such Participant’s Immediate Family), subject to such limits as the Board may establish. The transferee of such Nonqualified Stock Option shall remain subject to all terms and conditions applicable to such Nonqualified Stock Option prior to such transfer. The foregoing right to transfer the Nonqualified Stock Option, if granted by the Board shall apply to the right to consent to amendments to the Award Agreement.

6.3 Shares of Common Stock purchased upon exercise of a Stock Option shall be paid for in such amounts, at such times and upon such terms as shall be determined by the Board, subject to limitations set forth in the Stock Option Award Agreement. The Board may, in its sole discretion, permit the exercise of a Stock Option by payment in cash or by tendering shares of Common Stock (either by actual delivery of such shares or by attestation), or any combination thereof, as determined by the Board. In the sole discretion of the Board, payment in shares of Common Stock also may be made with shares received upon the exercise or partial exercise of the Stock Option, whether or not involving a series of exercises or partial exercises and whether or not share certificates for such shares surrendered have been delivered to the Participant. The Board also may, in its sole discretion, permit the payment of the exercise price of a Stock Option by the voluntary surrender of all or a portion of the Stock Option. Shares of Common Stock previously held by the Participant and surrendered in payment of the Option Price of a Stock Option shall be valued for such purpose at the Fair Market Value thereof on the date the Stock Option is exercised.

6.4 The holder of a Stock Option shall have no rights as a shareholder with respect to any shares covered by the Stock Option (including, without limitation, any voting rights, the right to inspect or receive the Company’s balance sheets or financial statements or any rights to receive dividends or non-cash distributions with respect to such shares) until such time as the holder has exercised the Stock Option and then only with respect to the number of shares which are the subject of the exercise. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such stock certificate is issued.

6.5 The Board may permit the voluntary surrender of all or a portion of any Stock Option granted under the Plan to be conditioned upon the granting to the Participant of a new Stock Option for the same or a different number of shares of Common Stock as the Stock Option surrendered, or may require such voluntary surrender as a condition precedent to a grant of a new Stock Option to such Participant. Subject to the provisions of the Plan, such new Stock Option shall be exercisable at such Option Price, during such Option Period and on such other terms and conditions as are specified by the Board at the time the new Stock Option is granted. Upon surrender, the Stock Options surrendered shall be canceled and the shares of Common Stock previously subject to them shall be available for the grant of other Stock Options.

6.6 The Board may at any time offer to purchase a Participant’s outstanding Stock Option for a payment equal to the value of such Stock Option payable in cash, shares of Common Stock or Restricted Stock or other property upon surrender of the Participant’s Stock Option, based on such terms and conditions as the Board shall establish and communicate to the Participant at the time that such offer is made.

6.7 The Board shall have the discretion, exercisable either at the time the Award is granted or at the time the Participant discontinues employment, to establish as a provision applicable to the exercise of one or more Stock Options that, during a limited period of exercisability following a Termination of Service, the Stock Option may be exercised not only with respect to the number of shares of Common Stock for which it is exercisable at the time of the Termination of Service but also with respect to one or more subsequent installments for which the Stock Option would have become exercisable had the Termination of Service not occurred.

ARTICLE VII. - RESTRICTED STOCK

7.1 The Board may, in its sole discretion, from time to time on or after the Effective Date award shares of Restricted Stock to Eligible Persons as a reward for past service and an incentive for the performance of future services that will contribute materially to the successful operation of the Company an its Affiliates, subject to the terms and conditions set forth in this Article.

7.2 The Board shall determine the terms and conditions of any Award of Restricted Stock, which shall be set forth in the related Award Agreement, including without limitation:

(a) the purchase price, if any, to be paid for such Restricted Stock, which may be zero, subject to such minimum consideration as may be required by applicable law;

(b) the duration of the Restriction Period or Restriction Periods with respect to such Restricted Stock and whether any events may accelerate or delay the end of such Restriction Period(s);

(c) the circumstances upon which the restrictions or limitations shall lapse, and whether such restrictions or limitations shall lapse as to all shares of Restricted Stock at the end of the Restriction Period or as to a portion of the shares of Restricted Stock in installments during the Restriction Period by means of one or more vesting schedules;

(d) whether such Restricted Stock is subject to repurchase by the Company or to a right of first refusal at a predetermined price or if the Restricted Stock may be forfeited entirely under certain conditions;

(e) whether any performance goals may apply to a Restriction Period to shorten or lengthen such period; and

(f) whether dividends and other distributions with respect to such Restricted Stock are to be paid currently to the Participant or withheld by the Company for the account of the Participant.

7.3 Awards of Restricted Stock must be accepted within a period of thirty (30) days after the Grant Date (or such shorter or longer period as the Board may specify at such time) by executing an Award Agreement with respect to such Restricted Stock and tendering the purchase price, if any. A prospective recipient of an Award of Restricted Stock shall not have any rights with respect to such Award, unless such recipient has executed an Award Agreement with respect to such Restricted Stock, has delivered a fully executed copy thereof to the Board and has otherwise complied with the applicable terms and conditions of such Award.

7.4 In the sole discretion of the Board and as set forth in the Award Agreement for an Award of Restricted Stock, all shares of Restricted Stock held by a Participant and still subject to restrictions shall be forfeited by the Participant upon the Participant’s Termination of Service and shall be reacquired, canceled and retired by the Company. Notwithstanding the foregoing, unless otherwise provided in an Award Agreement with respect to an Award of Restricted Stock, in the event of the death, Disability or Retirement of a Participant during the Restriction Period, or in other cases of special circumstances (including hardship or other special circumstances of a Participant whose employment is involuntarily terminated), the Board may elect to waive in whole or in part any remaining restrictions with respect to all or any part of such Participant’s Restricted Stock, if it finds that a waiver would be appropriate.

7.5 Except as otherwise provided in this Article VII, no shares of Restricted Stock received by a Participant shall be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of during the Restriction Period.

7.6 Upon an Award of Restricted Stock to a Participant, a certificate or certificates representing the shares of such Restricted Stock will be issued to and registered in the name of the Participant. Unless otherwise determined by the Board, such certificate or certificates will be held in custody by the Company until (i) the Restriction Period expires and the restrictions or limitations lapse, in which case one or more certificates representing such shares of Restricted Stock that do not bear a restrictive legend (other than any legend as required under applicable federal or state securities laws) shall be delivered to the Participant, or (ii) a prior forfeiture by the Participant of the shares of Restricted Stock subject to such Restriction Period, in which case the Company shall cause such certificate or certificates to be canceled and the shares represented thereby to be retired, all as set forth in the Participant’s Award Agreement. It shall be a condition of an Award of Restricted Stock that the Participant deliver to the Company a stock power endorsed in blank relating to the shares of Restricted Stock to be held in custody by the Company.

7.7 Except as provided in this Article VII or in the related Award Agreement, a Participant receiving an Award of shares of Restricted Stock Award shall have, with respect to such shares, all rights of a

shareholder of the Company, including the right to vote the shares and the right to receive any distributions, unless and until such shares are otherwise forfeited by such Participant; provided, however, the Board may require that any cash dividends with respect to such shares of Restricted Stock be automatically reinvested in additional shares of Restricted Stock subject to the same restrictions as the underlying Award, or may require that cash dividends and other distributions on Restricted Stock be withheld by the Company or its Affiliates for the account of the Participant. The Board shall determine whether interest shall be paid on amounts withheld, the rate of any such interest, and the other terms applicable to such withheld amounts.

ARTICLE VIII. - STOCK AWARDS

8.1 The Board may, in its sole discretion, from time to time on or after the Effective Date grant Stock Awards to Eligible Persons in payment of compensation that has been earned or as compensation to be earned, including without limitation compensation awarded or earned concurrently with or prior to the grant of the Stock Award, subject to the terms and conditions set forth in this Article VIII.

8.2 For the purposes of this Plan, in determining the value of a Stock Award, all shares of Common Stock subject to such Stock Award shall be set in the Award Agreement and may be less than one hundred percent (100%) of the Fair Market Value of the Common Stock at the Grant Date.

8.3 Unless otherwise determined by the Board and set forth in the related Award Agreement, shares of Common Stock subject to a Stock Award will be issued, and one or more certificates representing such shares will be delivered, to the Participant as soon as practicable following the Grant Date of such Stock Award. Upon the issuance of such shares and the delivery of one or more certificates representing such shares to the Participant, such Participant shall be and become a shareholder of the Company fully entitled to receive dividends, to vote and to exercise all other rights of a shareholder of the Company. Notwithstanding any other provision of this Plan, unless the Board expressly provides otherwise with respect to a Stock Award, as set forth in the related Award Agreement, no Stock Award shall be deemed to be an outstanding Award for purposes of the Plan.

ARTICLE IX. - PERFORMANCE SHARES

9.1 The Board may, in its sole discretion, from time to time on or after the Effective Date award Performance Shares to Eligible Persons as an incentive for the performance of future services that will contribute materially to the successful operation of the Company and its Affiliates, subject to the terms and conditions set forth in this Article IX.

9.2 The Board shall determine the terms and conditions of any Award of Performance Shares, which shall be set forth in the related Award Agreement, including without limitation:

(a) the purchase price, if any, to be paid for such Performance Shares, which may be zero, subject to such minimum consideration as may be required by applicable law;

(b) the performance period (the “Performance Period”) and/or performance objectives (the “Performance Objectives”) applicable to such Awards;

(c) the number of Performance Shares that shall be paid to the Participant if the applicable Performance Objectives are exceeded or met in whole or in part; and

(d) the form of settlement of a Performance Share.

9.3 At any date, each Performance Share shall have a value equal to the Fair Market Value of a share of Common Stock.

9.4 Performance Periods may overlap and Participants may participate simultaneously with respect to Performance Shares for which different Performance Periods are prescribed.

9.5 Performance Objectives may vary from Participant to Participant and between Awards and shall be based upon such performance criteria or combination of factors as the Board may deem appropriate, including, but not limited to, minimum earnings per share or return on equity. If during the course of a Performance Period there shall occur significant events which the Board expects to have a substantial effect on the applicable Performance Objectives during such period, the Board may revise such Performance Objectives.

9.6 In the sole discretion of the Board and as set forth in the Award Agreement for an Award of Performance Shares, all Performance Shares held by a Participant and not earned shall be forfeited by the Participant upon the Participant’s Termination of Service. Notwithstanding the foregoing, unless otherwise provided in an Award Agreement with respect to an Award of Performance Shares, in the event of the death, Disability or Retirement of a Participant during the applicable Performance Period, or in other cases of special circumstances (including hardship or other special circumstances of a Participant whose employment is involuntarily terminated), the Board may determine to make a payment in settlement of such Performance Shares at the end of the Performance Period, based upon the extent to which the Performance Objectives were satisfied at the end of such period and pro rated for the portion of the Performance Period during which the Participant was employed by the Company or an Affiliate; provided, however, that the Board may provide for an earlier payment in settlement of such Performance Shares in such amount and under such terms and conditions as the Board deems appropriate or desirable.

9.7 The settlement of a Performance Share shall be made in cash, whole shares of Common Stock or a combination thereof and shall be made as soon as practicable after the end of the applicable Performance Period. Notwithstanding the foregoing, the Board in its sole discretion may allow a Participant to defer payment in settlement of Performance Shares on terms and conditions approved by the Board and set forth in the related Award Agreement entered into in advance of the time of receipt or constructive receipt of payment by the Participant.

9.8 Performance Shares shall not be transferable by the Participant. The Board shall have the authority to place additional restrictions on the Performance Shares including, but not limited to, restrictions on transfer of any shares of Common Stock that are delivered to a Participant in settlement of any Performance Shares.

ARTICLE X. - CHANGES OF CONTROL OR OTHER FUNDAMENTAL CHANGES

10.1 Upon the occurrence of a Change of Control and unless otherwise provided in the Award Agreement with respect to a particular Award:

(a) all outstanding Stock Options shall become immediately exercisable in full, subject to any appropriate adjustments in the number of shares subject to the Stock Option and the Option Price, and shall remain exercisable for the remaining Option Period, regardless of any provision in the related Award Agreement limiting the exercisability of such Stock Option or any portion thereof for any length of time;

(b) all outstanding Performance Shares with respect to which the applicable Performance Period has not been completed shall be paid out as soon as practicable as follows:

(i) all Performance Objectives applicable to the Award of Performance Shares shall be deemed to have been satisfied to the extent necessary to earn one hundred percent (100%) of the Performance Shares covered by the Award;

(ii) the applicable Performance Period shall be deemed to have been completed upon occurrence of the Change of Control;

(iii) the payment to the Participant in settlement of the Performance Shares shall be the amount determined by the Board, in its sole discretion, or in the manner stated in the Award Agreement, as multiplied by a fraction, the numerator of which is the number of full calendar months of the applicable Performance Period that have elapsed prior to occurrence of the Change of Control, and the denominator of which is the total number of months in the original Performance Period; and

(iv) upon the making of any such payment, the Award Agreement as to which it relates shall be deemed terminated and of no further force and effect.

(c) all outstanding shares of Restricted Stock with respect to which the restrictions have not lapsed shall be deemed vested, and all such restrictions shall be deemed lapsed and the Restriction Period ended.

10.2 Anything contained herein to the contrary notwithstanding, upon the dissolution or liquidation of the Company, each Award granted under the Plan and then outstanding shall terminate; provided, however, that following the adoption of a plan of dissolution or liquidation, and in any event prior to the effective date of such dissolution or liquidation, each such outstanding Award granted hereunder shall be exercisable in full and all restrictions shall lapse, to the extent set forth in Section 10.1 (a), (b) and (c) above.

10.3 After the merger of one or more corporations into the Company or any Affiliate, any merger of the Company into another corporation, any consolidation of the Company or any Affiliate of the Company and one or more corporations, or any other corporate reorganization of any form involving the Company as a party thereto and involving any exchange, conversion, adjustment or other modification of the outstanding shares of the Common Stock, each Participant shall, at no additional cost, be entitled, upon any exercise of such Participant’s Stock Option, to receive, in lieu of the number of shares as to which such Stock Option shall then be so exercised, the number and class of shares of stock or other securities or such other property to which such Participant would have been entitled to pursuant to the terms of the agreement of merger or consolidation or reorganization, if at the time of such merger or consolidation or reorganization, such Participant had been a holder of record of a number of shares of Common Stock equal to the number of shares as to which such Stock Option shall then be so exercised. Comparable rights shall accrue to each Participant in the event of successive mergers, consolidations or reorganizations of the character described above. The Board may, in its sole discretion, provide for similar adjustments upon the occurrence of such events with regard to other outstanding Awards under this Plan. The foregoing adjustments and the manner of application of the foregoing provisions shall be determined by the Board in its sole discretion. Any such adjustment may provide for the elimination of any fractional shares which might otherwise become subject to an Award. All adjustments made as the result of the foregoing in respect of each Incentive Stock Option shall be made so that such Incentive Stock Option shall continue to be an Incentive Stock Option, as defined in Section 422 of the Code.

ARTICLE XI. - AMENDMENT AND TERMINATION

11.1 Subject to the provisions of Section 11.2, the Board of Directors at any time and from time to time may amend or terminate the Plan as may be necessary or desirable to implement or discontinue the Plan or any provision hereof. To the extent required by the Act or the Code, however, no amendment, without approval by the Company’s shareholders, shall:

(a) materially alter the group of persons eligible to participate in the Plan;

(b) except as provided in Section 3.4, change the maximum aggregate number of shares of Common Stock that are available for Awards under the Plan;

(c) alter the class of individuals eligible to receive an Incentive Stock Option or increase the limit on Incentive Stock Options set forth in Section 4.1(d) or the value of shares of Common Stock for which an Eligible Employee may be granted an Incentive Stock Option.

11.2 No amendment to or discontinuance of the Plan or any provision hereof by the Board of Directors or the shareholders of the Company shall, without the written consent of the Participant, adversely affect (in the sole discretion of the Board) any Award theretofore granted to such Participant under this Plan; provided, however, that the Board retains the right and power to:

(a) annul any Award if the Participant is terminated for cause as determined by the Board; and

(b) convert any outstanding Incentive Stock Option to a Nonqualified Stock Option.

11.3 If a Change of Control has occurred, no amendment or termination shall impair the rights of any person with respect to an outstanding Award as provided in Article X.

ARTICLE XII. - MISCELLANEOUS PROVISIONS

12.1 Nothing in the Plan or any Award granted hereunder shall confer upon any Participant any right to continue in the employ of the Company or its Affiliates or to serve as a Director or shall interfere in any way with the right of the Company or its Affiliates or the shareholders of the Company, as applicable, to terminate the employment of a Participant or to release or remove a Director at any time. Unless specifically provided otherwise, no Award granted under the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Company or its Affiliates for the benefit of their respective employees unless the Company shall determine otherwise. No Participant shall have any claim to an Award until it is actually granted under the Plan and an Award Agreement has been executed and delivered to the Company. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall, except as otherwise provided by the Board, be no greater than the right of an unsecured general creditor of the Company. All payments to be made hereunder shall be paid from the general funds of the Company, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts, except as provided in Article VII with respect to Restricted Stock and except as otherwise provided by the Board.

12.2 The Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any government or regulatory agency as may be required. Any provision herein relating to compliance with Rule 16b-3 under the Act shall not be applicable with respect to participation in the Plan by Participants who are not subject to Section 16 of the Act.

12.3 The terms of the Plan shall be binding upon the Company, its successors and assigns.

12.4 Neither a Stock Option nor any other type of equity-based compensation provided for hereunder shall be transferable except as provided for in Section 6.2. In addition to the transfer restrictions otherwise

contained herein, additional transfer restrictions shall apply to the extent required by federal or state securities laws. If any Participant makes such a transfer in violation hereof, any obligation hereunder of the Company to such Participant shall terminate immediately.

12.5 The Plan shall be governed by, and construed in accordance with, the laws of the State of Nevada (without regard to its choice-of-law provisions).

12.6 Each Participant exercising an Award hereunder agrees to give the Board prompt written notice of any election made by such Participant under Section 83 (b) of the Code or any similar provision.

12.7 If any provision of this Plan or an Award Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Award Agreement under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the Award Agreement, it shall be stricken, and the remainder of the Plan or the Award Agreement shall remain in full force and effect.

12.8 The grant of an Award pursuant to this Plan shall not affect in any way the right or power of the Company or any of its Affiliates to make adjustments, reclassification, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or to dissolve, liquidate or sell, or to transfer all or part of its business or assets.

12.9 The Plan is not subject to the provisions of ERISA or qualified under Section 401(a) of the Code.

12.10 If a Participant is required to pay to the Company an amount with respect to income and employment tax withholding obligations in connection with (i) the exercise of a Nonqualified Stock Option, (ii) certain dispositions of Common Stock acquired upon the exercise of an Incentive Stock Option, or (iii) the receipt of Common Stock pursuant to any other Award, then the issuance of Common Stock to such Participant shall not be made (or the transfer of shares by such Participant shall not be required to be effected, as applicable) unless such withholding tax or other withholding liabilities shall have been satisfied in a manner acceptable to the Company. To the extent provided by the terms of an Award Agreement, the Participant may satisfy any federal, state or local tax withholding obligation relating to the exercise or acquisition of Common Stock under an Award by any of the following means (in addition to the Company’s right to withhold from any compensation paid to the Participant by the Company) or by a combination of such means: (i) tendering a cash payment; (ii) authorizing the Company to withhold shares of Common Stock from the shares of Common Stock otherwise issuable to the Participant as a result of the exercise or acquisition of Common Stock under the Award, provided, however, that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law; or (iii) delivering to the Company owned and unencumbered shares of Common Stock.

X	/s/ Kathryn Sevier Phillips
AAC Holdings, Inc.
Its:	Secretary

EX-10

Exhibit 10.2

AAC HOLDINGS, INC.

2014 EQUITY INCENTIVE PLAN

AAC HOLDINGS, INC.

2014 EQUITY INCENTIVE PLAN

Section 1. Purpose.

This plan shall be known as the “AAC Holdings, Inc. 2014 Equity Incentive Plan” (the “Plan”). The purpose of the Plan is to promote the interests of AAC Holdings, Inc., a Nevada corporation (the “Company”), its Subsidiaries and its stockholders by (i) attracting and retaining key officers, employees, and directors of, and consultants to, the Company and its Subsidiaries and Affiliates; (ii) motivating such individuals by means of performance-related incentives to achieve long-range performance goals; (iii) enabling such individuals to participate in the long-term growth and financial success of the Company; (iv) encouraging ownership of stock in the Company by such individuals; and (v) linking such individuals’ compensation to the long-term interests of the Company and its stockholders. With respect to any awards granted under the Plan that are intended to comply with the requirements of “performance-based compensation” under Section 162(m) of the Code, the Plan shall be interpreted in a manner consistent with such requirements.

Section 2. Definitions.

As used in the Plan, the following terms shall have the meanings set forth below:

(a) “Affiliate” shall mean (i) any entity that, directly or indirectly, is controlled by the Company, (ii) any entity in which the Company has a significant equity interest, (iii) an affiliate of the Company, as defined in Rule 12b-2 promulgated under Section 12 of the Exchange Act, and (iv) any entity in which the Company has at least twenty percent (20%) of the combined voting power of the entity’s outstanding voting securities, in each case as designated by the Board as being a participating employer in the Plan.

(b) “Award” shall mean any Option, Stock Appreciation Right, Restricted Share Award, Restricted Share Unit, Performance Award, Other Stock-Based Award or any other right, interest or option relating to Shares or other property (including cash) granted pursuant to the provisions of the Plan.

(c) “Award Agreement” shall mean any written agreement, contract or other instrument or document evidencing any Award, which may, but need not, be executed or acknowledged by a Participant. For avoidance of doubt, Award Agreements include any employment agreement or change in control agreement between the Company and any Participant that refers to Awards and any letter or electronic mail notifying a Participant that he or she has received an Award.

(d) “Board” shall mean the Board of Directors of the Company.

(e) “Change in Control” shall mean, unless otherwise defined in the applicable Award Agreement, any of the following events:

(i) The acquisition (other than from the Company) by any person, entity or “group,” within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act, other than the Company or a wholly-owned subsidiary or any employee benefit plan thereof, of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 30% or more of either the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities entitled to vote generally in the election of directors; provided, however, no Change in Control shall be deemed to have occurred for any

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acquisition by any corporation with respect to which, following such acquisition, more than 60% of such corporation and the combined voting power of the then outstanding voting securities of such corporation entitled to vote generally in the election of directors is then beneficially owned, directly or indirectly, by all or substantially all of the individuals or entities who were the beneficial owners, respectively, of the then outstanding shares of common stock or the combined voting power of the Company’s then outstanding voting securities immediately prior to such acquisition in substantially the same proportions as their ownership, immediately prior to such acquisition, of the Company’s then outstanding common stock and then outstanding voting securities, as the case may be;

(ii) Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board, provided that any person becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the Directors of the Company) shall be, for purposes of this Agreement, considered as though such person were a member of the Incumbent Board;

(iii) Consummation of a reorganization, merger or consolidation, in each case, with respect to which persons who were the stockholders of the Company immediately prior to such reorganization, merger or consolidation do not, immediately thereafter, own more than 60% of the combined voting power entitled to vote generally in the election of directors of the reorganized, merged or consolidated corporation’s then outstanding voting securities; or

(iv) Stockholder approval of a liquidation or dissolution of the Company or of the sale of all or substantially all of the assets of the Company.

Notwithstanding the foregoing, (i) unless otherwise provided in an applicable Award Agreement, with respect to Awards constituting a “deferral of compensation” subject to Section 409A of the Code, a Change in Control shall be limited to a “change in the ownership of the Company,” a “change in the effective control of the Company,” or a “change in the ownership of a substantial portion of the assets of the Company” as such terms are defined in Section 1.409A-3(i)(5) of the U.S. Treasury Regulations, and (ii) other than pursuant to clause (iv) above, no Award Agreement shall define a Change in Control in such a manner that a Change in Control would be deemed to occur prior to the actual consummation of the event or transaction that results in a change of control of the Company (e.g., upon the announcement, commencement, or stockholder approval of any event or transaction that, if completed, would result in a change in control of the Company).

(f) “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

(g) “Committee” shall mean the Compensation Committee of the Board or a subcommittee thereof, or such other committee designated by the Board to administer the Plan. To the extent that compensation realized in respect of Awards is intended to be “performance based” under Section 162(m) and the Committee is not comprised solely of individuals who are “outside directors” within the meaning of Section 162(m), the Committee may from time to time delegate some or all of its functions under the Plan to a committee or subcommittee composed of members that meet the relevant requirements.

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(h) “Consultant” shall mean any consultant or advisor who is a natural person and who provides services to the Company or its Affiliates, so long as such person (i) renders bona fide services that are not in connection with the offer and sale of the Company’s securities in a capital raising transaction and (ii) does not directly or indirectly promote or maintain a market for the Company’s securities.

(i) “Covered Officer” shall mean at any date (i) any individual who, with respect to the previous taxable year of the Company, was a “covered employee” of the Company within the meaning of Section 162(m); provided, however, that the term “Covered Officer” shall not include any such individual who is designated by the Committee, in its discretion, at the time of any Award or at any subsequent time, as reasonably expected not to be such a “covered employee” with respect to the current taxable year of the Company or with respect to the taxable year of the Company in which the compensation attributable to such Award would otherwise be deductible by the Company, and (ii) any individual who is reasonably expected to be, or designated by the Committee at the time of any Award or at any subsequent time as such, a “covered employee” with respect to the current taxable year of the Company or with respect to the taxable year of the Company in which the compensation attributable to such Award would otherwise be deductible by the Company.

(j) “Director” shall mean a member of the Board.

(k) “Employee” shall mean a current or prospective officer or employee of the Company or any Affiliate.

(l) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended from time to time.

(m) “Fair Market Value” means, with respect to Shares as of any date, the value of a Share as determined by the Committee, in its discretion, subject to the following: (i) if, on such date, Shares are listed on a national or regional securities exchange or market system, or Share prices are quoted on the Over the Counter Bulletin Board (OTCBB), the Fair Market Value of a Share shall be the closing price of a Share (or the mean of the closing bid and asked prices of a Share if the Share price is so quoted instead) as quoted on such national, regional securities exchange, market system or OTCBB constituting the primary market for the Shares, as reported in The Wall Street Journal, the OTCBB or such other source as the Company deems reliable for such date; if the relevant date does not fall on a day on which the Shares have traded over the counter or on such securities exchange or market system, the date on which the Fair Market Value shall be established shall be the last day on which the Shares were so traded prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion, and (ii) in the event there is no public market for the Shares on such date, the fair market value as determined in good faith by the Board or Committee. The Fair Market Value of any property other than Shares shall mean the market value of such property determined by such methods or procedures as shall be established from time to time by the Committee.

(n) “Grant Price” means the price established at the time of grant of an SAR pursuant to Section 6 used to determine whether there is any payment due upon exercise of the SAR.

(o) “Incentive Stock Option” shall mean an Option that is granted under Section 6 of the Plan and that is intended to meet the requirements of Section 422 of the Code or any successor provision thereto.

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(p) “Non-Qualified Stock Option” shall mean an Option that is granted under Sections 6 or 10 of the Plan and is not an Incentive Stock Option, including any Option that was intended to qualify as an Incentive Stock Option and fails to so qualify for any reason.

(q) “Non-Employee Director” shall mean a member of the Board who is not an officer or employee of the Company or any Subsidiary of the Company.

(r) “Option” shall mean any right granted to a Participant under the Plan allowing such Participant to purchase Shares at an Option Price and during such period or periods as the Committee shall determine.

(s) “Option Price” shall mean the purchase price payable to purchase one Share upon the exercise of an Option.

(t) “Other Stock-Based Award” shall mean any Award granted under Sections 9 or 10 of the Plan.

(u) “Participant” shall mean any Employee, Director, or Consultant who receives an Award under the Plan.

(v) “Performance Award” shall mean any Award granted under Section 8 of the Plan.

(w) “Person” shall mean any individual, corporation, partnership, limited liability company, association, joint-stock company, trust, unincorporated organization, government or political subdivision thereof or other entity.

(x) “Restricted Share” shall mean any Share granted under Sections 7 or 10 of the Plan with the restriction that the holder may not sell, transfer, pledge or assign such Share and with such other restrictions as the Committee, in its discretion, may impose, which restrictions may lapse separately or in combination at such time or times, and/or upon the satisfaction of such conditions, in installments or otherwise, as the Committee may deem appropriate.

(y) “Restricted Share Unit” shall mean an Award granted under Sections 7 or 10 of the Plan that is valued by reference to a Share, which value may be paid to the Participant by delivery of cash, Shares or such other property, as the Committee shall determine, upon the lapse of restrictions as the Committee, in its discretion, may impose, which restrictions may lapse separately or in combination at such time or times, and/or upon the satisfaction of such conditions, in installments or otherwise, as the Committee may deem appropriate.

(z) “SEC” shall mean the Securities and Exchange Commission or any successor thereto.

(aa) “Section 16” shall mean Section 16 of the Exchange Act and the rules promulgated thereunder and any successor provision thereto as in effect from time to time.

(bb) “Section 162(m)” shall mean Section 162(m) of the Code and the regulations promulgated thereunder and any successor provision thereto as in effect from time to time.

(cc) “Shares” shall mean shares of the common stock, $0.001 par value, of the Company.

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(dd) “Stock Appreciation Right” or “SAR” shall mean a stock appreciation right granted under Sections 6 or 10 of the Plan that entitles the holder to receive, with respect to each Share encompassed by the exercise of such SAR, the amount determined by the Committee and specified in an Award Agreement. In the absence of such a determination, the holder shall be entitled to receive, with respect to each Share encompassed by the exercise of such SAR, the excess of the Fair Market Value of such Share on the date of exercise over the Grant Price applicable to such SAR.

(ee) “Subsidiary” shall mean any Person (other than the Company) of which a majority of its voting power or its equity securities or equity interest is owned directly or indirectly by the Company.

(ff) “Substitute Awards” shall mean Awards granted solely in assumption of, or in substitution for, outstanding awards previously granted by a company acquired by the Company or with which the Company combines.

Section 3. Administration.

3.1 Authority of Committee. The Plan shall be administered by the Committee, which shall be appointed by and serve at the pleasure of the Board; provided, however, with respect to Awards to Non-Employee Directors, all references in the Plan to the Committee shall be deemed to be references to the Board. Subject to the terms of the Plan and applicable law, and in addition to other express powers and authorizations conferred on the Committee by the Plan, the Committee shall have full power and authority in its discretion to:

(i) designate Participants;

(ii) determine eligibility for participation in the Plan and decide all questions concerning eligibility for and the amount of Awards under the Plan;

(iii) determine the type or types of Awards to be granted to a Participant and whether such Awards are to be granted singly, in combination, or in tandem;

(iv) determine the number of Shares to be covered by, or with respect to which payments, rights or other matters are to be calculated in connection with Awards;

(v) determine the timing, terms, and conditions of any Award;

(vi) accelerate the time at which all or any part of an Award may be settled or exercised;

(vii) determine whether, to what extent, and under what circumstances, Awards may be settled or exercised in cash, Shares, other securities, other Awards or other property, or canceled, forfeited or suspended and the method or methods by which Awards may be settled, exercised, canceled, forfeited or suspended;

(viii) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award shall be deferred either automatically or at the election of the holder thereof or of the Committee;

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(ix) determine whether, to what extent and under what circumstances any Award shall be canceled, suspended or subjected to additional restrictions, including in connection with any Share ownership guidelines or insider trading policies of the Company;

(x) grant Awards as an alternative to, or as the form of payment for grants or rights earned or payable under, other bonus or compensation plans, arrangements or policies of the Company or any Affiliate;

(xi) grant Substitute Awards on such terms and conditions as the Committee may prescribe, subject to compliance with the Incentive Stock Option rules under Section 422 of the Code and the nonqualified deferred compensation rules under Section 409A of the Code, where applicable;

(xii) make all determinations under the Plan concerning termination of any Participant’s employment or service with the Company or an Affiliate, including whether such termination occurs by reason of cause, disability, retirement (each, as may be defined by the Committee from time to time or set forth in an Award Agreement), or in connection with a Change in Control and whether a leave constitutes a termination of employment;

(xiii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan;

(xiv) to the extent permitted by Section 14.2 and not prohibited by Section 6.2, amend or modify the terms of any Award at or after grant;

(xv) correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent that the Committee shall deem desirable to carry it into effect;

(xvi) establish, amend, suspend or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and

(xvii) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan, subject to the exclusive authority of the Board under Section 14 hereunder to amend or terminate the Plan. The exercise of an Option or receipt of an Award shall be effective only if an Award Agreement shall have been duly executed and delivered on behalf of the Company following the grant of the Option or other Award.

3.2 Committee Discretion Binding. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time and shall be final, conclusive, and binding upon all Persons, including the Company and any Affiliate, any Participant and any holder or beneficiary of any Award. A Participant or other holder of an Award may contest a decision or action by the Committee with respect to such Person or Award only on the grounds that such decision or action was arbitrary or capricious or was unlawful, and any review of such decision or action shall be limited to determining whether the Committee’s decision or action was arbitrary or capricious or was unlawful.

3.3 Delegation. Subject to the terms of the Plan, the Committee’s charter and applicable law, the Committee may delegate to one or more officers or managers of the Company or of any Affiliate, or to a Committee of such officers or managers, the authority, subject to such terms and limitations as the

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Committee shall determine, to grant Awards to or to cancel, modify or waive rights with respect to, or to alter, discontinue, suspend or terminate Awards held by Participants who are not officers or directors of the Company for purposes of Section 16 or who are otherwise not subject to such Section.

Section 4. Shares Available For Awards.

4.1 Shares Available.

(a) Subject to the provisions of Section 4.2 hereof, a total of 1,000,000 Shares shall be authorized for grant under the Plan. Of such Shares authorized, a total of 1,000,000 Shares may be granted pursuant to the exercise of Incentive Stock Options.

(b) If any Shares subject to an Award are forfeited, an Award expires or an Award is settled for cash (in whole or in part), the Shares subject to such Award shall, to the extent of such forfeiture, expiration or cash settlement, again be available for Awards under the Plan. In the event that withholding tax liabilities arising from an Award other than an Option or Stock Appreciation Right are satisfied by the tendering of Shares (either actually or by attestation) or by the withholding of Shares by the Company, the Shares so tendered or withheld shall be added to the Shares available for Awards under the Plan. Notwithstanding anything to the contrary contained herein, the following Shares shall not be added to the Shares authorized for grant under paragraph (a) of this Section: (i) Shares tendered by the Participant or withheld by the Company in payment of the Option Price or to satisfy any tax withholding obligation with respect to an Option or SAR, and (ii) Shares subject to a SAR that are not issued in connection with the stock settlement of the SAR on exercise thereof, and (iii) Shares reacquired by the Company on the open market or otherwise using cash proceeds from the exercise of Options.

(c) Notwithstanding the foregoing and subject to adjustment as provided in Section 4.2 hereof, no Participant may receive Options or SARs under the Plan in any calendar year that, taken together, relate to more than 200,000 Shares.

4.2 Adjustments. In the event that any dividend (other than a normal, recurring dividend) or other distribution (whether in the form of cash, Shares, other securities or other property), recapitalization, stock split, reverse stock split, reorganization, merger, consolidation, split-up, spin-off, combination, repurchase or exchange of Shares or other securities of the Company, issuance of warrants or other rights to purchase Shares or other securities of the Company, or other similar corporate transaction or event affects the Shares, then the Committee shall in an equitable and proportionate manner as deemed appropriate by the Committee (and, as applicable, in such manner as is consistent with Sections 162(m), 422 and 409A of the Code and the regulations thereunder) either: (i) adjust any or all of (1) the aggregate number and class of Shares or other securities of the Company (or number and kind of other securities or property) with respect to which Awards may be granted under the Plan; (2) the number and class of Shares or other securities of the Company (or number and kind of other property) subject to outstanding Awards under the Plan, provided that the number of Shares subject to any Award shall always be a whole number; (3) the grant or exercise price with respect to any Award under the Plan; and (4) the limits on the number of Shares or Awards that may be granted to Participants under the Plan in any calendar year; (ii) provide for an equivalent award in respect of securities of the surviving entity of any merger, consolidation or other transaction or event having a similar effect; or (iii) make provision for a cash payment to the holder of an outstanding Award.

4.3 Substitute Awards; Future Pre-Existing Plans. Any Shares issued by the Company as Substitute Awards in connection with the assumption or substitution of outstanding grants from any acquired corporation shall not reduce the Shares available for Awards under the Plan or count against any limits set forth in the Plan.

4.4 Sources of Shares Deliverable Under Awards. Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares, treasury shares or of issued Shares which have been reacquired by the Company.

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Section 5. Eligibility.

Any Employee, Director or Consultant shall be eligible to be designated a Participant; provided, however, that Non-Employee Directors shall only be eligible to receive Awards granted consistent with Section 10; provided further, that any award to an Employee who is a prospective employee or officer shall be conditioned upon such individual becoming an employee or officer of the Company or its Affiliate. The terms and conditions of Awards need not be the same with respect to each Participant.

Section 6. Stock Options; Stock Appreciation Rights.

6.1 Grant. Subject to the provisions of the Plan and other applicable legal requirements, the Committee shall have sole and complete authority to determine the Participants to whom Options and SARs shall be granted, the number of Shares subject to each Award, the exercise price and the conditions and limitations applicable to the exercise of each Option and SAR. An Option may be granted with or without a related SAR. A SAR may be granted with or without a related Option. The grant of an Option shall take place when the Committee by resolution, written consent or other appropriate action determines to grant such Option for a particular number of Shares to a particular Participant at a particular Option Price. The Committee shall have the authority to grant Incentive Stock Options and to grant Non-Qualified Stock Options. In the case of Incentive Stock Options, the terms and conditions of such grants shall be subject to and comply with Section 422 of the Code, as from time to time amended, and any regulations implementing such statute.

6.2 Price. The Committee in its sole discretion shall establish the Option Price at the time each Option is granted and the Grant Price at the time each SAR is granted. Except in the case of Substitute Awards and subject to the provisions of Section 6.6, the Option Price of an Option, and the Grant Price of an SAR, may not be less than one hundred percent (100%) of the Fair Market Value of a Share on the date of grant of such Option or SAR. Notwithstanding the foregoing and except as permitted by the provisions of Section 4.2 hereof, the Committee shall not have the power to (i) amend the terms of previously granted Options or SARs to reduce the Option Price of such Options or the Grant Price of such SARs, (ii) cancel previously granted Options or SARs and grant substitute Options or SARs with a lower Option Price or Grant Price than the cancelled Options or SARs, or (iii) cancel previously granted Options or SARs in exchange for a cash payment when the Option Price or Grant Price exceeds the Fair Market Value of the underlying Shares (other than in connection with a Change in Control), in each case without the approval of the Company’s stockholders.

6.3 Term. Subject to the Committee’s authority under Section 3.1 and the provisions of Section 6.6, each Option and SAR and all rights and obligations thereunder shall expire on the date determined by the Committee and specified in the Award Agreement. The Committee shall be under no duty to provide terms of like duration for Options or SARs granted under the Plan. Notwithstanding the foregoing, but subject to the last sentence of Section 6.4(a), no Option or SAR shall be exercisable after the expiration of ten (10) years from the date such Option or SAR was granted.

6.4 Exercise.

(a) Each Option and SAR shall be exercisable at such times and subject to such terms and conditions as the Committee may, in its sole discretion, specify in the applicable Award Agreement or thereafter. The Committee shall have full and complete authority to determine whether an Option or SAR

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will be exercisable in full at any time or from time to time during the term of the Option or SAR, or to provide for the exercise thereof in such installments, upon the occurrence of such events and at such times during the term of the Option or SAR as the Committee may determine. An Award Agreement may provide that the period of time over which an Option or SAR, other than an Incentive Stock Option, may be exercised shall be automatically extended if on the scheduled expiration of such Award, the Participant’s exercise of such Award would violate applicable securities law; provided, however, that during the extended exercise period the Option or SAR may only be exercised to the extent the Option or SAR was exercisable in accordance with its terms immediately prior to such scheduled expiration date; provided further, however, that such extended exercise period shall end not later than thirty (30) days after the exercise of such Option or SAR first would no longer violate such laws.

(b) The Committee may impose such conditions with respect to the exercise of Options, including without limitation, any relating to the application of federal, state or foreign securities laws or the Code, as it may deem necessary or advisable.

(c) An Option or SAR may be exercised in whole or in part at any time, with respect to whole Shares only, within the period permitted thereunder for the exercise thereof, and shall be exercised by (i) written notice of intent to exercise the Option or SAR, in such form as the Committee may prescribe, delivered to the Company at its principal office or such other office as the Committee may from time to time direct, and (ii) payment in full to the Company at the direction of the Committee of the amount of the Option Price for the number of Shares with respect to which the Option is then being exercised.

(d) Payment of the Option Price shall be made (i) in cash or cash equivalents, (ii) at the discretion of the Committee, by transfer, either actually or by attestation, to the Company of unencumbered Shares previously acquired by the Participant, valued at the Fair Market Value of such Shares on the date of exercise (or next succeeding trading date, if the date of exercise is not a trading date), together with any applicable withholding taxes, such transfer to be upon such terms and conditions as determined by the Committee, (iii) at the discretion of the Committee, by a cashless (broker-assisted) exercise that complies with applicable laws, (iv) at the discretion of the Committee, by withholding Shares (net-exercise) otherwise deliverable to the Participant pursuant to the Option having an aggregate Fair Market Value at the time of exercise equal to the total Option Price or (v) any combination of (i) through (iv). Until the optionee has been issued the Shares subject to such exercise, he or she shall possess no rights as a stockholder with respect to such Shares.

(e) At the Committee’s discretion, the amount payable to the Participant as a result of the exercise of a SAR may be settled in cash, Shares or other property, or any combination thereof. A fractional Share shall not be deliverable upon the exercise of a SAR but a cash payment will be made in lieu thereof.

(f) An Award Agreement may provide, or be amended to provide, that if on the last day of the term of an Option or SAR, the Fair Market Value of one Share exceeds the Option Price or Grant Price of such Award, the Participant has not exercised the Option or SAR and the Option or SAR has not expired, the Option or SAR shall be deemed to have been exercised by the Participant on such day with payment made by withholding Shares otherwise issuable in connection with the exercise of the Option or SAR. In such event, the Company shall deliver to the Participant the number of Shares for which the Award was deemed exercised, less the number of Shares required to be withheld for the payment of the total purchase price (in the case of an Option) and required withholding taxes.

6.5 Termination of Employment or Service. Except as otherwise provided in the applicable Award Agreement, if a Participant’s employment or service is terminated, the outstanding Options and SARs held by such Participant shall terminate on the date of such termination of employment or service and

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be forfeited. Notwithstanding the foregoing provisions of this Section 6.5 to the contrary, the Committee may determine in its discretion that an Option or SAR may be exercised following any such termination of employment, whether or not exercisable at the time of such termination of employment; provided, however, that in no event may an Option or SAR be exercised after the expiration date of such Option or SAR specified in the applicable Award Agreement, except as provided in the last sentence of Section 6.4(a).

6.6 Ten Percent Stock Rule. Notwithstanding any other provisions in the Plan, if at the time an Option is otherwise to be granted pursuant to the Plan, the optionee or rights holder owns directly or indirectly (within the meaning of Section 424(d) of the Code) Shares of the Company possessing more than ten percent (10%) of the total combined voting power of all classes of Stock of the Company or its parent or Subsidiary corporations (within the meaning of Section 422(b)(6) of the Code), then any Incentive Stock Option to be granted to such optionee or rights holder pursuant to the Plan shall satisfy the requirement of Section 422(c)(5) of the Code, and the Option Price shall be not less than one hundred ten percent (110%) of the Fair Market Value of the Shares of the Company, and such Option by its terms shall not be exercisable after the expiration of five (5) years from the date such Option is granted.

Section 7. Restricted Shares And Restricted Share Units.

7.1 Grant.

(a) Subject to the provisions of the Plan and other applicable legal requirements, the Committee shall have sole and complete authority to determine the Participants to whom Restricted Shares and Restricted Share Units shall be granted, the number of Restricted Shares and/or the number of Restricted Share Units to be granted to each Participant, the duration of the period during which, and the conditions under which, the Restricted Shares and Restricted Share Units may be forfeited to the Company, and the other terms and conditions of such Awards. The Restricted Share and Restricted Share Unit Awards shall be evidenced by Award Agreements in such form as the Committee shall from time to time approve, which agreements shall comply with and be subject to the terms and conditions provided hereunder and any additional terms and conditions established by the Committee that are consistent with the terms of the Plan.

(b) Each Restricted Share and Restricted Share Unit Award made under the Plan shall be for such number of Shares as shall be determined by the Committee and set forth in the Award Agreement containing the terms of such Restricted Share or Restricted Share Unit Award. Such agreement shall set forth a period of time during which the grantee must remain in the continuous employment of the Company in order for the forfeiture and transfer restrictions to lapse. If the Committee so determines, the restrictions may lapse during such restricted period in installments with respect to specified portions of the Shares covered by the Restricted Share or Restricted Share Unit Award. The Award Agreement may also, in the discretion of the Committee, set forth performance or other conditions that will subject the Shares to forfeiture and transfer restrictions. The Committee may, at its discretion, waive all or any part of the restrictions applicable to any or all outstanding Restricted Share and Restricted Share Unit Awards.

7.2 Dividends and Other Distributions.

(a) Prior to the lapse of any applicable transfer restrictions, Participants holding Restricted Shares shall be credited with any dividends payable in cash, Shares or other property paid with respect to such Restricted Shares while they are so held, unless determined otherwise by the Committee and set forth in the Award Agreement. The Committee may apply any restrictions to such dividends that the Committee deems appropriate. Except as set forth in the Award Agreement or otherwise determined by the Committee, in the event (a) of any adjustment as provided in Section 4.2, or (b) any cash, Shares or other property is paid by the Company as a dividend on Restricted Shares, such cash, Shares or other property payable to a Participant on such Restricted Shares shall be subject to the same terms and conditions, including any transfer restrictions, as relate to the original Restricted Shares and shall be paid to the Participant when and if the applicable Restricted Shares vest.

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(b) Unless otherwise provided in the applicable Award Agreement, Participants holding Restricted Share Units shall not be credited with any dividends paid with respect to the underlying Shares of such Restricted Share Units. If the applicable Award Agreement specifies that a Participant will be entitled to receive dividend equivalent rights, (i) the amount of any such dividend equivalent right shall equal the amount that would be payable to the Participant as a stockholder in respect of a number of Shares equal to the number of Restricted Share Units then credited to the Participant, (ii) any such dividend equivalent right shall be paid in accordance with the Company’s payment practices as may be established from time to time and as of the date on which such dividend would have been payable in respect of outstanding Shares, and (iii) unless otherwise provided in the applicable Award Agreement, dividend equivalents will not be paid in respect of Restricted Share Units that are not yet vested unless and until such Restricted Share Units vest.

7.3 Transfer Restrictions on Restricted Shares. At the time of a Restricted Share Award, a certificate representing the number of Shares awarded thereunder shall be registered in the name of the grantee. Such certificate shall be held by the Company or any custodian appointed by the Company for the account of the grantee subject to the terms and conditions of the Plan, and shall bear such a legend setting forth the restrictions imposed thereon as the Committee, in its discretion, may determine. Alternatively, the Committee may, in its discretion, provide that a Participant’s ownership of Restricted Shares prior to the lapse of any transfer restrictions or any other applicable restrictions shall, in lieu of such certificates, be evidenced by a “book entry” (i.e., a computerized or manual entry) in the records of the Company or its designated agent in the name of the Participant who has received such Award, and confirmation and account statements sent to the Participant with respect to such book-entry Shares may bear the restrictive legend referenced in the preceding sentence. Such records of the Company or such agent shall, absent manifest error, be binding on all Participants who receive Restricted Share Awards evidenced in such manner. The holding of Restricted Shares by the Company or such an escrow holder, or the use of book entries to evidence the ownership of Restricted Shares, in accordance with this Section 7.3, shall not affect the rights of Participants as owners of the Restricted Shares awarded to them, nor affect the restrictions applicable to such shares under the Award Agreement or the Plan, including the transfer restrictions.

7.4 Other Rights of Restricted Stockholders. Unless otherwise provided in the applicable Award Agreement, the grantee shall have all other rights of a stockholder with respect to the Restricted Shares, including the right to vote such Shares, subject to the following restrictions: (i) the grantee shall not be entitled to delivery of the stock certificate until the expiration of the restricted period and the fulfillment of any other restrictive conditions set forth in the Award Agreement with respect to such Shares; (ii) none of the Shares may be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of during such restricted period or until after the fulfillment of any such other restrictive conditions; and (iii) except as otherwise determined by the Committee at or after grant, all of the Shares (including any dividends accrued and held thereon) shall be forfeited and all rights of the grantee to such Shares shall terminate, without further obligation on the part of the Company, unless the grantee remains in the continuous employment of the Company for the entire restricted period in relation to which such Shares were granted and unless any other restrictive conditions relating to the Restricted Share Award are met.

7.5 Termination of Restrictions on Restricted Shares. At the end of the restricted period and provided that any other restrictive conditions of the Restricted Share Award are met, or at such earlier time as otherwise determined by the Committee, all restrictions set forth in the Award Agreement relating to the Restricted Share Award or in the Plan shall lapse as to the restricted Shares subject thereto, and a stock certificate for the appropriate number of Shares, free of the restrictions and restricted stock legend, shall be delivered to the Participant or the Participant’s beneficiary or estate, as the case may be (or,

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in the case of book-entry Shares, such restrictions and restricted stock legend shall be removed from the confirmation and account statements delivered to the Participant or the Participant’s beneficiary or estate, as the case may be, in book-entry form) and any dividends or dividend equivalents accrued thereon shall be paid.

7.6 Payment of Restricted Share Units. Each Restricted Share Unit shall have a value equal to the Fair Market Value of a Share. Restricted Share Units shall be paid in cash, Shares, other securities or other property, as determined in the sole discretion of the Committee, upon the lapse of the restrictions applicable thereto, or otherwise in accordance with the applicable Award Agreement. Except as otherwise determined by the Committee at or after grant, Restricted Share Units may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of, and all Restricted Share Units (and any dividend equivalents associated therewith) and all rights of the grantee thereto shall terminate, without further obligation on the part of the Company, unless the grantee remains in continuous employment of the Company for the entire restricted period in relation to which such Restricted Share Units were granted and unless any other restrictive conditions relating to the Restricted Share Unit Award are met. Except as otherwise provided in the Plan or the applicable Award Agreement, a Participant shall have no rights of a stockholder with respect to Restricted Share Units.

7.7 Termination of Employment or Service. Except as otherwise provided in the applicable Award Agreement, if a Participant’s employment or service is terminated, the Participant’s rights in unvested Restricted Shares and Restricted Share Units (and any accrued dividends or dividend equivalent rights associated therewith) then subject to restrictive conditions shall lapse, and such Restricted Shares and Restricted Share Units shall be forfeited and surrendered to the Company without consideration. Notwithstanding the foregoing provisions of this Section 7.7 to the contrary, the Committee may provide in its discretion that a Participant’s rights in unvested Restricted Shares and Restricted Share Units shall not lapse in the event of certain terminations of employment or service, such as termination by the Company without cause, by a Participant voluntarily, or by reason or death, disability or retirement (each, as may be defined by the Committee from time to time or set forth in an Award Agreement).

Section 8. Performance Awards.

8.1 Grant. The Committee shall have sole and complete authority to determine the Participants who shall receive a Performance Award, which shall consist of a right that is (i) denominated in cash, Shares or other property, (ii) valued, as determined by the Committee, in accordance with the achievement of such performance goals during such performance periods as the Committee shall establish, and (iii) payable at such time and in such form as the Committee shall determine.

8.2 Terms and Conditions. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the performance goals to be achieved during any performance period, the length of any performance period, the amount of any Performance Award and the amount and kind of any payment or transfer to be made pursuant to any Performance Award, and, subject to Section 11 of the Plan, may amend specific provisions of the Performance Award; provided, however, that such amendment may not adversely affect existing Performance Awards made within a performance period commencing prior to implementation of the amendment.

8.3 Dividends and Other Distributions. Notwithstanding any provision of this Plan to the contrary, dividends or dividend equivalents on Performance Awards denominated in Shares may not be paid to a Participant (but they may be accumulated for eventual payment) until such time as the Committee determines that the performance criteria underlying such Performance Awards have been satisfied.

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8.4 Payment of Performance Awards. An Award Agreement may provide that Performance Awards may be paid in a lump sum or in installments following the close of the performance period or, in accordance with the procedures established by the Committee, on a deferred basis, subject to the requirements of Section 409A of the Code. Notwithstanding the foregoing, and to the extent permissible under Section 162(m) (if applicable), the Committee may in its discretion, waive any performance goals and/or other terms and conditions relating to a Performance Award. A Participant’s rights to any Performance Award may not be sold, assigned, transferred, pledged, hypothecated or otherwise encumbered or disposed of in any manner, except by will or the laws of descent and distribution, and/or except as the Committee may determine at or after grant.

8.5 Termination of Employment or Service. Except as otherwise provided in the applicable Award Agreement, if a Participant’s employment or service is terminated prior to the close of the applicable performance period, the Participant’s rights in unvested Performance Awards then subject to restrictive conditions shall lapse, and such Performance Awards shall be forfeited and surrendered to the Company without consideration. Notwithstanding the foregoing provisions of this Section 8.5 to the contrary, the Committee may provide in its discretion that a Participant’s rights in unvested Performance Awards shall not lapse in the event of certain terminations of employment or service, such as termination by the Company without cause, by a Participant voluntarily, or by reason of death, disability or retirement (each, as may be defined by the Committee from time to time or set forth in an Award Agreement).

8.6 Forfeiture/Recapture. The Committee may require, in an Award Agreement issued in respect of a Performance Award or as a condition to the payout of a Performance Award, that the Participant remain liable to forfeit some or all of the Performance Award or to pay back some or all of any cash payment or the gains realized by the Participant in connection with his sale of Shares issued in respect of vesting of Performance Awards, if the Company or a Subsidiary subsequently corrects or restates the results that formed the basis for the Performance Award to have been paid out or vested. The Committee shall have the authority in each instance to determine whether to impose such requirements, the parameters of any such requirements and whether or not to require forfeiture or repayment by any particular Participant.

Section 9. Other Stock-Based Awards.

The Committee shall have the authority to determine the Participants who shall receive an Other Stock-Based Award, which shall consist of any right that is (i) not an Award described in Sections 6, 7, or 8 above and (ii) an Award of Shares or an Award denominated or payable in, valued in whole or in part by reference to, or otherwise based on or related to, Shares or other property (including, without limitation, securities convertible into Shares), as deemed by the Committee to be consistent with the purposes of the Plan. Subject to the terms of the Plan and any applicable Award Agreement, the Committee shall determine the terms and conditions of any such Other Stock-Based Award.

Section 10. Non-Employee Director Awards.

The Board may provide that all or a portion of a Non-Employee Director’s annual retainer, meeting fees and/or other awards or compensation as determined by the Board, be payable (either automatically or at the election of a Non-Employee Director) in the form of Non-Qualified Stock Options, Restricted Shares, Restricted Share Units and/or Other Stock-Based Awards under the Plan, including unrestricted Shares. The Board shall determine the terms and conditions of any such Awards, including the terms and conditions which shall apply upon a termination of the Non-Employee Director’s service as a member of the Board, and shall have full power and authority in its discretion to administer such Awards, subject to the terms of the Plan and applicable law. Subject to applicable legal requirements, the Board may also grant Awards to Non-Employee Directors pursuant to the terms of the Plan, including any Award described in Sections 6, 7 or 9 above.

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Section 11. Provisions Applicable To Covered Officers And Performance Awards.

11.1 Covered Officers. Notwithstanding anything in the Plan to the contrary, unless the Committee determines that a Performance Award to be granted to a Covered Officer should not qualify as “performance-based compensation” for purposes of Section 162(m), Performance Awards granted to Covered Officers shall be subject to the terms and provisions of this Section 11. Accordingly, unless otherwise determined by the Committee, if any provision of the Plan or any Award Agreement relating to such an Award does not comply or is inconsistent with Section 162(m), such provision shall be construed or deemed amended to the extent necessary to conform to such requirements, and no provision shall be deemed to confer upon the Committee discretion to increase the amount of compensation otherwise payable to a Covered Officer in connection with any such Award upon the attainment of the performance criteria established by the Committee.

11.2 Performance Goals. The Committee may grant Performance Awards to Covered Officers based solely upon the attainment of performance targets related to one or more performance goals selected by the Committee from among the goals specified below. For the purposes of this Section 11, performance goals shall be limited to one or more of the following Company, Subsidiary, operating unit, business segment or division financial performance measures:

(a) total sales or revenues;

(b) sales or revenue per employee;

(c) earnings before interest, taxes, depreciation and/or amortization;

(d) operating income or profit (before or after taxes);

(e) operating margins, gross margins or cash margin;

(f) operating efficiencies;

(g) return on equity, assets (or net assets), capital, capital employed or investment;

(h) net income (before or after taxes);

(i) pre- or after-tax income (before or after allocation of corporate overhead and bonuses);

(j) earnings (gross, net, pre-tax, after tax or per share);

(k) utilization;

(l) improvement in or attainment of expense levels or working capital levels, including cash, inventory and accounts receivable;

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(m) gross or net profit margins;

(n) stock price or total stockholder return;

(o) cash flow or cash flow per Share (before or after dividends);

(p) appreciation in and/or maintenance of the price of Shares or other publicly-traded securities of the Company;

(q) client growth or sales;

(r) debt reduction;

(s) year-end cash;

(t) financial ratios, including those measuring activity, leverage, liquidity or profitability cost of capital or assets under management;

(u) financing and other capital-raising transactions;

(v) revenue;

(w) market share;

(x) strategic business objectives, consisting of one or more objectives based on meeting specified cost targets, business expansion goals or goals relating to acquisitions or divestitures; or

(y) any combination thereof.

Each goal may be expressed on an absolute and/or relative basis, may be based on or otherwise employ comparisons based on internal targets, the past performance of the Company or any Subsidiary, operating unit, business segment or division of the Company and/or the past or current performance of other companies, and in the case of earnings-based measures, may use or employ comparisons relating to capital, stockholders’ equity and/or Shares outstanding, or to assets or net assets. The Committee may appropriately adjust any evaluation of performance under criteria set forth in this Section 11.2 to exclude any of the following events that occurs during a performance period: (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs, (v) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management and (vi) any extraordinary non-recurring items as described in Accounting Principles Board Opinion No. 30 and/or in management’s discussion and analysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year; provided, that the Committee must commit to make any such adjustments, and shall specify such adjustments, within the time for prescribing performance targets generally as described in Section 11.5.

11.3 Maximum Limits. With respect to any Covered Officer, the maximum annual number of Shares in respect of which all Performance Awards may be granted under Section 8 of the Plan is 150,000 (subject to adjustment as provided in Section 4.2) and the maximum amount of all Performance Awards that are settled in cash and that may be granted under Section 8 of the Plan in any year is $3,000,000.

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11.4 Negative Discretion Allowed. Notwithstanding any provision of the Plan (other than Article 13), with respect to any Restricted Share Award, Restricted Share Unit Award, Performance Award or Other Share-Based Award that is subject to this Section 11, the Committee may adjust downwards, but not upwards, the amount payable pursuant to such Award to a Covered Officer, and the Committee may not waive the achievement of the applicable performance goals, except in the case of the death or disability of the Participant.

11.5 Section 162(m) Administration. To the extent necessary to comply with Section 162(m), with respect to grants of Performance Awards to a Covered Officer, no later than 90 days following the commencement of each performance period (or such other time as may be required or permitted by Section 162(m) of the Code), the Committee shall, in writing, (1) select the performance goal or goals applicable to the performance period, (2) establish the various targets and bonus amounts which may be earned for such performance period, and (3) specify the relationship between performance goals and targets and the amounts to be earned by each Covered Officer for such performance period. Following the completion of each performance period, the Committee shall certify in writing whether the applicable performance targets have been achieved and the amounts, if any, payable to Covered Officers for such performance period. In determining the amount earned by a Covered Officer for a given performance period, subject to any applicable Award Agreement, the Committee shall have the right to reduce (but not increase) the amount payable at a given level of performance to take into account additional factors that the Committee may deem relevant in its sole discretion to the assessment of individual or corporate performance for the performance period.

Section 12. Termination of Employment or Service.

Subject to the terms and conditions set forth herein, the Committee shall have the full power and authority to determine the terms and conditions that shall apply to any Award upon a termination of employment or service with the Company or its Affiliates, including a termination by the Company with or without cause, by a Participant voluntarily, or by reason of death, disability or retirement (each, as may be defined by the Committee from time to time or set forth in an Award Agreement), and may provide such terms and conditions in the Award Agreement or in such rules and regulations as it may prescribe.

Section 13. Change In Control.

13.1 Impact on Certain Awards. Unless otherwise provided in an applicable Award Agreement or by the Committee at any time, in the event of a Change in Control of the Company, Options and Stock Appreciation Rights outstanding as of the date of the Change in Control shall be cancelled and terminated without payment if the Fair Market Value of one Share as of the date of the Change in Control is less than the per Share Exercise Price of such Award. Award Agreements may provide (at or after grant) that, in the event of a Change in Control, all Performance Awards shall be considered to be earned and payable (in full or pro rata based on the target value of the Award and the portion of Performance Period completed as of the date of the Change in Control), and any limitations or other restrictions shall lapse and such Performance Awards shall be immediately settled or distributed.

13.2 Assumption or Substitution of Certain Awards. (a) Unless otherwise provided in an Award Agreement or by the Committee at any time, in the event of a Change in Control of the Company in which the successor company assumes or substitutes for an Option, SAR, Restricted Share Award, Restricted Share Unit, Performance Award or Other Stock-Based Award (or in which the Company is the ultimate parent corporation and continues the Award), if a Participant’s employment with such successor company (or the Company) or a subsidiary thereof terminates within 24 months following such Change in Control (or such other period set forth in the Award Agreement): (i) Options and SARs outstanding as of the date of such termination of employment will immediately vest, become fully exercisable, and may thereafter be

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exercised for 24 months (or the period of time set forth in the Award Agreement), (ii) restrictions, limitations and other conditions applicable to Restricted Shares and Restricted Share Units outstanding as of the date of such termination of employment shall lapse and the Restricted Shares and Restricted Share Units shall become free of all restrictions, limitations and conditions and become fully vested, and (iii) the restrictions, limitations and other conditions applicable to any Other Stock-Based Awards or any other Awards (including the settlement at target level of any Performance Awards) shall lapse, and such Awards shall become free of all restrictions, limitations and conditions and become fully vested and transferable to the full extent of the original grant. For the purposes of this Section 13.2, an Option, SAR, Restricted Share Award, Restricted Share Unit, Performance Award or Other Stock-Based Award shall be considered assumed or substituted for if following the Change in Control the Award confers the right to purchase or receive, for each Share subject to the Option, SAR, Restricted Share Award, Restricted Share Unit, Performance Award or Other Stock-Based Award immediately prior to the Change in Control, the consideration (whether stock, cash or other securities or property) received in the transaction constituting a Change in Control by holders of Shares for each Share held on the effective date of such transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding Shares); provided, however, that if such consideration received in the transaction constituting a Change in Control is not solely common stock of the successor company, the Committee may, with the consent of the successor company, provide that the consideration to be received upon the exercise or vesting of an Option, SAR, Restricted Share Award, Restricted Share Unit or Other Stock-Based Award, for each Share subject thereto, will be solely common stock of the successor company substantially equal in fair market value to the per Share consideration received by holders of Shares in the transaction constituting a Change in Control. The determination of such substantial equality of value of consideration shall be made by the Committee in its discretion and its determination shall be conclusive and binding.

(b) Unless otherwise provided in an Award Agreement or by the Committee at any time, in the event of a Change in Control of the Company to the extent the successor company does not assume or substitute for an Option, SAR, Restricted Share Award, Restricted Share Unit or Other Stock-Based Award (or in which the Company is the ultimate parent corporation and does not continue the Award): (i) those Options and SARs outstanding as of the date of the Change in Control that are not assumed or substituted for (or continued) shall immediately vest and become fully exercisable, (ii) restrictions, limitations and other conditions applicable to Restricted Shares and Restricted Share Units that are not assumed or substituted for (or continued) shall lapse and the Restricted Shares and Restricted Share Units shall become free of all restrictions, limitations and conditions and become fully vested, and (iii) the restrictions, other limitations and other conditions applicable to any Other Stock-Based Awards or any other Awards (including the settlement at target level of Performance Awards) that are not assumed or substituted for (or continued) shall lapse, and such Other Stock-Based Awards or such other Awards shall become free of all restrictions, limitations and conditions and become fully vested and transferable to the full extent of the original grant.

(c) The Committee, in its discretion, may determine that, upon the occurrence of a Change in Control of the Company, each Option and SAR outstanding shall terminate within a specified number of days after notice to the Participant, and/or that each Participant shall receive, with respect to each Share subject to such Option or SAR, an amount equal to the excess of the Fair Market Value of such Share immediately prior to the occurrence of such Change in Control over the Option Price or Grant Price of such Option and/or SAR; such amount to be payable in cash, in one or more kinds of stock or property (including the stock or property, if any, payable in the transaction) or in a combination thereof, as the Committee, in its discretion, shall determine. The Committee, in its discretion, may determine that, upon the occurrence of a Change in Control of the Company, any other outstanding Award may be settled in cash.

13.3 No Implied Rights; Other Limitations. No Participant shall have any right to prevent the consummation of any Change in Control or any of the acts described in Section 4.2 affecting the number of Shares available to, or other entitlement of, such Participant under the Plan or such Participant’s Award. Any actions or determinations of the Committee under this Section 13 need not be uniform as to all outstanding Awards, nor treat all Participants identically.

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Section 14. Amendment And Termination.

14.1 Amendments to the Plan. Except as otherwise provided in the Plan, the Board may amend, alter, suspend, discontinue or terminate the Plan or any portion thereof at any time; provided that no such amendment, alteration, suspension, discontinuation or termination shall be made without stockholder approval if such approval is necessary to comply with any tax or regulatory requirement for which or with which the Board deems it necessary or desirable to comply, including the rules and regulations of the principal securities exchange on which Shares are traded.

14.2 Amendments to Awards. Subject to the restrictions and shareholder approval requirements set forth in Section 6.2 and Section 14.1, the Committee may waive any conditions or rights under, amend any terms of or alter, suspend, discontinue, cancel or terminate, any Award theretofore granted, prospectively or retroactively; provided that any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely affect the rights of any Participant or any holder or beneficiary of any Award theretofore granted shall not to that extent be effective without the consent of the affected Participant, holder or beneficiary.

14.3 Adjustments of Awards upon the Occurrence of Certain Unusual or Nonrecurring Events. Subject to Section 11.5, the Committee is hereby authorized to make equitable and proportionate adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (and shall make such adjustments for events described in Section 4.2 hereof) affecting the Company or any Affiliate, or the financial statements of the Company or any Affiliate, or of changes in applicable laws, regulations or accounting principles.

Section 15. General Provisions.

15.1 Limited Transferability of Awards. Subject to this Section 15.1, each Award shall be exercisable only by a Participant during the Participant’s lifetime, or, if permissible under applicable law, by the Participant’s legal guardian or representative. No Award may be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by a Participant other than by will or by the laws of descent and distribution and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company and its Affiliates; provided that the designation of a beneficiary shall not constitute an assignment, alienation, pledge, attachment, sale, transfer or encumbrance.

(a) Notwithstanding the foregoing, the Committee may, in its sole discretion, permit Awards other than Incentive Stock Options to be transferred by a Participant, without consideration, subject to such rules as the Committee may adopt consistent with any applicable Award Agreement to preserve the purposes of the Plan, to:

(i) any person who is a “family member” of the Participant, as such term is used in the instructions to Form S-8 (collectively, the “Immediate Family Members”);

(ii) a trust solely for the benefit of the Participant and his or her Immediate Family Members;

(iii) a partnership or limited liability company whose only partners or shareholders are persons described in (i) or (ii) above; or

(iv) any other transferee as may be approved by the Committee in its sole discretion or as provided in the applicable Award agreement;

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(each transferee described in clauses (i), (ii), (iii) and (iv) above is hereinafter referred to as a “Permitted Transferee”); provided that the Participant gives the Committee advance written notice describing the terms and conditions of the proposed transfer and the Committee notifies the Participant in writing that such a transfer is permissible and would comply with the requirements of the Plan and any applicable Award Agreement.

(b) The terms of any Award transferred in accordance with the immediately preceding Section shall apply to the Permitted Transferee and any reference in the Plan, or in any applicable Award Agreement, to a Participant shall be deemed to refer to the Permitted Transferee, except that (i) Permitted Transferees shall not be entitled to transfer any Award, other than by will or the laws of descent and distribution; (ii) Permitted Transferees shall not be entitled to exercise any transferred Option unless there shall be in effect a registration statement on an appropriate form covering the Shares to be acquired pursuant to the exercise of such Option if the Committee determines, consistent with any applicable Award Agreement, that such a registration statement is necessary or appropriate, (iii) the Committee or the Company shall not be required to provide any notice to a Permitted Transferee, whether or not such notice is or would otherwise have been required to be given to the Participant under the Plan or otherwise, and (iv) the consequences of the termination of the Participant’s employment by, or services to, the Company or an Affiliate under the terms of the Plan and the applicable Award agreement shall continue to be applied with respect to the Participant, including, without limitation, that an Option shall be exercisable by the Permitted Transferee only to the extent, and for the periods, specified in the Plan and the applicable Award Agreement.

15.2 Dividend Equivalents. Subject to any limitations set forth in the Plan, in the sole and complete discretion of the Committee, an Award may provide the Participant with dividends or dividend equivalents, payable in cash, Shares, other securities or other property on a current or deferred basis. All dividend or dividend equivalents which are not paid currently may, at the Committee’s discretion, accrue interest, be reinvested into additional Shares, or, in the case of dividends or dividend equivalents credited in connection with Performance Awards, be credited as additional Performance Awards and paid to the Participant if and when, and to the extent that, payment is made pursuant to such Award. The total number of Shares available for grant under Section 4 shall not be reduced to reflect any dividends or dividend equivalents that are reinvested into additional Shares or credited as Performance Awards.

15.3 No Rights to Awards. No Person shall have any claim to be granted any Award, and there is no obligation for uniformity of treatment of Participants or holders or beneficiaries of Awards. The terms and conditions of Awards need not be the same with respect to each Participant.

15.4 Share Certificates. All certificates for Shares or other securities of the Company or any Affiliate (or, if any such Shares or securities are in book-entry form, such book-entry balances and confirmation and account statements with respect thereto) delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations and other requirements of the SEC or any state securities commission or regulatory authority, any stock exchange or other market upon which such Shares or other securities are then listed, and any applicable Federal or state laws, and the Committee may cause a legend or legends to be put on any such certificates (or confirmation and account statements for book-entry Shares) to make appropriate reference to such restrictions.

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15.5 Tax Withholding. A Participant may be required to pay to the Company or any Affiliate and the Company or any Affiliate shall have the right and is hereby authorized to withhold from any Award, from any payment due or transfer made under any Award or under the Plan, or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding or other tax-related obligations in respect of an Award, its exercise or any other transaction involving an Award, or any payment or transfer under an Award or under the Plan and to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for the payment of such taxes.

15.6 Withholding or Tendering Shares. Without limiting the generality of Section 15.5, the Committee may in its discretion permit a Participant to satisfy or arrange to satisfy, in whole or in part, the tax obligations incident to an Award by: (a) electing to have the Company withhold Shares or other property otherwise deliverable to such Participant pursuant to his or her Award (provided, however, that the amount of any Shares so withheld shall not exceed the amount necessary to satisfy required federal, state local and foreign withholding obligations using the minimum statutory withholding rates for federal, state, local and/or foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income) and/or (b) tendering to the Company Shares owned by such Participant (or by such Participant and his or her spouse jointly) and purchased or held for the requisite period of time as may be required to avoid the Company’s or the Affiliates’ incurring an adverse accounting charge, based, in each case, on the Fair Market Value of the Shares on the payment date as determined by the Committee. All such elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee, in its sole discretion, deems appropriate.

15.7 Award Agreements. Each Award hereunder shall be evidenced by an Award Agreement that shall be delivered to the Participant and may specify the terms and conditions of the Award and any rules applicable thereto. In the event of a conflict between the terms of the Plan and any Award Agreement, the terms of the Plan shall prevail. The Committee shall, subject to applicable law, determine the date an Award is deemed to be granted. The Committee or, except to the extent prohibited under applicable law, its delegate(s) may establish the terms of agreements or other documents evidencing Awards under this Plan and may, but need not, require as a condition to any such agreement’s or document’s effectiveness that such agreement or document be executed by the Participant, including by electronic signature or other electronic indication of acceptance, and that such Participant agree to such further terms and conditions as specified in such agreement or document. The grant of an Award under this Plan shall not confer any rights upon the Participant holding such Award other than such terms, and subject to such conditions, as are specified in this Plan as being applicable to such type of Award (or to all Awards) or as are expressly set forth in the agreement or other document evidencing such Award.

15.8 No Limit on Other Compensation Arrangements. Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other compensation arrangements, which may, but need not, provide for the grant of Options, Restricted Shares, Restricted Share Units, Other Stock-Based Awards or other types of Awards provided for hereunder.

15.9 No Right to Employment; Claims to Awards. The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ or service of the Company or any Affiliate. Further, the Company or an Affiliate may at any time dismiss a Participant from employment or service, free from any liability or any claim under the Plan, unless otherwise expressly provided in an Award Agreement. No Employee, Director or Consultant shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Employees, Directors or Consultants under the Plan.

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15.10 No Rights as Stockholder. Subject to the provisions of the Plan and the applicable Award Agreement, no Participant or holder or beneficiary of any Award shall have any rights as a stockholder with respect to any Shares to be distributed under the Plan until such person has become a holder of such Shares. Notwithstanding the foregoing, in connection with each grant of Restricted Shares hereunder, the applicable Award Agreement shall specify if and to what extent the Participant shall not be entitled to the rights of a stockholder in respect of such Restricted Shares.

15.11 Compliance with Section 409A of the Code. Notwithstanding any other provisions of the Plan or any Award Agreements thereunder, it is intended that the provisions of the Plan and such Award Agreements comply with Section 409A of the Code, and that no Award shall be granted, deferred, accelerated, extended, paid out or modified under this Plan, or any Award Agreement interpreted, in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Participant. Any provision of this Plan that would cause the grant of an Award or the payment, settlement or deferral thereof to fail to satisfy Section 409A of the Code shall be amended to comply with Section 409A of the Code on a timely basis, which may be made on a retroactive basis, in accordance with regulations and other guidance issued under Section 409A of the Code. In the event that it is reasonably determined by the Board or Committee that, as a result of Section 409A of the Code, payments in respect of any Award under the Plan may not be made at the time contemplated by the terms of the Plan or the relevant Award agreement, as the case may be, without causing the Participant holding such Award to be subject to taxation under Section 409A of the Code, the Company will make such payment on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code; which, if the Participant is a “specified employee” within the meaning of Section 409A, shall be the first day following the six-month period beginning on the date of Participant’s termination of employment. Unless otherwise provided in an Award Agreement or other document governing the issuance of such Award, payment of any Performance Award intended to qualify as a “short term deferral” within the meaning of Section 1.409A-1(b)(4)(i) of the U.S. Treasury Regulations shall be made between the first day following the close of the applicable Performance Period and the last day of the “applicable 2 ¹⁄₂ month period” as defined therein. Although the Company intends to administer the Plan so that Awards will be exempt from, or will comply with, the requirements of Section 409A of the Code, the Company does not warrant that any Award under the Plan will qualify for favorable tax treatment under Section 409A of the Code or any other provision of federal, state, local or foreign law. The Company shall not be liable to any Participant for any tax, interest, or penalties that Participant might owe as a result of the grant, holding, vesting, exercise, or payment of any Award under the Plan.

15.12 Cancellation of Award; Forfeiture of Gain. Notwithstanding anything to the contrary contained herein, an Award Agreement may provide that the Award shall be canceled if the Participant, without the consent of the Company, while employed by or providing services to the Company or any Subsidiary or after termination of such employment or service, violates a non-competition, non-solicitation, non-disclosure or similar covenant or agreement (including any such covenant in an Award Agreement) or otherwise engages in activity that is in conflict with or adverse to the interest of the Company or any Subsidiary (including conduct contributing to any financial restatements or financial irregularities), as determined by the Committee in its discretion. The Committee may provide in an Award Agreement that if within the time period specified in the Agreement the Participant engages in an activity referred to or prohibited in the preceding sentence, the Participant will forfeit all or any portion of any gain realized on the vesting or exercise of the Award and must repay such gain to the Company.

15.13 Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan and any Award Agreement shall be determined in accordance with the laws of the State of Nevada without giving effect to conflicts of laws principles.

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15.14 Severability. If any provision of the Plan or any Award is, or becomes, or is deemed to be invalid, illegal or unenforceable in any jurisdiction or as to any Person or Award, or would disqualify the Plan or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to the applicable laws, or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Award, such provision shall be stricken as to such jurisdiction, Person or Award and the remainder of the Plan and any such Award shall remain in full force and effect.

15.15 Other Laws. The Committee may refuse to issue or transfer any Shares or other consideration under an Award if, acting in its sole discretion, it determines that the issuance or transfer of such Shares or such other consideration might violate any applicable law or regulation (including applicable non-U.S. laws or regulations) or entitle the Company to recover the same under Exchange Act Section 16(b), and any payment tendered to the Company by a Participant, other holder or beneficiary in connection with the exercise of such Award shall be promptly refunded to the relevant Participant, holder or beneficiary.

15.16 No Trust or Fund Created. Neither the Plan nor any Award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any Affiliate and a Participant or any other Person. To the extent that any Person acquires a right to receive payments from the Company or any Affiliate pursuant to an Award, such right shall be no greater than the right of any unsecured general creditor of the Company or any Affiliate.

15.17 No Fractional Shares. No fractional Shares shall be issued or delivered pursuant to the Plan or any Award, and the Committee shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional Shares or whether such fractional Shares or any rights thereto shall be canceled, terminated or otherwise eliminated.

15.18 Headings. Headings are given to the sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof.

Section 1. Term Of The Plan.

16.1 Effective Date. The Plan shall be effective as of the date adopted by the Board, provided that no Incentive Stock Options shall be granted hereunder unless the Plan is approved by the Company’s stockholders within twelve months of any such grant.

16.2 Expiration Date. No new Awards shall be granted under the Plan after the tenth anniversary of the Effective Date. Unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award granted hereunder may, and the authority of the Board or the Committee to amend, alter, adjust, suspend, discontinue or terminate any such Award or to waive any conditions or rights under any such Award shall, continue after the tenth anniversary of the Effective Date.

Date Adopted by the Board:     June 3, 2014

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EX-10

Exhibit 10.4

FORM OF NON-RESTRICTED SHARE AWARD AGREEMENT

UNDER THE AAC HOLDINGS, INC.

2007 STOCK INCENTIVE PLAN

(Employee)

Name of Grantee:                                                   

No. of Shares:                                                          

Grant Date:                                                             

Pursuant to the AAC Holdings, Inc. 2007 Stock Incentive Plan (as amended from time to time, the “Plan”), American Addiction Centers, Inc., formerly known as Forterus, Inc., formerly known as Mezey Howarth Racing Stables, Inc., and formerly known as MH 1, Inc. (the “Company”) hereby grants (the “Agreement”) to the individual named above (the “Grantee”) the number of non-restricted Shares specified above (the “Shares”), subject to the restrictions and conditions set forth in this Agreement and the Plan. The Company acknowledges the receipt from the Grantee of consideration with respect to the par value of the Shares in the form of cash, past or future services rendered to the Company by the Grantee, or such other form of consideration as is acceptable to the Board of Directors of the Company (the “Board”). Capitalized terms in this Agreement shall have the meanings specified in the Plan, unless a different meaning is specified herein.

1. Grantee’s Rights. The Grantee shall have no rights with respect to this Agreement unless he or she shall have accepted this Agreement by signing and delivering to the Company a copy of this Agreement. As soon as practicable following the Company’s receipt of this executed Agreement, a stock certificate representing the number of Shares granted under this Agreement shall be registered in the name of the Grantee and delivered to the Grantee. Thereupon, the Grantee shall have all the rights of a stockholder with respect to such Shares, including voting and dividend rights.

2. Restrictions and Conditions. Any certificates for Restricted Shares granted herein shall bear an appropriate legend, as determined by the Board in its sole discretion, to the effect that such shares are subject to restrictions as set forth herein.

3. Incorporation of Plan. Notwithstanding anything herein to the contrary, the Restricted Shares shall be subject to and governed by all the terms and conditions of the Plan.

4. No Obligation to Continue Employment. The Company is not obligated by or as a result of this Agreement to continue the Grantee in employment and this Agreement shall not interfere in any way with the right of the Company to terminate the employment of the Grantee at any time.

5. Electronic Consent. The Company may choose to deliver certain statutory materials relating to the Agreement in electronic form. By accepting the Restricted Shares, the Grantee agrees that the Company may deliver these materials in an electronic format. If at any time the Grantee would prefer to receive paper copies of these documents, as the Grantee is entitled to, the Company will provide paper copies upon written request by the Grantee to the Secretary of the Company.

6. Lock-Up Agreement. Grantee hereby agrees that, if requested by the Company and a managing underwriter in connection with any firmly underwritten public offering of the Company’s Shares registered under the Securities Act of 1933, as amended, Grantee will not, without the prior written consent of the Company and such managing underwriter, during the period commencing on the date of the final prospectus relating to such registered public offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock or other securities of the Company, including the Restricted Shares, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such shares of capital stock or other securities of the Company, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of such shares of capital stock or other securities, in cash or otherwise.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has executed this Agreement on and as of the day and year first above written.

AMERICAN ADDICTION CENTERS, INC.

By:

Name:

Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.

Dated:
	Grantee’s Signature
	Grantee’s Name
	Grantee’s Address:

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EX-10

Exhibit 10.5

FORM OF RESTRICTED SHARE AWARD AGREEMENT

UNDER THE AAC HOLDINGS, INC.

2007 STOCK INCENTIVE PLAN

(Employee)

Name of Grantee:

No. of Restricted Shares:

Grant Date:

Pursuant to the AAC Holdings, Inc. 2007 Stock Incentive Plan (as amended from time to time, the “Plan”), American Addiction Centers, Inc., formerly known as Forterus, Inc., formerly known as Mezey Howarth Racing Stables, Inc., and formerly known as MH 1, Inc. (the “Company”) hereby grants (the “Agreement”) to the individual named above (the “Grantee”) the number of Restricted Shares specified above (the “Restricted Shares”), subject to the restrictions and conditions set forth in this Agreement and the Plan. The Company acknowledges the receipt from the Grantee of consideration with respect to the par value of the Restricted Shares in the form of cash, past or future services rendered to the Company by the Grantee, or such other form of consideration as is acceptable to the Board of Directors of the Company (the “Board”). Capitalized terms in this Agreement shall have the meanings specified in the Plan, unless a different meaning is specified herein.

1.     Grantee’s Rights. The Grantee shall have no rights with respect to this Agreement unless he or she shall have accepted this Agreement by (i) signing and delivering to the Company a copy of this Agreement and (ii) delivering to the Company a stock power endorsed in blank. Upon execution of this Agreement by the Grantee,                      stock certificates representing the number of Restricted Shares granted in each tranche under this Agreement shall be registered in the name of the Grantee and held by the Company or any custodian appointed by the Company for the Grantee’s account subject to the terms and conditions of this Agreement. Thereupon, the Grantee shall have all the rights of a stockholder with respect to such shares, including voting and dividend rights, subject, however, to the restrictions and conditions specified in this Agreement. The certificates shall remain in the custody of the Company or any such custodian until all of the Restricted Shares represented by the certificates vest or are forfeited in accordance with this Agreement.

2.     Restrictions and Conditions.

(a) Any certificates for Restricted Shares granted herein shall bear an appropriate legend, as determined by the Board in its sole discretion, to the effect that such shares are subject to restrictions as set forth herein.

(b) Restricted Shares granted herein may not be sold, assigned, transferred, pledged, or otherwise encumbered or disposed of by the Grantee prior to vesting.

(c) If the Grantee’s employment with the Company terminates for Cause or is voluntarily terminated by Grantee prior to vesting of the Restricted Shares granted herein, all unvested Restricted Shares shall immediately and automatically be forfeited and returned to the Company. For purposes of this Agreement, “Cause” shall mean: (i) gross negligence or willful misconduct by the Grantee in the performance of the Grantee’s duties to the Company where such gross negligence or willful misconduct has resulted or is likely to result in substantial and material damage to the Company; (ii) any breach by the Grantee of any non-compete agreement or similar agreement between the Grantee and the Company;

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(iii) any material breach by the Grantee of any confidentiality agreement or similar agreement between the Grantee and the Company; (iv) a material violation by the Grantee of any federal or state law or regulation or the Company’s compliance program in the performance of the Grantee’s duties; (v) commission by the Grantee of any act of fraud with respect to the Company; (vi) the Grantee’s conviction of, or the Grantee’s entry of a guilty plea or plea of nolo contendere with respect to, a felony; (vii) the Grantee’s failure to perform duties consistent with the Grantee’s position or to follow or comply with the reasonable directives of the Board or the Grantee’s supervisor(s), provided that (A) the Grantee shall have received written notice that specifically identifies the manner in which the Company believes that the Grantee has engaged in such failure and (B) the Grantee shall not have cured such failure within thirty (30) days following receipt of such notice, provided further that such opportunity to cure a failure shall not apply if the Grantee has received more than one notice with respect to the same or similar conduct pursuant to this clause (vii) during any twelve (12) consecutive month period; or (viii) any act or omission that would constitute “cause” under any employment agreement or similar agreement between the Grantee and the Company.

(d) If the Grantee’s employment with the Company terminates for any reason other than as provided in subsection 2(c) prior to vesting of the Restricted Shares granted herein, the Company shall for a period of ninety (90) days following such termination of employment have an option to purchase all or any portion of the unvested Restricted Shares at a price per Restricted Share equal to the then-current fair market value. The Company may exercise such option by delivering a written notice to the Grantee, specifying the number of unvested Restricted Shares with respect to which the Company is exercising such option, the current fair market value per Restricted Share, and the closing date for such purchase (which date shall be within fifteen (15) days of the date notice is given). At the Company’s option, the closing shall occur by mail or at the Company’s principal business office. The Company shall pay the purchase price by check and shall instruct any custodian of the shares to deliver the shares to the Company for cancellation. The unvested Restricted Shares so purchased shall be deemed cancelled and held as treasury stock following such closing date, notwithstanding any failure of the Grantee to deliver such certificate(s), and Grantee shall not be entitled to any further voting, dividend or other rights or incidents of stock ownership with respect thereto other than the right to receive the purchase price. If any of the unvested Restricted Shares are not purchased as provided herein, such unvested Restricted Shares shall no longer be deemed Restricted Shares and the restrictions and conditions set forth in this Section 2 shall lapse.

3.    Vesting of Restricted Shares. The restrictions and conditions in Section 2 of this Agreement shall lapse on the Vesting Dates specified in the following schedule so long as the Grantee remains continuously in the Employment of the Company on such dates.

                    Number of                     Shares Vested                     Percentage of                     
Shares Vested                     Vesting Date                     

Subsequent to such the Vesting Date, the Restricted Shares on which all restrictions and conditions have lapsed shall no longer be deemed Restricted Shares. Once the restrictions and conditions have lapsed, the Company shall release the stock certificate representing such vested Restricted Shares to Grantee. The Board may at any time accelerate the vesting schedule specified in this Section 3. Notwithstanding anything herein to the contrary, in the event of a Change of Control, the Restricted Shares shall become fully vested as of the effective time of the Change of Control.

4.    Dividends. Dividends on the Restricted Shares, to the extent declared and paid, shall be paid currently to the Grantee.

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5.    Election Under Section 83(b). The Grantee and the Company hereby agree that the Grantee may, within 30 days following the acceptance of this Agreement as provided in Section 1 of this Agreement, file with the Internal Revenue Service and the Company an election under Section 83(b) of the Internal Revenue Code. In the event the Grantee makes such an election, he or she agrees to provide a copy of the election to the Company. The Grantee acknowledges that he or she is responsible for obtaining the advice of his or her tax advisors with regard to the Section 83(b) election and that he or she is relying solely on such advisors and not on any statements or representations of the Company or any of its agents with regard to such election.

6.    Incorporation of Plan. Notwithstanding anything herein to the contrary, the Restricted Shares shall be subject to and governed by all the terms and conditions of the Plan.

7.    Transferability. Unless otherwise approved by the Board, this Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution.

8.    No Obligation to Continue Employment. The Company is not obligated by or as a result of this Agreement to continue the Grantee in employment and this Agreement shall not interfere in any way with the right of the Company to terminate the employment of the Grantee at any time.

9.    Notices. Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently furnish to the other party in writing.

10.    Electronic Consent. The Company may choose to deliver certain statutory materials relating to the Agreement in electronic form. By accepting the Restricted Shares, the Grantee agrees that the Company may deliver these materials in an electronic format. If at any time the Grantee would prefer to receive paper copies of these documents, as the Grantee is entitled to, the Company will provide paper copies upon written request by the Grantee to the Secretary of the Company.

11.    Lock-Up Agreement. Grantee hereby agrees that, if requested by the Company and a managing underwriter in connection with any firmly underwritten public offering of the Company’s Shares registered under the Securities Act of 1933, as amended, Grantee will not, without the prior written consent of the Company and such managing underwriter, during the period commencing on the date of the final prospectus relating to such registered public offering and ending on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days) (i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of capital stock or other securities of the Company, including the Restricted Shares, or (ii) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such shares of capital stock or other securities of the Company, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of such shares of capital stock or other securities, in cash or otherwise.

[SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has executed this Agreement on and as of the day and year first above written.

AMERICAN ADDICTION CENTERS, INC.

By:

Name:

Title:

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.

Dated:
	Grantee’s Signature
	Grantee’s Name
	Grantee’s Address:

EX-10

Exhibit 10.8

SECOND AMENDED AND RESTATED CREDIT AGREEMENT

THIS SECOND AMENDED AND RESTATED CREDIT AGREEMENT (this “Agreement”) is entered into as of April 15, 2014, by and among AAC HOLDINGS, INC., a Nevada corporation (“Holdings”), AMERICAN ADDICTION CENTERS, INC. (formerly known as FORTERUS, INC.), a Nevada corporation (“Borrower”), the lenders party hereto from time to time (the “Lenders”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent and collateral agent for the Lenders (together with its successors and assigns, the “Agent”).

RECITALS

Borrower has requested that Lenders and Agent renew Borrower’s credit described in the Restated Credit Agreement between Borrower and Wells Fargo Bank, National Association (the “Initial Lender”) dated as of May 1, 2013 (as amended or otherwise modified to the date hereof, the “Prior Credit Agreement”), which amended and restated the Credit Agreement between Borrower and the Initial Lender dated August 30, 2011 (as amended or otherwise modified prior to the Prior Credit Agreement, the “Original Credit Agreement”), and has also asked for additional credit, which the Lenders are agreeable to granting subject to the terms and conditions contained herein.

NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Holdings, Borrower, the Lenders and the Agent hereby amend and restate the Prior Agreement in its entirety and further agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1. DEFINED TERMS. As used in this Agreement, the following terms shall have the meanings set forth below:

“2013 Interim Financials” has the meaning assigned to such term in Section 3.5.

“AAC Equity Transactions” means the sale and issuance of common stock of Borrower between February 13, 2014 and the Closing Date to certain accredited investors pursuant to a private placement permitted under the Securities Act of 1933, as amended resulting in not less than $6,000,000 of net proceeds to Borrower.

“AAC Excess Equity Amount” means the aggregate amount of the proceeds of the AAC Equity Transactions on or prior to the Closing Date minus $2,500,000.

“Affiliate” means, as applied to any Person, any other Person who controls, is controlled by, or is under common control with, such Person. For purposes of this definition, “control” means the possession, directly or indirectly through one or more intermediaries, of the power to direct the management and policies of a Person, whether through the ownership of equity interests, by contract, or otherwise; provided, that (i) any Person which owns directly or

indirectly 10% or more of the equity interests having ordinary voting power for the election of directors or other members of the governing body of a Person or 10% or more of the partnership or other ownership interests of a Person (other than as a limited partner of such Person) shall be deemed an Affiliate of such Person, (ii) each director (or comparable manager) of a Person shall be deemed to be an Affiliate of such Person, and (iii) each partnership in which a Person is a general partner shall be deemed an Affiliate of such Person. Notwithstanding anything to the contrary in the foregoing, Alcentra shall not be deemed an Affiliate of BHR as a result of its ownership of the BHR Preferred Equity.

“Alcentra” means Alcentra Group Holdings, Inc. and/or each of its Affiliates (including but not limited to Alcentra Capital Corporation).

“Alcentra Intercreditor Agreement” means an intercreditor agreement entered into by Agent and Alcentra in the event Alcentra Subordinated Debt is issued, in form and substance satisfactory in all respects to Agent and the Required Lenders.

“Alcentra Subordinated Debt” means unsecured Debt of the Borrower (which may be guaranteed on an unsecured basis by Holdings and the Operating Subsidiaries) in an aggregate principal amount acceptable to Agent and Required Lenders not to exceed $7,500,000 (or such higher amount approved by Agent and the Required Lenders in their sole discretion) arising under the Alcentra Subordinated Note Documents (except for any increase of the principal amount due to non-cash in-kind payments of interest or accrual of any fees or unreimbursed expenses, in each case, pursuant to the terms of the Alcentra Subordinated Note Documents), which Debt shall be subordinated in right of payment to the Loans or any other obligations under any Loan Document pursuant to the Alcentra Intercreditor Agreement.

“Alcentra Subordinated Notes” means the unsecured subordinated promissory notes issued to BNY Alcentra pursuant to the Alcentra Subordinated Note Purchase Agreement.

“Alcentra Subordinated Note Documents” means collectively the Alcentra Subordinated Note Purchase Agreement, the Alcentra Subordinated Notes, the Alcentra Intercreditor Agreement, all guarantees with respect thereto and all other documents, instruments and agreements executed in connection therewith, in each case in form and substance acceptable in all respects to Agent and the Required Lenders, as amended, restated, supplemented or otherwise modified in accordance with the Alcentra Intercreditor Agreement.

“Alcentra Subordinated Note Purchase Agreement” means a Note Purchase Agreement to be entered into by and among BNY Alcentra, Holdings, the Borrower and the Operating Subsidiaries, in form and substance acceptable in all respects to Agent and the Required Lenders, as amended, restated, supplemented or otherwise modified in accordance with the Alcentra Intercreditor Agreement.

“Anti-Corruption Laws” means the United States Foreign Corrupt Practices Act of 1977, as amended.

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“Applicable Margin” means, for any day:

(a) As of the Closing Date, until changed hereunder in accordance with the following provisions, 300 basis points per annum for Loans;

(b) Commencing with the fiscal quarter ended on March 31, 2014, and continuing with each fiscal quarter thereafter, the Agent shall determine the Applicable Margin in accordance with the following matrix, based on the Leverage Ratio for the most recent determination date:

Leverage Ratio	Applicable Margin
Level 1 > 4.75 to 1.00	300 bps
Level II > 4.00 to 1.00 and < 4.75 to 1.00	275 bps
Level III < 4.00 to 1.00	250 bps

(c) For the purposes of the foregoing, (i) the Leverage Ratio shall be determined as of the end of each fiscal quarter based upon the financial statements delivered pursuant to Section 5.3(b) and (ii) each change in the Applicable Margin resulting from a change in the Leverage Ratio shall be effective during the period commencing on and including the date of delivery to the Agent of such financial statements indicating such change and ending on the date immediately preceding the effective date of the next such change; provided that the Leverage Ratio shall be deemed to be in Level 1 (A) at any time that an Event of Default has occurred and is continuing, and providing further that, immediately following the remedy and/or waiver or cure of the relevant Event of Default, the Leverage Ratio shall be deemed to have been reinstated to the Level which would otherwise be applicable (and the Applicable Margin adjusted accordingly) or (B) subject to the Agent’s discretion, if the Borrower fails to deliver the financial statements required to be delivered by it pursuant to Section 5.3 during the period from the expiration of the time for delivery thereof until such consolidated financial statements are delivered. Any changes in the Applicable Margin shall be determined by the Agent in accordance with the provisions set forth in this definition, and the Agent will promptly provide notice of such determinations to the Borrower. Any such determination by the Agent shall be conclusive and binding absent manifest error.

“Audited Financial Statements” has the meaning assigned to such term in Section 3.5.

“Bankruptcy Code” means the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time.

“BHR” means Behavioral Healthcare Realty, LLC.

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“BHR Acquisition” has the meaning assigned to such term in the definition of “Initial Reorganization Transactions”.

“BHR Preferred Equity” means the $8,000,000 stated value of Series A preferred units of BHR that may be issued by BHR to Alcentra under the BHR Preferred Equity Transactions, including BHR Preferred Equity that is issued to Alcentra in connection with BHR’s redemption of the Existing BHR Preferred Equity.

“BHR Preferred Equity Transactions” means the sale and issuance of the BHR Preferred Equity to Alcentra pursuant to the BHR Operating Agreement in a stated value equal to $8,000,000.

“BHR Operating Agreement” means the Amended and Restated Limited Liability Company Agreement of BHR, dated as of April 15, 2014, as amended or otherwise modified to the extent permitted under Section 6.12.

“BNY Alcentra” means BNY Alcentra Group Holdings, Inc., a Delaware corporation, and/or each of its Affiliates (including, but not limited to Alcentra Capital Corporation), but excluding Holdings and its Subsidiaries.

“Borrower Conversion” has the meaning assigned to that term in Section 6.5.

“Borrower Merger” means a subsidiary short-form merger of a merger sub owned by Holdings with and into Borrower, pursuant to which Borrower will become a direct wholly owned Subsidiary of Holdings, which merger will occur after the consummation of the Holdings IPO and shall be in form and substance reasonably satisfactory to Agent and the Required Lenders.

“Business Day” means a day other than a Saturday, Sunday or a day on which commercial banks in California are authorized or required by law to close.

“Capital Expenditures” means, with respect to any Person, the aggregate of all expenditures by such Person for the acquisition or leasing (pursuant to a capital lease) of fixed or capital assets (including replacements, capitalized repairs and improvements) which are required to be capitalized under GAAP on the balance sheet of such Person; provided that the following shall be excluded from the foregoing: (i) any portion of such expenditures attributable solely to property, plant and equipment comprising a Permitted Acquisition; (ii) any portion of such expenditures with respect to real estate projects of any Real Estate Subsidiary to the extent such expenditures are paid for with the proceeds of any Debt of a Real Estate Subsidiary permitted under this Agreement (other than any advance under the Line of Credit) or the Holdings IPO; (iii) any portion of the initial construction expenditures incurred in 2014 by the applicable Real Estate Subsidiary of BHR with respect to the following real estate projects of such Real Estate Subsidiary previously disclosed to Agent (A) outpatient facility in Arlington, Texas, (B) outpatient facility in Las Vegas, Nevada, and (C) construction project in Riverview, Florida, in each case of this clause (iii), solely to the extent such expenditures are paid for with the proceeds of the BHR Preferred Equity, the Alcentra Subordinated Debt or the Holdings IPO or, in the case of expenditures incurred prior to the Closing Date, solely to the extent used for the acquisition of the outpatient facility in Arlington, Texas; and (iv) any such expenditures made with insurance proceeds received in connection with a casualty loss with respect to fixed assets within one hundred and eighty (180) days after receipt of such insurance proceeds.

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“Change of Control” means any event or transaction or series of events or transactions, whether as the most recent transaction in a series of transactions or otherwise (or any combination of the following), following which:

(a) the Permitted Holders shall together cease to: (i) be the record and beneficial owners (as defined below) of not less than 51%, on a fully diluted basis, of the outstanding Ownership Interests of Holdings or (ii) possess the power to direct or cause the direction of the management or policies of Holdings, whether through the ability to exercise voting power, by contract or otherwise;

(b) Holdings shall fail to: (i) be the record and beneficial owner (as defined below) of not less than 90% (or, following the Borrower Merger, 100%), on a fully diluted basis, of the outstanding Ownership Interests of Borrower or (ii) have the power to direct or cause the direction of the management and policies of Borrower, whether through the ability to exercise voting power, by contract or otherwise;

(c) Holdings (and following the Borrower Merger, Borrower) shall fail to: (i) be the record and beneficial owner (as defined below) of 100%, on a fully diluted basis, of the outstanding Ownership Interests of BHR (except for the BHR Preferred Equity) or (ii) Holdings or Borrower shall fail to have the power to direct or cause the direction of the management and policies of BHR, whether through the ability to exercise voting power, by contract or otherwise;

(d) Borrower shall fail to: (i) be the direct or indirect record and beneficial owner (as defined below) of 100%, on a fully diluted basis, of the outstanding Ownership Interests of each of the Subsidiaries of Borrower or Holdings (other than BHR prior to the Borrower Merger and, in the case of BHR, except to the extent outstanding, the BHR Preferred Equity) or (ii) have the power to direct or cause the direction of the management and policies of such Subsidiaries, whether through the ability to exercise voting power, by contract or otherwise;

(e) during any period of 24 consecutive months, individuals, who at the beginning of the applicable period constitute the board of directors of Holdings, and any new or successor member of the board of directors of Holdings appointed or elected by Permitted Holders in accordance with the applicable Organizational Documents of Holdings, shall cease for any reason to constitute at least a majority of the members of the board of directors of Holdings;

(f) a “Change of Control” or similar event (as defined or provided in any agreement evidencing any Subordinated Obligations) has occurred.

For purposes of this definition, the terms “group” and “beneficial owner” shall have the respective meanings ascribed to them pursuant to Section 13(d) of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission (or any successor agency) promulgated thereunder.

“Closing” shall mean the closing of this Agreement on the Closing Date in accordance with Section 4.1.

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“Closing Date” means the first date on which the conditions set forth in Section 4.1 have been satisfied or waived in writing by the Lenders.

“Collateral” means all assets of Holdings, Borrower, or any Subsidiary subject to a security interest granted to the Agent or any Lender under the Loan Documents.

“Companies” has the meaning assigned to that term in Section 2.1.

“Companies Eligible Accounts Receivable” has the meaning assigned to the term in Section 2.1(b).

“Consolidated Net Income” means, for any period, for Holdings and its Subsidiaries on a consolidated basis, the net income of Holdings and its Subsidiaries (excluding extraordinary gains and gains from asset sales outside the ordinary course of business) for that period, as determined in accordance with GAAP.

“CRMS” means Clinical Revenue Management Services, LLC.

“CRMS Acquisition” has the meaning assigned to such term in the definition of “Initial Reorganization Transactions”.

“Debt” means, as to any Person, (i) all obligations for borrowed money (including subordinated debt), (ii) all capital lease obligations, (iii) all obligations of such Person evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, or other financial products, (iv) all obligations or liabilities of others secured by a lien on any asset of such Person, irrespective of whether such obligation or liability is assumed, (v) all obligations of such Person to pay the deferred purchase price of assets (other than trade payables incurred in the ordinary course of business and repayable in accordance with customary trade practices and, for the avoidance of doubt, other than royalty payments payable in the ordinary course of business in respect of non-exclusive licenses), (vi) any Disqualified Equity Interests of such Person, and (vii) any obligation of such Person guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted, or sold with recourse) any obligation of any other Person that constitutes Debt under any of clauses (i) through (vi) above.

“Default” means any condition, event or act which with the giving of notice or the passage of time or both would constitute an Event of Default.

“Disqualified Equity Interests” shall mean any equity interest that, by its terms (or by the terms of any security or other equity interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loans that are accrued and payable and the termination of the commitments of the Lenders hereunder), (ii) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (iii) provides for the scheduled payments of dividends in cash, or (iv) is or becomes convertible into or

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exchangeable for Debt or any other equity interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 180 days after the latest maturity date of the Loans.

“ERISA Affiliate” means, as applied to any Person, any trade or business (whether or not incorporated) which is a member of a group of which that Person is a member and which is under common control within the meaning of Section 414(b) and (c) of the Internal Revenue Code.

“EBITDA” has the meaning assigned to such term in Section 5.9(a).

“Event of Default” has the meaning assigned to such term in Section 7.1.

“Existing BHR Preferred Equity” means the $1,825,000 of stated value of the Series A Preferred Units of BHR owned by the holders identified on Schedule 3.1 attached hereto issued pursuant to the Subscription Agreements, dated from November 2013 to February 2014.

“Existing Subordinated Creditors” has the meaning assigned to such term in Section 2.8(a).

“Existing Subordinated Debt” has the meaning assigned to such term in Section 3.5.

“Fixed Charge Coverage Ratio” has the meaning assigned to such term in Section 5.9(b).

“Funded Debt” has the meaning assigned to such term in Section 5.9(a).

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

“Governmental Authority” shall mean any federal, state, local or foreign government or quasi-governmental authority of any nature, or any subdivision, agency, instrumentality, authority, department, commission, board or bureau thereof or any federal, state, local or foreign court, tribunal or arbitrator.

“Guaranties” means (i) the Guaranty dated as of August 30, 2011 of Michael T. Cartwright in favor of Agent, (ii) the Guaranty dated as of August 30, 2011 of Jerrod N. Menz in favor of Agent, (iii) the Loan Party Guaranty and (iv) all other guaranties of any of the Loans or any of the obligations under any of the Loan Documents.

“Guarantors” means collectively, Holdings, the Operating Subsidiaries, the Individual Guarantors and all other guarantors party to the Guaranties.

“Healthcare Laws” has the meaning assigned to such term in Section 3.13(a).

“Holdings Contribution” means subsequent to the Borrower Merger, the contribution by Holdings of its membership interests in CRMS and BHR to Borrower.

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“Holdings IPO” means the closing of a sale of shares of Holdings’ common stock to the public in a firm-commitment underwritten initial public offering pursuant to an effective registration statement under the Securities Act of 1933, as amended, resulting in at least $30,000,000 of proceeds, net of the underwriting discount and commissions, to Holdings, provided that the shares of Holdings’ common stock are then listed on either the New York Stock Exchange or Nasdaq.

“Holdings Note” means the Demand Note, dated April 15, 2014, issued by Holdings to Borrower in the principal amount of $3,500,000.

“Immaterial Subsidiary” means each of the following Subsidiaries of Borrower, so long as such Subsidiary has no assets or current operations and subject to Section 5.12(c): The Heights Supportive Housing, LLC and Hamilton Medically Assisted Treatment Associates, LLC.

“Individual Guarantors” means Michael T. Cartwright or Jerrod N. Menz.

“Initial Lender” has the meaning assigned to such term in the introductory paragraph hereto.

“Initial Reorganization Transactions” means, collectively, (i) a voluntary share exchange with certain stockholders of Borrower, whereby holders representing over 90% of the outstanding shares of common stock of Borrower exchanged their shares on a one-for-one basis for shares of Holdings’ common stock (the “Share Exchange”), including a waiver by the exchanging stockholders of AAC of potential claims arising from certain corporate matters of the Borrower with respect to Nevada corporate law; (ii) substantially concurrent with the Share Exchange, the acquisition by Holdings of all of the outstanding common membership interests of BHR, an entity controlled by related parties of Borrower, which owns the Desert Hope facility and the Greenhouse facility, in exchange for cash and 521,999 shares of Holdings’ common stock, representing approximately 5.3% of Holdings’ outstanding common stock (the “BHR Acquisition”); and (iii) substantially concurrent with the Share Exchange and BHR Acquisition, the acquisition of all of the outstanding membership interests of CRMS, an entity owned by related parties of Borrower that provides patient billing services for Borrower, in exchange for cash and 149,144 shares of Holdings’ common stock, representing approximately 1.5% of Holdings’ outstanding common stock (the “CRMS Acquisition”); provided that the aggregate amount of cash paid pursuant to clauses (ii) and (iii) shall not exceed the lesser of $3,500,000 and the AAC Excess Equity Amount.

“Initial Reorganization Transaction Documents” means all agreements and documents evidencing the Initial Reorganization Transactions and all other agreements and documents entered into in connection therewith, in each case in form and substance satisfactory to Agent and the Required Lenders.

“Leverage Ratio” has the meaning assigned to that term in Section 5.9(a).

“Loan Documents” means this Agreement, the Notes, the Security Agreement, the Guaranties, the Alcentra Intercreditor Agreement, and any other promissory notes, guaranties, security agreements, pledge agreements, mortgages, deeds of trust, control agreements, reaffirmation agreements, intercreditor agreements, subordination agreements, contracts, instruments and other documents required hereby or at any time hereafter delivered to Agent and/or the Lenders in connection herewith.

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“Loan Parties” means, collectively, Borrower, Holdings and the other Guarantors.

“Loan Party Guaranty” means the Amended and Restated Guaranty, dated as of the Closing Date, by and among Holdings, the Operating Subsidiaries and Agent.

“Loans” means all loans and advances made by any Lender to Borrower under this Agreement.

“Material Adverse Effect” means (i) a material adverse effect in the business, operations, results of operations, assets, liabilities or financial condition of Holdings and its Operating Subsidiaries, taken as a whole, or Holdings and its Subsidiaries, taken as a whole, (ii) a material impairment of any Loan Party’s ability to perform its obligations under the Loan Documents to which it is a party or of Agent’s or Lenders’ ability to enforce the obligations under the Loan Documents or realize upon the Collateral, or (iii) an impairment of the enforceability or priority of Agent’s liens with respect to all or a material portion of the Collateral.

“Notes” means, collectively, the Line of Credit Note, the Existing Term Note A, the Existing Term Note B and all other notes issued under this Agreement from time to time.

“OFAC” means The Office of Foreign Assets Control of the U.S. Department of the Treasury.

“Operating Subsidiary” means each Subsidiary of Borrower other than any Real Estate Subsidiary or any Immaterial Subsidiary. A list of all Operating Subsidiaries as of the Closing Date and after giving effect to the Initial Reorganization Transactions is included in Part B of Annex B attached hereto.

“Ownership Interest” means all shares, interests, participations, rights to purchase, options, warrants, general or limited partnership interests, limited liability company interests or other equivalents (regardless of how designated) of or in a corporation, partnership, limited liability company or equivalent entity, whether voting or nonvoting, including common stock, preferred stock or other capital stock or any other “equity security” (as such term is defined in Rule 3a11-1 of the Rules and Regulations promulgated by the Securities and Exchange Commission (17 C.F.R. § 240.3a11-1) under the Securities Exchange Act of 1934, as amended).

“Permitted Acquisition” means any acquisition by Borrower or any Operating Subsidiary in the form of acquisitions of all or substantially all of the business or a line of business (whether by merger, the acquisition of capital stock, assets or any combination thereof) of any other Person if each such acquisition meets all of the following requirements and any other acquisition to which Agent consents in writing in its sole discretion:

(i) no less than ten (10) Business Days prior to the proposed closing date of such acquisition, the Borrower shall have delivered written notice of such acquisition to Agent, which notice shall include the proposed closing date of such acquisition;

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(ii) the Borrower shall have certified on or before the closing date of such acquisition, in writing and in a form reasonably acceptable to Agent, that such acquisition has been approved by the board of directors (or equivalent governing body) of the Person to be acquired;

(iii) the Person or business to be acquired shall be in a substantially similar line of business as the Borrower and its Subsidiaries;

(iv) none of Holdings, Borrower or any Subsidiary shall incur or assume any Debt in connection with the proposed acquisition other than as permitted by Section 6.4; provided that the availability under the Line of Credit shall be equal to or greater than $2,000,000 after giving effect to the consummation of the proposed acquisition on a Pro Forma Basis;

(v) if such transaction is a merger or consolidation, the Borrower or another Loan Party (other than Holdings or any individual guarantor) shall be the surviving Person and no Change of Control shall have been effected thereby;

(vi) no later than five (5) Business Days prior to the proposed closing date of such acquisition, the Borrower shall have delivered to Agent a compliance certificate for the most recent fiscal quarter end preceding such acquisition for which financial statements are available demonstrating, in form and substance reasonably satisfactory to Agent, compliance on a Pro Forma Basis (as of the date of the acquisition and after giving effect thereto and any Debt incurred in connection therewith) with each covenant contained in Section 5.9;

(vii) no later than five (5) Business Days prior to the proposed closing date of such acquisition the Borrower, to the extent requested by Agent, (A) shall have delivered to Agent promptly upon the finalization thereof copies of substantially final definitive documentation for the Permitted Acquisition, which shall be in form and substance reasonably satisfactory to Agent and Required Lenders, and (B) shall have delivered to, or made available for inspection by, Agent substantially complete diligence information related to the Permitted Acquisition;

(viii) no Event of Default or Default shall have occurred and be continuing both before and after giving effect to such acquisition and any Debt incurred in connection therewith;

(ix) the Borrower shall have obtained the prior written consent of the Required Lenders prior to the consummation of such acquisition if (A) the consideration for all Permitted Acquisitions (or series of related acquisitions) during any fiscal year exceeds $1,000,000 or (B) the consideration for all Permitted Acquisitions (or series of related acquisitions) during the term of this agreement exceeds $2,000,000 in the aggregate; provided that if the Holdings IPO has occurred, the monetary thresholds in clauses (A) and (B) shall be increased to $4,000,000 and $8,000,000, respectively;

(x) the Borrower shall demonstrate, in form and substance reasonably satisfactory to Bank, that the entity to be acquired had positive EBITDA for the four (4) fiscal quarter period ended immediately prior to the proposed closing date of such acquisition; and

(xi) the Borrower shall provide such other documents and other information as may be reasonably requested by Agent in connection with the acquisition.

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“Permitted Holders” shall mean, collectively, Michael T. Cartwright and Jerrod N. Menz (together with any trusts or family partnerships established, or caused to be established, by any of them for estate planning purposes).

“Permitted Liens” means: (a) current taxes and assessments not yet due and payable; (b) any Liens granted to the Agent or the Lenders to secure the repayment of performance of the Loans and other obligations under the Loan Documents; (c) Liens of mechanics, materialmen, shippers, warehousemen, and other like Liens for services or materials incurred in the ordinary course of business; (d) easements, zoning restrictions, restrictive covenants, encroachments, permits, rights of way, minor survey or title exceptions, and other restrictions that do not materially interfere with or impair the use or operation of any of the facilities of Holdings and its Subsidiaries; (e) cash pledges or cash deposits in the ordinary course of business in connection with workers’ compensation, unemployment insurance and other social security legislation, other than any Lien imposed by ERISA; (f)(i) Liens on real property rights or interests created by leases of real property entered into in the ordinary course of Loan Parties’ business and any interest or title of a lessor under a real property lease in any real property rights or interests leased to a Loan Party or (ii) Liens consisting of leases, subleases, licenses or sublicenses (including with respect to intellectual property and software) granted to others in the ordinary course of business and not interfering in any material respect with the business of Holdings and its Subsidiaries, and any interest or title of a lessor, sublessor or licensor under any lease, sublease or license, as applicable; (g) any purchase money security interests granted by, or capital lease obligations incurred by, a Borrower or any Subsidiary of a Borrower in connection with any Permitted Purchase Money Indebtedness; (h) Liens (i) of a collection bank arising under Section 4-210 of the Uniform Commercial Code on items in the course of collection, (ii) attaching to commodity trading accounts or other brokerage accounts incurred in the ordinary course of business or (iii) in favor of a banking institution arising as a matter of law encumbering deposits (including the right of set-off) and which are within the general parameters customary in the banking industry so long as those deposits are permitted herein; (i) Liens arising from precautionary Uniform Commercial Code financing statement filings (or similar filings) under UCC 9-505 to the extent the underlying transaction is not prohibited by the terms of this Agreement or any of the other Loan Documents; (j) Liens that are contractual rights of set-off (i) relating to the establishment of depository relations with banks, to the extent permitted herein, not given in connection with the issuance of Debt, (ii) relating to purchase orders and other agreements entered into with customers, suppliers or service providers of the Borrower or its Subsidiaries in the ordinary course of business or (iii) relating to the credit cards and credit accounts of the Borrower or any of its Subsidiaries in the ordinary course of business; and (k) liens granted by BHR pursuant to Section 9.9(e)(iv) of the BHR Operating Agreement in the equity of any Real Estate Subsidiary owned by BHR and the proceeds thereof; provided that Agent shall have received not less than five (5) Business Days prior written notice of the granting of any such lien which notice shall include a copy of the pledge agreement pursuant to which such liens are proposed to be granted.

“Permitted Purchase Money Indebtedness” means purchase money or capital lease Debt incurred by Borrower or any Operating Subsidiary of Borrower to acquire any equipment (including motor vehicles and furniture) if each of the following conditions is satisfied: (a) the total amount of purchase money and capital lease Debt does not exceed, as of any date, an aggregate amount equal to $2,250,000, (b) such purchase money and capital lease Debt will not

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be secured by any of the Collateral other than the specific equipment financed thereby, related assets and the identifiable cash proceeds thereof, and (c) the principal amount of such purchase money and capital lease Debt will not, at the time of the incurrence thereof, exceed the value of the property financed thereby.

“Person” means an individual, partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature.

“Pro Forma Basis” means, with respect to compliance with any financial covenants under Section 5.9, pro forma compliance with such covenant after giving effect to any Permitted Acquisition, taking into account all Debt incurred by Holdings or its Subsidiaries with respect to the proposed acquisition and adding the historical consolidated financial statements of Holdings and its Subsidiaries (including the consolidated financial statements of any other Person or assets that were the subject of a prior Permitted Acquisition during the relevant period) to the historical consolidated financial statements of the Target (or the historical financial statements related to the assets to be acquired pursuant to the proposed acquisition), adjusted to eliminate expense items that would not have been incurred and to include income items that would have been recognized, in each case, if the consolidation had been accomplished at the beginning of the relevant period, such eliminations and inclusions to be approved by Agent.

“Qualified Equity Interest” means and refers to any equity interests issued by Holdings (and not by Borrower or any other Subsidiary) that is not a Disqualified Equity Interest.

“Real Estate Subsidiary” means each of BHR and its Subsidiaries to the extent such Subsidiary primarily engages in the real estate holding business. A list of all Real Estate Subsidiaries as of the Closing Date is included in Part C of Annex B attached hereto.

“Real Estate Subsidiary Debt” means all existing and future Debt between any Real Estate Subsidiary and Wells Fargo, including, without limitation, all Debt under (i) the Building Loan Agreement, dated as of October 8, 2013, by and between Greenhouse Real Estate, LLC, and Wells Fargo, (ii) the Loan Agreement, dated as of May 10, 2013, by and between The Academy Real Estate, LLC and Wells Fargo, and (iii) Loan Agreement, dated as of May 15, 2013, by and between Concorde Real Estate, LLC and Wells Fargo.

“Related Transaction Documents” means, collectively, all agreements and documents entered into in connection with the Initial Reorganization Transactions, the AAC Equity Transactions and the BHR Preferred Equity Transactions.

“Reliant Debt” means the unsecured Debt of Michael Cartwright, Jerrod Menz and Kirk Manz that is guarantied on an unsecured basis by Borrower owed to Reliant Bank in a principal amount outstanding not to exceed $1,766,775.43.

“Reliant Debt Documents” means collectively the Term Loan Promissory Note, dated October 15, 2013, representing the Reliant Debt, and the term loan agreement, the continuing guaranty and all other documents, instruments and agreements executed in connection therewith, as amended, supplemented or otherwise modified in accordance with the terms hereof.

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“Required Lenders” means, as of any date of determination, Lenders owning more than 50% of the then aggregate unpaid principal amount of the Loans and 50% of the unused commitments under the Line of Credit.

“Restricted Payment” means to (i) declare or pay any dividend or make any other payment or distribution, directly or indirectly, on account of equity interests issued by Holdings, Borrower or any of their respective Subsidiaries (including any payment in connection with any merger or consolidation involving Holdings, Borrower or any such Subsidiary) or to the direct or indirect holders of equity interests issued by Holdings, Borrower or any of their respective Subsidiaries in their capacity as such, (ii) purchase, redeem, make any sinking fund or similar payment, or otherwise acquire or retire for value (including in connection with any merger or consolidation involving Holdings, Borrower or any such Subsidiary) any equity interests issued by Holdings, Borrower or any of their respective Subsidiaries, or (iii) make any payment to retire, or to obtain the surrender of, any outstanding warrants, options, or other rights to acquire equity interests of Holdings, Borrower or any of their respective Subsidiaries now or hereafter outstanding.

“Sanctioned Entity” means (a) a country or a government of a country, (b) an agency of the government of a country, (c) an organization directly or indirectly controlled by a country or its government, (d) a Person resident in or determined to be resident in a country, in each case, that is subject to a country sanctions program administered and enforced by OFAC.

“Sanctioned Person” means a person named on the list of Specially Designated Nationals maintained by OFAC.

“Sanctions” means any applicable international economic sanctions administered or enforced by the U.S. government (including OFAC).

“Secured Parties” means collectively, the Agent, the Lenders and the other secured parties referred to in the Security Agreement and other Loan Documents.

“Security Agreement” means the Amended and Restated Security Agreement dated as of the Closing Date among Holdings, Borrower, the Operating Subsidiaries and the Agent.

“Share Exchange” has the meaning assigned to such term in the definition of “Initial Reorganization Transactions”.

“Solvent” and “Solvency” mean, with respect to any Person on any date of determination, that on such date (i) the fair value of the property of such Person is greater than the total amount of liabilities, including contingent liabilities, of such Person, (ii) the present fair salable value of the assets of such Person is not less than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (iii) such Person does not intend to, and does not believe that it will, incur debts or liabilities beyond such Person’s ability to pay such debts and liabilities as they mature, (iv) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which such Person’s property would constitute an unreasonably small capital, and (v) such Person is able to pay its debts and liabilities, contingent obligations and other commitments as they mature in the ordinary course of business. The amount of contingent liabilities at any time shall be computed as the amount that, in the light of all the facts and circumstances existing at such time, represents the amount that can reasonably be expected to become an actual or matured liability.

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“Subordinated Obligations” shall mean, as of any date of determination, (a) any Existing Subordinated Debt and (b) any other Debt of Holdings, Borrower or any of their respective Subsidiaries, including, without limitation, the Alcentra Subordinated Debt, on that date which has been subordinated in right of payment to the Loans or any other obligations under any Loan Document in a manner satisfactory to the Agent and Required Lenders and contains such other protective terms with respect to senior debt (such as amount, maturity, amortization, interest rate, covenants, defaults, remedies, payment blockage and terms of subordination) as the Required Lenders may require.

“Subsidiary” means, with respect to any Person, any corporation or other entity of which fifty percent (50%) or more of the securities or other ownership interests having ordinary voting power for the election of directors or other persons performing similar functions are now or hereafter owned directly or indirectly by such Person. Except as otherwise indicated herein, references to Subsidiaries shall refer to Subsidiaries of Holdings.

“Swap Agreement” means (i) any and all rate swap transactions, basis swaps, credit derivative transactions, forward rate transactions, commodity swaps, commodity options, forward commodity contracts, equity or equity index swaps or options, bond or bond price or bond index swaps or options or forward bond or forward bond price or forward bond index transactions, interest rate options, forward foreign exchange transactions, cap transactions, floor transactions, collar transactions, currency swap transactions, cross-currency rate swap transactions, currency options, spot contracts, or any other similar transactions or any combination of any of the foregoing (including any options to enter into any of the foregoing), whether or not any such transaction is governed by or subject to any master agreement, and (ii) any and all transactions of any kind, and the related confirmations, that are subject to the terms and conditions of, or governed by, any form of master agreement published by the International Swaps and Derivatives Association, Inc., any International Foreign Exchange Master Agreement, or any other master agreement (any such master agreement, together with any related schedules, a “Master Agreement”), including any such obligations or liabilities under any Master Agreement.

“Target” means a Person whose assets or Ownership Interests, as applicable, are acquired by the Borrower or an Operating Subsidiary in a Permitted Acquisition.

“Wells Fargo” means Wells Fargo Bank, National Association.

SECTION 1.2. Accounting Terms.

(a) Generally. All accounting terms not specifically or completely defined herein shall be construed in conformity with, and all financial data (including financial ratios and other financial calculations) required to be submitted pursuant to this Agreement shall be prepared in conformity with, GAAP applied on a consistent basis, as in effect from time to time, applied in a manner consistent with that used in preparing the Audited Financial Statements, except as otherwise specifically prescribed herein. Notwithstanding the foregoing, for purposes of

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determining compliance with any covenant (including the computation of any financial covenant) contained herein, Debt of Holdings, Borrower and the other Subsidiaries shall be deemed to be carried at 100% of the outstanding principal amount thereof, and the effects of FASB ASC 825 on financial liabilities shall be disregarded.

(b) Changes in GAAP. If at any time any change in GAAP would affect the computation of any financial ratio or requirement set forth in any Loan Document, and either the Borrower or the Required Lenders shall so request, the Agent, the Lenders and the Borrower shall negotiate in good faith to amend such ratio or requirement to preserve the original intent thereof in light of such change in GAAP (subject to the approval of the Required Lenders); provided that, until so amended, (i) such ratio or requirement shall continue to be computed in accordance with GAAP prior to such change therein and (ii) the Borrower shall provide to the Agent and the Lenders financial statements and other documents required under this Agreement or as reasonably requested hereunder setting forth a reconciliation between calculations of such ratio or requirement made before and after giving effect to such change in GAAP.

SECTION 1.3. OTHER INTERPRETIVE PROVISIONS. The definitions of terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The words “include,” “includes” and “including” shall be deemed to be followed by the phrase “without limitation.” The word “will” shall be construed to have the same meaning and effect as the word “shall.” Unless the context requires otherwise, (i) any definition of or reference to any agreement, instrument or other document (including any organization document) shall be construed as referring to such agreement, instrument or other document as from time to time amended, restated, supplemented or otherwise modified (subject to any restrictions on such amendments, restatements, supplements or modifications set forth herein or in any other Loan Document), (ii) any reference herein to any Person shall be construed to include such Person’s successors and assigns, (iii) the words “hereto,” “herein,” “hereof” and “hereunder,” and words of similar import when used in any Loan Document, shall be construed to refer to such Loan Document in its entirety and not to any particular provision thereof, (iv) all references in a Loan Document to Articles, Sections, Exhibits and Schedules shall be construed to refer to Articles and Sections of, and Exhibits and Schedules to, the Loan Document in which such references appear, (v) any reference to any law shall include all statutory and regulatory provisions consolidating, amending, replacing or interpreting such law and any reference to any law or regulation shall, unless otherwise specified, refer to such law or regulation as amended, modified or supplemented from time to time, and (vi) the words “asset” and “property” shall be construed to have the same meaning and effect and to refer to any and all tangible and intangible assets and properties, including cash, securities, accounts and contract rights

ARTICLE II

CREDIT TERMS

SECTION 2.1. LINE OF CREDIT.

(a) Line of Credit. Subject to the terms and conditions of this Agreement, each Lender holding a Line of Credit commitment set forth on Annex A attached hereto (or pursuant to any assignment and assumption) (each, a “Line of Credit Lender”) hereby agrees to make

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advances to Borrower from time to time up to and including April 1, 2015 in an aggregate amount not to exceed such Line of Credit Lender’s commitment set forth opposite such Line of Credit Lender’s name on Annex A attached hereto (or in the applicable assignment and assumption) (the “Line of Credit”). The aggregate commitments of the Line of Credit as of the Closing Date is Fifteen Million Dollars ($15,000,000.00) (“Line of Credit”), the proceeds of which shall be used to finance Borrower’s and its Operating Subsidiaries working capital requirements. Borrower’s obligation to repay advances under the Line of Credit shall be evidenced by one or more promissory note(s) dated as of the Closing Date (collectively, the “Line of Credit Note”), substantially in the form of the Line of Credit Note attached hereto as Exhibit A, all terms of which are incorporated herein by this reference. The outstanding principal amount of outstanding borrowings under the Line of Credit as of the date hereof is $13,049,997.32.

(b) Limitation on Borrowings. Outstanding borrowings under the Line of Credit, to a maximum of the principal amount set forth above, shall not at any time exceed an aggregate of seventy percent (70%) of the Companies Eligible Accounts Receivable (as defined below). All of the foregoing shall be determined by Agent upon receipt and review of all collateral reports required hereunder and such other documents and collateral information as Agent may from time to time reasonably require. Borrower acknowledges that said borrowing base was established by Agent with the understanding that, among other items, the aggregate of all returns, rebates, discounts, credits and allowances made to accounts receivable (exclusive of the initial adjustment to record revenue at net at the time of billing) for the immediately preceding three (3) months at all times shall be less than twenty percent (20%) of Borrower’s gross sales for said period. If such dilution of Borrower’s accounts for the immediately preceding three (3) months at any time exceeds twenty percent (20%) of Borrower’s gross sales for said period, or if there at any time exists any other matters, events, conditions or contingencies which Agent reasonably believes may affect payment of any portion of Borrower’s accounts, Agent, in its sole discretion, may reduce the foregoing advance rate against the Companies Eligible Accounts Receivable to a percentage appropriate to reflect such additional dilution and/or establish additional reserves against the Companies Eligible Accounts Receivable.

As used in this Section 2.1, Borrower and each of its Operating Subsidiaries may be referred to collectively as the “Companies” and each as a “Company.”

As used herein, “Companies Eligible Accounts Receivable” shall consist solely of trade accounts created in the ordinary course of a Company’s business arising from the provision of client services, which are supported by private insurance acceptable to Agent, upon which the Company’s right to receive payment is absolute and not contingent upon the fulfillment of any condition whatsoever, and in which Agent has a perfected security interest of first priority, and shall not include:

(i) any account which is more than one hundred twenty (120) days past due;

(ii) any account owed by an account debtor or payor, including any insurance company (or any affiliate of such account debtor or payor), where 50% or more of all accounts owed by such account debtor or payor (or affiliates thereof) are deemed ineligible under clause (i) above;

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(iii) that portion of any account for which there exists any right of setoff, defense or discount (except regular discounts allowed in the ordinary course of business to promote prompt payment) or for which any defense or counterclaim has been asserted;

(iv) any account which represents an obligation of any state or municipal government or of the United States government or any political subdivision thereof;

(v) any account which represents an obligation of an account debtor or payor, including any insurance company, located in a foreign country;

(vi) any account which arises from the sale or lease to or performance of services for, or represents an obligation of, an employee, affiliate, partner, member, parent or subsidiary of any Company;

(vii) that portion of any account, which represents interim or progress billings or retention rights on the part of the account debtor or payor, including any insurance company;

(viii) that portion of any account which is not covered by insurance;

(ix) that portion of any account from an account debtor or payor, including any insurance company, to whom a Company owes a trade payable, but only to the extent of such trade payable;

(x) that portion of any account in respect of which a credit loss has been recognized or reserved by any Company, but only to the extent of such loss or reserve;

(xi) any account with respect to which the account debtor or payor, including any insurance company, is subject to an Insolvency Proceeding, is not Solvent, has gone out of business, or as to which a Company has received notice of an imminent Insolvency Proceeding or a material impairment of the financial condition of such account debtor or payor (as used herein, the term “Insolvency Proceeding” means any proceeding commenced by or against any Person under any provision of the Bankruptcy Code or under any other state or federal bankruptcy or insolvency law, assignments for the benefit of creditors, formal or informal moratoria, compositions, extensions generally with creditors, or proceedings seeking reorganization, arrangement, or other similar relief);

(xii) any account deemed ineligible by Agent when Agent, in its good faith credit judgment, deems the creditworthiness or financial condition of the account debtor or payor, including any insurance company, or the industry in which any such account debtor or payor is engaged, to be unsatisfactory.

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(c) Making Loans under the Line of Credit. Subject to the conditions set forth in Section 4.2, the Borrower may borrow under the Line of Credit on any Business Day, provided that the Borrower (either by Michael T. Cartwright, Jerrod N. Menz or Kirk R. Manz) shall give the Agent an irrevocable notice in the form of Exhibit B attached hereto (the “Borrowing Notice”), which notice must be received by the Agent prior to 10:00 a.m., California time) three (3) Business Days prior to the requested borrowing date specifying (x) the amount of the proposed borrowing and (y) the requested date of the borrowing. Promptly following receipt of any such Borrowing Notice, the Agent shall notify each Line of Credit Lender of the date of the borrowing and the amount of such Line of Credit Lender’s pro rata share of the borrowing. Not later than 12:00 noon, California time, on the date specified for any such borrowing, each Line of Credit Lender shall deposit immediately available funds in the amount of its pro rata share of such borrowing to the account of the Agent. Upon satisfaction of the applicable conditions set forth in Section 4.2, the Agent will make available the proceeds of all such borrowing to the Borrower by crediting the account of the Borrower on the books of the Agent, or as otherwise directed by the Borrower. Unless the Agent shall have received notice from a Line of Credit Lender prior to the date of any borrowing that such Line of Credit Lender will not make available to the Agent such Line of Credit Lender’s ratable portion of such borrowing, the Agent may assume that such Line of Credit Lender has made such portion available to the Agent on the date of such Borrowing in accordance with this Section 2.1(c) and the Agent may, in reliance upon such assumption, make available to the Borrower on such date a corresponding amount. If and to the extent that such Line of Credit Lender shall not have so made such ratable portion available to the Agent, such Line of Credit Lender and, in the case of a Line of Credit Lender other than Agent, the Borrower agree to repay to the Agent forthwith on demand such corresponding amount together with interest thereon, for each day from the date such amount is made available to the Borrower until the date such amount is repaid to the Agent, at (A) in the case of such Line of Credit Lender, the Federal Funds Rate and (B) in the case of the Borrower, with respect to a Line of Credit Lender other than Agent, the interest rate applicable at the time to such borrowing. If such Line of Credit Lender shall repay to the Agent such corresponding amount, such amount so repaid shall constitute such Line of Credit Lender’s pro rata share of such borrowing for purposes of this Agreement. The failure of any Line of Credit Lender to make available its pro rata share of any borrowing hereunder shall not relieve any other Line of Credit Lender of its obligation, if any, hereunder, to make available its pro rata share of such borrowing on the date of such borrowing, but no Line of Credit Lender shall be responsible for the failure of any other Line of Credit Lender to make available its pro rata share of any borrowing on the date of any borrowing.

(d) Borrowing and Repayment. Borrower may from time to time during the term of the Line of Credit borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions contained herein or in the Line of Credit Note; provided however, that the total outstanding borrowings under the Line of Credit shall not at any time exceed the maximum principal amount available thereunder, as set forth above.

SECTION 2.2. EXISTING TERM LOAN A.

(a) Existing Term Loan A. The Initial Lender has made a loan to Borrower in the original principal amount of Seven Hundred Eighty Thousand Dollars ($780,000.00) (“Existing Term Loan A”), on which the outstanding principal balance as of the date hereof is $617,000.00.

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Borrower’s obligation to repay the Existing Term Loan A is evidenced by a promissory note dated as of May 1, 2013, as amended and restated as of the Closing Date (“Existing Term Note A”), all terms of which are incorporated herein by this reference. Any reference in the Existing Term Note A to any prior loan agreement between the Initial Lender and Borrower shall be deemed a reference to this Agreement. Subject to the terms and conditions of this Agreement, each of the Borrower and the Initial Lender hereby confirms that the Existing Term Loan A remains in full force and effect.

(b) Repayment. The outstanding principal balance of the Existing Term Loan A shall be due and payable in full on May 15, 2017.

(c) Prepayment. Borrower may prepay principal on the Existing Term Loan A solely in accordance with the provisions of the Existing Term Note A.

SECTION 2.3. EXISTING TERM LOAN B.

(a) Exiting Term Loan B. The Initial Lender has made a loan to Borrower in the original principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00) (“Existing Term Loan B”), on which the outstanding principal balance as of the date hereof is $1,500,000.00. Borrower’s obligation to repay the Existing Term Loan B is evidenced by a promissory note dated as of July 31, 2013, as amended and restated as of the Closing Date (“Existing Term Note B”), all terms of which are incorporated herein by this reference. Any reference in the Existing Term Note B to any prior loan agreement between the Initial Lender and Borrower shall be deemed a reference to this Agreement. Subject to the terms and conditions of this Agreement, each of the Borrower and the Initial Lender hereby confirms that the Existing Term Loan B remains in full force and effect.

(b) Repayment. The outstanding principal balance of the Existing Term Loan B shall be due and payable in full on July 1, 2014.

(c) Prepayment. Borrower may prepay principal on the Existing Term Loan B solely in accordance with the provisions of the Existing Term Note B.

SECTION 2.4. INTEREST/FEES.

(a) Interest. The outstanding principal balance of each credit subject hereto shall bear interest at the rate of interest set forth in each promissory note or other instrument or document executed in connection therewith.

(b) Computation and Payment. Interest shall be computed on the basis of a 360-day year, actual days elapsed. Interest shall be payable at the times and place set forth in each promissory note or other instrument or document required hereby.

(c) Amendment Fee. Borrower shall pay to the Lenders a non-refundable amendment fee equal to 1.00% of the aggregate amount of the Line of Credit, which fee shall be due and payable in full on the Closing Date.

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SECTION 2.5. COLLECTION OF PAYMENTS. Borrower authorizes Agent to collect all principal, interest and fees due under each credit subject hereto by charging Borrower’s deposit account number *** with Agent, or any other deposit account maintained by Holdings, Borrower or any Operating Subsidiary with Agent, for the full amount thereof. Should there be insufficient funds in any such deposit account to pay all such sums when due, the full amount of such deficiency shall be immediately due and payable by Borrower.

SECTION 2.6. COLLATERAL.

As security for all indebtedness and other obligations of Borrower to the Agent and the other Secured Parties subject hereto, Borrower and certain other Loan Parties have granted to Agent, for the benefit of the Secured Parties, security interests of first priority in substantially all assets of such Loan Parties pursuant to the Security Agreement and the other Loan Documents.

Borrower shall pay to Agent immediately upon demand the full amount of all charges, costs and expenses (to include fees paid to third parties and all allocated costs of Agent personnel), expended or incurred by Agent in connection with any of the foregoing security, including without limitation, filing and recording fees and costs of appraisals, audits and title insurance.

SECTION 2.7. GUARANTIES. The payment and performance of all indebtedness and other obligations of Borrower to Agent and the other Secured Parties shall be guaranteed jointly and severally by the Guarantors pursuant to the Guaranties.

SECTION 2.8. SUBORDINATION OF DEBT.

(a) All indebtedness and other obligations of Borrower to Michael Blackburn, James D. Bevell, Jr., SNB Investments, LLC, William M. Adkins, Brian David Waller, East Fork Partners, W. Bradford Blevins, Jay Moore Hollomon, Jerry Donald Bostelman, Erick Klindt and Randall R. Harness (collectively, the “Existing Subordinated Creditors”) shall be subordinated in right of payment to all indebtedness and other obligations of Borrower to the Secured Parties, as evidenced by and subject to the terms of subordination agreements in form and substance reasonably satisfactory to Agent.

(b) All other Subordinated Obligations shall be subordinated in right of payment to all indebtedness and other obligations of Borrower to the Secured Parties, as evidenced by and subject to the terms of subordination agreements in form and substance reasonably satisfactory to Agent.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Each of Holdings and Borrower makes the following representations and warranties to the Agent and the Lenders, which representations and warranties shall survive the execution of this Agreement and shall continue in full force and effect until the full and final payment, and satisfaction and discharge, of all obligations of Borrower to the Agent and the Lenders subject to this Agreement.

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SECTION 3.1. LEGAL STATUS; INITIAL REORGANIZATION TRANSACTIONS. Borrower is a corporation, duly organized and existing and in good standing under the laws of Nevada, and is qualified or licensed to do business (and is in good standing as a foreign corporation, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a Material Adverse Effect.

Schedule 3.1 attached hereto lists all Subsidiaries of Holdings as of the Closing Date and all shareholders, managers and other equity holders of Holdings and each of its Subsidiaries. Holdings owns, directly or indirectly, one hundred percent (100%) of each of the Subsidiaries listed on Schedule 3.1 attached hereto except as expressly set forth on Schedule 3.1.

Each Subsidiary is duly organized and existing and in good standing under the laws of the state of its incorporation or formation, as the case may be, and is qualified or licensed to do business (and is in good standing as a foreign corporation or limited liability company, if applicable) in all jurisdictions in which such qualification or licensing is required or in which the failure to so qualify or to be so licensed could have a Material Adverse Effect.

As of the Closing Date, all of the Initial Reorganization Transactions have been consummated in accordance with applicable law and the terms of the Initial Reorganization Transaction Documents and, in connection therewith, not more than the AAC Excess Equity Amount in cash has been paid by Holdings and its Affiliates to any Persons other than the Loan Parties as a result thereof.

As of the Closing Date, all of the AAC Equity Transactions and BHR Preferred Equity Transactions have been consummated, and the Existing BHR Preferred Equity shall have been redeemed, in each case, in accordance with applicable law and the terms of the BHR Operating Agreement and the other applicable Related Transaction Documents. Borrower received not less than $6,000,000 in connection with the consummation of the AAC Equity Transactions and BHR received not less than $8,000,000 in connection with the consummation of the BHR Preferred Equity Transaction.

SECTION 3.2. AUTHORIZATION AND VALIDITY. This Agreement and each other Loan Document have been duly authorized by each Loan Party party thereto, and upon their execution and delivery in accordance with the provisions hereof will constitute legal, valid and binding agreements and obligations of each Loan Party or the party which executes the same, enforceable in accordance with their respective terms.

SECTION 3.3. NO VIOLATION. The execution, delivery and performance by each Loan Party of the Loan Documents to which it is a party, and the execution, delivery and performance by each of Holdings, Borrower and the other Subsidiaries of the Related Transaction Documents to which it is a party, do not violate any provision of any law or regulation, or contravene any provision of the Articles of Incorporation, By-Laws or other formation or organizational document of Holdings, Borrower or any other Subsidiary, or result in any breach of or default under any contract, obligation, indenture or other instrument to which Holdings, Borrower or any Subsidiary is a party or by which Holdings, Borrower or any other Subsidiary may be bound.

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SECTION 3.4. LITIGATION. There are no pending, or to the best of Holdings’ or Borrower’s knowledge threatened, actions, claims, investigations, suits or proceedings by or before any Governmental Authority, arbitrator, court or administrative agency which could have a Material Adverse Effect.

SECTION 3.5. CORRECTNESS OF FINANCIAL STATEMENTS. The annual financial statements of Borrower and its Subsidiaries dated December 31, 2012 (the “Audited Financial Statements”), and all interim financial statements of Borrower and its Subsidiaries dated each of March 31, 2013, June 30, 2013 and September 30, 2013 (collectively, the “2013 Interim Financials”) , and all annual financial statements of Holdings and its Subsidiaries required to be delivered pursuant to Section 5.3(a) and all interim financial statements of Holdings and its Subsidiaries required to be delivered pursuant to Section 5.3(b), true copies of which will be delivered by Borrower to Agent and the Lenders prior to the applicable delivery dates required under Section 4.4(c), Section 5.3(a) or Section 5.3(b), as applicable; and each of such financial statements (a) are or will be, when delivered, except as set forth on Schedule 3.5 with respect to the 2013 Interim Financials, complete and correct and present fairly the financial condition of Borrower and Subsidiaries or Holdings and Subsidiaries, as applicable, (b) disclose all liabilities of Borrower and Subsidiaries or Holdings and Subsidiaries, as applicable, that are required to be reflected or reserved against under GAAP, whether liquidated or unliquidated, fixed or contingent, and (c) have been prepared in accordance with GAAP consistently applied. Since December 31, 2013, there has been no material adverse change in the financial condition of Holdings, Borrower or any Subsidiary, nor has Holdings, Borrower or any Operating Subsidiary mortgaged, pledged, granted a security interest in or otherwise encumbered any of its assets or properties except in favor of Agent, the Initial Lender or as otherwise permitted by the Required Lenders in writing. As of the Closing Date, all of the subordinated debt of the Loan Parties owed to the Existing Subordinated Creditors (together with the outstanding principal amount, the scheduled amortizations and the final maturity dates thereof) is listed on Schedule 3.5 attached hereto (collectively, the “Existing Subordinated Debt”), all Existing Subordinated Debt is unsecured and the only Loan Party obligated under the Existing Subordinated Debt is the Borrower.

SECTION 3.6. INCOME TAX RETURNS. Neither Holdings nor Borrower has knowledge of any pending assessments or adjustments of its or any Subsidiary’s income tax payable with respect to any year.

SECTION 3.7. NO SUBORDINATION. There is no agreement, indenture, contract or instrument to which Holdings, Borrower or any other Subsidiary is a party or by which Holdings, Borrower or such Subsidiary may be bound that requires the subordination in right of payment of Holdings’, Borrower’s or such Subsidiary’s obligations subject to this Agreement to any other obligation of Holdings, Borrower or such Subsidiary.

SECTION 3.8. PERMITS, FRANCHISES. Holdings, Borrower and Subsidiaries possess, and will hereafter possess, all permits, consents, approvals, franchises and licenses required and rights to all trademarks, trade names, patents, and fictitious names, if any, necessary to enable each of them to conduct the business in which they are now engaged in compliance with applicable law except where the failure to possess any such permits, consents, approvals, franchises or licenses could not reasonably be expected to have a Material Adverse Effect.

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SECTION 3.9. ERISA. Holdings, Borrower and their respective ERISA Affiliates are in compliance in all material respects with all applicable provisions of the Employee Retirement Income Security Act of 1974, as amended or recodified from time to time (“ERISA”); Holdings, Borrower and their respective ERISA Affiliates have not violated any provision of any defined employee pension benefit plan (as defined in ERISA) maintained or contributed to by Holdings, Borrower or any ERISA Affiliate (each, a “Plan”); no Reportable Event as defined in ERISA has occurred and is continuing with respect to any Plan initiated by Holdings, Borrower or any ERISA Affiliate ; Holdings, Borrower and their respective ERISA Affiliates have met their minimum funding requirements under ERISA with respect to each Plan; and each Plan will be able to fulfill its benefit obligations as they come due in accordance with the Plan documents and under GAAP.

SECTION 3.10. OTHER OBLIGATIONS. None of Holdings, Borrower and any Subsidiary are in default on any obligation for Debt, including any Subordinated Obligations, any purchase money obligation or any other material lease, commitment, contract, instrument or obligation.

SECTION 3.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to Agent and Lenders in writing prior to the date hereof, Holdings, Borrower and other Subsidiaries are in compliance in all material respects with all applicable federal or state environmental, hazardous waste, health and safety statutes, and any rules or regulations adopted pursuant thereto, which govern or affect any of their operations and/or properties, including without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Superfund Amendments and Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act of 1976, and the Federal Toxic Substances Control Act, as any of the same may be amended, modified or supplemented from time to time. None of the operations of Holdings, Borrower or any other Subsidiary is the subject of any federal or state investigation evaluating whether any remedial action involving a material expenditure is needed to respond to a release of any toxic or hazardous waste or substance into the environment. None of Holdings, Borrower or any other Subsidiary, has any material contingent liability in connection with any release of any toxic or hazardous waste or substance into the environment.

SECTION 3.12. SOLVENCY. As of the Closing Date and after giving effect to the transactions contemplated hereby, Holdings, Borrower and the Subsidiaries, on a consolidated basis, are and will be Solvent.

SECTION 3.13. HEALTHCARE MATTERS. Except as described on Schedule 3.13 hereto:

(a) Holdings, Borrower and the other Subsidiaries and to the best knowledge of Holdings, Borrower and their respective Subsidiaries, all of their respective officers, directors, employees, or agents acting in their capacity as such on behalf of Holdings, Borrower or its Subsidiaries, as applicable (“Personnel”) are in compliance in all material respects with all applicable statutes, regulations, rules, orders, ordinances and other laws of any Governmental Authority to which they are subject with respect to healthcare regulatory matters (including, without limitation, Sections 1128, 1128A and 1128B of the Social Security Act, as amended, 42 U.S.C. §§ 1320a-7, 7(a) and 7(b), including, without limitation, Criminal Penalties Involving

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Medicare or State Health Care Programs, commonly referred to as the “Federal Anti-Kickback Statute” and Section 1877 of the Social Security Act, as amended, 42 U.S.C. § 1395nn (Prohibition Against Certain Physician Referrals), commonly referred to as the “Stark Law,” the statute commonly referred to as the “Federal False Claims Act,” the Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act of 2009, the Federal TRICARE Statute, and the regulations issued pursuant thereto and all federal and state statutes and regulations relating to the possession, distribution, maintenance and documentation of controlled substances) (collectively, “Healthcare Laws”). Holdings, Borrower and the other Subsidiaries maintain all records required to be maintained by the Food and Drug Administration, the Drug Enforcement Administration and each State Board of Pharmacy, to the extent such requirements apply to Holdings, Borrower and the other Subsidiaries, for the states in which Holdings, Borrower and the other Subsidiaries do business and the laws of all other applicable federal, state and local Governmental Authorities as required to be maintained by all other applicable Healthcare Laws. There are no presently existing circumstances which would result or would be reasonably likely to result in violations, in any material respect, of any applicable Healthcare Laws by Holdings, Borrower or the other Subsidiaries.

(b) None of Holdings, Borrower or any other Subsidiary or, to the best knowledge of Holdings, Borrower and their respective Subsidiaries, any of their respective Personnel have been convicted of, charged with or, to the best knowledge of Holdings, Borrower and their respective Subsidiaries, investigated for, a Federal Health Care Program (as defined in 42 U.S.C. § 1320a-7b(f)) related offense that would result in exclusion from participation in a Federal Health Care Program, or convicted of, charged with or investigated for a violation of federal or state law relating to fraud, theft, embezzlement, breach of fiduciary responsibility, financial misconduct, obstruction of an investigation or controlled substances. None of Holdings, Borrower or any other Subsidiary or, to the best knowledge of Holdings, Borrower and their respective Subsidiaries, any of their respective Personnel is excluded or suspended from participation in any Federal Health Care Program, or is debarred, suspended or are otherwise ineligible to participate in such Federal Health Care Programs. None of Holdings, Borrower or any other Subsidiary or, to the best knowledge of Holdings, Borrower and their respective Subsidiaries, any of their respective Personnel has committed any offense which may reasonably serve as the basis for any such exclusion, suspension, debarment or other ineligibility. To the best knowledge of Holdings, Borrower and their respective Subsidiaries, none of Holdings, Borrower or any other Subsidiary has since arranged or contracted with any individual or entity that is suspended, excluded or debarred from participation in, or otherwise ineligible to participate in, a Federal Health Care Program or other federal or state program.

(c) There are no pharmaceutical or other products now being sold or distributed or services provided by Holdings, Borrower or any other Subsidiary that would require any approval of any Governmental Authority prior to commercial distribution of such products, for which approval has not been obtained. All pharmaceutical or other products now being distributed or services provided by Holdings, Borrower and the other Subsidiaries and all products included in the inventory of Holdings, Borrower and the other Subsidiaries comply in all material respects with applicable legal requirements of all jurisdictions in which such pharmaceutical or other products are now being distributed or such services are now being provided.

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SECTION 3.14. PATRIOT ACT; OFAC.

(a) To the extent applicable, each of the Loan Parties and their Subsidiaries is in compliance, in all material respects, with the (a) Trading with the Enemy Act, as amended, and each of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) and any other enabling legislation or executive order relating thereto, and (b) Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism (USA Patriot Act of 2001) (the “Patriot Act”). No part of the proceeds of the Loans made hereunder will be used by any Loan Party or any of their Affiliates, directly or indirectly, for any payments to any governmental official or employee, political party, official of a political party, candidate for political office, or anyone else acting in an official capacity, in order to obtain, retain or direct business or obtain any improper advantage, in violation of the Anti-Corruption Laws.

(b) No Loan Party nor any of its Subsidiaries is in violation of any of the country or list based economic and trade sanctions administered and enforced by OFAC. No Loan Party nor any of its Subsidiaries or Affiliates (a) is a Sanctioned Person or a Sanctioned Entity, (b) has its assets located in Sanctioned Entities, or (c) derives revenues from investments in, or transactions with Sanctioned Persons or Sanctioned Entities. No proceeds of any Loan made hereunder will be used to fund any operations in, finance any investments or activities in, or make any payments to, a Sanctioned Person or a Sanctioned Entity. No Loan Party nor any Affiliate thereof is a Person named on a list published by OFAC or is a person with whom dealings are prohibited under any OFAC regulations.

ARTICLE IV

CONDITIONS

SECTION 4.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation of Agent and the Lenders to enter into this Agreement and to consummate the transactions contemplated by this Agreement is subject to the fulfillment to Lenders’ and Agent’s satisfaction of all of the following conditions:

(a) Approval of Agent’s Counsel. All legal matters incidental to the execution of this Agreement shall be satisfactory to Agent’s counsel.

(b) Documentation. Agent and Lenders shall have received, in form and substance satisfactory to the Agent and the Lenders, each of the following, duly executed:

(i) This Agreement and each promissory note or other instrument or document required hereby.

(ii) Borrower Corporate Resolution: Borrowing.

(iii) Holdings and Other Corporate Loan Parties’ Joint Resolution: Continuing Guaranty and Third Party Collateral.

(iv) Limited Liability Company Loan Parties’ Joint Resolutions: Continuing Guaranty and Third Party Collateral.

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(v) Loan Party Guaranty.

(vi) Security Agreement.

(vii) Pledge Company Consent by BHR.

(viii) Reaffirmation of Guaranties by Michael T. Cartwright and Jerrod N. Menz.

(ix) a favorable opinion of Bass, Berry & Sims PLC, counsel to Holdings, the Borrower and the Operating Subsidiaries, and a favorable opinion of Ballard Spahr LLP, special Nevada counsel to the Loan Parties incorporated or formed pursuant to Nevada law, addressed to the Agent and each Lender.

(x) UCC-3 financing statements (amendment and/or assignment) with respect to the UCC-1 financings statements filed in connection with the Prior Credit Agreement, and UCC-1 financing statements, in each case, in form appropriate for filing under the Uniform Commercial Code of all jurisdictions that the Agent may deem reasonably necessary or desirable in order to perfect or continue to perfect the liens created under the Security Agreement, covering the Collateral described in the Security Agreement.

(xi) Secretary’s Certificate of Loan Parties (other than the Loan Parties who are natural persons) attaching thereto the organizational documents, resolutions and certificate of incumbency of the Loan Parties.

(xii) Solvency Certificate.

(xiii) Officer’s Certificate of the Borrower certifying that the conditions specified in Sections 4.2(a) and 4.2(b) have been satisfied.

(xiv) Such other documents as Agent or any Lender may require under any other Section of this Agreement.

(c) Financial Condition. There shall have been no material adverse change, as determined by Agent, in the financial condition or business of Holdings, Borrower, any Subsidiary or any guarantor hereunder, nor any material decline, as determined by Agent, in the market value of any collateral required hereunder or a substantial or material portion of the assets of Holdings, Borrower, any Subsidiary or any such guarantor.

(d) Initial Reorganization Transactions; AAC Equity Transactions and BHR Preferred Equity Transactions. Each of the Initial Reorganization Transactions, the AAC Equity Transactions, the BHR Preferred Equity Transactions, and the redemption of the Existing BHR Preferred Equity shall have been consummated prior to or substantially concurrently with the Closing, in each case in form and substance acceptable to Agent and Required Lenders, and in accordance with the applicable Related Transaction Documents (except for waivers of

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conditions that are not adverse to the Lenders, in any material respect, or as otherwise approved in writing by the Agent and the Required Lenders), complete and accurate copies of which shall have been delivered to the Agent and the Lenders. The aggregate amount of cash consideration paid or payable by Holdings and its Subsidiaries in connection with the Initial Reorganization Transactions shall not exceed the lesser of $3,500,000 and the AAC Excess Equity Amount.

(e) Related Transaction Documents; Reliant Debt Documents. Agent and Lenders shall have received true, correct and complete copies of the Related Transaction Documents and the Reliant Debt Documents.

(f) Payment of Fees. Any fees required to be paid to the Agent and Lenders on or before the Closing Date (including the Amendment Fee under Section 2.4(c) and legal fees to Agent’s counsel) shall have been paid.

SECTION 4.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of Lenders to make each extension of credit requested by Borrower hereunder shall be subject to the fulfillment to Agent’s satisfaction of each of the following conditions:

(a) Compliance. Each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents shall be true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality qualification, in which case such representations and warranties shall be true and correct in all respects) on and as of such date as if made on and as of such date, except (i) for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties shall remain true and correct in all material respects as of such earlier date (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality qualification, in which case such representations and warranties shall be true and correct in all respects as of such earlier date) and (ii) that for the purposes of this Section 4.2, the representations and warranties contained in Section 3.5 shall be deemed to refer to the most recent financial statements described in Section 3.5 or furnished pursuant to Sections 5.3(a) or 5.3(b), as applicable.

(b) No Default or Event of Default. No Default or Event of Default shall exist or would result from such credit extension or from the application of the proceeds thereof.

(c) Documentation. Lenders and Agent shall have received all additional documents which may be required in connection with such extension of credit.

SECTION 4.3. LIMITED WAIVER.

(a) Upon satisfaction of the conditions set forth in Sections 4.1 and 4.2 on the Closing Date, Lenders hereby waive the Events of Default and Default existing under the Prior Credit Agreement and set forth on Annex C attached hereto with respect to the periods set forth on Annex C (the “Existing Defaults”).

(b) Without limiting the generality of the provisions of Section 9.6(b) of this Agreement, the waivers set forth above shall be limited precisely as written and relate solely to the Existing Defaults, in the manner and to the extent set forth above, and nothing in Section 4.3(a)

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shall be deemed to: (i) constitute a waiver of compliance by the Borrower with respect to any other term, provision or condition of the Prior Credit Agreement, this Agreement or any other Loan Documents; or (ii) prejudice any right or remedy that Agent or any Lender may now have (except to the extent such right or remedy was based upon the Existing Defaults that will not exist after giving effect to this Section 4.3) or may have in the future under or in connection with this Agreement or any other Loan Documents.

SECTION 4.4. POST CLOSING COVENANTS.

(a) Stock Certificates; Membership Interest Certificates. Within 10 Business Days after the Closing Date, the Loan Parties shall deliver all certificates representing the pledged equity interests pledged under the Security Agreement (to the extent such equity interests are certificated) accompanied by undated stock or membership interest powers executed in blank and instruments evidencing the pledged debt pledged under the Security Agreement indorsed in blank, it being understood that all equity interests of a Subsidiary that is a corporation shall be certificated.

(b) Insurance. Within 10 Business Days after the Closing Date, Borrower shall have delivered to Agent evidence of insurance coverage on all Holdings’, Borrower’s and each Subsidiary’s property, in form, substance, amounts, covering risks and issued by companies satisfactory to Agent, with loss payable and additional insured endorsements in favor of Agent.

(c) 2013 Audited Financial Statements. Within 10 Business Days after the Closing Date, Borrower shall have delivered to Agent audited financial statements of Borrower and its subsidiaries for the fiscal year ended on December 31, 2013 in compliance with Section 5.3(a).

(d) Release of Liens. Within 20 Business Days after the Closing Date, Borrower shall have delivered to Agent evidence showing the termination of the UCC-1 financing statements filed against ABTTC, Inc. by Primary Funding Corporation (filed on March 9, 2011) and by Strategic Funding Source, Inc. (filed on May 2, 2011).

(e) CRMS Joinder. Within 10 Business Days after the Closing Date, CRMS shall become a Guarantor and each of Holdings and Borrower shall, and shall cause CRMS to, deliver all of the agreements and documents required to be delivered under Section 5.12(a) in connection therewith.

ARTICLE V

AFFIRMATIVE COVENANTS

Each of Holdings and Borrower covenants that so long as Lenders remain committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated, excluding however contingent indemnification obligations for which no claim has been made) of Borrower to Agent or Lenders under any of the Loan Documents remain outstanding, and until payment in full of all obligations of the Loan Parties pursuant to the Loan Documents, each of Holdings and Borrower shall, and shall cause each of their respective Subsidiaries to, unless the Required Lenders otherwise consent in writing:

SECTION 5.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest, fees or other liabilities due under any of the Loan Documents at the times and place and in the manner specified therein, and immediately upon demand by Agent, the amount by which the outstanding principal balance of any credit subject hereto at any time exceeds any limitation on borrowings applicable thereto.

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SECTION 5.2. ACCOUNTING RECORDS. Each of Holdings and Borrower shall, and shall cause each Subsidiary to, maintain adequate books and records in accordance with GAAP consistently applied, and permit any representative of Agent, at any reasonable time, to inspect, audit and examine such books and records, to make copies of the same, and to inspect their properties.

SECTION 5.3. FINANCIAL STATEMENTS AND OTHER INFORMATION. Each of Holdings and Borrower shall, and shall cause each Subsidiary to, provide to Agent and Lenders all of the following, in form and detail satisfactory to Agent:

(a) not later than 120 days after and as of the end of each fiscal year (except for the audited financial statements of Borrower and its Subsidiaries for the fiscal year ended on December 31, 2013, which shall be delivered pursuant to Section 4.4), an audited consolidated and consolidating financial statement of Holdings (or in the case of the 2013 financial statements, Borrower) and Subsidiaries, prepared by BDO USA, LLP (or other independent certified public accountants of nationally recognized standing or otherwise approved by the Agent, such approval not to be unreasonably withheld) (without a “going concern” or other qualification or exception, including any qualification or exception as to the scope of such audit; and with statements to the effect that such consolidated financial statements present fairly in all material respects the financial condition and results of operations of Holdings (or in the case of the 2013 financial statements, Borrower) and its Subsidiaries on a consolidated basis in accordance with GAAP consistently applied), to include balance sheet, income statement and statement of cash flow, and within 30 days after filing, but in no event later than each November 15^th, copies of Holdings’, Borrower’s and each Subsidiary’s filed federal income tax returns for such year;

(b) not later than 45 days after and as of the end of each of the first three fiscal quarters of each fiscal year, a consolidated and consolidating reviewed financial statement of Holdings and Subsidiaries, prepared by BDO USA, LLP (or other independent certified public accountants of nationally recognized standing or otherwise approved by the Agent, such approval not to be unreasonably withheld), to include balance sheet, income statement and statement of cash flow;

(c) contemporaneously with each annual and quarterly financial statement of Holdings and its Subsidiaries (and with respect to the fiscal year ended on December 31, 2013, Borrower and its Subsidiaries) required hereby, a certificate of the chief executive officer, president or chief financial officer of Holdings or Borrower, as applicable, in form and substance reasonably acceptable to Agent, stating that such financial statements are accurate and that there exists no Default or Event of Default, and setting forth the calculations for the financial covenants in Section 5.9 as of such fiscal quarter;

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(d) not later than 15 days after and as of the end of each month, a borrowing base certificate, an aged listing of accounts receivable and accounts payable, and a reconciliation of accounts, and immediately upon each request from Agent, a list of the names and addresses of all Borrower’s and each other Company’s account debtors;

(e) not later than 120 days after and as of the end of each calendar year, a financial statement of each individual guarantor hereunder, prepared by such guarantor, to include assets, liabilities (direct and contingent), income, and expenses, and within 30 days after filing, but in no event later than each November 15^th, copies of each such guarantor’s filed federal income tax returns for such year;

(f) promptly after the same are available, copies of each annual report, proxy or financial statement or other report or communication sent to the equityholders (including preferred stock or unit holders) of Holdings, Borrower or any other Subsidiary, and copies of all annual, regular, periodic and special reports and registration statements which Holdings may file or be required to file with the Securities and Exchange Commission (“SEC”) under Section 13 or 15(d) of the Securities Exchange Act of 1934, and not otherwise required to be delivered to Agent pursuant hereto; and

(g) as promptly as practicable (but in any event not later than five (5) Business Days) after giving or receiving the same, copies of all notices, reports, financial statements, appraisals or other written information given to any holders of Subordinated Obligations in excess of $500,000 or the BHR Preferred Equity that are not otherwise provided to Agent and copies of all amendments, supplements or modifications to any documents evidencing any Subordinated Obligations, BHR Preferred Equity, other Disqualified Capital Stock or any Related Transaction Document;

(h) from time to time such other information as Agent or Required Lenders may reasonably request.

Documents required to be delivered pursuant to Section 5.3(a), (b) or (e) (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so delivered, shall be deemed to have been delivered on the date (i) on which Holdings posts such documents, or provides a link thereto on Holdings’ website on the Internet at its website address; or (ii) on which such documents are posted on Holdings’ or Borrower’s behalf on an Internet or intranet website, if any, to which each Lender and Agent have access (whether a commercial, third-party website or whether sponsored by the Agent); provided that (x) Borrower shall deliver paper copies of such documents to Agent or any Lender upon its request to the Borrower to deliver such paper copies until a written request to cease delivering paper copies is given by Agent or such Lender and (y) Borrower shall notify Agent and each Lender (by facsimile or electronic mail) of the posting of any such documents and provide to Agent by electronic mail electronic versions (i.e., soft copies) of such documents. The Agent shall have no obligation to request the delivery of or to maintain paper copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by Holdings or Borrower with any such request by a Lender for delivery, and each Lender shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

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SECTION 5.4. COMPLIANCE.

(a) Each of Holdings and Borrower shall, and shall cause each Subsidiary to, preserve and maintain all licenses, permits, governmental approvals, rights, privileges and franchises necessary for the conduct of each of their businesses except where the failure to do so could not reasonably be expected to have a Material Adverse Effect. Each of Holdings and Borrower shall, and shall cause each Subsidiary to, comply with the provisions of all documents pursuant to which each of them is organized and/or which govern their continued existence and with the requirements of all laws, rules, regulations and orders of any Governmental Authority applicable to each of them and/or each of their businesses except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b) Holdings and the Borrower have implemented and maintain in effect policies and procedures designed to ensure compliance by Holdings and its Subsidiaries and their respective directors, officers, employees and agents with Anti-Corruption Laws and applicable Sanctions, and Holdings, its Subsidiaries and their respective officers and employees and to the knowledge of Holdings or either Borrower, their respective directors and agents, are in compliance with Anti-Corruption Laws and applicable Sanctions in all material respects. None of (i) Holdings or its Subsidiaries or any of their respective directors, officers or employees or (ii) to the knowledge of Holdings or either Borrower, any agent of Holdings or any of its Subsidiaries that will act in any capacity in connection with or benefit from the credit facility established hereby, is a Sanctioned Person. No Loan, use of proceeds or other transaction contemplated by this Agreement will violate Anti-Corruption Laws or applicable Sanctions.

SECTION 5.5. INSURANCE. Each of Holdings and Borrower shall, and shall cause each Subsidiary to, maintain and keep in force, for each business in which they are engaged, insurance of the types and in amounts customarily carried in similar lines of business, including but not limited to fire, extended coverage, public liability, flood, property damage and workers’ compensation, with all such insurance carried with companies and in amounts reasonably satisfactory to Agent, and deliver to Agent from time to time at Agent’s request schedules setting forth all insurance then in effect.

SECTION 5.6. FACILITIES. Each of Holdings and Borrower shall, and shall cause each Subsidiary to, keep all properties useful or necessary to each of their businesses in good repair and condition, and from time to time make necessary repairs, renewals and replacements thereto so that such properties shall be fully and efficiently preserved and maintained, except where failure to preserve or maintain any of the foregoing could not, in the aggregate, reasonably be expected to have a Material Adverse Effect.

SECTION 5.7. TAXES AND OTHER LIABILITIES. Each of Holdings and Borrower shall, and shall cause each Subsidiary to, pay and discharge when due any and all indebtedness, obligations, assessments and taxes, both real or personal, including without limitation federal and state income taxes and state and local property taxes and assessments, except (a) such as Holdings, Borrower and Subsidiaries may in good faith contest or as to which a bona fide dispute may arise, and (b) for which Holdings, Borrower and Subsidiaries have made provision, to Agent’s reasonable satisfaction, for eventual payment thereof in the event Holdings, Borrower or any Subsidiary is obligated to make such payment.

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SECTION 5.8. LITIGATION. Each of Holdings and Borrower shall, and shall cause each Subsidiary to, promptly give notice in writing to Agent of (a) any litigation, investigation, proceeding or suspension between Holdings, Borrower or any other Subsidiary and any Governmental Authority or (b) the commencement of, or any material development in, any litigation or proceeding affecting Holdings, Borrower or any other Subsidiary (i) in which the amount of damages sought from such party exceeds any applicable insurance coverage by $100,000 or (ii) in which injunctive or similar relief is sought.

SECTION 5.9. FINANCIAL CONDITION. Holdings shall maintain its financial condition on a consolidated basis with Subsidiaries as follows using GAAP consistently applied and used consistently with prior practices (except to the extent modified by the definitions herein):

(a) Funded Debt to EBITDA for Holdings and its Subsidiaries (the “Leverage Ratio”), as of the last day of any fiscal quarter, commencing with the fiscal quarter ending March 31, 2014, determined on a rolling four (4) quarter basis, to be not greater than the ratio set forth opposite the applicable fiscal quarter below:

Any Fiscal Quarter Ending On or About	Maximum Leverage Ratio
March 31, 2014	4.50: 1.00
June 30, 2014	5.00: 1.00
September 30, 2014	4.75: 1.00
December 31, 2014 and thereafter	3.75: 1.00

For purposes hereof, “Funded Debt” means the Debt of Holdings and its Subsidiaries, on a consolidated basis, including, for avoidance of doubt, the BHR Preferred Equity.

For purposes hereof, “EBITDA” means for Holdings and its Subsidiaries on a consolidated basis, Consolidated Net Income, plus, without duplication, to the extent reducing Consolidated Net Income, (i) interest expense, (ii) depreciation expense, (iii) amortization expense, (iv) tax expense, (v) non-cash stock compensation, (vi) one-time legal and restructuring costs incurred in 2014 connection with the AAC Equity Transactions, the BHR Preferred Equity Transactions, the Initial Reorganization Transactions and the Holdings IPO in an amount not to exceed $2,500,000, (vii) one-time legal, accounting and other transaction costs incurred in connection with a Permitted Acquisition in 2014 or in any subsequent fiscal year in an aggregate amount not to exceed $200,000 in any fiscal year, (viii) one-time settlement costs paid on or about April 9, 2014, in connection with certain wage and settlement charges in California in an amount not to exceed $2,500,000, (ix) one-time restructuring costs incurred in 2013 in connection with the closing of the Leading Edge operations and the consolidation of call centers in an amount not to exceed $806,000, and (x) to the extent approved by the Agent in writing , other one-time and non-recurring charges.

(b) Fixed Charge Coverage Ratio not less than 1.25 to 1.00 as of each fiscal quarter end, determined on a rolling 4-quarter basis.

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For purposes hereof, “Fixed Charge Coverage Ratio” means for Holdings and its Subsidiaries, on a consolidated basis, (x) the aggregate of EBITDA (as defined above) minus (1) 100% of Capital Expenditures during such period, minus (2) Restricted Payments made by Holdings or Borrower or BHR to its equity holders during such period (without duplication), excluding any Restricted Payments in connection with the Initial Reorganization Transactions paid on the Closing Date that are permitted hereunder, minus (3) total amount of Permitted Acquisitions made during such period divided by (y) the aggregate of total interest expense for such period plus scheduled debt amortization or maturity payments or redemptions for such period, excluding, however, for purposes of this clause (y), the Reliant Debt to the extent repaid with the proceeds of the Holdings IPO.

(c) Each of net revenues and EBITDA of Holdings and its Operating Subsidiaries as of the end of each fiscal quarter determined on a rolling four (4) quarter basis of not less than eighty-five percent (85%) of the net revenues and EBITDA of Holdings and its Operating Subsidiaries as of the immediately preceding fiscal quarter determined on a rolling four (4) quarter basis.

(d) On and as of July 14, 2014, the sum of (i) unrestricted cash and cash equivalents of Holdings and its Operating Subsidiaries (determined in a manner consistent with the most recent consolidated balance sheet of Holdings and its Subsidiaries) and (ii) the amount, if any, of unfunded commitments of Alcentra to provide the Alcentra Subordinated Debt under the Alcentra Subordinated Note Documents to the extent there is no event of default or other condition to funding that is not satisfied thereunder and Holdings, Borrower and the applicable Subsidiary shall have the ability to obtain such investments from Alcentra on such date, shall be no less than $9,000,000.

SECTION 5.10. NOTICE TO LENDERS. Each of Holdings and Borrower shall, and shall cause each Subsidiary to, promptly (but in no event more than five (5) days after the occurrence of each such event or matter) give written notice to Agent in reasonable detail of: (a) the occurrence of any Event of Default or any Default; (b) any change in the name or the organizational structure of Holdings, Borrower or any Subsidiary; (c) the occurrence and nature of any Reportable Event or Prohibited Transaction, each as defined in ERISA, or any funding deficiency with respect to any Plan; or (d) any termination or cancellation of any insurance policy which Holdings, Borrower or any Subsidiary is required to maintain, or any uninsured or partially uninsured loss through liability or property damage, or through fire, theft or any other cause affecting Holdings’, Borrower’s or any Subsidiary’s property in excess of an aggregate of $500,000.00.

SECTION 5.11. INTEREST RATE HEDGING. Each of Holdings and Borrower shall cause the applicable Real Estate Subsidiaries to enter into one or more interest rate swap agreements (which, for avoidance of doubt, shall not include an interest rate cap arrangement) reasonably acceptable to Agent to cover a notional amount of the principal amount of the Real Estate Subsidiary Debt outstanding on the Closing Date (excluding any Real Estate Subsidiary Debt incurred to acquire the outpatient centers located in Las Vegas, Nevada and Dallas, Texas on or about the Closing Date) with swaps providers acceptable to Agent, in its sole discretion, and providing for the counterparty thereto to make payments thereunder for the full term of the

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applicable Real Estate Subsidiary Debt and shall maintain in full force and effect the interest rate hedge agreements for the full term of the applicable Real Estate Subsidiary Debt; provided that (a) Concorde Real Estate, LLC shall enter into such Swap Agreements with respect to its Real Estate Subsidiary Debt within 90 days from the Closing Date; (b) Greenhouse Real Estate, LLC shall enter into such Swap Agreements with respect to its Real Estate Subsidiary Debt within 90 days from the Closing Date , and (c) The Academy Real Estate, LLC shall enter into such Swap Agreements with respect to its Real Estate Subsidiary Debt by December 31, 2014.

SECTION 5.12. ADDITIONAL SUBSIDIARIES; FURTHER ASSURANCES.

(a) If requested by Agent or Required Lenders in its or their sole discretion, Holdings and Borrower shall, at the time that any Loan Party forms any direct or indirect Operating Subsidiary or acquires any direct or indirect Operating Subsidiary after the Closing Date, within 10 days of such formation or acquisition (or such later date as permitted by Agent in its sole discretion), (i) cause such new Operating Subsidiary to become a Subsidiary Guarantor by delivering to Agent a joinder to the Loan Party Guaranty and a joinder to the Security Agreement, and deliver all other Loan Documents, agreements and certificates requested by Agent, in each case, all in form and substance reasonably satisfactory to Agent (including being sufficient to grant to Agent a first priority lien in and to the assets of such newly formed or acquired Operating Subsidiary), and (ii) provide, or cause the applicable Loan Party to provide, to Agent a pledge agreement and appropriate certificates and powers or financing statements, pledging all of the direct or beneficial ownership interest in such new Operating Subsidiary in form and substance reasonably satisfactory to Agent.

(b) Each of Holdings and Borrower will, and will cause the other Loan Parties to, promptly deliver to the Agent such security agreements, pledge agreements, control agreements, mortgages, leasehold mortgages, and other instruments, agreements, certificates and documents (including Uniform Commercial Code financing statements) as Agent or the Required Lenders may reasonably request to: (i) grant, perfect, maintain, protect and evidence security interests in favor of the Agent, for the benefit of the Secured Parties, in any or all Collateral; and (ii) otherwise establish, maintain, protect and evidence the rights provided to the Agent, for the benefit of the Secured Parties, pursuant to the Security Documents. Without limiting the generality of the foregoing, each of Holdings and Borrower will, and will cause the other Loan Parties to, promptly deliver to the Agent, upon request by Agent or the Required Lenders, such deeds of trust, mortgages, leasehold mortgages and other agreements and documents to grant, perfect, maintain, project and evidence security interests in favor of the Agent, for the benefit of the Secured Parties, in the real estate owned or leased by such Loan Party.

(c) If any Immaterial Subsidiary shall have not been dissolved or merged with and into another Subsidiary that is a Loan Party on or prior to December 31, 2014 or shall own any assets or operate any business, each of Holdings and Borrower shall (i) cause such Immaterial Subsidiary to become a Subsidiary Guarantor by delivering to Agent a joinder to the Loan Party Guaranty and a joinder to the Security Agreement, and deliver all other Loan Documents, agreements and certificates requested by Agent, in each case, all in form and substance reasonably satisfactory to Agent (including being sufficient to grant to Agent a first priority lien in and to the assets of such Immaterial Subsidiary). Upon delivery of Loan Documents pursuant to this Section 5.12(c), such Immaterial Subsidiary shall become an Operating Subsidiary.

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(d) In the event the Holdings IPO occurs, Holdings and Borrower shall cause the Borrower Merger and the Holdings Contribution to occur concurrently therewith or promptly thereafter.

(e) The Borrower shall not (and Holdings shall not permit the Borrower to) consummate the Borrower Conversion unless all of the following requirements are met:

(i) no less than fifteen (15) Business Days prior to the proposed closing date of the Borrower Conversion, the Borrower shall have delivered written notice to Agent, which notice shall include the proposed closing date of the Borrower Conversion;

(ii) the Borrower shall have certified on or before the closing date of the Borrower Conversion, in writing and in a form reasonably acceptable to Agent, that the Borrower Conversion has been approved by and board of directors of Borrower and all other necessary consent by shareholders and all other Persons;

(iii) no later than five (5) Business Days prior to the proposed closing date of the Borrower Conversion, to the extent requested by Agent, the Borrower shall have delivered to Agent promptly upon the finalization thereof copies of substantially final definitive documentation for the Borrower Conversion, including the proposed operating agreement for Borrower, each of such definitive documentation shall be in form and substance reasonably satisfactory to Agent and the Required Lenders;

(iv) no Event of Default or Default shall have occurred and be continuing both before and after giving effect to the Borrower Conversion;

(v) the Borrower shall have executed and delivered, concurrently with the closing of the Borrower Conversion, all amendments to Loan Documents and all other Loan Documents, agreements and certificates requested by Agent, in each case, all in form and substance reasonably satisfactory to Agent (including being sufficient to continue the first priority lien in and to the assets of the Borrower granted to Agent);

(vi) Agent and the Lenders shall have received a favorable opinion of the counsel to the Borrower, and a favorable opinion of special Nevada counsel to the Borrower, addressed to the Agent and each Lender, in form and substance reasonably satisfactory to Agent and the Required Lenders; and

(vii) the Borrower shall provide such other documents and other information as may be reasonably requested by Agent in connection with the Borrower Conversion.

(f) Any document, agreement, or instrument executed or issued pursuant to this Section 5.12 shall constitute a Loan Document.

SECTION 5.13. OPERATING ACCOUNTS. On and after July 14, 2014, Holdings and Borrower shall, and shall cause their respective Subsidiaries to, maintain all of Holdings’, Borrowers and their Subsidiaries’ operating and other deposit accounts and securities/investment accounts with Wells Fargo and its Affiliates; provided, that Holdings, Borrower and their Subsidiaries may have bank accounts with any other financial institutions so

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long as the average daily balance of all amounts in such accounts, in the aggregates, shall not exceed $75,000. All of the operating and other deposit accounts and securities/investment accounts of Holdings, Borrower and their respective Subsidiaries at any financial institutions (other than Wells Fargo and its Affiliates) as of the Closing Date are set forth on Schedule 5.13, and none of Holdings, Borrower and their Subsidiaries shall open any new bank account with any financial institution (other than Wells Fargo, National Association and its Affiliates) without providing at least five (5) Business Days prior written notice to Agent.

ARTICLE VI

NEGATIVE COVENANTS

Each of Holdings and Borrower further covenants that so long as Lenders remain committed to extend credit to Borrower pursuant hereto, or any liabilities (whether direct or contingent, liquidated or unliquidated, excluding however contingent indemnification obligations for which no claim has been made) of Borrower to Agent or Lenders under any of the Loan Documents remain outstanding, and until payment in full of all obligations of the Loan Parties under the Loan Documents, neither Holdings nor Borrower will, or will permit any Subsidiary to, without Required Lenders’ prior written consent:

SECTION 6.1. USE OF FUNDS. Use any of the proceeds of any credit extended hereunder except for the purposes stated in Article 1 hereof, it being understood that no such proceeds shall be loaned, advanced, invested or otherwise transferred to BHR or any other Real Estate Subsidiary without the prior written consent of the Required Lenders.

SECTION 6.2. CAPITAL EXPENDITURES. Make any Capital Expenditures in any fiscal year in excess of an aggregate of $3,000,000 for Holdings, Borrower and their respective Subsidiaries.

SECTION 6.3. LEASE EXPENDITURES. Incur operating lease expense payable to any Person (other than any real estate lease payment payable by Borrower or any Operating Subsidiary to a Real Estate Subsidiary) in any fiscal year in excess of an aggregate of $175,000.00 for Holdings and each Operating Subsidiary combined.

SECTION 6.4. OTHER INDEBTEDNESS. Create, incur, assume or permit to exist any Debt, except (a) the liabilities of Holdings and Subsidiaries to Agent and the Lenders under the Loan Documents, (b) the Real Estate Subsidiary Debt, (c) the BHR Preferred Equity outstanding on the Closing Date and any BHR Preferred Equity issued after the Closing Date; provided that, in the case of any such issuance after the Closing Date, no Default or Event of default shall have occurred and be continuing and Holdings and its Subsidiaries are in pro forma compliance with the financial covenants set forth in Section 5.9 hereof, (d) Existing Subordinated Debt of Borrower so long as, in each case, no Alcentra Subordinated Debt has been issued; provided that the Existing Subordinated Debt payable to Michael Blackburn and James D. Bevell, Jr. may remain outstanding, (e) Permitted Purchase Money Indebtedness, (f) the Reliant Debt as in effect on the Closing Date; provided, that the Reliant Debt shall be paid in full concurrently with the consummation of the Holdings IPO, (g) any other Debt of Holdings and Subsidiaries existing as of the Closing Date, and listed on Schedule 6.4 attached hereto, (h) borrowings hereafter by an Operating Subsidiary from Borrower in the ordinary course of

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business, (i) so long as no Default or Event of Default shall have occurred and be continuing both before and after giving effect thereto, Holdings, Borrower and their Subsidiaries are in pro forma compliance with the financial covenants set forth in Section 5.9 and the Alcentra Subordinated Note Documents are in form and substance acceptable to Agent and the Required Lenders, the Alcentra Subordinated Debt, (j) unsecured borrowings hereafter by Borrower or any Subsidiary of Borrower from other lenders so long as the outstanding principal balance of borrowings by Borrower and each Subsidiary from such other lenders, presently existing or hereafter arising, do not exceed $100,000.00 in the aggregate at any time for Borrower and each Subsidiary combined and (k) the Holdings Note.

SECTION 6.5. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or consolidate with any other entity; make any substantial change in the nature of any of their businesses as conducted as of the date hereof; acquire all or substantially all of the assets of any other entity; nor sell, lease, transfer or otherwise dispose of all or a substantial or material portion of Holdings’ or any Subsidiary’s assets except (a) Permitted Acquisitions, (b) the consummation of the Initial Reorganization Transactions and the Borrower Merger, in each case in form and substance satisfactory to Agent, (c) subject to Section 5.12(d), in the event the Holdings IPO occurs, Holdings and Borrower shall cause the Borrower Merger to occur concurrently therewith or promptly thereafter after which the Borrower may convert to a Nevada limited liability company, which conversion shall be permitted by this Agreement subject to the requirements in Sections 5.12(d) and 5.12(e) (such conversion, the “Borrower Conversion”), (d) in the event the Holdings IPO occurs, the Holdings Contribution and (e) any Immaterial Subsidiary may be merged out of existence or liquidate, wind up its affairs or dissolve. Notwithstanding anything to the contrary in the foregoing, this Section 6.5 shall not be deemed to prohibit the exercise of remedies by Alcentra with respect to the BHR Preferred Equity pursuant to Section 9.9(e)(v) of the BHR Operating Agreement after the occurrence and during the continuation of an event of default thereunder after the expiration of the applicable grace period and standstill period thereunder; provided that Agent shall have received not less than ten (10) Business Days prior written notice thereof, it being understood that, in the event that Alcentra is subject to a standstill period with respect to the exercise of any such remedies, Alcentra may send such notice to Agent before the termination of the applicable standstill period.

SECTION 6.6. GUARANTIES. Guarantee or become liable in any way as surety, endorser (other than as endorser of negotiable instruments for deposit or collection in the ordinary course of business), accommodation endorser or otherwise for any liabilities or obligations of any other person or entity, except (a) any of the foregoing in favor of the Secured Parties under the Loan Documents, (b) guaranties by Holdings, Borrower or BHR with respect to the Real Estate Subsidiary Debt, (c) subject to the Alcentra Intercreditor Agreement, guaranties by Holdings and the Operating Subsidiaries of the Alcentra Subordinated Debt permitted by Section 6.4(i), (d) unsecured guaranties by Holdings and the Operating Subsidiaries of Debt permitted by Section 6.4(j), (e) an unsecured guaranty by Borrower of the Reliant Debt and (f) as otherwise listed on Schedule 6.6 attached hereto.

SECTION 6.7. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to or investments in any person or entity, except (a) investments in cash and cash equivalents, (b) any of the foregoing existing as of the Closing Date and listed on Schedule 6.7, (c) loans made hereafter by Borrower to an Operating Subsidiary in the ordinary course of business, (d) Permitted Acquisitions, (e) equity investments by BHR in its Real Estate Subsidiaries made with the proceeds of the BHR Preferred Equity and (f) the Holdings Note.

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SECTION 6.8. RESTRICTED PAYMENTS; BONUS PAYMENTS.

(a) Make any Restricted Payments; provided however, that (i) any Subsidiary of Borrower may pay cash dividends or distributions to Borrower or any other Subsidiary of Borrower that owns equity interests in such Subsidiary, (ii) BHR may make cash payments when due (and non-cash payments in the form of the capitalization of the “Preferred Return” described in clause (iv) of the definition of Event of Default under the BHR Operating Agreement) to the holders of the BHR Preferred Equity in respect of the BHR Preferred Equity in accordance with, and to the extent expressly required and permitted under the BHR Operating Agreement, (iii) certain Restricted Payments may be paid in connection with the Initial Reorganization Transactions and the Borrower Merger as set forth on Schedule 6.8 attached hereto, and (vi) concurrently with the consummation of the Borrower Merger, so long as there is no Default or Even of Default that have occurred and be continuing both before and after giving effect thereto, the Borrower may make a dividend or other distribution to Holdings in an amount equal to the outstanding principal amount of the Holdings Note plus accrued and unpaid interest thereon, which amount shall be used by Holdings solely to pay off the Holdings Note in full.

(b) Notwithstanding anything to the contrary in this Agreement, Holdings and Borrower will not, and will not permit any Subsidiary to, pay the accrued bonuses to their officers for the fiscal year ending on December 31, 2013, which accrued bonuses shall not exceed $1,500,000 in the aggregate, unless and until the Holdings IPO is consummated.

SECTION 6.9. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to exist a security interest in, or lien upon, all or any portion of Holdings’, Borrower’s or any other Subsidiary’s assets now owned or hereafter acquired, except Permitted Liens.

SECTION 6.10. TRANSACTIONS WITH AFFILIATES. Directly or indirectly, enter into or permit to exist any transaction with any Affiliate of Holdings, Borrower or any of its Subsidiaries, including any transactions between Holdings, Borrower and any Operating Subsidiary on the one hand, and any Real Estate Subsidiary on the other hand, except for: (a) transactions (other than the payment of management, consulting, monitoring, or advisory fees) that are no less favorable, taken as a whole, to Holdings or its Subsidiaries, including each applicable Operating Subsidiary, as applicable, than would be obtained in an arm’s length transaction with a non-Affiliate; (b) customary indemnity provided for the benefit of officers and directors (or comparable managers) of Holdings or its applicable Subsidiaries; and (c) transactions permitted by Section 6.3, 6.4(c), 6.4(k), 6.6, 6.7 or 6.8.

SECTION 6.11. RESTRICTIVE AGREEMENTS. Directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of Holdings, Borrower or any other Subsidiary to create, incur or permit to exist any lien upon any of its property or assets, or (b) the ability of any Subsidiary to pay dividends or other distributions with respect to holders of its equity interests or to make or repay loans or advances to the Borrower or any other Subsidiary or to guarantee Debt of the Borrower or any other Subsidiary; provided that (i) the foregoing shall not apply to restrictions

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and conditions imposed by law or by any Loan Document, (ii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Subsidiary pending such sale, provided such restrictions and conditions apply only to the Subsidiary that is to be sold and such sale is permitted hereunder, (iii) the foregoing shall not apply to restrictions applicable to BHR or its Real Estate Subsidiaries imposed under Section 8.9 of the BHR Operating Agreement and (iv) the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to secured Debt of any Real Estate Subsidiary permitted by this Agreement if such restrictions or conditions apply only to the property or assets securing such Debt and such Real Estate Subsidiary.

SECTION 6.12. PREPAYMENTS AND AMENDMENTS. (a) Except in connection with refinancing of Debt permitted by Section 6.4, optionally prepay, redeem, defease, purchase, or otherwise acquire any Debt of Holdings, Borrower or its Subsidiaries, other than (w) the indebtedness and other obligations under the Loan Documents or the Real Estate Subsidiary Debt, (x) intercompany Debt among Borrower and its Operating Subsidiaries in the ordinary course of business, (y) prepayment in full of the Existing Subordinated Debt with the proceeds of the Alcentra Subordinated Debt (excluding, however, the Existing Subordinated Debt payable to Michael Blackburn and James D. Bevell, Jr. which may remain outstanding) and (z) payment in full of the Holdings Note concurrently with the consummation of the Borrower Merger; or (b) make any payment on account of any subordinated debt of any Loan Party if such payment is not permitted at such time under the subordination terms and conditions, including, in the case of any Alcentra Subordinated Debt, the Alcentra Intercreditor Agreement; or (c) amend or otherwise modify the governing documents of any Loan Party if the effect thereof, either individually or in the aggregate, could reasonably be expected to be adverse to the interests of the Lenders, in any material respect, or (d) amend or otherwise modify the BHR Operating Agreement (x) to increase or otherwise modify in any manner adverse to Holdings or any of its Subsidiaries (including BHR) any dividend, redemption, put or other payment obligation with respect to the BHR Preferred Equity, or (y) to increase or otherwise modify in a manner adverse to Holdings or any of its Subsidiaries (including BHR) any other obligation of BHR or any of its Affiliates under the BHR Operating Agreement or (z) to amend or otherwise modify the BHR Operating Agreement if the effect thereof, either individually or in the aggregate, could reasonably be expected to be adverse to the interests of the Lenders; or (e) amend or otherwise modify the Holdings Note, any Reliant Debt Document or any documents evidencing Subordinated Obligations, except, in the case of the Alcentra Subordinated Debt, the Alcentra Intercreditor Agreement.

SECTION 6.13. HOLDINGS AS HOLDING COMPANY. Notwithstanding anything to the contrary in this Agreement, Holdings will not incur any Debt or other liabilities (other than liabilities arising under the Loan Documents), own or acquire any assets (other than the equity interests of Borrower) or engage itself in any operations or business, except in connection with its ownership of Borrower, its rights and obligations under the Loan Documents, customary obligations incidental to its existence, ownership of the equity interests in the Borrower, the issuance of its equity interests to its equity holders and liabilities imposed by law (including liabilities in respect of taxes); provided that Holdings may consummate the Initial Reorganization Transactions and, following or concurrently with the Holdings IPO, the Borrower Merger and the Holdings Contribution.

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SECTION 6.14. REAL ESTATE SUBSIDIARIES. Notwithstanding anything to the contrary in this Agreement:

(a) Borrower will not permit BHR to incur any Debt or other liabilities, own or acquire any assets (other than the equity interests of its Subsidiaries) or engage itself in any operations or business, except in connection with its ownership of its Subsidiaries and its rights and obligations under the Real Estate Subsidiary Debt or the BHR Preferred Equity, customary obligations incidental to its existence, ownership of the equity interests in its Subsidiaries, the issuance of its equity interests to its equity holders and liabilities imposed by law (including liabilities in respect of taxes).

(b) Borrower will not permit any Real Estate Subsidiary (other than BHR) to incur any Debt or other liabilities (other than the Real Estate Subsidiary Debt and related liabilities permitted under this Agreement), own or acquire any assets (other than the real estate and related assets that it currently owns or hereafter acquires) or engage itself in any operations or business, except in connection with its rights and obligations under the Real Estate Subsidiary Debt or its rights and obligations in connection with the real estate that it owns (including any lease agreements related thereto).

SECTION 6.15. ACCOUNTING CHANGES. None of Holdings, the Borrower or any of their respective Subsidiaries shall change (i) its fiscal year (currently ending on December 31 of each calendar year) or (ii) its accounting practices except as required or permitted by GAAP.

ARTICLE VII

EVENTS OF DEFAULT

SECTION 7.1. The occurrence of any of the following shall constitute an “Event of Default” under this Agreement:

(a) Borrower shall fail to pay when due any principal, interest, fees or other amounts payable under any of the Loan Documents.

(b) Any financial statement or certificate furnished to Agent or Lenders in connection with, or any representation or warranty made by Holdings, Borrower or any other party under this Agreement or any other Loan Document shall prove to be incorrect, false or misleading in any material respect when furnished or made.

(c) Any default in the performance of or compliance with any obligation, agreement or other provision contained herein or in any other Loan Document (other than those specifically described as an “Event of Default” in any other clause of this Section 7.1), and with respect to any such default that by its nature can be cured, such default shall continue for a period of twenty (20) days from its occurrence; provided, however, that a default under Sections 4.4 or 5.9 or Article VI shall not be subject to such cure period.

(d) (i) Holdings, Borrower, or any Subsidiary shall (A) default in making any payment of any principal of any Debt (including any guarantee obligation, but excluding the Loans) on the due date with respect thereto and beyond the period of grace, if any; or (B) default in making any payment of any interest on any such Debt beyond the period of grace, if any,

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provided in the instrument or agreement under which such Debt was created; or (C) default in the observance or performance of any other agreement or condition relating to any such Debt or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, the effect of which default or other event or condition is to cause, or to permit the holder or beneficiary of such Debt (or a trustee or agent on behalf of such holder or beneficiary) to cause, with the giving of notice if required, such Debt to become due prior to its stated maturity or (in the case of any such Debt constituting a guarantee obligation) to become payable; or (ii) any Disqualified Equity Interests of Holdings, Borrower or any Subsidiary shall be payable or otherwise be required to be paid; provided that, except for with respect to any Real Estate Subsidiary Debt, a default, event or condition described in clauses (i) or (ii) above shall not at any time constitute an Event of Default unless, at such time, one or more defaults, events or conditions of the type described therein shall have occurred and be continuing with respect to Debt the outstanding principal amount of which and, with respect to any such Disqualified Equity Interests, the required payments described in clause (ii) above, exceeds in the aggregate $500,000 or such Debt constitutes Real Estate Subsidiary Debt owed to a Lender or an Affiliate of a Lender; or (ii) a default by a Holdings, Borrower, or any Subsidiary shall occur under any contractual obligation of such party, which default results in the termination of one or more material agreements, instruments or undertakings to which Holdings, Borrower, or any Subsidiary is a party and which termination(s) reasonably could be expected to have a Material Adverse Effect.

(e) (i) Holdings, Borrower, or any Subsidiary shall commence any case, proceeding or other action (A) under any existing or future law of any jurisdiction, domestic or foreign, relating to bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding up, liquidation, dissolution, composition or other relief with respect to it or its debts, or (B) seeking appointment of a receiver, trustee, custodian, conservator or other similar official for it or for all or any substantial part of its assets, or any Holdings, Borrower, or any Subsidiary shall make a general assignment for the benefit of its creditors; or (ii) there shall be commenced against Holdings, Borrower, or any Subsidiary any case, proceeding or other action of a nature referred to in clause (i) above that (A) results in the entry of an order for relief or any such adjudication or appointment or (B) remains undismissed or undischarged for a period of sixty (60) days; or (iii) there shall be commenced against Holdings, Borrower, or any Subsidiary any case, proceeding or other action seeking issuance of a warrant of attachment, execution, distraint or similar process against all or any substantial part of its assets that results in the entry of an order for any such relief that shall not have been vacated, discharged, or stayed or bonded pending appeal within sixty (60) days from the entry thereof; or (iv) Holdings, Borrower, or any Subsidiary shall take any action in furtherance of, or indicating its consent to, approval of, or acquiescence in, any of the acts set forth in clause (i), (ii), or (iii) above; or (v) any Loan Party shall generally not, or shall be unable to, or shall admit in writing its inability to, pay its debts as they become due.

(f) one or more judgments or decrees shall be entered against Holdings, Borrower, or any Subsidiary involving in the aggregate liabilities (to the extent not paid or covered by insurance as to which the relevant insurance company has acknowledged coverage) of $500,000 or more, and (x) all such judgments or decrees shall not have been satisfied, vacated, discharged, stayed or bonded pending appeal within sixty (60) days from the entry thereof or (y) enforcement proceedings shall have been commenced by any creditor upon such judgment or order.

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(g) Unless otherwise permitted by this Agreement, the dissolution or liquidation of Holdings, Borrower or any Subsidiary if a corporation, partnership, joint venture or other type of entity; or, unless otherwise permitted by this Agreement, Holdings, Borrower or any Subsidiary, or, any of its directors, stockholders or members, shall take action seeking to effect the dissolution or liquidation of Holdings, Borrower or such Subsidiary.

(h) Any Change of Control occurs.

(i) Any material provision of any Loan Document shall for any reason cease to be valid and binding on or enforceable against any Loan Party or any Subsidiary of any Loan Party party thereto or any Loan Party or any such Subsidiary shall so state in writing or bring an action to limit its obligations or liabilities thereunder; or any Loan Document shall for any reason (other than pursuant to the terms thereof) cease to create a valid security interest in the Collateral purported to be covered thereby or such security interest shall for any reason cease to be a perfected and first priority security interest subject only to Permitted Liens.

(j) Any subordination agreements governing any Subordinated Obligations shall for any reason be revoked or invalidated, or otherwise cease to be in full force and effect, or any Person shall contest in any manner the validity or enforceability thereof or send termination notice or otherwise deny that it has any further liability or obligation thereunder, or the obligations of the Loan Parties under the Loan Documents, for any reason shall not have the priority contemplated by this Agreement or such subordination agreements.

SECTION 7.2. REMEDIES. (a) Upon the occurrence of any Event of Default described in Section 7.1(e), the Line of Credit shall immediately terminate and all indebtedness and other obligations of Borrower and the other Loan Parties under the Loan Documents, with accrued interest thereon, shall automatically become due and payable and (b) upon the occurrence of any other Event of Default, any term thereof to the contrary notwithstanding, shall at Agent’s or Required Lenders’ option and without notice become immediately due and payable without presentment, demand, protest or notice of dishonor, all of which are hereby expressly waived by Borrower and the obligation, if any, of any Lender to extend any further credit under any of the Loan Documents shall immediately cease and terminate. In addition to the foregoing, upon the occurrence of any Event of Default, Agent shall have all rights, powers and remedies available under each of the Loan Documents, or accorded by law, including without limitation the right to resort to any or all security for any credit subject hereto and to exercise any or all of the rights of a beneficiary or secured party pursuant to applicable law. All rights, powers and remedies of Agent may be exercised at any time by Agent and from time to time after the occurrence of an Event of Default, are cumulative and not exclusive, and shall be in addition to any other rights, powers or remedies provided by law or equity.

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ARTICLE VIII

THE AGENT

SECTION 8.1. AUTHORIZATION AND ACTION.

(a) Each Lender hereby appoints and authorizes the Agent to take such action as agent on its behalf and to exercise such powers under this Agreement as are delegated to the Agent by the terms hereof, together with such powers as are reasonably incidental thereto. As to any matters not expressly provided for by this Agreement or any other Loan Document, the Agent shall not be required to exercise any discretion or take any action, but shall be required to act or to refrain from acting (and shall be fully protected in so acting or refraining from acting) upon the instructions of the Required Lenders, and such instructions shall be binding upon all Lenders; provided, however, that the Agent shall not be required to take any action which exposes the Agent to personal liability or which is contrary to this Agreement or applicable law. The Agent agrees to give to each Lender prompt notice of each notice given to it by the Borrower pursuant to the terms of this Agreement.

(b) The Agent and any co-agents, sub-agents and attorneys-in-fact appointed by the Agent pursuant to Section 8.1(a) for purposes of holding or enforcing any lien on the Collateral (or any portion thereof) granted under the Loan Documents, or for exercising any rights and remedies thereunder and hereunder at the direction of the Agent, shall be entitled to the benefits of all provisions of this Article 8 as if set forth in full herein with respect thereto.

SECTION 8.2. AGENT’S RELIANCE, ETC. None of the Agent or any of its directors, officers, agents or employees shall be liable for any action taken or omitted to be taken by it or them under or in connection with this Agreement, except for its or their own gross negligence or willful misconduct. Without limitation of the generality of the foregoing, the Agent: (a) may treat the payee of any Note as the holder thereof until the Agent receives written notice of the assignment or transfer thereof signed by such payee and in form satisfactory to the Agent; (b) may consult with legal counsel (including counsel for the Loan Parties), independent public accountants and other experts selected by it and shall not be liable for any action taken or omitted to be taken in good faith by it in accordance with the advice of such counsel, accountants or experts; (c) makes no warranty or representation to any Lender and shall not be responsible to any Lender for any statements, warranties or representations made in or in connection with this Agreement; (d) shall not have any duty to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions of this Agreement on the part of the Loan Parties or to inspect the property (including the books and records) of the Loan Parties or any of their Subsidiaries; (e) shall not be responsible to any Lender for the due execution, legality, validity, enforceability, genuineness, sufficiency or value of this Agreement or any other instrument or document furnished pursuant hereto; and (f) shall incur no liability under or in respect of this Agreement by acting upon any notice, consent, certificate or other instrument or writing (which may be by telegram, telecopy or telex) believed by it to be genuine and signed or sent by the proper party or parties.

SECTION 8.3. WELLS FARGO AND AFFILIATES. With respect to its commitments and Loans hereunder, Wells Fargo Bank, National Association (“Wells Fargo”), shall have the same rights and powers under this Agreement as any other Lender and may

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exercise the same as though it were not the Agent; and the term “Lender” or “Lenders” shall, unless otherwise expressly indicated, include Wells Fargo in its individual capacity. Wells Fargo and its affiliates may accept deposits from, lend money to, act as trustee under indentures of, and generally engage in any kind of business with, the Loan Parties, their Subsidiaries and any Person who may do business with or own securities of any Loan Party, all as if Wells Fargo were not the Agent and without any duty to account therefor to the Lenders.

SECTION 8.4. LENDER CREDIT DECISION. Each Lender acknowledges that it has, independently and without reliance upon the Agent or any other Lender and based on the financial statements and such other documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into this Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Agent or any other Lender and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under this Agreement.

SECTION 8.5. INDEMNIFICATION. The Lenders agree to indemnify the Agent (to the extent not reimbursed by the Borrower), ratably in accordance with their respective pro rata share, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind or nature whatsoever which may be imposed on, incurred by, or asserted against the Agent in any way relating to or arising out of this Agreement or any action taken or omitted by the Agent under this Agreement, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements resulting from the Agent’s gross negligence or willful misconduct. Without limitation of the foregoing, each Lender agrees to reimburse the Agent promptly upon demand for its pro rata share of any out-of-pocket expenses (including counsel fees) incurred by the Agent in connection with the preparation, execution, delivery, administration, modification, amendment or enforcement (whether through negotiations, legal proceedings or otherwise) of, or legal advice in respect of rights or responsibilities under, this Agreement, to the extent that the Agent is not reimbursed for such expenses by the Borrower.

SECTION 8.6. SUCCESSOR AGENT. The Agent may resign at any time by giving written notice thereof to the Lenders and the Borrower and may be removed at any time with or without cause by the Required Lenders. Upon any such resignation or removal, the Required Lenders shall have the right to appoint a successor Agent. If no successor Agent shall have been so appointed by the Required Lenders, and shall have accepted such appointment, within thirty (30) days after the retiring Agent’s giving of notice of resignation or the Required Lenders’ removal of the retiring Agent, then the retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which shall be a commercial bank organized under the laws of the United States of America or of any State thereof and having a combined capital and surplus of at least $50,000,000. Upon the acceptance of any appointment as Agent hereunder by a successor Agent, such successor Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Agent, and the retiring Agent shall be discharged from its duties and obligations under this Agreement. After any retiring Agent’s resignation or removal hereunder as Agent, the provisions of this Article 8 shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Agent under this Agreement.

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SECTION 8.7. COLLATERAL MATTERS.

(a) The Agent is hereby authorized by each Lender, without the necessity of any notice to or further consent from any Lender, and without the obligation to take any such action, to take any action with respect to any Collateral or any Loan Document which may from time to time be necessary to perfect and maintain perfected liens granted pursuant to the Loan Documents.

(b) The Lenders irrevocably authorize the Agent to release (and to execute and deliver such documents, instruments and agreements as the Agent may deem necessary to release) any lien granted to or held by the Agent upon any Collateral (i) upon (A) termination of all commitments of all Lenders hereunder, and (B) the payment in full of all Loans and all other obligations payable under this Agreement and under the other Loan Documents; (ii) constituting property of any Loan Party which is sold, transferred or otherwise disposed of in connection with any transaction permitted by this Agreement or the Loan Documents; (iii) consisting of an instrument, if the Debt evidenced thereby has been paid in full; or (iv) if approved or consented to by those of the Lenders required by Section 9.6(b).

(c) The Lenders irrevocably authorize the Agent to release (and to execute and deliver such documents, instruments and agreements as the Agent may deem necessary to release) any Guarantor (other than Holdings) from its obligations under the applicable Guaranty if such Person ceases to be an Operating Subsidiary as a result of a transaction permitted under the Loan Documents.

(d) Upon request by the Agent, the Lenders will confirm in writing the Agent’s authority to release particular types or items of Collateral or Guaranty pursuant to this Section 8.7.

ARTICLE IX

MISCELLANEOUS

SECTION 9.1. NO WAIVER. No delay, failure or discontinuance of Agent or any Lender in exercising any right, power or remedy under any of the Loan Documents shall affect or operate as a waiver of such right, power or remedy; nor shall any single or partial exercise of any such right, power or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power or remedy. Any waiver, permit, consent or approval of any kind by Agent or any Lender of any breach of or default under any of the Loan Documents must be in writing and shall be effective only to the extent set forth in such writing.

SECTION 9.2. NOTICES. All notices, requests and demands which any party is required or may desire to give to any other party under any provision of this Agreement must be in writing delivered to each party at the following address:

HOLDINGS:	AAC HOLDINGS, INC.
	Attention: Kirk Manz (kirkm@FORTERUS.COM)
	115 East Park Drive, Suite 100
	Brentwood, Tennessee 37027

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	with a copy to:
	AAC HOLDINGS, INC.
	Attention: Kathryn Sevier Phillips
	(ksphillips@ContactAAC.com)
	115 East Park Drive, Second Floor
	Brentwood, Tennessee 37027
BORROWER:	AMERICAN ADDICTION CENTERS, INC.
	Attention: Kirk Manz (kirkm@FORTERUS.COM)
	115 East Park Drive, Second Floor
	Brentwood, Tennessee 37027
	with a copy to:
	AMERICAN ADDICTION CENTERS, INC.
	Attention: Kathryn Sevier Phillips
	(ksphillips@ContactAAC.com)
	115 East Park Drive, Second Floor
	Brentwood, Tennessee 37027
AGENT AND INITIAL LENDER:
	WELLS FARGO BANK, NATIONAL ASSOCIATION
	5901 Priestly Drive, 1st Floor, Suite 130
	Carlsbad, California 92008
LENDERS	To the applicable Lenders’ addresses set forth in the applicable assignment and assumption

or to such other address as any party may designate by written notice to all other parties. Each such notice, request and demand shall be deemed given or made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or three (3) days after deposit in the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt.

SECTION 9.3. COSTS, EXPENSES AND ATTORNEYS’ FEES. Borrower shall pay to Agent and each Lender immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees), expended or incurred by Agent and the Lenders in connection with (a) the negotiation and preparation of this Agreement and the other Loan Documents, Agent’s continued administration hereof and thereof, and the preparation of any amendments and waivers hereto and thereto, (b) the enforcement of Agent’s or Lenders’ rights and/or the collection of any amounts which become due to Agent or Lenders under any of the Loan Documents, and (c) the prosecution or defense of any action in any way related to any of the Loan Documents, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Agent, any Lender or any other person) relating to Borrower or any other person or entity.

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SECTION 9.4. INDEMNITY. Whether or not the transactions contemplated hereby shall be consummated, the Borrower agrees to indemnify, pay and hold the Agent and each Lender, and the shareholders, officers, directors, employees and agents of the Agent and each Lender, harmless from and against any and all claims, liabilities, losses, damages, costs and expenses (whether or not any of the foregoing Persons is a party to any litigation), including, without limitation, reasonable attorneys’ fees and costs and costs of investigation, document production, attendance at a deposition, or other discovery, with respect to or arising out of this Agreement or the Loan Documents or any use of proceeds hereunder, or any claim, demand, action or cause of action being asserted against any Loan Party (collectively, the “Indemnified Liabilities”), provided that the Borrower shall have no obligation hereunder with respect to Indemnified Liabilities arising from the gross negligence or willful misconduct of any such Persons. This covenant shall survive termination of this Agreement and payment of the outstanding Notes.

SECTION 9.5. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties; provided, however, that neither Holdings nor Borrower may assign or transfer its interests or rights hereunder without Agent’s and Lenders’ prior written consent. Each Lender reserves the right to sell, assign, transfer, negotiate or grant participations in all or any part of, or any interest in, such Lender’s rights and benefits under each of the Loan Documents. In connection therewith, Agent or such Lender may disclose all documents and information which Agent or such Lender now has or may hereafter acquire relating to any credit subject hereto, Holdings or its business, Borrower or its business, and Subsidiary or its business, any guarantor hereunder or the business of such guarantor, or any collateral required hereunder.

SECTION 9.6. ENTIRE AGREEMENT; AMENDMENT.

(a) This Agreement and the other Loan Documents constitute the entire agreement between Holdings, Borrower, Agent and the Lenders with respect to each credit subject hereto and supersede all prior negotiations, communications, discussions and correspondence concerning the subject matter hereof.

(b) No amendment or waiver of any provision of the Loan Documents nor consent to any departure by any Loan Party therefrom, shall in any event be effective unless the same shall be in writing and signed by the Required Lenders, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given; provided, however, that no amendment, waiver or consent shall, unless in writing and signed by each Lender affected thereby, do any of the following: (i) waive any of the conditions specified in Section 4.1, (ii) increase the commitment of such Lender hereunder or subject such Lender to any additional obligations, (iii) reduce the principal of, or interest on, the Loans or any fees or other amounts payable hereunder, (iv) postpone any date fixed for any payment of principal of, or interest on, the Loans or any fees or other amounts payable hereunder, (v) amend this Section 9.6(b), (vi) release all or substantially all of the Collateral unless otherwise permitted by Section 8.7 or (vii) release all or substantially all of the Guaranties; provided, further, that no

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amendment, waiver or consent shall, unless in writing and signed by Agent in addition to the Lenders required above to take such action, affect the rights or duties of Agent under this Agreement or any other Loan Document.

SECTION 9.7. NO THIRD PARTY BENEFICIARIES. This Agreement is made and entered into for the sole protection and benefit of the parties hereto and their respective permitted successors and assigns, and no other person or entity shall be a third party beneficiary of, or have any direct or indirect cause of action or claim in connection with, this Agreement or any other of the Loan Documents to which it is not a party.

SECTION 9.8. INDEPENDENCE OF COVENANTS. All covenants hereunder shall be given independent effect so that if a particular action or condition is not permitted by any of such covenants, the fact that it would be permitted by an exception to, or would otherwise be within the limitations of, another covenant shall not avoid the occurrence of an Event of Default or Default if such action is taken or condition exists.

SECTION 9.9. TIME. Time is of the essence of each and every provision of this Agreement and each other of the Loan Documents.

SECTION 9.10. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity without invalidating the remainder of such provision or any remaining provisions of this Agreement.

SECTION 9.11. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same Agreement.

SECTION 9.12. NO NOVATION; AMENDMENT AND RESTATEMENT. This Agreement is not intended to and shall not constitute a novation, payment and reborrowing or termination of the indebtedness or any other obligations under the Prior Credit Agreement. All loans made and obligations incurred under the Prior Credit Agreement which are outstanding on the Closing Date shall continue as loans and obligations under (and shall be governed by the terms of) this Agreement and the other Loan Documents. Upon this Agreement becoming effective pursuant to Sections 4.1 and 4.2 on the Closing Date, (a) all terms and conditions of the Prior Credit Agreement and any other Loan Documents executed and delivered pursuant thereto, as amended by this Agreement and the other Loan Documents being executed and delivered in connection herewith, shall be and remain in full force and effect, as so amended; and (b) the terms and conditions of the Prior Credit Agreement shall be amended as set forth herein and, as so amended, the Prior Credit Agreement shall be restated in its entirety.

SECTION 9.13. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the State of New York.

SECTION 9.14. ARBITRATION.

(a) Arbitration. The parties hereto agree, upon demand by any party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their

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respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (i) any credit subject hereto, or any of the Loan Documents, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the parties; and (iii) be conducted by the AAA, or such other administrator as the parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any party who fails or refuses to submit to arbitration following a demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years’ experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of New York and may grant any remedy or

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relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e) Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the party’s presentation and that no alternative means for obtaining information is available.

(f) Class Proceedings and Consolidations. No party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except parties who have executed any Loan Document, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

(g) Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h) Real Property Collateral: Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.

(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of

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information by a party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the parties potentially applies to a dispute, the arbitration provision most directly related to the Loan Documents or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the Loan Documents or any relationship between the parties.

(j) Small Claims Court. Notwithstanding anything herein to the contrary, each party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction. Further, this arbitration provision shall apply only to disputes in which either party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the day and year first written above.

Holdings:
AAC HOLDINGS, INC.
By:	/s/ Michael T. Cartwright
	Name:	Michael T. Cartwright
	Title:	Chief Executive Officer
Borrower:
AMERICAN ADDICTION CENTERS, INC.
By:	/s/ Michael T. Cartwright
	Name:	Michael T. Cartwright
	Title:	Chief Executive Officer

Agent:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ Alan Prohaska
Name:	Alan Prohaska
Title:	Vice President
Lender:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ Alan Prohaska
Name:	Alan Prohaska
Title:	Vice President

Annex B

Annex A

Line of Credit Commitment

Line of Credit Lender	Line of Credit Commitment		Pro Rata Share
Wells Fargo Bank, National Association	$	15,000,000		100	%
TOTAL	$	15,000,000		100	%

Annex B

Part B – Operating Subsidiaries

Forterus Health Care Services, Inc.

ABTTC, Inc.

B&B Holdings Intl LLC

Greenhouse Treatment Center, LLC

San Diego Addiction Treatment Center, Inc.

FitRx, LLC

Concorde Treatment Center, LLC

AAC Las Vegas Outpatient Center, LLC

AAC Dallas Outpatient Center, LLC

Addiction Labs of America, LLC

Parallax Center, LLC

Singer Island Recovery Center LLC

Leading Edge Recovery Center, LLC

Part C – Real Estate Subsidiaries

Behavioral Healthcare Realty, LLC

Greenhouse Real Estate, LLC

The Academy Real Estate, LLC

Concorde Real Estate, LLC

Annex C

Existing Defaults

1. Defaults and Events of Default under Sections 4.9(a) and (c) of the Prior Credit Agreement for the fiscal quarters of the Borrower ended on December 31, 2013 and March 31, 2014.

2. Defaults and Events of Default under Section 5.2 of the Prior Credit Agreement as a result of the incurrence of capital expenditures for the fiscal year ending on December 31, 2013 and all of the prior periods that were not permitted under Section 5.2 of the Prior Credit Agreement.

3. Defaults and Events of Default under Section 5.3 of the Prior Credit Agreement as a result of the incurrence of operating lease expenses for the fiscal year ending on December 31, 2013 and all of the prior periods that were not permitted under Section 5.3 of the Prior Credit Agreement.

4. Defaults and Events of Default under with Section 5.4 of the Prior Credit Agreement as a result of the incurrence of (i) the Existing Subordinated Debt and (ii) certain other unsecured Debt and capital leases not to exceed $1,500,000.

Schedule 3.1

Subsidiaries, Shareholders, Managers and Other Equity Holders

No.	Legal Entity Name and “Doing Business As” Name	Shareholder(s)/Member(s) of Legal Entity	Manager(s), if applicable	Stock / Membership Interests %
	PARENT
1.	AAC Holdings, Inc.	[See Separate Chart]	n/a		[See Separate Chart	]
	SUBSIDIARIES – CORPORATIONS
2.	American Addiction Centers, Inc.	[See Separate Chart]	n/a		[See Separate Chart	]
3.	ABTTC, Inc.	American Addiction Centers, Inc.	n/a		1,000/1,000 Shares
4.	Forterus Health Care Services, Inc.	American Addiction Centers, Inc.	n/a		5,000/5,000 Shares
5.	San Diego Addiction Treatment Center, Inc.	American Addiction Centers, Inc.	n/a		1,500/1,500 Shares
	SUBSIDIARIES – LIMITED LIABILITY COMPANIES
6.	AAC Dallas Outpatient Center, LLC	American Addiction Centers, Inc.	n/a		100	%
7.	AAC Las Vegas Outpatient Center, LLC	American Addiction Centers, Inc.	n/a		100	%
8.	Addiction Labs of America, LLC	American Addiction Centers, Inc.	n/a		100	%
9.	B&B Holdings Intl LLC	American Addiction Centers, Inc.	Michael T. Cartwright Jerrod N. Menz		100	%
10.	Concorde Treatment Center, LLC d/b/a Desert Hope Center	American Addiction Centers, Inc.	Michael T. Cartwright Jerrod N. Menz		100	%
11.	Fitrx, LLC	American Addiction Centers, Inc.	n/a		100	%
12.	Greenhouse Treatment Center, LLC	American Addiction Centers, Inc.	Michael T. Cartwright Jerrod N. Menz		100	%
13.	Hamilton Medically Assisted Treatment Associates, LLC	B&B Holdings Intl LLC	Michael T. Cartwright Jerrod N. Menz		100	%
14.	Leading Edge Recovery Center, LLC	B&B Holdings Intl LLC	Michael T. Cartwright Jerrod N. Menz		100	%
15.	Parallax Center, LLC	American Addiction Centers, Inc.	n/a		100	%
16.	Singer Island Recovery Center LLC	B&B Holdings Intl LLC	Michael T. Cartwright Jerrod N. Menz		100	%
17.	The Heights Supportive Housing, LLC	B&B Holdings Intl LLC	n/a		100	%
	BHR
18.	Behavioral Healthcare Realty, LLC (Common Units)	AAC Holdings, Inc.	Michael T. Cartwright		100	%
19.	Behavioral Healthcare Realty, LLC (Existing BHR Preferred Equity)	[See Separate Chart]	Michael T. Cartwright		[See Separate Chart	]
20.	Concorde Real Estate, LLC	Behavioral Healthcare Realty, LLC	Michael T. Cartwright		100	%
21.	Greenhouse Real Estate, LLC	Behavioral Healthcare Realty, LLC	Michael T. Cartwright		100	%
22.	The Academy Real Estate, LLC	Behavioral Healthcare Realty, LLC	n/a		100	%
	CRMS
23.	Clinical Revenue Management Services, LLC	AAC Holdings, Inc.	n/a		100	%

Schedule 3.1

Subsidiaries, Shareholders, Managers and Other Equity Holders

Stockholders of AAC Holdings, Inc. as of April 15, 2014

Stockholder	Shares		% of Outstanding
MICHAEL CARTWRIGHT		2,515,424		25.8	%
JERROD MENZ		2,161,927		22.2	%
LUCIUS BURCH III		669,381		6.9	%
JERROD MENZ IRREVOCABLE FAMILY TRUST UAD 12/20/12		607,533		6.2	%
MICHAEL T CARTWRIGHT IRREVOCABLE FAMILY TRUST UAD 12/20/12		607,533		6.2	%
TINA CARTWRIGHT IRREVOCABLE FAMILY TRUST UAD 12-20-2012		607,533		6.2	%
VICTORIA MENZ IRREVOCABLE FAMILY TRUST UAD 12/20/12		607,533		6.2	%
JERRY BOSTELMAN		374,969		3.9	%
KIRK MANZ		332,844		3.4	%
DAVID KLOEPPEL & ANN KLOEPPEL TIC		121,507		1.2	%
BRAD BLEVINS		104,905		1.1	%
ROBERT H SPRAIN JR		77,792		0.8	%
TINA F. CARTWRIGHT		74,572		0.8	%
VICTORIA MENZ		74,572		0.8	%
MICHAEL BLACKBURN		72,355		0.7	%
ZYCRON INC		60,753		0.6	%
JAY M HOLLOMON		56,150		0.6	%
ROGER M FINLEY		49,813		0.5	%
BRIAN WALLER		45,024		0.5	%
CANTERBURY INDEMNITY, INC.		39,184		0.4	%
CLARENCE ELCAN		36,021		0.4	%
RICHARD ELLIOT RAGSDALE		34,090		0.4	%
MARK SMITH & MELISSA SMITH JT TEN		33,899		0.3	%
KATHRYN SEVIER PHILLIPS		32,585		0.3	%
JOSEPH E MAXWELL		31,744		0.3	%
JAY M. HOLLOMON AND MEREDITH G. HOLLOMON, THE HOLLOMON REVOCABLE LIVING TRUST		31,347		0.3	%
RANDALL HARNESS		28,718		0.3	%
CANDANCE HENDERSON-GRICE		26,241		0.3	%
MICHAEL A. CARTER, SR.; PAMELA L. CARTER		23,510		0.2	%
WILLIAM ADKINS		23,418		0.2	%
ANDREW L SAUL & LAURA P SAUL JT TEN		19,987		0.2	%
DARRELL S. FREEMAN; GLORIA FREEMAN		19,592		0.2	%
MILAN INVESTMENT GROUP, LLC		15,673		0.2	%
SNB INVESTMENTS		15,384		0.2	%
STEPHEN PRINCE		15,000		0.2	%

Schedule 3.1

Subsidiaries, Shareholders, Managers and Other Equity Holders

SHAUNA L NEWMAN	14,364	0.1	%
AMERICAN HERMETICS OF TENNESSEE INC	12,150	0.1	%
ADAM MITTELBERG	11,602	0.1	%
MARK MOEHLMANN	7,836	0.1	%
EAST FORK PARTNERS	7,548	0.1	%
ADAM MITTELBERG & TARA MITTELBERG JT TEN	4,997	0.1	%
PRINCE LAND SERVICES, INC.	3,919	0.0	%
VICTOR HOPE CAPITAL, LLC	3,918	0.0	%
EPF I I GST TRUST U/A 04/26/02	3,918	0.0	%
DARRELL S. FREEMAN	3,713	0.0	%
DAVID KLOEPPEL	3,713	0.0	%
MICHAEL J STETAR	3,038	0.0	%
MARC C TURNER	3,038	0.0	%
Total Shares Outstanding - April 15, 2014	9,732,267	100.0	%

Schedule 3.1

Subsidiaries, Shareholders, Managers and Other Equity Holders

Stockholders of American Addiction Centers, Inc. as of April 15, 2014

Stockholder	Shares		% of Outstanding
AAC HOLDINGS, INC.		9,061,124		91.8	%
JAMES D. BEVELL JR		444,434		4.5	%
CEDE & CO		95,189		1.0	%
RICHARD FINLEY		40,703		0.4	%
JAMES H. SHEDIVY		31,500		0.3	%
JOSE OROZCO		42,415		0.4	%
ERIC T KLINDT		15,925		0.2	%
UBS FINANCIAL SERVICES INC FBO - DANIEL J MCKENNA		12,152		0.1	%
BRENT CLEMENTS		12,151		0.1	%
STEPHEN T HARRIS		12,151		0.1	%
REED SHANDOFF		12,151		0.1	%
RICHARD F SMITH		8,505		0.1	%
FARZIN FERDOWSI; ZIBA FERDOWSI		8,000		0.1	%
FREEMAN WEBB HOLDINGS, LLC		7,837		0.1	%
IRA INNOVATIONS LLC FBO RANDALL HARNESS IRA		7,837		0.1	%
AMY G. KILLETT		7,836		0.1	%
CHARLES E GREER		6,956		0.1	%
IRA INNOVATIONS LLC FBO SHAUNA NEWMAN IRA		6,504		0.1	%
PHILLIP MATTHEW SIMPSON		4,997		0.1	%
PAUL REED		4,000		0.0	%
IRA INNOVATIONS LLC FBO ALAN GRICE IRA		3,918		0.0	%
ROBERT E JONES		3,038		0.0	%
RUSSELL R JONES		3,038		0.0	%
PATRICK SHOCKNEY		3,038		0.0	%
W TODD SWEAT		3,038		0.0	%
NANCY VARGAS		3,038		0.0	%
STEVEN L. MIRANDA & KELLY A. MIRANDA		2,000		0.0	%
STEPHEN R. FAWEHINMI / MARISON B. FAWEHINMI		1,959		0.0	%
Shareholders Holding Less Than 1,000 Shares (48 total)		3,038		0.0	%
Total Shares Outstanding - April 15, 2014		9,868,472		100.0	%

Schedule 3.1

Subsidiaries, Shareholders, Managers and Other Equity Holders

Existing BHR Preferred Equity

Preferred A Unit Holder	Units		% of Outstanding
Canterbury Indemnity, Inc.		10.0		27.4	%
Hollomon Revocable Living Trust, dated September 20, 2007, Jay M. Hollomon and Meredith G. Hollomon, Trustees		2.0		5.5	%
Jerry D. Bostelman		5.0		13.7	%
Milan Investment Group, LLC		1.5		4.1	%
Michael A. Carter and Pamela L. Carter		1.0		2.7	%
American Hermetics of Tennessee, Inc.		2.0		5.5	%
Roger M. Finley		4.0		11.0	%
William A. Adkins		4.0		11.0	%
Shauna L. Newman		6.0		16.4	%
Victor Hope Capital, LLC		1.0		2.7	%
Total Preferred A Units		36.5		100.0	%

Schedule 3.5

Exceptions to 2013 Interim Financials

As a result of the 2013 annual audit, adjustments were identified that impacted the previously issued 2013 Interim Financials. In the opinion of the Borrower’s management, the adjustments were not material to the 2013 Interim Financials for the periods ending March 31, 2013 and June 30, 2013. However, the Borrower has elected to revise the 2013 Interim Financials for the periods ending March 31, 2013 and June 30, 2013 to reflect those adjustments. The adjustments related to the 2013 Interim Financials for the period ending September 30, 2013 (all of which have been disclosed in writing to Agent prior to the Closing Date) were material and the Borrower is in the process of revising the 2013 Interim Financials for that period. All of these adjustments will be reflected in the 2013 audited financial statements.

Existing Subordinated Debt

Attached.

Schedule 3.13

Healthcare Matters

(a) Holdings, Borrower and its other Subsidiaries are in the process of a comprehensive, internal audit of all privacy and confidentiality policies and practices, including those relating to compliance with the Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act of 2009, and 42 C.F.R Part 2 in preparation for the Holdings IPO. None of Holdings, Borrower or any other Subsidiaries is aware of any reportable breaches with respect to any of these privacy or confidentiality laws and regulations, but it is expected that new policies and practices will be adopted by Holdings, Borrower and its other Subsidiaries, as applicable. Similarly, Holdings, Borrower and its other Subsidiaries will implement a new Corporate Compliance Plan in preparation for the Holdings IPO.

(b) Horizon Blue Cross Blue Shield of New Jersey v. Avee Laboratories et al.

On September 4, 2013, Horizon Blue Cross Blue Shield of New Jersey (“Horizon”) filed an amended complaint in the Superior Court of New Jersey against several defendants including Leading Edge Recovery Center, LLC, one of our subsidiaries. Leading Edge Recovery Center, LLC formerly operated a drug and alcohol treatment facility in New Jersey. Horizon alleges the defendants submitted and caused others to submit unnecessary drug tests in violation of New Jersey law is seeking recovery for monetary and treble damages. Holdings and the Borrower are vigorously defending these claims and believes them to be without merit. Further, the Borrower has made a demand for indemnification upon James Bevell for these claims.

(c) None

Schedule 5.13

Bank Accounts

Type of Account		Depository Bank or Securities Intermediary	Address of Depository Bank or Securities Intermediary	Account Number	Entity
American Addiction Centers, Inc. entities:
	ZBA	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	Addiction Labs of America, LLC
	ZBA	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	Forterus Health Care Services, Inc.
	Deposit	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	American Addiction Centers, Inc.
	ZBA	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	Singer Island Recovery Center, LLC
	ZBA	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	Greenhouse Treatment Center, LLC
	ZBA	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	American Addiction Centers, Inc.
	ZBA	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	Leading Edge Recovery Center, LLC
	ZBA	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	Concorde Treatment Center, LLC
	ZBA/AP Checking	Wells Fargo	PO Box 63020, San Francisco, CA 94163	***	ABTTC, Inc.
	Money Market	Reliant Bank	101 Creekstone Blvd Ste. 200, Franklin, TN 37064	***	Performance Revolution, LLC d/b/a FitRx
	AP Checking	JP Morgan Chase	PO Box 659754, San Antonio, TX 78265-9754	***	ABTTC, Inc.
	AP/Payroll Checking	Commerce Bank		***	Forterus Health Care Services, Inc.
Professional Groups:
	AP/Payroll Checking	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	San Diego Professional Group PC
	AP Checking	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Brentwood Professional Group PC
	AP Checking	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Palm Beach Professional Group PC
	AP Checking	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Las Vegas Professional Group PC
	AP Checking	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Grand Prairie Professional Group PC
Behavioral Healthcare Really, LLC entities:
	AP Checking	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Greenhouse Real Estate LLC
	AP Checking	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Concorde Real Estate LLC
	AP Checking	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Behavioral Healthcare Realty LLC
Clinical Revenue Management Services, LLC:
	Operating AP / Payroll Account	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Clinical Revenue Management Services, LLC
	HRA Account	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Clinical Revenue Management Services, LLC
	Money Market Account	Reliant Bank	1736 Carothers Parkway, Brentwood, TN 37027	***	Clinical Revenue Management Services, LLC

Note: there were no deposit accounts, securities accounts, or commodity accounts associated with the following Grantors:

AAC Holdings, Inc.

B&B Holdings Intl LLC

San Diego Addiction Treatment Center, Inc.

AAC Las Vegas Outpatient Center, LLC

AAC Dallas Outpatient Center, LLC

Parallax Center, LLC

The Heights Supportive Housing, LLC

Hamilton Medically Assisted Treatment Associates, LLC

Schedule 6.4

Existing Debt

Notes Payable:	Balance1
Notes Payable – Partner		50,000.00
NP Blackburn		576,569.49
NP Blackburn/Springhill		0.00
NP Bevell		576,569.49
NP Balloon		3,278,456.91
NP-Wells Fargo Office Furniture – Aug 12		79,543.15
NP-Wells Fargo Office Furniture – Aug 12		88,230.52
NP Wells/Tampa Property		0.00
DeLage Landen Software		7,761.91
Milnor Capital		30,118.41

See attached Listing of Vehicles and Capital Leases.

¹  Balances are as of March 31, 2014

Schedule 6.6

Existing Guaranties

Wells Fargo	Credit Card	Maximum Limit:	$	1,000,000.00
American Express	Credit Card	Maximum Limit:	$	750,000.00

Schedule 6.7

Existing Investments

Description		Amount2
BHR to AAC	Intercompany Due To / Due From		426,556.96	3
AAC to BHR	Intercompany Due To / Due From		223,000.00
Professional Groups:
Brentwood	Receivable (for funding of operation)		25,000.00
San Diego	Receivable (for funding of operation)		368,654.00
Las Vegas	Receivable (for funding of operation)		318,500.00
Palm Beach	Receivable (for funding of operation)		469,609.00
			1,181,763.00
Jose Orozco4	Note Receivable		24,999.94

²  Balances are as of March 31, 2014.

³  These BHR / AAC Intercompany Due To/ Due From items will be paid pursuant to the post-closing Agreement executed in connection with the Initial Reorganization Transactions following the audit to consolidate all financial statements.

⁴  Represents a note receivable from an employee under a Promissory Note. Under the terms of the Promissory Note, the monthly principal payments in the amount of $8,333.34 are forgiven over the term of the Promissory Note. The final forgiveness period under the Promissory Note is on July 1, 2014, at which time the Promissory Note principal balance will be $0.

Schedule 6.8

Restricted Payments – Initial Reorganization Transactions and Borrower Merger

None.

Exhibit A

AMENDED AND RESTATED REVOLVING LINE OF CREDIT NOTE

$[            ]	[            ]
	[            ], 20[    ]

FOR VALUE RECEIVED, the undersigned AMERICAN ADDICTION CENTERS, INC. (formerly known as FORTERUS, INC.), a Nevada corporation (“Borrower”), promises to pay to the order of [            ] (“Lender”) at its office at [            ], or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of [            ] Dollars ($[            ]), or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein.

This Note is made pursuant to and is subject to the terms and conditions of that certain Second Amended and Restated Credit Agreement, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the “Credit Agreement”) among AAC HOLDINGS, INC., a Nevada corporation, Borrower, the lenders party hereto from time to time, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent and collateral agent (together with its successors and assigns, the “Agent”). Capitalized terms used herein without definition shall have the meanings assigned to such terms in the Credit Agreement.

1. DEFINITIONS:

As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:

(a) “Daily One Month LIBOR” means, for any day, the rate of interest equal to LIBOR then in effect for delivery for a one (1) month period.

(b) “LIBOR” means the rate of interest per annum determined by Agent based on the rate for United States dollar deposits for delivery of funds for one (1) month as reported on Reuters Screen LIBOR01 page (or any successor page) at approximately 11:00 a.m., London time, or, for any day not a London Business Day, the immediately preceding London Business Day (or if not so reported, then as determined by Agent from another recognized source or interbank quotation).

(c) “London Business Day” means any day that is a day for trading by and between banks in Dollar deposits in the London interbank market.

2. INTEREST:

(a) Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a fluctuating rate per annum determined by Agent to be the sum of the Daily One Month LIBOR in effect from time to time

plus the Applicable Margin. Each of Agent and Lender is hereby authorized to note the date and interest rate applicable to this Note and any payments made thereon on Agent’s and Lender’s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.

(b) Taxes and Regulatory Costs. Borrower shall pay to Lender immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) costs, expenses and liabilities arising from or in connection with reserve percentages prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Lender with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Lender among its operations shall be conclusive and binding upon Borrower

(c) Payment of Interest. Interest accrued on this Note shall be payable on the first day of each month, commencing May 1, 2014.

(d) Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Agent’s or Required Lenders’ option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note.

3. BORROWING AND REPAYMENT:

(a) Borrowing and Repayment. Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of the Credit Agreement; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on April 1, 2015.

(b) Advances. Advances hereunder, to the total amount of the principal sum stated above, may be made by the Line of Credit Lenders at the request of Borrower pursuant to Section 2.1(c) of the Credit Agreement.

(c) Application of Payments. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.

-2-

4. EVENTS OF DEFAULT:

Any Event of Default under the Credit Agreement shall constitute an “Event of Default” under this Note.

5. MISCELLANEOUS:

(a) Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by the holder or any other person) relating to Borrower or any other person or entity.

(b) Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.

(c) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York.

(d) Amendment and Restatement. This Note amends and restates in its entirety the Revolving Line of Credit Note, dated as of November 1, 2011, issued by Borrower to Lender (as amended or otherwise modified to the date hereof, the “Prior Note”). Each of the Borrower and Lender acknowledges and agrees that this Note does not constitute a novation, payment and reborrowing or termination of the obligations under the Prior Note and that all such obligations are in all respects continued and outstanding as obligations under this Note.

[Remainder of page intentionally left blank. Signature pages follow.]

-3-

IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.

Borrower:

AMERICAN ADDICTION CENTERS, INC.

By:

Name:

Title:

Acknowledged and Agreed to:

Lender:

[            ]

By:

Name:

Title:

EXHIBIT B

[FORM OF BORROWING NOTICE]

Date:             , 20    

To: Wells Fargo Bank, National Association, as the Agent (as defined herein)

Ladies and Gentlemen:

Reference is made to that certain Second Amended and Restated Credit Agreement dated as of April 15, 2014 (as amended, restated, supplemented or otherwise modified from time to time, the “Agreement”); capitalized terms used herein without definition shall have the meaning assigned to such terms in the Agreement), among by and among AAC HOLDINGS, INC., a Nevada corporation, AMERICAN ADDICTION CENTERS, INC. (formerly known as FORTERUS, INC.), a Nevada corporation (“Borrower”), the lenders party hereto from time to time (“Lenders”), and WELLS FARGO BANK, NATIONAL ASSOCIATION, as administrative agent and collateral agent for the Lenders (together with its successors and assigns, the “Agent”).

The undersigned hereby request:

A borrowing of Loans under the Line of Credit (the “Borrowing”)

1. On                                  (a Business Day).

2. In the amount of $            .

The foregoing request complies with the requirements of Section 2.1(c) of the Agreement.

The undersigned hereby certify that the following statements are true on the date hereof, and will be true on the above date, before and after giving effect and to the application of the proceeds from the Borrowing: (a) each of the representations and warranties made by any Loan Party in or pursuant to the Loan Documents are true and correct in all material respects (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality qualification, in which case such representations and warranties are true and correct in all respects), except (i) for representations and warranties expressly stated to relate to a specific earlier date, in which case such representations and warranties remain true and correct in all material respects as of such earlier date (other than those representations and warranties that are expressly qualified by a Material Adverse Effect or other materiality qualification, in which case such representations and warranties are true and correct in all respects as of such earlier date) and (ii) that for the purposes of Section 4.2 of the Agreement, the representations and warranties contained in Section 3.5 of the Agreement shall be deemed to refer to the most recent financial statements described in Section 3.5 of the Agreement or furnished pursuant to Sections 5.3(a) or 5.3(b) of the Agreement, as applicable, and (b) no Default or Event of Default exists or would result from the Borrowing requested hereunder or from the application of the proceeds thereof.

IN WITNESS WHEREOF, the Borrower has caused this Borrowing Notice to be executed and delivered by its duly authorized officer, as of the date first above written.

AMERICAN ADDICTION CENTERS, INC.

By:

Name:

Title:

EX-10

Exhibit 10.9

PROMISSORY NOTE

$1,500,000.00	Carlsbad, California
	July 31, 2013

FOR VALUE RECEIVED, the undersigned AMERICAN ADDICTION CENTERS, INC. (formerly known as Forterus, Inc.) (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at 5901 Priestly Drive, 1st Floor, Suite 130, Carlsbad, California 92008-8825, or at such other place as the holder hereof may designate, In lawful money of the United States of America and In Immediately available funds, the principal sum of One Million Five Hundred Thousand Dollars ($1,500,000.00), with interest thereon as set forth herein.

DEFINITIONS:

As used herein, the following terms shall have the meanings set forth after each, and any other term defined In this Note shall have the meaning set forth at the place defined:

(a) “Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close.

(b) “Daily One Month LIBOR” means, for any day, the rate of interest equal to LIBOR then In effect for delivery for a one (1) month period.

(c) “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula:

LIBOR =	Base LIBOR
	100% - LIBOR Reserve Percentage

(i) “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, for delivery of funds for one (1) month in an amount equal to the outstanding principal balance of this Note. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

(ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the term of this Note.

INTEREST:

(a) Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a rate per annum five percent (5.00%) above the Dally One Month LIBOR Rate In effect from time to time. Each change in the rate of interest hereunder shall become effective on the date each Daily One Month LIBOR Rate change Is announced within Bank.

(b) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any and all (i) withholdings, Interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes In the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs Imposed by any domestic or foreign governmental authority or resulting from compliance by

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Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.

(c) Payment of Interest. Interest accrued on this Note shall be payable on the first day of each month, commencing August 1, 2013.

(d) Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank’s option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note.

REPAYMENT AND PREPAYMENT:

(a) Repayment. The outstanding principal balance of this Note shall be due and payable in full on July 1, 2014.

(b) Application of Payments. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.

(c) Prepayment. Borrower may prepay principal on this Note at any time, in any amount and without penalty.

EVENTS OF DEFAULT:

This Note is made pursuant to and is subject to the terms and conditions of that certain Restated Credit Agreement between Borrower and Bank dated as of May 1, 2013, as amended from time to time (the “Credit Agreement”). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an “Event of Default” under this Note.

MISCELLANEOUS:

(a) Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower, and the obligation, if any, of the holder to extend any further credit hereunder shall immediately cease and terminate. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.

(b) Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.

(c) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California.

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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.

AMERICAN ADDICTION CENTERS, INC.
(formerly known as Forterus, Inc.)
By:	/s/    Jerrod Menz
	Jerrod Menz, Chief Executive Officer

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EX-10

Exhibit 10.10

TERM NOTE

$780,000.00	Carlsbad, California
	May 1, 2013

FOR VALUE RECEIVED, the undersigned AMERICAN ADDICTION CENTERS, INC. (formerly known as FORTERUS, INC.) (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Bank”) at its office at 5901 Priestly Drive, 1^st Floor, Suite 130, Carlsbad, California, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of Seven Hundred Eighty Thousand Dollars ($780,000.00), with interest thereon as set forth herein.

DEFINITIONS:

As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined:

(a) “Business Day” means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close.

(b) “Fixed Rate Term” means a period of one (1) month during which the entire outstanding principal balance of this Note bears interest determined in relation to LIBOR, with the understanding that (i) the initial Fixed Rate Term shall commence on the date this Note is disbursed, (ii) each successive Fixed Rate Term shall commence automatically, and without notice to or consent from Borrower, on the first Business Day following the date on which the immediately preceding Fixed Rate Term matures, and (iii) if, on the first Business Day of the last Fixed Rate Term applicable hereto the remaining term of this Note is less than one (1) month, said Fixed Rate Term shall be in effect only until the scheduled maturity date hereof. If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day.

(c) “LIBOR” means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) and determined pursuant to the following formula:

LIBOR =	Base LIBOR
	100% - LIBOR Reserve Percentage

(i) “Base LIBOR” means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market.

(ii) “LIBOR Reserve Percentage” means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for “Eurocurrency Liabilities” (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term.

(d) “Prime Rate” means at any time the rate of Interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank’s base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate.

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INTEREST:

(a) Interest. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) at a fixed rate per annum determined by Bank to be three and fifteen hundredths percent (3.15%) above LIBOR in effect on the first day of each Fixed Rate Term. With respect to each Fixed Rate Term hereunder, Bank is hereby authorized to note the date and Interest rate applicable thereto and any payments made thereon on Bank’s books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted.

(b) Taxes and Regulatory Costs. Borrower shall pay to Bank immediately upon demand, in addition to any other amounts due or to become due hereunder, any end all (i) withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) Imposed by any domestic or foreign governmental authority and related in any manner to LIBOR, and (ii) future, supplemental, emergency or other changes in the LIBOR Reserve Percentage, assessment rates imposed by the Federal Deposit Insurance Corporation, or similar requirements or costs imposed by any domestic or foreign governmental authority or resulting from compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority and related in any manner to LIBOR to the extent they are not included in the calculation of LIBOR. In determining which of the foregoing are attributable to any LIBOR option available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower.

(c) Payment of Interest. Interest accrued on this Note shall be payable on the 15^th day of each month, commencing June 15, 2013.

(d) Default Interest. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, or at Bank’s option upon the occurrence, and during the continuance of an Event of Default, the outstanding principal balance of this Note shall bear interest at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to four percent (4%) above the rate of interest from time to time applicable to this Note.

REPAYMENT AND PREPAYMENT:

(a) Repayment. Principal shall be payable on the 15^th day of each month in installments of Sixteen Thousand Two Hundred Fifty Dollars ($16,250.00) each, commencing June 15, 2013, and continuing up to and including April 15, 2017, with a final installment consisting of all remaining unpaid principal due and payable in full on May 15, 2017.

(b) Application of Payments. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof.

(c) Prepayment. Borrower may prepay principal on this Note at any time and in the minimum amount of One Hundred Thousand Dollars ($100,000.00); provided however, that if the outstanding principal balance of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance hereof. In consideration of Bank providing this prepayment option to Borrower, or if this Note shad become due and payable at any time prior to the last day of any Fixed Rate Term by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month;

(i) Determine the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto.

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(ii) Subtract from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid.

(iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above.

Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank, if Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum two percent (2.00%) above the Prime Rate In effect from time to time (computed on the basis of a 360-day year, actual days elapsed).

All prepayments of principal shall be applied on the most remote principal installment or installments then unpaid.

EVENTS OF DEFAULT:

This Note is made pursuant to and is subject to the terms and conditions of that certain Credit Agreement between Borrower and Bank dated as of May 1, 2013, as amended from time to time (the “Credit Agreement”). Any default in the payment or performance of any obligation under this Note, or any defined event of default under the Credit Agreement, shall constitute an “Event of Default” under this Note.

MISCELLANEOUS:

(a) Remedies. Upon the occurrence of any Event of Default, the holder of this Note, at the holder’s option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by Borrower. Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys’ fees (to include outside counsel fees and all allocated costs of the holder’s in-house counsel), expended or incurred by the holder in connection with the enforcement of the holder’s rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, end including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Borrower or any other person or entity.

(b) Obligations Joint and Several. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several.

(c) Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California.

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IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above.

AMERICAN ADDICTION CENTERS, INC.

(formerly known as FORTERUS, INC.)

By:	/s/ Jerrod Menz
	Jerrod Menz, Chief Executive Officer

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EX-10

Exhibit 10.11

TERM LOAN AGREEMENT

by and among

AAC HOLDINGS, INC.

as Borrower,

Guarantor (as herein defined),

and

RELIANT BANK,

as Lender

Entered into May 2, 2014, but effective as of April 15, 2014

TERM LOAN AGREEMENT

THIS TERM LOAN AGREEMENT (the “Agreement”) is entered into May 2, 2014 but effective as of April 15, 2014 (“Effective Date”), by and among

[i] RELIANT BANK, with offices at 1736 Carothers Parkway, Suite 100, Brentwood, Tennessee 37027 (“Lender”);

[ii] AAC HOLDINGS, INC., a Nevada corporation (“Borrower”);

[iii] AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (“American”);

[iv] MICHAEL T. CARTWRIGHT, an individual residing in Tennessee (“Cartwright”);

[v] JERROD N. MENZ, an individual residing in Tennessee (“Menz”); and

[vi] KIRK R. MANZ, an individual residing in Tennessee (“Manz;” American, Cartwright, Menz, and Manz are collectively referred to herein as the “Guarantor”).

Lender, Borrower and Guarantor are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS:

WHEREAS, Borrower desires to obtain a term loan from Lender in the principal amount of One Million Seven Hundred Thirty-one Thousand One Hundred Sixty-four and 45/100 Dollars ($1,731,164.45); and

WHEREAS, Lender has agreed to make the Loan (defined herein) to Borrower, subject to the certain terms, conditions and contingencies contained herein, for the purpose of assisting and aiding Borrower.

AGREEMENT:

NOW, THEREFORE, in consideration of the foregoing recitals and the mutual promises hereinafter set forth, in further consideration of certain other agreements and instruments entered into simultaneously herewith, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Parties, Lender and Borrower agree as follows:

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ARTICLE 1

DEFINITIONS

1.1. Definitions. As used herein, the following capitalized terms shall have the indicated meanings, unless expressly indicated otherwise:

“Agreement” shall mean this Term Loan Agreement, as amended from time to time.

“Borrower” shall mean Borrower as defined in the preamble of this Agreement, which Borrower shall also be deemed the “Debtor” under the Uniform Commercial Code, and such successors and assigns thereof permitted under this Agreement by Lender.

“Business Day” means a day, other than Saturday, Sunday, or any legal holiday, upon which Lender is open for banking business in Nashville, Tennessee.

“Debtor Relief Laws” shall mean all applicable liquidation, conservatorship, bankruptcy, moratorium, arrangement, receivership, insolvency, reorganization or similar laws or general equitable principles from time to time in effect affecting the rights of creditors generally.

“Event of Default” or “event of default” shall mean any one of those events specified in Section 7.1 herein.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied, as promulgated by the American Institute of Certified Public Accountants and the Financial Accounting Standards Board.

“Guaranty” means the Continuing Guaranty of even date herewith executed and delivered by Guarantor in consideration of the Loan.

“Guarantor” shall mean the Guarantor defined in the preamble of this Agreement and such successors and assigns thereof permitted under this Agreement by Lender.

“Indebtedness” means all obligations, indebtedness and liabilities of whatsoever kind, nature or description owed to Lender by or on account of Borrower and related to the Loan, whether direct or indirect, absolute or contingent, due or to become due, and whether now existing or hereafter arising or created or acquired and howsoever evidenced, and whether joint and several or otherwise, and includes, without limitation, all further and future advances which Lender may at any time make related to any Loan Document including, without limitation, advances, insurance payments, tax payments, payments to governmental entities or agencies, the payment of any liens, claims, or encumbrances, and payment of any filing or recording fees; and includes all reasonable costs, court costs and expenses of whatever kind incurred by Lender in the protection, enforcement, defense or collection of the Indebtedness or the Loan Documents; all reasonable costs, expenses, and court costs and fees incurred or necessary to protect, enforce, liquidate, defend, or collect against the Borrower, Guarantor, or any party liable or obligated for part or all of the Indebtedness; and all costs, court costs, expenses, and attorney’s fees of whatever kind incurred by the Lender related thereto.

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“Lender” shall mean Lender as defined in the preamble of this Agreement, which shall also be deemed the “Secured Party” under the Uniform Commercial Code, together with its successors and assigns.

“Loan” shall mean the One Million Seven Hundred Thirty-one Thousand One Hundred Sixty-four and 45/100 Dollars ($1,731,164.45) term loan being extended by Lender to Borrower pursuant to this Agreement.

“Loan Documents” shall mean collectively, this Agreement, the Note, the Guaranty, the Correction and Revision Agreement of even date herewith, executed by Borrower and Guarantor, and any and all other documents made, executed, delivered or given by Borrower, Guarantor or any other Person (or for the benefit of Borrower) in connection with the Loan and delivered to Lender to evidence the Loan or to secure the prompt payment and performance of all obligations in connection therewith.

“Material Adverse Change” or “Material Adverse Effect” means (a) a material adverse change in, or material adverse effect on (after considering the availability of insurance proceeds), the business, prospects, assets, liabilities or financial condition of a Borrower, taken as a whole, or (b) a material impairment of a Borrower’s ability to perform its obligations under the Loan Documents.

“Maturity Date” shall mean the Maturity Date as set forth in the Note.

“Note” shall mean the Term Loan Promissory Note dated of even date herewith, made by Borrower payable to Lender evidencing Borrower’s obligation to repay the Loan, together with all amendments, changes, extensions, modifications, renewals replacements, substitutions, and supplements, thereto and thereof, as applicable, from time to time.

“Person” includes any individual, corporation, joint venture, general or limited partnership, limited liability company, trust, organization, association, other entity or tribunal.

“State” shall mean the State of Tennessee.

“Uniform Commercial Code” or “UCC” means, at any time, the Uniform Commercial Code as in effect in the state where a Loan Document has been filed, as from time to time amended, but shall mean as to all Loan Documents in the interpretation of this Agreement, the Uniform Commercial Code as in effect in the State.

1.2. Other Definitional Provisions.

(a) Accounting Terms. Any accounting term not specifically defined herein shall have the meaning as such term is used in accordance with GAAP consistently applied, and the determination of any accounting term, whether or not specifically defined herein, shall be in accordance with GAAP consistently applied.

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(b) Banking Terms. Any banking term not specifically defined herein shall have the meaning as such term is used in accordance with customary and standard banking practices, and the determination of any banking term, whether or not specifically defined herein, shall be in accordance therewith.

(c) Other Terms. All terms and phrases used herein, but which are not subject to Sections 1.2(a) and (b) and which are not expressly defined herein or by reference to other sources, shall have the meanings assigned to them in the Uniform Commercial Code or if an applicable definition is not contained therein, then said term shall have the meaning commonly assigned thereto.

(d) All terms defined in this Agreement shall have the above defined meanings when used in this Agreement, the Note or any other Loan Documents, certificate, report or other document made or delivered pursuant to this Agreement, unless otherwise defined therein.

(e) Defined terms used herein in the singular shall include the plural and vice versa.

(f) The words “hereof,” “herein,” “hereunder,” and similar terms when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement; the words “include”, “includes,” and “including” shall be deemed to be followed by “without limitation” regardless of whether such words or words of like import in fact follow same, and, unless the context clearly indicates otherwise, the disjunctive “or” shall include the conjunctive “and.”

ARTICLE 2

LOAN

Upon execution of this and other required Loan Documents and upon satisfaction of the contingencies hereinafter set forth and subject to the terms, conditions, warranties and representations herein, Lender agrees to make the Loan to Borrower. The Loan is a term loan and not a revolving credit facility, and the Loan amounts that are repaid may not be re-borrowed. The Loan shall be repaid to Lender by Borrower pursuant to the Note.

Borrower agrees to pay the reasonable costs and expenses of Lender related to or arising from this Agreement, the Loan Documents and the Closing (hereinafter defined) of the Loan.

The Lender’s records with respect to the Loan, the interest rates applicable thereto, each payment by the Borrower of principal and interest on the Loan pursuant to the Note, the amounts paid and payable by the Borrower hereunder and under the Note, and fees, expenses, and any other amounts due and payable in connection with this Agreement shall be presumptively correct absent manifest error or convincing evidence otherwise presented by Borrower to Lender. Within ten (10) days of receipt of a written request from Borrower, the Lender shall advise the Borrower, in writing, of the principal and interest outstanding under the Loan as of the date of such request and the dates on which such future payments are due. In the event Borrower does not pay the full amount due under the Note based upon such written response by Lender, such event shall not be considered a Borrower event of default under this Agreement or the Loan

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Documents so long as Borrower causes the full amount due to be paid within ten (10) days of receipt of written notice from Lender regarding the same. Borrower agrees to pay (i) a loan origination fee equal to Seventeen Thousand Three Hundred Eleven and 65/100 Dollars ($17,311.65), and (ii) an administrative fee of Five Hundred Fifty and 00/100 Dollars ($550.00), with such fees to be paid at Closing (collectively, the “Loan Fee”), which shall be included in the Indebtedness and payable pursuant to the Note.

This Agreement shall automatically terminate upon the Borrower’s payment of the Indebtedness due under the Note, or as otherwise agreed by the Parties.

ARTICLE 3

REPRESENTATIONS, WARRANTIES

AND COVENANTS

To induce Lender to enter into this Agreement and extend the Loan evidenced by the Note, Borrower and/or Guarantor hereby makes the representations and warranties to Lender set forth in this Article which shall survive the date and execution hereof and without which Lender would not enter into this Agreement and other Loan Documents and extend the credit evidenced by the Note. The representations and warranties shall be made as of the Effective Date and shall continue to be true, accurate and complete until such time as all of the Indebtedness is paid in full or until the end of the term of this Agreement, whichever is earliest. As used herein, the phrase “to the best of Borrower’s knowledge” shall mean the actual knowledge of Cartwright, Menz and Manz without the requirement to verify, inquire about or investigate the same.

3.1. Power and Authority; Enforceability. Borrower has the power to enter into this Agreement, the Note, the Loan Documents and the power and authority to execute and deliver to Lender additional agreements and other instruments and documents relating to the Indebtedness. This Agreement and the other Loan Documents to which the Borrower is a party have been duly executed and delivered by Borrower, and constitute the legal, valid, and binding obligations of Borrower, enforceable against Borrower in accordance with their respective terms except as enforceability may be limited by applicable laws, Debtor Relief Laws and general principles of equity.

3.2. No Breach. To the best of Borrower’s knowledge, the execution by Borrower of this Agreement, the Loan Documents and the other instruments, agreements, documents and note in connection herewith, does not and shall not constitute a breach, violation of, or default under any other material agreement to which Borrower is a party. The performance by Borrower of the obligations under this Agreement, the Loan Documents or any of the agreements and instruments executed by or on behalf of Borrower and delivered to Lender in connection with the Loan shall not constitute an event of default or breach under any other material agreement, instrument, security filing, security agreement, or other document to which Borrower is bound.

3.3. Taxes. Borrower has timely filed all federal, state and local tax returns and reports required to be filed by the Borrower and has timely paid all federal, state and local taxes owed by Borrower or for which Borrower is obligated or liable.

3.4. Payment and Performance. Borrower shall pay Lender all payments when due and shall fully discharge, satisfy, and perform all of its obligations to Lender.

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3.5. Compliance with All Laws. To the best of Borrower’s knowledge, Borrower has complied, is in compliance and shall continue to be in compliance with all local, state and federal laws, rules and regulations where failure to comply would have a Material Adverse Effect on Borrower.

3.6. No Litigation. There is no litigation, proceeding or investigation pending or, to the best of Borrower’s knowledge, threatened against Borrower, Guarantor or the material assets or property of Borrower or Guarantor in any court, bureau, agency or commission which would have a Material Adverse Effect on Borrower. To the best of Borrower’s knowledge, Borrower is not in default with respect to any judgment, order, writ, injunction, restraining order, decree, rule, regulation of any applicable court, bureau, administrative agency or commission which would have a Material Adverse Effect on Borrower. Borrower agrees to give Lender written notice, within twenty (20) days of filing, of the filing of any litigation, proceeding or investigation in any court, bureau, agency or commission that could have a Material Adverse Effect on Borrower, a Guarantor, or the assets or property of Borrower.

3.7. Annual Summary of Litigation Matters to be Submitted to Lender. Borrower agrees to provide on an annual basis within ninety (90) days after the close of each calendar year a detailed summary of all litigation matters, claims and assessments pending or served against Borrower, and said summary shall include, but not be limited to, the identity of the parties, name of the court or agency, docket or file number, the description of the claim including the maximum monetary amount thereof and/or the possible extent of injunctive or equitable relief sought thereunder and an estimate by counsel for Borrower of the liability of Borrower, if any.

3.8. Material Adverse Changes. Borrower shall inform Lender in writing promptly of any modifications, deviations, transitions, reversals, alterations, and the like, in contracts, business ventures, or business relationships which could reasonably be expected to have a Material Adverse Effect on the business or net worth of Borrower.

3.9. Financial Reporting Requirements. Borrower and Guarantor, as applicable, agree to deliver to Lender the following:

(a) Complete copies of Borrower’s federal tax returns within thirty (30) days of filing; provided, in the event an extension is filed, Borrower shall deliver a copy of the extension within thirty (30) days of filing;

(b) In a form acceptable to Lender, the personal financial statements of each Guarantor no later than April 15^th of each calendar year during the term of the Loan;

(c) Audited financial statements of Borrower and American (including balance sheet and income statements) prepared in reasonable detail and in conformity with GAAP and applied on a basis consistent with preceding years no later than April 15^th of each calendar year during the term of the Loan; and

(d) Such other and additional financial information of Borrower or Guarantor in a form acceptable to Lender as Lender reasonably may request.

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All financial statements of Borrower submitted to Lender in connection with the Loan shall fairly present, in all material respects, the financial condition and capitalization of Borrower as of the date of such financial statements. All such financial statements of Borrower shall be prepared in accordance with GAAP consistently applied (except any internally prepared monthly financial statements delivered to Lender, as reasonably requested, are not required to contain the note disclosures required by GAAP). Every submission by Borrower to Lender of financial statements shall constitute Borrower’s representation and warranty to Lender that no Material Adverse Changes have occurred or have been threatened or are pending since the date of Borrower’s most recent previous submission of financial statements to Lender that otherwise have not been previously disclosed to Lender in writing. Borrower shall at no time have any liabilities, direct or contingent, except those disclosed in such financial statements.

3.10. Reimbursement of Lender’s Additional Expenses. Borrower shall, on demand, reimburse Lender for any and all reasonable expenses incurred, or which may be hereafter incurred, by Lender from time to time in connection with or by reason of [i] Borrower’s application for, the making of, or any modifications, renewals or extensions of, the Loan, or [ii] Borrower’s failure to comply with Lender’s reasonable requests for information required by the Loan Documents.

3.11. No Untrue Statements; No Omissions. No representation, warranty and covenant by Borrower herein, and no statement, document, certificate or other instrument or exhibit furnished or to be furnished hereunder or in connection with the Loan contains or will contain, at any time during the term of this Agreement, any untrue statement of a material fact or omits any material fact relating to Borrower’s representations and warranties herein. All material information furnished by Borrower to Lender in connection with the Loan Documents is and will be true and correct in all material respects or prepared in good faith based upon assumptions Borrower believes to be reasonable on the date as of which such information is furnished.

3.12. Greenhouse Loan. Borrower, Guarantor and Greenhouse Real Estate, LLC agree to apply any cash proceeds realized following a refinancing of any loan to Greenhouse Real Estate, LLC, to the principal reduction of the Note hereunder or to pay off the Note in full.

3.13. Compliance Certificate. Borrower and/or Guarantor agrees to provide Lender with evidence that Borrower and/or Guarantor is in compliance with all covenants provided in any loan documents executed by Borrower and/or Guarantor in connection with any loan from Wells Fargo Bank no later than the end of each quarter (“Wells Fargo Bank Covenants”). Borrower and/or Guarantor acknowledges and agrees that if Borrower and/or Guarantor is not in compliance with any Wells Fargo Bank Covenants and fails to either cure or have such noncompliance waived within sixty (60) days of the end of such quarter, Borrower and/or Guarantor shall be in default hereunder.

3.14. Change of Entity Name. Borrower shall not carry on business, trade as, be known as, use as, incorporate or reorganize under any other name or change its legal entity or current entity name without prior written notice to Lender and the prior written consent of Lender.

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ARTICLE 4

CONDITIONS

The obligation of Lender to perform hereunder and under the Loan Documents shall be subject to Borrower’s fulfillment of the following conditions to the reasonable satisfaction of Lender:

4.1. Representations and Warranties True, Correct, and Complete. Borrower’s representations and warranties contained in Article 3 of this Agreement and in each and every other Loan Document shall be true, correct and complete as of the date of execution hereof, the date of Closing, or the date of any disbursement of monies pursuant to this Agreement and the Loan Documents, and shall survive the same and shall be true, correct and complete thereafter, so long as any Indebtedness exists hereunder or in connection herewith.

4.2. Execution of Documents; Performance of Obligations. Borrower shall, at all times during the term of this Agreement, duly, properly and with valid authority execute and deliver such Loan Documents, agreements, instruments, assignments, deeds and notes as are reasonably required by Lender (including, without limitation, those set forth in Article V) in form and substance satisfactory to Lender. Borrower shall at all times during the term of this Agreement perform its obligations, maintain its covenants, and fulfill the conditions imposed herein.

ARTICLE 5

CLOSING AND FEES TO LENDER

5.1. Closing. The closing of the Loan (the “Closing”) shall take place at a date and time mutually agreed upon by the Parties.

5.2. Closing Documents. Borrower shall deliver, or cause to be delivered, the following documents at Closing executed on behalf of Borrower and/or Guarantor, as applicable:

(a) This Agreement;

(b) The Note;

(c) The Guaranty;

(d) A Borrower’s Loan Closing Certificate of even date herewith;

(e) A statement itemizing the Closing fees to be paid to Lender by Borrower in accordance herewith (“Loan Settlement Statement”);

(f) A Correction and Revision Agreement of even date herewith, executed by Borrower, Guarantor and Lender; and

(g) Such other documents, certificates or instruments as Lender shall reasonably require as a condition to the extension of the Loan and that are customary for the nature of the transaction contemplated herein.

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5.3. Fees to Lender. In addition to all other amounts due pursuant to this Agreement, Borrower agrees to pay to Lender the following pursuant to the terms of the Note:

(a) The Loan Fee;

(b) Those costs and expenses set forth in the Loan Settlement Statement; and

(c) For the benefit of Borrower, on demand, all reasonable costs and expenses that Lender pays or incurs in connection with the negotiation, preparation, and consummation of this Agreement or any of the other Loan Documents, including without limitation: [i] reasonable attorneys’ fees, costs, and disbursements; [ii] administrative costs and expenses related to Closing the Loan, including costs and expenses of lien searches and copies for due diligence materials from governmental authorities or other vendors; and [iii] costs and expenses of forwarding loan proceeds.

All fees payable hereunder shall be paid on the dates due to the Lender as provided in the Loan Documents, in immediately available funds without deduction, set-off, or counterclaim. None of the foregoing fees (in subsections (a)-(c) above) are refundable under any circumstances, except as otherwise permitted at law or in equity.

ARTICLE 6

INDEMNIFICATION

6.1. Indemnification of Lender as to the Loan. Borrower hereby agrees to indemnify and hold harmless Lender, its successors and assigns and does hereby indemnify and hold harmless Lender, its successors and assigns, from and against any losses, damages, expenses or liabilities, obligations, penalties, actions, judgments, suits, costs, including attorney fees and disbursements of any kind or nature whatsoever which may be imposed in, incurred by or served against Lender in any way relating to or arising out of this Agreement, the Note, the Loan Documents or any other agreement or instrument in connection herewith, or any action taken or omitted to be taken by Lender under this Agreement, the Loan Documents or any other agreement or instrument or other note in connection herewith (except for losses, damages, expenses or liabilities, obligations, penalties, actions, judgments, suits, costs caused by or arising from the gross negligence or intentional misconduct of Lender), and Borrower agrees to pay Lender the maximum rate of interest permitted by law for any monies accruing or coming due hereunder. At the cost and expense of Borrower, which shall be reasonable, and with legal counsel chosen by Lender, Borrower shall defend any and all claims relating to such indemnified matters and shall pay any judgments or decrees entered relating thereto.

6.2. Survival. Borrower’s indemnification and holding harmless of Lender in this Article shall survive any foreclosure, sale, taking, possession, realization, seizure or acceptance of a bill of sale and/or deed in lieu of foreclosure by Lender, and the indemnity and hold harmless in this Article shall survive the payment in full of the Indebtedness to Lender and the release of any Borrower.

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ARTICLE 7

EVENTS OF DEFAULT

7.1. Default. Upon the occurrence and during the continuance of any of the following events of default, Lender may, at its option, declare by written notice to Borrower that the principal of and interest on any note or notes of Borrower and all Indebtedness remaining unpaid, to be immediately due and payable, all without demand, presentment, or other notice of any kind, all of which are hereby expressly waived:

(1) Failure to pay the Indebtedness, or any part thereof, or the payment of any other sum which may be due and owing under any Loan Document when and as the same shall become due and payable; or

(2) If any warranty, covenant, representation, agreement or statement made, furnished or contained in this Agreement or in any other Loan Document be false, untrue or misleading in any material respect either at the time made or furnished or becomes false, untrue or misleading at any time thereafter during the term of this Agreement; or

(3) The occurrence of an event of default or the nonperformance, nonobservance, default, breach or failure to timely comply, perform, observe or execute in every particular the covenants, agreements, promises, obligations, warranties and conditions set out in any Loan Document or any other instrument or agreement between Borrower and Lender with respect to any other indebtedness of Borrower owed to Lender and such default is not cured within any applicable cure period; or the occurrence of an event of default or the nonperformance, nonobservance, default, breach or failure to timely comply, perform, observe or execute in every particular the covenants, agreements, promises, obligations, warranties and conditions set out in any other agreement with any other creditor, person, or entity, whether or not related to the Indebtedness, to which Borrower is a party or that may materially affect any of Borrower’s assets or that may affect Borrower’s ability to pay the Indebtedness or perform under the Loan Documents; or

(4) The filing by or against Borrower of a voluntary or involuntary petition in bankruptcy; or any such Borrower’s adjudication as a bankrupt or insolvent; or the filing by Borrower of any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief for itself under any present or future federal, state or other law or regulation relating to bankruptcy, insolvency, receivership or other relief for debtors; or the making by Borrower, of any general assignment for the benefit of creditors; or the admission in writing by Borrower, of its inability to pay the Indebtedness as it becomes due; or the commission by Borrower, of an act of bankruptcy, unless the obligation of performance under this Agreement and/or the Loan Documents is assigned to another party acceptable to Lender; or

(5) The occurrence of an event of default or the occurrence of an event which, with the passage of time or the giving of notice, or both, would constitute an event of default under this Agreement or any other Loan Document; or

(6) Should a Material Adverse Change occur in the financial condition of Borrower; or

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(7) The occurrence of an event of default or the nonperformance, nonobservance, default, breach or failure to timely comply, perform, observe or execute in every particular the covenants, agreements, promises, obligations, warranties and conditions set out in any instrument or agreement between Borrower and/or Guarantor and Wells Fargo Bank and such default is not cured within any applicable cure period and/or waived by Lender; or

(8) Should any of the foregoing Events of Default occur with respect to any endorser or any guarantor of any of the Indebtedness.

7.2. Lender’s Right to Pursue Remedies. Upon the failure of Borrower to cure any default hereunder or upon the failure of Borrower to pay all Indebtedness to Lender pursuant to the Note, then Lender may pursue any and all legal and equitable remedies available to it (including, without limitation, those available to it under this Agreement, the Note, and any other Loan Document) and said remedies shall be cumulative and shall include, but not be limited to, the sale or other disposition of any part of or all of the property, assets and interests which are held or owned by Lender and the offset of any bank accounts and monies of Borrower on deposit with Lender and suit for a deficiency, if any, plus all reasonable attorney fees for all of same.

ARTICLE 8

GENERAL PROVISIONS

8.1. Notice. All notices, requests and communications shall be in writing, the sending or giving of such notices, requests or communications shall be in writing and the sending or giving of such notices, requests or communications shall be sufficient in all respects if sent by [i] certified mail, postage fully prepaid with return receipt requested, [ii] personal delivery, [iii] national overnight courier (e.g., FedEx or UPS) providing written evidence of receipt by addressee; or [iv] facsimile transmission. Any notice pursuant to this Section shall be mailed or delivered to the address set forth below. Any such notice or other communication shall be deemed to have been given (whether or not actually received) three (3) business days following the day it is mailed, or on the same date it is personally delivered as aforesaid or, if transmitted by facsimile transmission, on the day that such notice is transmitted as aforesaid or, if sent by recognized overnight carrier, on the next business day after delivery to such overnight carrier; provided, however, that any notice via facsimile transmission received after 5:00 p.m. (local time) shall be deemed for the purposes of this Section to have been given on the next business day. Unless otherwise provided to the contrary, all notices shall be effective when sent or given to the following addressee:

If to Lender: Reliant Bank 1736 Carothers Parkway, Suite 100 Brentwood, Tennessee 37027 Attention: Stephen Fawehinmi Telephone: (615) 221-2091 Email: sfawehinmi@reliantbank.com

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With a copy to:	Bone McAllester Norton PLLC 1600 Nashville City Center 511 Union Street Nashville, Tennessee 37219 Attention: Andrea P. Perry Telephone: (615) 238-6303 Email: aperry@bonelaw.com
If to Borrower:	AAC Holdings, Inc. 115 East Park Drive, Second Floor Brentwood, Tennessee 37027 Attention: Michael T. Cartwright Attention: Kirk R. Manz Telephone: (615) 642-6429 Email: fitrx@live.com
With a copy to:	AAC Holdings, Inc. 115 East Park Drive, Second Floor Brentwood, Tennessee 37027 Attention: Kathryn Sevier Phillips Telephone: (615) 732-1366 Email: ksphillips@contactaac.com
If to Guarantor:	Michael T. Cartwright 115 East Park Drive, Second Floor Brentwood, Tennessee 37027 Telephone: (615) 642-6429 Email: fitrx@live.com
	Jerrod N. Menz 115 East Park Drive, Second Floor Brentwood, Tennessee 37027 Telephone: (949) 257-6082 Email: jmenz@contactaac.com
	Kirk R. Manz 115 East Park Drive, Second Floor Brentwood, Tennessee 37027 Telephone: (615) 491-4274 Email: kirk.manz@gmail.com
	American Addiction Centers, Inc. 115 East Park Drive, Second Floor Brentwood, Tennessee 37027 Attention: Michael T. Cartwright Attention: Kirk R. Manz Telephone: (615) 642-6429 Email: fitrx@live.com

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With a copy to: American Addiction Centers, Inc. 115 East Park Drive, Second Floor Brentwood, Tennessee 37027 Attention: Kathryn Sevier Phillips Telephone: (615) 732-1366 Email: ksphillips@contactaac.com

Any Party hereto may change their address for the purpose of notice hereunder by giving notice pursuant to the provisions of this Section.

8.2. Assignment. This Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective heirs, successors and assigns.

8.3. Waiver. No course of dealing on the part of Lender, its officers or employees, and no failure or delay by Lender with respect to the exercise of any right, power or privilege by Lender under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or privilege operate as such a waiver. No waiver of default shall be effective unless in writing, signed by a duly authorized officer of Lender. No waiver of any default shall preclude any later exercise thereof or any exercise of any right, power or privilege hereunder. No waiver of any default or forbearance on the part of Lender in enforcing any of its rights under this Agreement shall operate as a waiver of any other default or right or of the same default or right, in future occasions.

8.4. Amendment and Waiver. This Agreement cannot be changed or terminated orally. No waiver of compliance of any provision or condition hereof and no consent provided for herein shall be effective unless evidenced by an instrument in writing duly executed by the Party hereto sought to be charged with such waiver or consent.

8.5. Effect of this Agreement. This Agreement sets forth the entire understanding of the Parties and supersedes any and all prior agreements and arrangements or understandings relating to the subject matter hereof. No representation, promise, inducement or statement of intention has been made by either Party which is not embodied in this Agreement, and no Party shall be bound by or be liable for any alleged representation, promise, inducement or statement of intent not embodied herein.

8.6. Headings. The article or paragraph headings of this Agreement are for convenience of reference only and do not form a part hereof and do not in any way modify, interpret or construe the intentions or agreement of the parties.

8.7. Time. Time is of the essence of this Agreement.

8.8. Counterparts; Delivery by Facsimile Transmission. This Agreement may be executed by each Party upon a separate copy or separate signature pages, and any combination of separate copies executed by all parties or including signature pages so executed will constitute a single counterpart of this Agreement. This Agreement may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same agreement. It will not be necessary, in proving this Agreement in

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any proceeding, to produce or account for more than one counterpart of this Agreement. Delivery of an executed counterpart of this Agreement by facsimile transmission (fax) or email shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any Party delivering an executed counterpart of this Agreement by facsimile transmission or email also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

8.9. Construction. The Parties acknowledge and agree that this Agreement shall be construed and enforced in accordance with the laws of the State and of the United States of America, and the legal relations and obligations of the Parties shall be governed by said laws.

8.10. Exclusive Forum. The Parties agree that the courts of general jurisdiction of Davidson County, Tennessee, or the United States District Court for the Middle District of Tennessee shall have exclusive original jurisdiction for the resolution of any and all disputes arising under or relating to this Agreement, the Loan Documents or instruments and documents in connection therewith.

8.11. Alterations. Any handwritten interlineation and/or handwritten additions, changes or modifications and/or typewritten interlineations to this Agreement constitute additions, changes and modifications as they appear if the assent of all Parties hereto is evidenced by the initials of all Parties being affixed thereto in the margin or near thereto. Insofar as there is any inconsistency or conflict between provisions, then the following provisions shall govern and control in the following order of precedence: handwritten additions, changes and modifications; handwritten interlineation; typewritten interlineation; typewritten additions, changes or modifications; regular typewritten text.

[Signature page follows.]

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[Signature Page to Term Loan Agreement]

IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly and properly executed and delivered at Nashville, Davidson County, Tennessee, as of the Effective Date.

LENDER: RELIANT BANK
By:	/s/ Stephen Fawehinmi
	Stephen Fawehinmi, Vice President

BORROWER: AAC HOLDINGS, INC., a Nevada corporation
By:	/s/ Kathryn Sevier Phillips
Name:	Kathryn Sevier Phillips
Title:	General Counsel and Secretary

GUARANTOR:

/s/ Michael T. Cartwright

Michael T. Cartwright, an individual

/s/ Jerrod N. Menz

Jerrod N. Menz, an individual

/s/ Kirk R. Manz

Kirk R. Manz, an individual

AMERICAN ADDICTION CENTERS, INC., a Nevada corporation
By:	/s/ Kathryn Sevier Phillips
Name:	Kathryn Sevier Phillips
Title:	General Counsel and Secretary

[Notary jurats follow.]

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[Notary jurats page]

STATE OF TENNESSEE                 )

COUNTY OF RUTHERFORD         )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Kathryn Sevier Phillips, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath acknowledged herself to be the General Counsel and Secretary of AAC Holdings, Inc., a Nevada corporation, the within named bargainor, and that she as General Counsel and Secretary, executed the foregoing instrument for the purpose therein contained by signing the name of the corporation by herself as General Counsel and Secretary.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

***

STATE OF TENNESSEE                 )

COUNTY OF RUTHERFORD         )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Michael T. Cartwright, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), the within named bargainor, and who executed the foregoing instrument for the purpose therein contained.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

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STATE OF TENNESSEE                 )

COUNTY OF RUTHERFORD         )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Jerrod N. Menz, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), the within named bargainor, and who executed the foregoing instrument for the purpose therein contained.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

***

STATE OF TENNESSEE                 )

COUNTY OF RUTHERFORD         )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Kirk R. Manz, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), the within named bargainor, and who executed the foregoing instrument for the purpose therein contained.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

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STATE OF TENNESSEE                 )

COUNTY OF RUTHERFORD         )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Kathryn Sevier Phillips, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath acknowledged herself to be the General Counsel and Secretary of American Addiction Centers, Inc., a Nevada corporation, the within named bargainor, and that she as General Counsel and Secretary, executed the foregoing instrument for the purpose therein contained by signing the name of the corporation by herself as General Counsel and Secretary.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

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EX-10

Exhibit 10.12

CONTINUING GUARANTY

THIS CONTINUING GUARANTY (the “Guaranty”) entered into May 2, 2014 but effective as of the 15^th day of April, 2014 (“Effective Date”), by AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (the “Guarantor”), in favor of RELIANT BANK with offices located at 1736 Carothers Parkway, Suite 100, Brentwood, Tennessee 37027 (the “Lender”), in order to induce the Lender to extend credit to AAC HOLDINGS, INC., a Nevada corporation (the “Borrower”). The Guarantor and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS

WHEREAS, pursuant to that certain Term Loan Agreement of even date herewith (“Loan Agreement”) between the Borrower, Guarantor and Lender, Lender has agreed to loan to Borrower the principal sum of One Million Seven Hundred Thirty-one Thousand One Hundred Sixty-four and 45/100 Dollars ($1,731,164.45) (“Loan”) for the purposes specified in the Loan Agreement;

WHEREAS, the Loan Agreement provides that the Loan shall be repaid to Lender pursuant to that certain Term Loan Promissory Note of even date herewith (“Note”) executed by Borrower in favor of Lender. The term “Loan Documents” for the purposes hereof shall mean the Loan Agreement, the Note and those other documents described in the Loan Agreement as “Loan Documents”; and

WHEREAS, a condition to Lender’s agreement to lend the Loan to Borrower is that Guarantor must enter into this Guaranty, without which the Lender would not lend the Loan to Borrower.

W I T N E S S E T H:

As an inducement to cause Lender to extend credit to the Borrower named herein, without which Guaranty the Borrower would be unable to obtain credit from the Lender, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees with the Lender that:

1. Definition of Obligations. As used in this Guaranty, the term “Obligations”, shall collectively mean all present and future debts and other obligations of the Borrower (and/or any successor(s) thereof) to the Lender and Lender’s successors, successors-in-title and assigns (except as limited below; if applicable) relating to the Loan and Loan Documents, when due, whether by acceleration or otherwise, with all interest as may accrue thereon, either before or after maturity or the occurrence of a default or Event of Default¹ thereof, together with all amendments, modifications, extensions, renewals, consolidations, refinancing, and restructures thereof, and all documents and other instruments now or hereafter, evidencing, securing, or otherwise relating to the Indebtedness, whether arising by note, loan documents, account, credit card, indemnity, contract, tort, guaranty, overdraft, or otherwise; whether direct or indirect, absolute or contingent; whether the Indebtedness is from time to time increased, reduced, or

¹  Any capitalized term used and not defined herein shall have the meaning ascribed it in the Loan Agreement.

entirely extinguished or re-incurred; whether or not the advances or events creating the Indebtedness are presently foreseen or are incurred with or without notice to Guarantor; and all reasonable costs, expenses, and fees (including reasonable attorneys’ fees) paid or incurred by Lender, in endeavoring to collect the Obligations, or to enforce, protect, or defend the Obligations, or any portion thereof, or to enforce, protect, or defend the perfection, validity, priority or enforceability of any mortgage, pledge, assignment, security interest, or lien securing the Obligations or to protect, defend, or enforce this Guaranty.

2. Continuing, Unconditional and Absolute Guaranty. The Guarantor hereby guarantees to Lender the full and timely payment and performance of the Obligations and agrees that the Guarantor’s guarantee of the Obligations is continuing, absolute and unconditional until the entire Obligation shall have been paid in full and discharged. The validity of this Guaranty shall not be impaired by any event whatsoever, including, but not limited to, the financial decline or bankruptcy of the Borrower; the failure of any other party to guarantee the Obligations or to assume liability for the Obligations or to provide collateral therefore; Lender’s failure to give Guarantor notice of default by Borrower; the unenforceability of any of the Obligations against the Borrower or any other person or entity or against any collateral for any reason; Lender’s failure to file suit against the Borrower (regardless of whether any one of the Borrower is or is becoming insolvent, is believed to be about to leave the state or any other circumstance); the occurrence of an Event of Default and Lender’s waiver or Lender’s failure to act as a result of such Event of Default; assumption of the Loan by any person or entity with or without release of Borrower; Lender’s declaration of default, acceleration or reinstatement of any or all of the Obligations at any time or times in accordance with applicable law and pursuant to the Loan Documents; Lender’s failure to renew or extend any or all of the Obligations as they become due (by acceleration or otherwise); or the termination of any relationship of Guarantor with Borrower, including, but not limited to, any relationship of employment, ownership, or commerce, or any other personal, business, or professional relationship. The Loan shall be deemed made in reliance upon the continued operation of this Guaranty in accordance herein. The Guarantor agrees that this Guaranty shall be valid and binding upon Guarantor upon the delivery of this executed Guaranty to Lender by Guarantor or an authorized representative of Guarantor.

3. Irrevocable Guaranty. Guarantor’s guarantee of the Obligations is irrevocable; provided, however, Guarantor may at any time by written notice (“Termination Notice”) to Lender prospectively terminate the Guarantor’s liability hereunder for Obligations, first incurred after Lender’s receipt of the Termination Notice, subject to the limitations set forth in this paragraph. After the delivery of Termination Notice to the Lender, Guarantor shall remain fully liable for all principal, interest and expenses, including reasonable attorney’s fees, for all existing Obligations outstanding as of the time of Lender’s receipt of the Termination Notice, for all principal of the Loan until paid in full, and for all interest subsequently accruing on the Loan until paid in full. In order to effectuate any attempted termination, the Guarantor must pay to the Lender all amounts owing hereunder, including pay in full on the Loan. The Guarantor acknowledges that it is critically important to the Borrower to obtain the commitment for the Loan and that the Lender would not make the commitment for the Loan without this Guaranty.

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4. Primary Liability of Guarantor. This Guaranty constitutes a guarantee of payment and performance and not of collection. The liability of Guarantor under this Guaranty shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower, any other co-Borrower, endorser, other guarantors, or other entity or person nor against any mortgage, assignment, pledge, security interest, or lien available to Lender. Guarantor waives any right to require an action to be brought against Borrower or any other co-Borrower, endorser, Guarantor, or other entity or person or to require that resort be had to any mortgage, assignment, pledge, security interest, or lien or against any collateral, or to any balance of any deposit account, or credit on the books of Lender in favor of Borrower or any other person. In accordance herein, Lender may enforce this Guaranty against Guarantor for any amounts due under the Obligations or any Obligation as they become due (by acceleration or otherwise) without first making demand or instituting collection proceedings against the Borrower in the event of a default under the Loan Documents. Guarantor’s liability for the Obligations is primary, and not secondary, and each document presently or hereafter executed by the Borrower to evidence or secure an Obligation to Lender is incorporated herein by reference and shall be fully enforceable against Guarantor.

5. Impairment of Collateral; Release of Liable Parties. Lender may, in its reasonable discretion, with or without notice to or consent from Guarantor, and with or without consideration, take or fail to take or delay taking any action of any type whatsoever; grant extensions, indulgences, compromises, or forbearance, or release, compromise or settle with any party therefore; or waive any default or Event of Default or fail to take any action upon the occurrence of default, an Event of Default, or upon maturity. No action which Lender shall take or fail to take in connection with the Obligations or with any Loan Documents evidencing the Obligations, or any of them, or any mortgage assignment, pledge, security interest, or lien for the payment of the Obligations to Lender, or for the performance of any Obligations or undertakings of Borrower or any co-Borrower, endorser, Guarantor or any other guarantor, nor any course of dealing with Borrower or any other person or entity, shall release, limit, reduce or waive Guarantors Obligations hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against Lender. The defenses of impairment of collateral and impairment of recourse and any requirement of diligence on Lender’s part in collecting the Obligations are hereby expressly waived by Guarantor.

6. Amendment of Obligations. The Lender may, without notice to or the joinder of Guarantor, modify, extend, accelerate, reinstate, refinance, consolidate, restructure, or renew the Obligations (with or without the execution of new promissory notes) and grant any consent or indulgence with respect hereto.

7. Waiver. Guarantor hereby waives (i) any requirement of presentment, protest, notice of dishonor, notice of default, notice of acceptance, demand and all other actions or notices that may otherwise be required on Lender’s part in connection with the Obligations, except those required herein, in the Loan Documents or pursuant to applicable law; (ii) all defenses of suretyship; and (iii) all rights of suretyship against Lender including, but not limited to, any right to cause Lender to initiate legal proceedings against the Borrower or any other applicable person or entity.

8. Subordination; Subrogation. Guarantor agrees that the Loan made by Guarantor to Borrower and any other obligations or debts of the Borrower to Guarantor shall be subordinate to the Obligations as to both payment and collection. Accordingly, in the event of a

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default under the Loan Documents and upon proper notice by Lender to Guarantor of the same, Guarantor agrees not to accept any payment whatsoever from the Borrower or to allow any payment by the Borrower for or to Guarantor or for Guarantor’s benefit without Lender’s prior written consent until all Obligations have been paid in full and this Guaranty has been terminated. Guarantor agrees that in the event of a bankruptcy or other insolvency proceedings involving Borrower, if Lender so directs, Guarantor will timely file a claim for the amount of the subordinated debt, in form approved by Lender. The Guarantor agrees to pursue said claim with diligence and to comply with any lawful instructions from Lender pertaining to the pursuit of the claim. The proceeds of any such claim shall be delivered to Lender, so long as such proceeds are not in excess of the amount of the Indebtedness. Guarantor shall not be subrogated to any rights of Lender against Borrower or any property or other party until the Obligations have been paid in full and terminated in writing by the Lender.

9. Application of Funds. The Lender may apply amounts received for Borrower’s account first to pay the Indebtedness, if any, before reducing the Obligations. Without notice to or consent of Guarantor, Lender may apply all payments and credits received from Borrower or from Guarantor in such manner and in such priority as Lender in its sole judgment shall see fit to the Obligations which are subject to this Guaranty.

10. Statute of Limitation. The Guarantor acknowledges that the statute of limitation applicable to this Guaranty shall begin to run only upon Lender’s accrual of a cause of action against Guarantor caused by Guarantor’s failure to honor a demand for performance hereunder made by Lender in writing; provided, however, if, subsequent to the demand upon Guarantor, Lender reaches an agreement with Borrower or Guarantor on any terms causing Lender to forbear in the enforcement of its demand upon Guarantor, the statute of limitation shall be reinstated and shall run for its full duration from such time that Lender subsequently makes demand upon Guarantor.

11. Death of Guarantor. If Guarantor is an individual, then, in the event of the death of Guarantor, the obligations of the Guarantor hereunder shall continue in full force and effect against Guarantor’s estate, and the executor or administrator of such estate shall be obligated and authorized to pay such debt and otherwise honor this Guaranty, and, if acceptable to Lender, to execute renewal of Guaranties or endorsements or notes or other evidence of indebtedness, from time to time, with respect to any unpaid Obligations hereunder.

12. Cancellation; Survival of Certain Obligations. The Lender may evidence its cancellation of this Guaranty and the release of Guarantor from liability hereunder by delivering to Guarantor an instrument of release, or by delivering this Guaranty to Guarantor marked cancelled or terminated, or both. The purported cancellation hereof and release of Guarantor shall not impair Guarantor’s continuing liability for (i) any amount of principal, interest or expenses that was mistakenly omitted by Lender in calculating the amount of the Obligations; (ii) any surviving liability of Borrower to reimburse Lender for expenses or to indemnify Lender provided for in any document executed prior to the purported cancellation hereof evidencing or securing the Obligations; (iii) liability for avoided payments and expenses related thereto (as provided in detail below); or (iv) any erroneous release hereof by Lender or any officer(s) of Lender.

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13. Waiver of Claim Against Borrower. Guarantor shall have no claim (as such as defined in 11 U.S.C. §101) against Borrower of any payment by Guarantor hereunder or in connection herewith, unless Guarantor’s possession of such claim would in no circumstance render a payment, hypothetical or otherwise, by Borrower to Lender, subject to avoidance, turnover, or nullification in any regard.

14. Recovery of Avoided Payments. If any payments or proceeds of collection applied by Lender to the Obligations should be challenged by a bankruptcy trustee, debtor-in-possession, creditor or other party as an avoidable transfer on the grounds that the payment constituted a preferential payment or a fraudulent conveyance under state law, federal law, or the Bankruptcy Code or any successor or similar statute thereto or on any other grounds, Lender may, as its option and in its sole discretion, elect whether to contest such challenge. If the Lender contests the avoidance action, all costs of the proceedings, including Lender’s reasonable attorney’s fees, will become part of the Obligations. If the contested amount, or any part thereof, is successfully avoided, the avoided amount will become part of the Obligations hereunder. If Lender elects not to contest the avoidance action, Lender may tender the amount subject to the avoidance action to the court, bankruptcy trustee, debtor-in-possession, creditor, or other party and the amount so tendered shall become part of the Obligations hereunder. The Guarantor’s obligation to reimburse Lender for amounts due under this paragraph shall survive the purported cancellation hereof.

15. Financial Statement. Guarantor covenants and agrees that from the date hereof and the earlier of the payment in full of the Obligations or the cancellation of this Guaranty, Guarantor, by and through Borrower, shall furnish, prepare, and deliver or cause to be furnished, prepared and delivered to Lender (i) current financial statements including balance sheet and income statements by the end of the month after each quarter end in a form acceptable to Lender, (ii) a compliance certificate that evidences Guarantor’s compliance with all covenants provided in any loan documents executed by Guarantor in connection with any loan from Wells Fargo Bank no later than the end of each quarter, (iii) audited financial statements including balance sheet and income statement prepared in reasonable detail and in conformity with GAAP, applied on a basis consistent with that of the preceding years no later than April 15^th of each calendar year during the term of the Loan, and (iv) within a reasonable period of time, such additional information and financial statements as Lender may from time to time request. In addition, within fifteen (15) days of filing, Guarantor shall deliver to Lender, without demand, a copy of Guarantor’s Federal Income Tax Return and any gift tax returns, all signed by Guarantor. The Guarantor warrants that Guarantor’s financial statements, all financial information and tax returns delivered to Lender hereunder are true, accurate and complete in every respect, and disclose all direct and contingent liabilities. Guarantor warrants that no Material Adverse Change has occurred in Guarantor’s financial condition as set forth in such financial statements.

16. Solvency of Guarantor. Guarantor warrants to Lender that Guarantor is not insolvent and that Guarantor’s execution hereof does not render Guarantor insolvent.

17. No Unpaid Taxes. Guarantor warrants that Guarantor is not presently and shall not hereafter be delinquent in the payment of any taxes imposed by any applicable governmental authority or in the filing of any tax return. Guarantor further warrants that Guarantor is not involved in a dispute with any taxing authority over tax amounts due.

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18. Consent to Jurisdiction and Venue. The Parties hereby irrevocably consent to the jurisdiction of the United States District Court for the Middle District of Tennessee and of all Tennessee state courts sitting in Davidson County, Tennessee, for the purpose of any litigation which concerns this Guaranty or the Obligations. It is further agreed that venue for any such action shall lie exclusively with courts sitting in those federal and Tennessee jurisdictions named above, unless the Parties agree to the contrary in writing. Guarantor acknowledges that this paragraph is a material inducement to the Lender in extending credit to the Borrower and in accepting this Guaranty.

19. Further Assurances, Etc. Guarantor agrees to execute such additional documents as Lender may reasonably require to perfect Lender’s interest in any of Guarantor’s property securing the Obligations, if applicable. Guarantor hereby irrevocably appoints Lender as Guarantor’s attorney-in-fact for the execution of such documents, which appointment shall automatically expire upon the satisfaction of the Indebtedness or the cancellation or termination of this Guaranty, whichever is earliest.

20. Expenses, Costs and Attorneys’ Fees. Guarantor agrees to pay to Lender all costs and expenses (including reasonable attorneys’ fees) paid or incurred by Lender in endeavoring to collect the Obligations or to enforce, protect, or defend the Obligations, or any portion thereof, or to enforce, protect, or defend the perfection, validity, priority, or enforceability of any mortgage assignment, pledge, security interest, or lien, which secures the Obligations, or any portion thereof, or to enforce, collect, protect or defend the Loan or any Loan Documents, or to enforce, protect, or defend any collateral or to collect or realize against any collateral which secures the Obligations or to enforce, collect or defend this Guaranty.

21. Notices. Any notices, demands or communications required under, allowed by or concerning this Guaranty shall be in accordance with the notice provisions in the Loan Agreement.

22. No Usury. If from any circumstances whatsoever, fulfillment of any provisions of this Guaranty, at the time performance of such provision shall be due, shall involve transcending the limit of validity presently prescribed by any applicable usury statute or other applicable law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity so that in no event shall any extraction be possible under the Guaranty that is excess of the limit of such validity, but such obligation shall be fulfilled to the maximum limit to such validity. The provisions of this paragraph shall control every other provision in this Guaranty.

23. Assignment. This Guaranty shall be binding upon the heirs, successors and assigns of Guarantor and Lender, except that the Guarantor shall not assign any rights or delegate any obligations arising hereunder without prior written consent of Lender. Any attempted assignment or delegation by Guarantor without the required prior written consent of Lender shall be void.

24. Entire Agreement; No Oral Representations Limiting Enforcement, Loan Agreement, Etc. This Guaranty represents the entire agreement between the Parties concerning the liability of Guarantor for the Obligations and any oral statements regarding Guarantor’s liability for the Obligations have been included in the language of this Guaranty. The

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Guarantor understands that the Lender intends to rely upon and to enforce this Guaranty and that the Guarantor must not rely upon or believe to be authorized or lawful any statement or representation to the contrary. The Lender hereby disavows any such statement or representation by any person. Without limiting the foregoing, Guarantor acknowledges Lender’s intention to enforce this Guaranty in accordance with its terms and to the fullest extent possible and Guarantor acknowledges that Lender has made no oral statements to Guarantor that could be construed as a waiver of Lender’s right to enforce this Guaranty in accordance with its terms by all available legal means.

25. Applicable Law. This Guaranty shall be governed by the laws of the State of Tennessee. The validity, construction and enforcement of this Guaranty and all other documents executed with respect to the Obligations shall be determined according to the substantive law of Tennessee applicable to contracts executed, delivered, and performed in that state. The provisions hereof are subject to all applicable state and federal laws to the extent they are not effectively waived herein, and shall be read as to comply therewith.

26. Change of Entity Name. Guarantor shall not carry on business, trade as, be known as, use as, incorporate or reorganize under any other name or change its legal entity or current entity name without prior written notice to Lender and the prior written consent of Lender.

27. General Provisions. The Lender’s indulgence or failure to act upon the existence of a default or event of default in any Obligations or this Guaranty or any other course of dealing or departure from the terms of this Guaranty or any Obligations shall not prejudice Lender’s rights to make demand and recover from Guarantor in accordance with the terms hereof. The remedies provided Lender in this Guaranty are not exclusive of any other remedies that may be available to Lender under any other document or at law or in equity. No provision of this Guaranty can be amended or waived, except by a statement in writing signed by the Party against which enforcement of the amendment or waiver is sought. Should any provision of this Guaranty be invalid or unenforceable for any reason, the remaining provisions hereof shall remain in full effect. Words used herein indicating gender or number shall be read as context may require.

28. Guarantor’s Books and Records; Lender’s Right to Inspect. Guarantor shall at all times keep proper books and records, maintain a system of accounting that enables Guarantor to produce financial statements in accordance with generally accepted accounting principles (“GAAP”), and maintain books and records that contain information as from time to time reasonably requested by Lender. Guarantor hereby authorizes Lender to make or cause to be made, at Guarantor’s reasonable expense and in such manner and at such times as Lender may reasonably require, during regular business hours and upon prior written notice (i) inspections and audits of any books, records and papers in the custody or control of Guarantor, relating to Guarantor’s financial or business conditions, including the making of copies thereof and extracts therefrom, and (ii) inspections and appraisals of any of Guarantor’s assets. Guarantor shall not modify or change its method of accounting (other than as may be required to conform to GAAP) in any material respect or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the

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preparation and storage of Guarantor’s or any of their subsidiaries’ or affiliates’ accounting records without such accounting firm or service bureau agreeing to provide Lender information regarding the Guarantor’s (or subsidiaries’ or affiliates’) financial condition.

29. Captions Not Controlling. Captions and headings have been included in this Guaranty for the convenience of the parties, and shall not be construed as affecting the content of the respective paragraphs.

THE PARTIES HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY LITIGATION, ACTION OR OTHER PROCEEDING (A) LENDER BRINGS TO ENFORCE OR COLLECT THE OBLIGATIONS OF THIS GUARANTY; (B) ALLEGING THAT LENDER HAS BREACHED ANY DUTY, OBLIGATION OR AGREEMENT, EXPRESS OR IMPLIED, RELATING TO THE OBLIGATIONS OF THIS GUARANTY; (C) ALLEGING THAT ANY PARTY OR SUCH PARTY’S OFFICERS, EMPLOYEES, REPRESENTATIVES, ATTORNEYS OR AGENTS HAVE ACTED WRONGFULLY, NEGLIGENTLY OR TORTIOUSLY WITH RESPECT TO THE OBLIGATIONS OF ANY BORROWER, ENDORSER OR GUARANTOR; OR (D) BETWEEN THE PARTIES RELATED HERETO. THIS WAIVER OF JURY TRIAL DOES NOT WAIVE GUARANTOR’S OR LENDER’S RIGHT TO BRING A LAW SUIT THAT A JUDGE, WITHOUT A JURY, WOULD DECIDE. IN ADDITION, THE GUARANTOR ACKNOWLEDGES A THOROUGH UNDERSTANDING OF THE TERMS OF THIS GUARANTY AND AGREES TO BE BOUND THEREBY.

This Guaranty is executed and delivered to Lender to as of the Effective Date.

[Signature Page Follows]

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[Signature page to Continuing Guaranty]

GUARANTOR:
AMERICAN ADDICTION CENTERS, INC.
By:	/s/ Michael T. Cartwright
Name: Michael T. Cartwright
Title: Chairman and Chief Executive Officer

STATE OF TENNESSEE                       )

COUNTY OF RUTHERFORD               )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Michael T. Cartwright, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath acknowledged himself to be the Chairman and Chief Executive Officer of American Addiction Centers, Inc., a Nevada corporation, the within named bargainor, and that he as Chairman and Chief Executive Officer, executed the foregoing instrument for the purpose therein contained by signing the name of the corporation by himself as Chairman and Chief Executive Officer.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

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EX-10

Exhibit 10.13

CONTINUING GUARANTY

THIS CONTINUING GUARANTY (the “Guaranty”) entered into May 2, 2014 but effective as of the 15^th day of April, 2014 (“Effective Date”), by MICHAEL T. CARTWRIGHT, an individual residing in Tennessee (the “Guarantor”), in favor of RELIANT BANK with offices located at 1736 Carothers Parkway, Suite 100, Brentwood, Tennessee 37027 (the “Lender”), in order to induce the Lender to extend credit to AAC HOLDINGS, INC., a Nevada corporation (the “Borrower”). The Guarantor and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS

WHEREAS, pursuant to that certain Term Loan Agreement of even date herewith (“Loan Agreement”) between the Borrower, Guarantor and Lender, Lender has agreed to loan to Borrower the principal sum of One Million Seven Hundred Thirty-One Thousand One Hundred Sixty-Four and 45/100 Dollars ($1,731,164.45) (“Loan”) for the purposes specified in the Loan Agreement;

WHEREAS, the Loan Agreement provides that the Loan shall be repaid to Lender pursuant to that certain Term Loan Promissory Note of even date herewith (“Note”) executed by Borrower in favor of Lender. The term “Loan Documents” for the purposes hereof shall mean the Loan Agreement, the Note and those other documents described in the Loan Agreement as “Loan Documents”; and

WHEREAS, a condition to Lender’s agreement to lend the Loan to Borrower is that Guarantor must enter into this Guaranty, without which the Lender would not lend the Loan to Borrower.

W I T N E S S E T H:

As an inducement to cause Lender to extend credit to the Borrower named herein, without which Guaranty the Borrower would be unable to obtain credit from the Lender, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees with the Lender that:

1. Definition of Obligations. As used in this Guaranty, the term “Obligations”, shall collectively mean all present and future debts and other obligations of the Borrower (and/or any successor(s) thereof) to the Lender and Lender’s successors, successors-in-title and assigns (except as limited below; if applicable) relating to the Loan and Loan Documents, when due, whether by acceleration or otherwise, with all interest as may accrue thereon, either before or after maturity or the occurrence of a default or Event of Default¹ thereof, together with all amendments, modifications, extensions, renewals, consolidations, refinancing, and restructures thereof, and all documents and other instruments now or hereafter, evidencing, securing, or otherwise relating to the Indebtedness, whether arising by note, loan documents, account, credit card, indemnity, contract, tort, guaranty, overdraft, or otherwise; whether direct or indirect, absolute or contingent; whether the Indebtedness is from time to time increased, reduced, or

¹  Any capitalized term used and not defined herein shall have the meaning ascribed it in the Loan Agreement.

entirely extinguished or re-incurred; whether or not the advances or events creating the Indebtedness are presently foreseen or are incurred with or without notice to Guarantor; and all reasonable costs, expenses, and fees (including reasonable attorneys’ fees) paid or incurred by Lender, in endeavoring to collect the Obligations, or to enforce, protect, or defend the Obligations, or any portion thereof, or to enforce, protect, or defend the perfection, validity, priority or enforceability of any mortgage, pledge, assignment, security interest, or lien securing the Obligations or to protect, defend, or enforce this Guaranty.

2. Continuing, Unconditional and Absolute Guaranty. The Guarantor hereby guarantees to Lender the full and timely payment and performance of the Obligations and agrees that the Guarantor’s guarantee of the Obligations is continuing, absolute and unconditional until the entire Obligation shall have been paid in full and discharged. The validity of this Guaranty shall not be impaired by any event whatsoever, including, but not limited to, the financial decline or bankruptcy of the Borrower; the failure of any other party to guarantee the Obligations or to assume liability for the Obligations or to provide collateral therefore; Lender’s failure to give Guarantor notice of default by Borrower; the unenforceability of any of the Obligations against the Borrower or any other person or entity or against any collateral for any reason; Lender’s failure to file suit against the Borrower (regardless of whether any one of the Borrower is or is becoming insolvent, is believed to be about to leave the state or any other circumstance); the occurrence of an Event of Default and Lender’s waiver or Lender’s failure to act as a result of such Event of Default; assumption of the Loan by any person or entity with or without release of Borrower; Lender’s declaration of default, acceleration or reinstatement of any or all of the Obligations at any time or times in accordance with applicable law and pursuant to the Loan Documents; Lender’s failure to renew or extend any or all of the Obligations as they become due (by acceleration or otherwise); or the termination of any relationship of Guarantor with Borrower, including, but not limited to, any relationship of employment, ownership, or commerce, or any other personal, business, or professional relationship. The Loan shall be deemed made in reliance upon the continued operation of this Guaranty in accordance herein. The Guarantor agrees that this Guaranty shall be valid and binding upon Guarantor upon the delivery of this executed Guaranty to Lender by Guarantor or an authorized representative of Guarantor.

3. Irrevocable Guaranty. Guarantor’s guarantee of the Obligations is irrevocable; provided, however, Guarantor may at any time by written notice (“Termination Notice”) to Lender prospectively terminate the Guarantor’s liability hereunder for Obligations, first incurred after Lender’s receipt of the Termination Notice, subject to the limitations set forth in this paragraph. After the delivery of Termination Notice to the Lender, Guarantor shall remain fully liable for all principal, interest and expenses, including reasonable attorney’s fees, for all existing Obligations outstanding as of the time of Lender’s receipt of the Termination Notice, for all principal of the Loan until paid in full, and for all interest subsequently accruing on the Loan until paid in full. In order to effectuate any attempted termination, the Guarantor must pay to the Lender all amounts owing hereunder, including pay in full on the Loan. The Guarantor acknowledges that it is critically important to the Borrower to obtain the commitment for the Loan and that the Lender would not make the commitment for the Loan without this Guaranty.

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4. Primary Liability of Guarantor. This Guaranty constitutes a guarantee of payment and performance and not of collection. The liability of Guarantor under this Guaranty shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower, any other co-Borrower, endorser, other guarantors, or other entity or person nor against any mortgage, assignment, pledge, security interest, or lien available to Lender. Guarantor waives any right to require an action to be brought against Borrower or any other co-Borrower, endorser, Guarantor, or other entity or person or to require that resort be had to any mortgage, assignment, pledge, security interest, or lien or against any collateral, or to any balance of any deposit account, or credit on the books of Lender in favor of Borrower or any other person. In accordance herein, Lender may enforce this Guaranty against Guarantor for any amounts due under the Obligations or any Obligation as they become due (by acceleration or otherwise) without first making demand or instituting collection proceedings against the Borrower in the event of a default under the Loan Documents. Guarantor’s liability for the Obligations is primary, and not secondary, and each document presently or hereafter executed by the Borrower to evidence or secure an Obligation to Lender is incorporated herein by reference and shall be fully enforceable against Guarantor.

5. Impairment of Collateral; Release of Liable Parties. Lender may, in its reasonable discretion, with or without notice to or consent from Guarantor, and with or without consideration, take or fail to take or delay taking any action of any type whatsoever; grant extensions, indulgences, compromises, or forbearance, or release, compromise or settle with any party therefore; or waive any default or Event of Default or fail to take any action upon the occurrence of default, an Event of Default, or upon maturity. No action which Lender shall take or fail to take in connection with the Obligations or with any Loan Documents evidencing the Obligations, or any of them, or any mortgage assignment, pledge, security interest, or lien for the payment of the Obligations to Lender, or for the performance of any Obligations or undertakings of Borrower or any co-Borrower, endorser, Guarantor or any other guarantor, nor any course of dealing with Borrower or any other person or entity, shall release, limit, reduce or waive Guarantors Obligations hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against Lender. The defenses of impairment of collateral and impairment of recourse and any requirement of diligence on Lender’s part in collecting the Obligations are hereby expressly waived by Guarantor.

6. Amendment of Obligations. The Lender may, without notice to or the joinder of Guarantor, modify, extend, accelerate, reinstate, refinance, consolidate, restructure, or renew the Obligations (with or without the execution of new promissory notes) and grant any consent or indulgence with respect hereto.

7. Waiver. Guarantor hereby waives (i) any requirement of presentment, protest, notice of dishonor, notice of default, notice of acceptance, demand and all other actions or notices that may otherwise be required on Lender’s part in connection with the Obligations, except those required herein, in the Loan Documents or pursuant to applicable law; (ii) all defenses of suretyship; and (iii) all rights of suretyship against Lender including, but not limited to, any right to cause Lender to initiate legal proceedings against the Borrower or any other applicable person or entity.

8. Subordination; Subrogation. Guarantor agrees that the Loan made by Guarantor to Borrower and any other obligations or debts of the Borrower to Guarantor shall be subordinate to the Obligations as to both payment and collection. Accordingly, in the event of a

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default under the Loan Documents and upon proper notice by Lender to Guarantor of the same, Guarantor agrees not to accept any payment whatsoever from the Borrower or to allow any payment by the Borrower for or to Guarantor or for Guarantor’s benefit without Lender’s prior written consent until all Obligations have been paid in full and this Guaranty has been terminated. Guarantor hereby grants Lender a security interest in all accounts now or hereafter owed Guarantor by Borrower and in all existing and future instruments, chattel paper and other property constituting obligations of Borrower to Guarantor. Lender may file this Guaranty (or a copy hereof) as a financing statement with respect thereto or Lender may, in its reasonable discretion, require Guarantor to execute a separate financing statement with respect thereto or require Guarantor to take other action reasonably necessary to perfect Lender’s interest therein, at Guarantor’s reasonable expense. Without limiting the foregoing, all such property in which a security interest may be perfected by possession shall be delivered to Lender immediately as made available to Guarantor and, until so delivered, shall be held in trust by Guarantor for Lender. Guarantor agrees that in the event of a bankruptcy or other insolvency proceedings involving Borrower, if Lender so directs, Guarantor will timely file a claim for the amount of the subordinated debt, in form approved by Lender. The Guarantor agrees to pursue said claim with diligence and to comply with any lawful instructions from Lender pertaining to the pursuit of the claim. The proceeds of any such claim shall be delivered to Lender, so long as such proceeds are not in excess of the amount of the Indebtedness. Guarantor shall not be subrogated to any rights of Lender against Borrower or any property or other party until the Obligations have been paid in full and terminated in writing by the Lender.

9. Application of Funds. The Lender may apply amounts received for Borrower’s account first to pay the Indebtedness, if any, before reducing the Obligations. Without notice to or consent of Guarantor, Lender may apply all payments and credits received from Borrower or from Guarantor or realized from any security in such manner and in such priority as Lender in its sole judgment shall see fit to the Obligations which are subject to this Guaranty.

10. Statute of Limitation. The Guarantor acknowledges that the statute of limitation applicable to this Guaranty shall begin to run only upon Lender’s accrual of a cause of action against Guarantor caused by Guarantor’s failure to honor a demand for performance hereunder made by Lender in writing; provided, however, if, subsequent to the demand upon Guarantor, Lender reaches an agreement with Borrower or Guarantor on any terms causing Lender to forbear in the enforcement of its demand upon Guarantor, the statute of limitation shall be reinstated and shall run for its full duration from such time that Lender subsequently makes demand upon Guarantor.

11. Death of Guarantor. If Guarantor is an individual, then, in the event of the death of Guarantor, the obligations of the Guarantor hereunder shall continue in full force and effect against Guarantor’s estate, and the executor or administrator of such estate shall be obligated and authorized to pay such debt and otherwise honor this Guaranty, and, if acceptable to Lender, to execute renewal of Guaranties or endorsements or notes or other evidence of indebtedness, from time to time, with respect to any unpaid Obligations hereunder.

12. Cancellation; Survival of Certain Obligations. The Lender may evidence its cancellation of this Guaranty and the release of Guarantor from liability hereunder by delivering to Guarantor an instrument of release, or by delivering this Guaranty to Guarantor marked

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cancelled or terminated, or both. The purported cancellation hereof and release of Guarantor shall not impair Guarantor’s continuing liability for (i) any amount of principal, interest or expenses that was mistakenly omitted by Lender in calculating the amount of the Obligations; (ii) any surviving liability of Borrower to reimburse Lender for expenses or to indemnify Lender provided for in any document executed prior to the purported cancellation hereof evidencing or securing the Obligations; (iii) liability for avoided payments and expenses related thereto (as provided in detail below); or (iv) any erroneous release hereof by Lender or any officer(s) of Lender.

13. Waiver of Claim Against Borrower. Guarantor shall have no claim (as such as defined in 11 U.S.C. §101) against Borrower of any payment or grant of security by Guarantor hereunder or in connection herewith, unless Guarantor’s possession of such claim would in no circumstance render a payment or grant of security, hypothetical or otherwise, by Borrower to Lender, subject to avoidance, turnover, or nullification in any regard.

14. Recovery of Avoided Payments. If any payments or proceeds of collection applied by Lender to the Obligations should be challenged by a bankruptcy trustee, debtor-in-possession, creditor or other party as an avoidable transfer on the grounds that the payment constituted a preferential payment or a fraudulent conveyance under state law, federal law, or the Bankruptcy Code or any successor or similar statute thereto or on any other grounds, Lender may, as its option and in its sole discretion, elect whether to contest such challenge. If the Lender contests the avoidance action, all costs of the proceedings, including Lender’s reasonable attorney’s fees, will become part of the Obligations. If the contested amount, or any part thereof, is successfully avoided, the avoided amount will become part of the Obligations hereunder. If Lender elects not to contest the avoidance action, Lender may tender the amount subject to the avoidance action to the court, bankruptcy trustee, debtor-in-possession, creditor, or other party and the amount so tendered shall become part of the Obligations hereunder. The Guarantor’s obligation to reimburse Lender for amounts due under this paragraph shall survive the purported cancellation hereof.

15. Financial Statement. Guarantor covenants and agrees that from the date hereof and the earlier of the payment in full of the Obligations or the cancellation of this Guaranty, Guarantor shall furnish, prepare, and deliver or cause to be furnished, prepared and delivered to Lender (i) current financial statements (not less than once every 12 months) in a form acceptable to Lender, and (ii) within a reasonable period of time, such additional information and financial statements as Lender may from time to time request. In addition, within fifteen (15) days of filing, Guarantor shall deliver to Lender, without demand, a copy of Guarantor’s Federal Income Tax Return and any gift tax returns, all signed by Guarantor. The Guarantor warrants that Guarantor’s financial statements, all financial information and tax returns delivered to Lender hereunder are true, accurate and complete in every respect, and disclose all direct and contingent liabilities. Guarantor warrants that no Material Adverse Change has occurred in Guarantor’s financial condition as set forth in such financial statements.

16. Solvency of Guarantor. Guarantor warrants to Lender that Guarantor is not insolvent and that Guarantor’s execution hereof does not render Guarantor insolvent.

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17. No Unpaid Taxes. Guarantor warrants that Guarantor is not presently and shall not hereafter be delinquent in the payment of any taxes imposed by any applicable governmental authority or in the filing of any tax return. Guarantor further warrants that Guarantor is not involved in a dispute with any taxing authority over tax amounts due.

18. Security Interest; Setoff. In order to further secure the payment of the Obligations, Guarantor hereby grants to Lender a security interest in and right of setoff against all of Guarantor’s presently owned or hereafter acquired monies, items, credits, deposits and instruments (including certificates of deposit) presently or hereafter in the possession of Lender. Lender may exercise its right of setoff without prior notice to Guarantor. The Lender shall not be liable for the dishonor of any items that may result from Lender’s exercise of any of its rights under this paragraph.

19. Consent to Jurisdiction and Venue. The Parties hereby irrevocably consent to the jurisdiction of the United States District Court for the Middle District of Tennessee and of all Tennessee state courts sitting in Davidson County, Tennessee, for the purpose of any litigation which concerns this Guaranty or the Obligations. It is further agreed that venue for any such action shall lie exclusively with courts sitting in those federal and Tennessee jurisdictions named above, unless the Parties agree to the contrary in writing. Guarantor acknowledges that this paragraph is a material inducement to the Lender in extending credit to the Borrower and in accepting this Guaranty.

20. Further Assurances, Etc. Guarantor agrees to execute such additional documents as Lender may reasonably require to perfect Lender’s interest in any of Guarantor’s property securing the Obligations, if applicable. Guarantor hereby irrevocably appoints Lender as Guarantor’s attorney-in-fact for the execution of such documents, which appointment shall automatically expire upon the satisfaction of the Indebtedness or the cancellation or termination of this Guaranty, whichever is earliest.

21. Expenses, Costs and Attorneys’ Fees. Guarantor agrees to pay to Lender all costs and expenses (including reasonable attorneys’ fees) paid or incurred by Lender in endeavoring to collect the Obligations or to enforce, protect, or defend the Obligations, or any portion thereof, or to enforce, protect, or defend the perfection, validity, priority, or enforceability of any mortgage assignment, pledge, security interest, or lien, which secures the Obligations, or any portion thereof, or to enforce, collect, protect or defend the Loan or any Loan Documents, or to enforce, protect, or defend any collateral or to collect or realize against any collateral which secures the Obligations or to enforce, collect or defend this Guaranty.

22. Notices. Any notices, demands or communications required under, allowed by or concerning this Guaranty shall be in accordance with the notice provisions in the Loan Agreement.

23. No Usury. If from any circumstances whatsoever, fulfillment of any provisions of this Guaranty, at the time performance of such provision shall be due, shall involve transcending the limit of validity presently prescribed by any applicable usury statute or other applicable law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity so that in no event shall any extraction be possible under the Guaranty that is excess of the limit of such validity, but such obligation shall be fulfilled to the maximum limit to such validity. The provisions of this paragraph shall control every other provision in this Guaranty.

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24. Assignment. This Guaranty shall be binding upon the heirs, successors and assigns of Guarantor and Lender, except that the Guarantor shall not assign any rights or delegate any obligations arising hereunder without prior written consent of Lender. Any attempted assignment or delegation by Guarantor without the required prior written consent of Lender shall be void.

25. Entire Agreement; No Oral Representations Limiting Enforcement, Loan Agreement, Etc. This Guaranty represents the entire agreement between the Parties concerning the liability of Guarantor for the Obligations and any oral statements regarding Guarantor’s liability for the Obligations have been included in the language of this Guaranty. The Guarantor understands that the Lender intends to rely upon and to enforce this Guaranty and that the Guarantor must not rely upon or believe to be authorized or lawful any statement or representation to the contrary. The Lender hereby disavows any such statement or representation by any person. Without limiting the foregoing, Guarantor acknowledges Lender’s intention to enforce this Guaranty in accordance with its terms and to the fullest extent possible and Guarantor acknowledges that Lender has made no oral statements to Guarantor that could be construed as a waiver of Lender’s right to enforce this Guaranty in accordance with its terms by all available legal means.

26. Applicable Law. This Guaranty shall be governed by the laws of the State of Tennessee. The validity, construction and enforcement of this Guaranty and all other documents executed with respect to the Obligations shall be determined according to the substantive law of Tennessee applicable to contracts executed, delivered, and performed in that state. The provisions hereof are subject to all applicable state and federal laws to the extent they are not effectively waived herein, and shall be read as to comply therewith.

27. Change of Entity Name. Guarantor shall not carry on business, trade as, be known as, use as, incorporate or reorganize under any other name or change its legal entity or current entity name without prior written notice to Lender and the prior written consent of Lender.

28. General Provisions. The Lender’s indulgence or failure to act upon the existence of a default or event of default in any Obligations or this Guaranty or any other course of dealing or departure from the terms of this Guaranty or any Obligations shall not prejudice Lender’s rights to make demand and recover from Guarantor in accordance with the terms hereof. The remedies provided Lender in this Guaranty are not exclusive of any other remedies that may be available to Lender under any other document or at law or in equity. No provision of this Guaranty can be amended or waived, except by a statement in writing signed by the Party against which enforcement of the amendment or waiver is sought. Should any provision of this Guaranty be invalid or unenforceable for any reason, the remaining provisions hereof shall remain in full effect. Words used herein indicating gender or number shall be read as context may require.

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29. Guarantor’s Books and Records; Lender’s Right to Inspect. Guarantor shall at all times keep proper books and records, maintain a system of accounting that enables Guarantor to produce financial statements in accordance with generally accepted accounting principles (“GAAP”), and maintain books and records that contain information as from time to time reasonably requested by Lender. Guarantor hereby authorizes Lender to make or cause to be made, at Guarantor’s reasonable expense and in such manner and at such times as Lender may reasonably require, during regular business hours and upon prior written notice (i) inspections and audits of any books, records and papers in the custody or control of Guarantor, relating to Guarantor’s financial or business conditions, including the making of copies thereof and extracts therefrom, and (ii) inspections and appraisals of any of Guarantor’s assets. Guarantor shall not modify or change its method of accounting (other than as may be required to conform to GAAP) in any material respect or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation and storage of Guarantor’s or any of their subsidiaries’ or affiliates’ accounting records without such accounting firm or service bureau agreeing to provide Lender information regarding the Guarantor’s (or subsidiaries’ or affiliates’) financial condition.

30. Captions Not Controlling. Captions and headings have been included in this Guaranty for the convenience of the parties, and shall not be construed as affecting the content of the respective paragraphs.

THE PARTIES HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY LITIGATION, ACTION OR OTHER PROCEEDING (A) LENDER BRINGS TO ENFORCE OR COLLECT THE OBLIGATIONS OF THIS GUARANTY; (B) ALLEGING THAT LENDER HAS BREACHED ANY DUTY, OBLIGATION OR AGREEMENT, EXPRESS OR IMPLIED, RELATING TO THE OBLIGATIONS OF THIS GUARANTY; (C) ALLEGING THAT ANY PARTY OR SUCH PARTY’S OFFICERS, EMPLOYEES, REPRESENTATIVES, ATTORNEYS OR AGENTS HAVE ACTED WRONGFULLY, NEGLIGENTLY OR TORTIOUSLY WITH RESPECT TO THE OBLIGATIONS OF ANY BORROWER, ENDORSER OR GUARANTOR; OR (D) BETWEEN THE PARTIES RELATED HERETO. THIS WAIVER OF JURY TRIAL DOES NOT WAIVE GUARANTOR’S OR LENDER’S RIGHT TO BRING A LAW SUIT THAT A JUDGE, WITHOUT A JURY, WOULD DECIDE. IN ADDITION, THE GUARANTOR ACKNOWLEDGES A THOROUGH UNDERSTANDING OF THE TERMS OF THIS GUARANTY AND AGREES TO BE BOUND THEREBY.

This Guaranty is executed and delivered to Lender to as of the Effective Date.

[Signature Page Follows]

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[Signature page to Continuing Guaranty]

GUARANTOR:

/s/ Michael T. Cartwright

Michael T. Cartwright

STATE OF TENNESSEE                       )

COUNTY OF RUTHERFORD               )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Michael T. Cartwright, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), the within named bargainor, and who executed the foregoing instrument for the purpose therein contained.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

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EX-10

Exhibit 10.14

CONTINUING GUARANTY

THIS CONTINUING GUARANTY (the “Guaranty”) entered into May 2, 2014 but effective as of the 15^th day of April, 2014 (“Effective Date”), by JERROD N. MENZ, an individual residing in Tennessee (the “Guarantor”), in favor of RELIANT BANK with offices located at 1736 Carothers Parkway, Suite 100, Brentwood, Tennessee 37027 (the “Lender”), in order to induce the Lender to extend credit to AAC HOLDINGS, INC., a Nevada corporation (the “Borrower”). The Guarantor and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS

WHEREAS, pursuant to that certain Term Loan Agreement of even date herewith (“Loan Agreement”) between the Borrower, Guarantor and Lender, Lender has agreed to loan to Borrower the principal sum of One Million Seven Hundred Thirty-one Thousand One Hundred Sixty-four and 45/100 Dollars ($1,731,164.45) (“Loan”) for the purposes specified in the Loan Agreement;

WHEREAS, the Loan Agreement provides that the Loan shall be repaid to Lender pursuant to that certain Term Loan Promissory Note of even date herewith (“Note”) executed by Borrower in favor of Lender. The term “Loan Documents” for the purposes hereof shall mean the Loan Agreement, the Note and those other documents described in the Loan Agreement as “Loan Documents”; and

WHEREAS, a condition to Lender’s agreement to lend the Loan to Borrower is that Guarantor must enter into this Guaranty, without which the Lender would not lend the Loan to Borrower.

W I T N E S S E T H:

As an inducement to cause Lender to extend credit to the Borrower named herein, without which Guaranty the Borrower would be unable to obtain credit from the Lender, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees with the Lender that:

1. Definition of Obligations. As used in this Guaranty, the term “Obligations”, shall collectively mean all present and future debts and other obligations of the Borrower (and/or any successor(s) thereof) to the Lender and Lender’s successors, successors-in-title and assigns (except as limited below; if applicable) relating to the Loan and Loan Documents, when due, whether by acceleration or otherwise, with all interest as may accrue thereon, either before or after maturity or the occurrence of a default or Event of Default¹ thereof, together with all amendments, modifications, extensions, renewals, consolidations, refinancing, and restructures thereof, and all documents and other instruments now or hereafter, evidencing, securing, or otherwise relating to the Indebtedness, whether arising by note, loan documents, account, credit card, indemnity, contract, tort, guaranty, overdraft, or otherwise; whether direct or indirect, absolute or contingent; whether the Indebtedness is from time to time increased, reduced, or

¹  Any capitalized term used and not defined herein shall have the meaning ascribed it in the Loan Agreement.

entirely extinguished or re-incurred; whether or not the advances or events creating the Indebtedness are presently foreseen or are incurred with or without notice to Guarantor; and all reasonable costs, expenses, and fees (including reasonable attorneys’ fees) paid or incurred by Lender, in endeavoring to collect the Obligations, or to enforce, protect, or defend the Obligations, or any portion thereof, or to enforce, protect, or defend the perfection, validity, priority or enforceability of any mortgage, pledge, assignment, security interest, or lien securing the Obligations or to protect, defend, or enforce this Guaranty.

2. Continuing, Unconditional and Absolute Guaranty. The Guarantor hereby guarantees to Lender the full and timely payment and performance of the Obligations and agrees that the Guarantor’s guarantee of the Obligations is continuing, absolute and unconditional until the entire Obligation shall have been paid in full and discharged. The validity of this Guaranty shall not be impaired by any event whatsoever, including, but not limited to, the financial decline or bankruptcy of the Borrower; the failure of any other party to guarantee the Obligations or to assume liability for the Obligations or to provide collateral therefore; Lender’s failure to give Guarantor notice of default by Borrower; the unenforceability of any of the Obligations against the Borrower or any other person or entity or against any collateral for any reason; Lender’s failure to file suit against the Borrower (regardless of whether any one of the Borrower is or is becoming insolvent, is believed to be about to leave the state or any other circumstance); the occurrence of an Event of Default and Lender’s waiver or Lender’s failure to act as a result of such Event of Default; assumption of the Loan by any person or entity with or without release of Borrower; Lender’s declaration of default, acceleration or reinstatement of any or all of the Obligations at any time or times in accordance with applicable law and pursuant to the Loan Documents; Lender’s failure to renew or extend any or all of the Obligations as they become due (by acceleration or otherwise); or the termination of any relationship of Guarantor with Borrower, including, but not limited to, any relationship of employment, ownership, or commerce, or any other personal, business, or professional relationship. The Loan shall be deemed made in reliance upon the continued operation of this Guaranty in accordance herein. The Guarantor agrees that this Guaranty shall be valid and binding upon Guarantor upon the delivery of this executed Guaranty to Lender by Guarantor or an authorized representative of Guarantor.

3. Irrevocable Guaranty. Guarantor’s guarantee of the Obligations is irrevocable; provided, however, Guarantor may at any time by written notice (“Termination Notice”) to Lender prospectively terminate the Guarantor’s liability hereunder for Obligations, first incurred after Lender’s receipt of the Termination Notice, subject to the limitations set forth in this paragraph. After the delivery of Termination Notice to the Lender, Guarantor shall remain fully liable for all principal, interest and expenses, including reasonable attorney’s fees, for all existing Obligations outstanding as of the time of Lender’s receipt of the Termination Notice, for all principal of the Loan until paid in full, and for all interest subsequently accruing on the Loan until paid in full. In order to effectuate any attempted termination, the Guarantor must pay to the Lender all amounts owing hereunder, including pay in full on the Loan. The Guarantor acknowledges that it is critically important to the Borrower to obtain the commitment for the Loan and that the Lender would not make the commitment for the Loan without this Guaranty.

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4. Primary Liability of Guarantor. This Guaranty constitutes a guarantee of payment and performance and not of collection. The liability of Guarantor under this Guaranty shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower, any other co-Borrower, endorser, other guarantors, or other entity or person nor against any mortgage, assignment, pledge, security interest, or lien available to Lender. Guarantor waives any right to require an action to be brought against Borrower or any other co-Borrower, endorser, Guarantor, or other entity or person or to require that resort be had to any mortgage, assignment, pledge, security interest, or lien or against any collateral, or to any balance of any deposit account, or credit on the books of Lender in favor of Borrower or any other person. In accordance herein, Lender may enforce this Guaranty against Guarantor for any amounts due under the Obligations or any Obligation as they become due (by acceleration or otherwise) without first making demand or instituting collection proceedings against the Borrower in the event of a default under the Loan Documents. Guarantor’s liability for the Obligations is primary, and not secondary, and each document presently or hereafter executed by the Borrower to evidence or secure an Obligation to Lender is incorporated herein by reference and shall be fully enforceable against Guarantor.

5. Impairment of Collateral; Release of Liable Parties. Lender may, in its reasonable discretion, with or without notice to or consent from Guarantor, and with or without consideration, take or fail to take or delay taking any action of any type whatsoever; grant extensions, indulgences, compromises, or forbearance, or release, compromise or settle with any party therefore; or waive any default or Event of Default or fail to take any action upon the occurrence of default, an Event of Default, or upon maturity. No action which Lender shall take or fail to take in connection with the Obligations or with any Loan Documents evidencing the Obligations, or any of them, or any mortgage assignment, pledge, security interest, or lien for the payment of the Obligations to Lender, or for the performance of any Obligations or undertakings of Borrower or any co-Borrower, endorser, Guarantor or any other guarantor, nor any course of dealing with Borrower or any other person or entity, shall release, limit, reduce or waive Guarantors Obligations hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against Lender. The defenses of impairment of collateral and impairment of recourse and any requirement of diligence on Lender’s part in collecting the Obligations are hereby expressly waived by Guarantor.

6. Amendment of Obligations. The Lender may, without notice to or the joinder of Guarantor, modify, extend, accelerate, reinstate, refinance, consolidate, restructure, or renew the Obligations (with or without the execution of new promissory notes) and grant any consent or indulgence with respect hereto.

7. Waiver. Guarantor hereby waives (i) any requirement of presentment, protest, notice of dishonor, notice of default, notice of acceptance, demand and all other actions or notices that may otherwise be required on Lender’s part in connection with the Obligations, except those required herein, in the Loan Documents or pursuant to applicable law; (ii) all defenses of suretyship; and (iii) all rights of suretyship against Lender including, but not limited to, any right to cause Lender to initiate legal proceedings against the Borrower or any other applicable person or entity.

8. Subordination; Subrogation. Guarantor agrees that the Loan made by Guarantor to Borrower and any other obligations or debts of the Borrower to Guarantor shall be subordinate to the Obligations as to both payment and collection. Accordingly, in the event of a

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default under the Loan Documents and upon proper notice by Lender to Guarantor of the same, Guarantor agrees not to accept any payment whatsoever from the Borrower or to allow any payment by the Borrower for or to Guarantor or for Guarantor’s benefit without Lender’s prior written consent until all Obligations have been paid in full and this Guaranty has been terminated. Guarantor hereby grants Lender a security interest in all accounts now or hereafter owed Guarantor by Borrower and in all existing and future instruments, chattel paper and other property constituting obligations of Borrower to Guarantor. Lender may file this Guaranty (or a copy hereof) as a financing statement with respect thereto or Lender may, in its reasonable discretion, require Guarantor to execute a separate financing statement with respect thereto or require Guarantor to take other action reasonably necessary to perfect Lender’s interest therein, at Guarantor’s reasonable expense. Without limiting the foregoing, all such property in which a security interest may be perfected by possession shall be delivered to Lender immediately as made available to Guarantor and, until so delivered, shall be held in trust by Guarantor for Lender. Guarantor agrees that in the event of a bankruptcy or other insolvency proceedings involving Borrower, if Lender so directs, Guarantor will timely file a claim for the amount of the subordinated debt, in form approved by Lender. The Guarantor agrees to pursue said claim with diligence and to comply with any lawful instructions from Lender pertaining to the pursuit of the claim. The proceeds of any such claim shall be delivered to Lender, so long as such proceeds are not in excess of the amount of the Indebtedness. Guarantor shall not be subrogated to any rights of Lender against Borrower or any property or other party until the Obligations have been paid in full and terminated in writing by the Lender.

9. Application of Funds. The Lender may apply amounts received for Borrower’s account first to pay the Indebtedness, if any, before reducing the Obligations. Without notice to or consent of Guarantor, Lender may apply all payments and credits received from Borrower or from Guarantor or realized from any security in such manner and in such priority as Lender in its sole judgment shall see fit to the Obligations which are subject to this Guaranty.

10. Statute of Limitation. The Guarantor acknowledges that the statute of limitation applicable to this Guaranty shall begin to run only upon Lender’s accrual of a cause of action against Guarantor caused by Guarantor’s failure to honor a demand for performance hereunder made by Lender in writing; provided, however, if, subsequent to the demand upon Guarantor, Lender reaches an agreement with Borrower or Guarantor on any terms causing Lender to forbear in the enforcement of its demand upon Guarantor, the statute of limitation shall be reinstated and shall run for its full duration from such time that Lender subsequently makes demand upon Guarantor.

11. Death of Guarantor. If Guarantor is an individual, then, in the event of the death of Guarantor, the obligations of the Guarantor hereunder shall continue in full force and effect against Guarantor’s estate, and the executor or administrator of such estate shall be obligated and authorized to pay such debt and otherwise honor this Guaranty, and, if acceptable to Lender, to execute renewal of Guaranties or endorsements or notes or other evidence of indebtedness, from time to time, with respect to any unpaid Obligations hereunder.

12. Cancellation; Survival of Certain Obligations. The Lender may evidence its cancellation of this Guaranty and the release of Guarantor from liability hereunder by delivering to Guarantor an instrument of release, or by delivering this Guaranty to Guarantor marked

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cancelled or terminated, or both. The purported cancellation hereof and release of Guarantor shall not impair Guarantor’s continuing liability for (i) any amount of principal, interest or expenses that was mistakenly omitted by Lender in calculating the amount of the Obligations; (ii) any surviving liability of Borrower to reimburse Lender for expenses or to indemnify Lender provided for in any document executed prior to the purported cancellation hereof evidencing or securing the Obligations; (iii) liability for avoided payments and expenses related thereto (as provided in detail below); or (iv) any erroneous release hereof by Lender or any officer(s) of Lender.

13. Waiver of Claim Against Borrower. Guarantor shall have no claim (as such as defined in 11 U.S.C. §101) against Borrower of any payment or grant of security by Guarantor hereunder or in connection herewith, unless Guarantor’s possession of such claim would in no circumstance render a payment or grant of security, hypothetical or otherwise, by Borrower to Lender, subject to avoidance, turnover, or nullification in any regard.

14. Recovery of Avoided Payments. If any payments or proceeds of collection applied by Lender to the Obligations should be challenged by a bankruptcy trustee, debtor-in-possession, creditor or other party as an avoidable transfer on the grounds that the payment constituted a preferential payment or a fraudulent conveyance under state law, federal law, or the Bankruptcy Code or any successor or similar statute thereto or on any other grounds, Lender may, as its option and in its sole discretion, elect whether to contest such challenge. If the Lender contests the avoidance action, all costs of the proceedings, including Lender’s reasonable attorney’s fees, will become part of the Obligations. If the contested amount, or any part thereof, is successfully avoided, the avoided amount will become part of the Obligations hereunder. If Lender elects not to contest the avoidance action, Lender may tender the amount subject to the avoidance action to the court, bankruptcy trustee, debtor-in-possession, creditor, or other party and the amount so tendered shall become part of the Obligations hereunder. The Guarantor’s obligation to reimburse Lender for amounts due under this paragraph shall survive the purported cancellation hereof.

15. Financial Statement. Guarantor covenants and agrees that from the date hereof and the earlier of the payment in full of the Obligations or the cancellation of this Guaranty, Guarantor shall furnish, prepare, and deliver or cause to be furnished, prepared and delivered to Lender (i) current financial statements (not less than once every 12 months) in a form acceptable to Lender, and (ii) within a reasonable period of time, such additional information and financial statements as Lender may from time to time request. In addition, within fifteen (15) days of filing, Guarantor shall deliver to Lender, without demand, a copy of Guarantor’s Federal Income Tax Return and any gift tax returns, all signed by Guarantor. The Guarantor warrants that Guarantor’s financial statements, all financial information and tax returns delivered to Lender hereunder are true, accurate and complete in every respect, and disclose all direct and contingent liabilities. Guarantor warrants that no Material Adverse Change has occurred in Guarantor’s financial condition as set forth in such financial statements.

16. Solvency of Guarantor. Guarantor warrants to Lender that Guarantor is not insolvent and that Guarantor’s execution hereof does not render Guarantor insolvent.

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17. No Unpaid Taxes. Guarantor warrants that Guarantor is not presently and shall not hereafter be delinquent in the payment of any taxes imposed by any applicable governmental authority or in the filing of any tax return. Guarantor further warrants that Guarantor is not involved in a dispute with any taxing authority over tax amounts due.

18. Security Interest; Setoff. In order to further secure the payment of the Obligations, Guarantor hereby grants to Lender a security interest in and right of setoff against all of Guarantor’s presently owned or hereafter acquired monies, items, credits, deposits and instruments (including certificates of deposit) presently or hereafter in the possession of Lender. Lender may exercise its right of setoff without prior notice to Guarantor. The Lender shall not be liable for the dishonor of any items that may result from Lender’s exercise of any of its rights under this paragraph.

19. Consent to Jurisdiction and Venue. The Parties hereby irrevocably consent to the jurisdiction of the United States District Court for the Middle District of Tennessee and of all Tennessee state courts sitting in Davidson County, Tennessee, for the purpose of any litigation which concerns this Guaranty or the Obligations. It is further agreed that venue for any such action shall lie exclusively with courts sitting in those federal and Tennessee jurisdictions named above, unless the Parties agree to the contrary in writing. Guarantor acknowledges that this paragraph is a material inducement to the Lender in extending credit to the Borrower and in accepting this Guaranty.

20. Further Assurances, Etc. Guarantor agrees to execute such additional documents as Lender may reasonably require to perfect Lender’s interest in any of Guarantor’s property securing the Obligations, if applicable. Guarantor hereby irrevocably appoints Lender as Guarantor’s attorney-in-fact for the execution of such documents, which appointment shall automatically expire upon the satisfaction of the Indebtedness or the cancellation or termination of this Guaranty, whichever is earliest.

21. Expenses, Costs and Attorneys’ Fees. Guarantor agrees to pay to Lender all costs and expenses (including reasonable attorneys’ fees) paid or incurred by Lender in endeavoring to collect the Obligations or to enforce, protect, or defend the Obligations, or any portion thereof, or to enforce, protect, or defend the perfection, validity, priority, or enforceability of any mortgage assignment, pledge, security interest, or lien, which secures the Obligations, or any portion thereof, or to enforce, collect, protect or defend the Loan or any Loan Documents, or to enforce, protect, or defend any collateral or to collect or realize against any collateral which secures the Obligations or to enforce, collect or defend this Guaranty.

22. Notices. Any notices, demands or communications required under, allowed by or concerning this Guaranty shall be in accordance with the notice provisions in the Loan Agreement.

23. No Usury. If from any circumstances whatsoever, fulfillment of any provisions of this Guaranty, at the time performance of such provision shall be due, shall involve transcending the limit of validity presently prescribed by any applicable usury statute or other applicable law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity so that in no event shall any extraction be possible under the Guaranty that is excess of the limit of such validity, but such obligation shall be fulfilled to the maximum limit to such validity. The provisions of this paragraph shall control every other provision in this Guaranty.

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24. Assignment. This Guaranty shall be binding upon the heirs, successors and assigns of Guarantor and Lender, except that the Guarantor shall not assign any rights or delegate any obligations arising hereunder without prior written consent of Lender. Any attempted assignment or delegation by Guarantor without the required prior written consent of Lender shall be void.

25. Entire Agreement; No Oral Representations Limiting Enforcement, Loan Agreement, Etc. This Guaranty represents the entire agreement between the Parties concerning the liability of Guarantor for the Obligations and any oral statements regarding Guarantor’s liability for the Obligations have been included in the language of this Guaranty. The Guarantor understands that the Lender intends to rely upon and to enforce this Guaranty and that the Guarantor must not rely upon or believe to be authorized or lawful any statement or representation to the contrary. The Lender hereby disavows any such statement or representation by any person. Without limiting the foregoing, Guarantor acknowledges Lender’s intention to enforce this Guaranty in accordance with its terms and to the fullest extent possible and Guarantor acknowledges that Lender has made no oral statements to Guarantor that could be construed as a waiver of Lender’s right to enforce this Guaranty in accordance with its terms by all available legal means.

26. Applicable Law. This Guaranty shall be governed by the laws of the State of Tennessee. The validity, construction and enforcement of this Guaranty and all other documents executed with respect to the Obligations shall be determined according to the substantive law of Tennessee applicable to contracts executed, delivered, and performed in that state. The provisions hereof are subject to all applicable state and federal laws to the extent they are not effectively waived herein, and shall be read as to comply therewith.

27. Change of Entity Name. Guarantor shall not carry on business, trade as, be known as, use as, incorporate or reorganize under any other name or change its legal entity or current entity name without prior written notice to Lender and the prior written consent of Lender.

28. General Provisions. The Lender’s indulgence or failure to act upon the existence of a default or event of default in any Obligations or this Guaranty or any other course of dealing or departure from the terms of this Guaranty or any Obligations shall not prejudice Lender’s rights to make demand and recover from Guarantor in accordance with the terms hereof. The remedies provided Lender in this Guaranty are not exclusive of any other remedies that may be available to Lender under any other document or at law or in equity. No provision of this Guaranty can be amended or waived, except by a statement in writing signed by the Party against which enforcement of the amendment or waiver is sought. Should any provision of this Guaranty be invalid or unenforceable for any reason, the remaining provisions hereof shall remain in full effect. Words used herein indicating gender or number shall be read as context may require.

29. Guarantor’s Books and Records; Lender’s Right to Inspect. Guarantor shall at all times keep proper books and records, maintain a system of accounting that enables Guarantor to produce financial statements in accordance with generally accepted accounting

7

principles (“GAAP”), and maintain books and records that contain information as from time to time reasonably requested by Lender. Guarantor hereby authorizes Lender to make or cause to be made, at Guarantor’s reasonable expense and in such manner and at such times as Lender may reasonably require, during regular business hours and upon prior written notice (i) inspections and audits of any books, records and papers in the custody or control of Guarantor, relating to Guarantor’s financial or business conditions, including the making of copies thereof and extracts therefrom, and (ii) inspections and appraisals of any of Guarantor’s assets. Guarantor shall not modify or change its method of accounting (other than as may be required to conform to GAAP) in any material respect or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation and storage of Guarantor’s or any of their subsidiaries’ or affiliates’ accounting records without such accounting firm or service bureau agreeing to provide Lender information regarding the Guarantor’s (or subsidiaries’ or affiliates’) financial condition.

30. Captions Not Controlling. Captions and headings have been included in this Guaranty for the convenience of the parties, and shall not be construed as affecting the content of the respective paragraphs.

THE PARTIES HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY LITIGATION, ACTION OR OTHER PROCEEDING (A) LENDER BRINGS TO ENFORCE OR COLLECT THE OBLIGATIONS OF THIS GUARANTY; (B) ALLEGING THAT LENDER HAS BREACHED ANY DUTY, OBLIGATION OR AGREEMENT, EXPRESS OR IMPLIED, RELATING TO THE OBLIGATIONS OF THIS GUARANTY; (C) ALLEGING THAT ANY PARTY OR SUCH PARTY’S OFFICERS, EMPLOYEES, REPRESENTATIVES, ATTORNEYS OR AGENTS HAVE ACTED WRONGFULLY, NEGLIGENTLY OR TORTIOUSLY WITH RESPECT TO THE OBLIGATIONS OF ANY BORROWER, ENDORSER OR GUARANTOR; OR (D) BETWEEN THE PARTIES RELATED HERETO. THIS WAIVER OF JURY TRIAL DOES NOT WAIVE GUARANTOR’S OR LENDER’S RIGHT TO BRING A LAW SUIT THAT A JUDGE, WITHOUT A JURY, WOULD DECIDE. IN ADDITION, THE GUARANTOR ACKNOWLEDGES A THOROUGH UNDERSTANDING OF THE TERMS OF THIS GUARANTY AND AGREES TO BE BOUND THEREBY.

This Guaranty is executed and delivered to Lender to as of the Effective Date.

[Signature Page Follows]

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[Signature page to Continuing Guaranty]

GUARANTOR:

/s/ Jerrod N. Menz

Jerrod N. Menz

STATE OF TENNESSEE                   )

COUNTY OF RUTHERFORD           )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Jerrod N. Menz, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), the within named bargainor, and who executed the foregoing instrument for the purpose therein contained.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

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EX-10

Exhibit 10.15

CONTINUING GUARANTY

THIS CONTINUING GUARANTY (the “Guaranty”) entered into May 2, 2014 but effective as of the 15^th day of April, 2014 (“Effective Date”), by KIRK R. MANZ, an individual residing in Tennessee (the “Guarantor”), in favor of RELIANT BANK with offices located at 1736 Carothers Parkway, Suite 100, Brentwood, Tennessee 37027 (the “Lender”), in order to induce the Lender to extend credit to AAC HOLDINGS, INC., a Nevada corporation (the “Borrower”). The Guarantor and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS

WHEREAS, pursuant to that certain Term Loan Agreement of even date herewith (“Loan Agreement”) between the Borrower, Guarantor and Lender, Lender has agreed to loan to Borrower the principal sum of One Million Seven Hundred Thirty-One Thousand One Hundred Sixty-Four and 45/100 Dollars ($1,731,164.45) (“Loan”) for the purposes specified in the Loan Agreement;

WHEREAS, the Loan Agreement provides that the Loan shall be repaid to Lender pursuant to that certain Term Loan Promissory Note of even date herewith (“Note”) executed by Borrower in favor of Lender. The term “Loan Documents” for the purposes hereof shall mean the Loan Agreement, the Note and those other documents described in the Loan Agreement as “Loan Documents”; and

WHEREAS, a condition to Lender’s agreement to lend the Loan to Borrower is that Guarantor must enter into this Guaranty, without which the Lender would not lend the Loan to Borrower.

W I T N E S S E T H:

As an inducement to cause Lender to extend credit to the Borrower named herein, without which Guaranty the Borrower would be unable to obtain credit from the Lender, and for other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees with the Lender that:

1. Definition of Obligations. As used in this Guaranty, the term “Obligations”, shall collectively mean all present and future debts and other obligations of the Borrower (and/or any successor(s) thereof) to the Lender and Lender’s successors, successors-in-title and assigns (except as limited below; if applicable) relating to the Loan and Loan Documents, when due, whether by acceleration or otherwise, with all interest as may accrue thereon, either before or after maturity or the occurrence of a default or Event of Default¹ thereof, together with all amendments, modifications, extensions, renewals, consolidations, refinancing, and restructures thereof, and all documents and other instruments now or hereafter, evidencing, securing, or otherwise relating to the Indebtedness, whether arising by note, loan documents, account, credit card, indemnity, contract, tort, guaranty, overdraft, or otherwise; whether direct or indirect, absolute or contingent; whether the Indebtedness is from time to time increased, reduced, or

¹  Any capitalized term used and not defined herein shall have the meaning ascribed it in the Loan Agreement.

entirely extinguished or re-incurred; whether or not the advances or events creating the Indebtedness are presently foreseen or are incurred with or without notice to Guarantor; and all reasonable costs, expenses, and fees (including reasonable attorneys’ fees) paid or incurred by Lender, in endeavoring to collect the Obligations, or to enforce, protect, or defend the Obligations, or any portion thereof, or to enforce, protect, or defend the perfection, validity, priority or enforceability of any mortgage, pledge, assignment, security interest, or lien securing the Obligations or to protect, defend, or enforce this Guaranty.

2. Continuing, Unconditional and Absolute Guaranty. The Guarantor hereby guarantees to Lender the full and timely payment and performance of the Obligations and agrees that the Guarantor’s guarantee of the Obligations is continuing, absolute and unconditional until the entire Obligation shall have been paid in full and discharged. The validity of this Guaranty shall not be impaired by any event whatsoever, including, but not limited to, the financial decline or bankruptcy of the Borrower; the failure of any other party to guarantee the Obligations or to assume liability for the Obligations or to provide collateral therefore; Lender’s failure to give Guarantor notice of default by Borrower; the unenforceability of any of the Obligations against the Borrower or any other person or entity or against any collateral for any reason; Lender’s failure to file suit against the Borrower (regardless of whether any one of the Borrower is or is becoming insolvent, is believed to be about to leave the state or any other circumstance); the occurrence of an Event of Default and Lender’s waiver or Lender’s failure to act as a result of such Event of Default; assumption of the Loan by any person or entity with or without release of Borrower; Lender’s declaration of default, acceleration or reinstatement of any or all of the Obligations at any time or times in accordance with applicable law and pursuant to the Loan Documents; Lender’s failure to renew or extend any or all of the Obligations as they become due (by acceleration or otherwise); or the termination of any relationship of Guarantor with Borrower, including, but not limited to, any relationship of employment, ownership, or commerce, or any other personal, business, or professional relationship. The Loan shall be deemed made in reliance upon the continued operation of this Guaranty in accordance herein. The Guarantor agrees that this Guaranty shall be valid and binding upon Guarantor upon the delivery of this executed Guaranty to Lender by Guarantor or an authorized representative of Guarantor.

3. Irrevocable Guaranty. Guarantor’s guarantee of the Obligations is irrevocable; provided, however, Guarantor may at any time by written notice (“Termination Notice”) to Lender prospectively terminate the Guarantor’s liability hereunder for Obligations, first incurred after Lender’s receipt of the Termination Notice, subject to the limitations set forth in this paragraph. After the delivery of Termination Notice to the Lender, Guarantor shall remain fully liable for all principal, interest and expenses, including reasonable attorney’s fees, for all existing Obligations outstanding as of the time of Lender’s receipt of the Termination Notice, for all principal of the Loan until paid in full, and for all interest subsequently accruing on the Loan until paid in full. In order to effectuate any attempted termination, the Guarantor must pay to the Lender all amounts owing hereunder, including pay in full on the Loan. The Guarantor acknowledges that it is critically important to the Borrower to obtain the commitment for the Loan and that the Lender would not make the commitment for the Loan without this Guaranty.

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4. Primary Liability of Guarantor. This Guaranty constitutes a guarantee of payment and performance and not of collection. The liability of Guarantor under this Guaranty shall be direct and immediate and not conditional or contingent upon the pursuit of any remedies against Borrower, any other co-Borrower, endorser, other guarantors, or other entity or person nor against any mortgage, assignment, pledge, security interest, or lien available to Lender. Guarantor waives any right to require an action to be brought against Borrower or any other co-Borrower, endorser, Guarantor, or other entity or person or to require that resort be had to any mortgage, assignment, pledge, security interest, or lien or against any collateral, or to any balance of any deposit account, or credit on the books of Lender in favor of Borrower or any other person. In accordance herein, Lender may enforce this Guaranty against Guarantor for any amounts due under the Obligations or any Obligation as they become due (by acceleration or otherwise) without first making demand or instituting collection proceedings against the Borrower in the event of a default under the Loan Documents. Guarantor’s liability for the Obligations is primary, and not secondary, and each document presently or hereafter executed by the Borrower to evidence or secure an Obligation to Lender is incorporated herein by reference and shall be fully enforceable against Guarantor.

5. Impairment of Collateral; Release of Liable Parties. Lender may, in its reasonable discretion, with or without notice to or consent from Guarantor, and with or without consideration, take or fail to take or delay taking any action of any type whatsoever; grant extensions, indulgences, compromises, or forbearance, or release, compromise or settle with any party therefore; or waive any default or Event of Default or fail to take any action upon the occurrence of default, an Event of Default, or upon maturity. No action which Lender shall take or fail to take in connection with the Obligations or with any Loan Documents evidencing the Obligations, or any of them, or any mortgage assignment, pledge, security interest, or lien for the payment of the Obligations to Lender, or for the performance of any Obligations or undertakings of Borrower or any co-Borrower, endorser, Guarantor or any other guarantor, nor any course of dealing with Borrower or any other person or entity, shall release, limit, reduce or waive Guarantors Obligations hereunder, affect this Guaranty in any way, or afford Guarantor any recourse against Lender. The defenses of impairment of collateral and impairment of recourse and any requirement of diligence on Lender’s part in collecting the Obligations are hereby expressly waived by Guarantor.

6. Amendment of Obligations. The Lender may, without notice to or the joinder of Guarantor, modify, extend, accelerate, reinstate, refinance, consolidate, restructure, or renew the Obligations (with or without the execution of new promissory notes) and grant any consent or indulgence with respect hereto.

7. Waiver. Guarantor hereby waives (i) any requirement of presentment, protest, notice of dishonor, notice of default, notice of acceptance, demand and all other actions or notices that may otherwise be required on Lender’s part in connection with the Obligations, except those required herein, in the Loan Documents or pursuant to applicable law; (ii) all defenses of suretyship; and (iii) all rights of suretyship against Lender including, but not limited to, any right to cause Lender to initiate legal proceedings against the Borrower or any other applicable person or entity.

8. Subordination; Subrogation. Guarantor agrees that the Loan made by Guarantor to Borrower and any other obligations or debts of the Borrower to Guarantor shall be subordinate to the Obligations as to both payment and collection. Accordingly, in the event of a

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default under the Loan Documents and upon proper notice by Lender to Guarantor of the same, Guarantor agrees not to accept any payment whatsoever from the Borrower or to allow any payment by the Borrower for or to Guarantor or for Guarantor’s benefit without Lender’s prior written consent until all Obligations have been paid in full and this Guaranty has been terminated. Guarantor hereby grants Lender a security interest in all accounts now or hereafter owed Guarantor by Borrower and in all existing and future instruments, chattel paper and other property constituting obligations of Borrower to Guarantor. Lender may file this Guaranty (or a copy hereof) as a financing statement with respect thereto or Lender may, in its reasonable discretion, require Guarantor to execute a separate financing statement with respect thereto or require Guarantor to take other action reasonably necessary to perfect Lender’s interest therein, at Guarantor’s reasonable expense. Without limiting the foregoing, all such property in which a security interest may be perfected by possession shall be delivered to Lender immediately as made available to Guarantor and, until so delivered, shall be held in trust by Guarantor for Lender. Guarantor agrees that in the event of a bankruptcy or other insolvency proceedings involving Borrower, if Lender so directs, Guarantor will timely file a claim for the amount of the subordinated debt, in form approved by Lender. The Guarantor agrees to pursue said claim with diligence and to comply with any lawful instructions from Lender pertaining to the pursuit of the claim. The proceeds of any such claim shall be delivered to Lender, so long as such proceeds are not in excess of the amount of the Indebtedness. Guarantor shall not be subrogated to any rights of Lender against Borrower or any property or other party until the Obligations have been paid in full and terminated in writing by the Lender.

9. Application of Funds. The Lender may apply amounts received for Borrower’s account first to pay the Indebtedness, if any, before reducing the Obligations. Without notice to or consent of Guarantor, Lender may apply all payments and credits received from Borrower or from Guarantor or realized from any security in such manner and in such priority as Lender in its sole judgment shall see fit to the Obligations which are subject to this Guaranty.

10. Statute of Limitation. The Guarantor acknowledges that the statute of limitation applicable to this Guaranty shall begin to run only upon Lender’s accrual of a cause of action against Guarantor caused by Guarantor’s failure to honor a demand for performance hereunder made by Lender in writing; provided, however, if, subsequent to the demand upon Guarantor, Lender reaches an agreement with Borrower or Guarantor on any terms causing Lender to forbear in the enforcement of its demand upon Guarantor, the statute of limitation shall be reinstated and shall run for its full duration from such time that Lender subsequently makes demand upon Guarantor.

11. Death of Guarantor. If Guarantor is an individual, then, in the event of the death of Guarantor, the obligations of the Guarantor hereunder shall continue in full force and effect against Guarantor’s estate, and the executor or administrator of such estate shall be obligated and authorized to pay such debt and otherwise honor this Guaranty, and, if acceptable to Lender, to execute renewal of Guaranties or endorsements or notes or other evidence of indebtedness, from time to time, with respect to any unpaid Obligations hereunder.

12. Cancellation; Survival of Certain Obligations. The Lender may evidence its cancellation of this Guaranty and the release of Guarantor from liability hereunder by delivering to Guarantor an instrument of release, or by delivering this Guaranty to Guarantor marked

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cancelled or terminated, or both. The purported cancellation hereof and release of Guarantor shall not impair Guarantor’s continuing liability for (i) any amount of principal, interest or expenses that was mistakenly omitted by Lender in calculating the amount of the Obligations; (ii) any surviving liability of Borrower to reimburse Lender for expenses or to indemnify Lender provided for in any document executed prior to the purported cancellation hereof evidencing or securing the Obligations; (iii) liability for avoided payments and expenses related thereto (as provided in detail below); or (iv) any erroneous release hereof by Lender or any officer(s) of Lender.

13. Waiver of Claim Against Borrower. Guarantor shall have no claim (as such as defined in 11 U.S.C. §101) against Borrower of any payment or grant of security by Guarantor hereunder or in connection herewith, unless Guarantor’s possession of such claim would in no circumstance render a payment or grant of security, hypothetical or otherwise, by Borrower to Lender, subject to avoidance, turnover, or nullification in any regard.

14. Recovery of Avoided Payments. If any payments or proceeds of collection applied by Lender to the Obligations should be challenged by a bankruptcy trustee, debtor-in-possession, creditor or other party as an avoidable transfer on the grounds that the payment constituted a preferential payment or a fraudulent conveyance under state law, federal law, or the Bankruptcy Code or any successor or similar statute thereto or on any other grounds, Lender may, as its option and in its sole discretion, elect whether to contest such challenge. If the Lender contests the avoidance action, all costs of the proceedings, including Lender’s reasonable attorney’s fees, will become part of the Obligations. If the contested amount, or any part thereof, is successfully avoided, the avoided amount will become part of the Obligations hereunder. If Lender elects not to contest the avoidance action, Lender may tender the amount subject to the avoidance action to the court, bankruptcy trustee, debtor-in-possession, creditor, or other party and the amount so tendered shall become part of the Obligations hereunder. The Guarantor’s obligation to reimburse Lender for amounts due under this paragraph shall survive the purported cancellation hereof.

15. Financial Statement. Guarantor covenants and agrees that from the date hereof and the earlier of the payment in full of the Obligations or the cancellation of this Guaranty, Guarantor shall furnish, prepare, and deliver or cause to be furnished, prepared and delivered to Lender (i) current financial statements (not less than once every 12 months) in a form acceptable to Lender, and (ii) within a reasonable period of time, such additional information and financial statements as Lender may from time to time request. In addition, within fifteen (15) days of filing, Guarantor shall deliver to Lender, without demand, a copy of Guarantor’s Federal Income Tax Return and any gift tax returns, all signed by Guarantor. The Guarantor warrants that Guarantor’s financial statements, all financial information and tax returns delivered to Lender hereunder are true, accurate and complete in every respect, and disclose all direct and contingent liabilities. Guarantor warrants that no Material Adverse Change has occurred in Guarantor’s financial condition as set forth in such financial statements.

16. Solvency of Guarantor. Guarantor warrants to Lender that Guarantor is not insolvent and that Guarantor’s execution hereof does not render Guarantor insolvent.

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17. No Unpaid Taxes. Guarantor warrants that Guarantor is not presently and shall not hereafter be delinquent in the payment of any taxes imposed by any applicable governmental authority or in the filing of any tax return. Guarantor further warrants that Guarantor is not involved in a dispute with any taxing authority over tax amounts due.

18. Security Interest; Setoff. In order to further secure the payment of the Obligations, Guarantor hereby grants to Lender a security interest in and right of setoff against all of Guarantor’s presently owned or hereafter acquired monies, items, credits, deposits and instruments (including certificates of deposit) presently or hereafter in the possession of Lender. Lender may exercise its right of setoff without prior notice to Guarantor. The Lender shall not be liable for the dishonor of any items that may result from Lender’s exercise of any of its rights under this paragraph.

19. Consent to Jurisdiction and Venue. The Parties hereby irrevocably consent to the jurisdiction of the United States District Court for the Middle District of Tennessee and of all Tennessee state courts sitting in Davidson County, Tennessee, for the purpose of any litigation which concerns this Guaranty or the Obligations. It is further agreed that venue for any such action shall lie exclusively with courts sitting in those federal and Tennessee jurisdictions named above, unless the Parties agree to the contrary in writing. Guarantor acknowledges that this paragraph is a material inducement to the Lender in extending credit to the Borrower and in accepting this Guaranty.

20. Further Assurances, Etc. Guarantor agrees to execute such additional documents as Lender may reasonably require to perfect Lender’s interest in any of Guarantor’s property securing the Obligations, if applicable. Guarantor hereby irrevocably appoints Lender as Guarantor’s attorney-in-fact for the execution of such documents, which appointment shall automatically expire upon the satisfaction of the Indebtedness or the cancellation or termination of this Guaranty, whichever is earliest.

21. Expenses, Costs and Attorneys’ Fees. Guarantor agrees to pay to Lender all costs and expenses (including reasonable attorneys’ fees) paid or incurred by Lender in endeavoring to collect the Obligations or to enforce, protect, or defend the Obligations, or any portion thereof, or to enforce, protect, or defend the perfection, validity, priority, or enforceability of any mortgage assignment, pledge, security interest, or lien, which secures the Obligations, or any portion thereof, or to enforce, collect, protect or defend the Loan or any Loan Documents, or to enforce, protect, or defend any collateral or to collect or realize against any collateral which secures the Obligations or to enforce, collect or defend this Guaranty.

22. Notices. Any notices, demands or communications required under, allowed by or concerning this Guaranty shall be in accordance with the notice provisions in the Loan Agreement.

23. No Usury. If from any circumstances whatsoever, fulfillment of any provisions of this Guaranty, at the time performance of such provision shall be due, shall involve transcending the limit of validity presently prescribed by any applicable usury statute or other applicable law, then ipso facto, the obligation to be fulfilled shall be reduced to the limit of such validity so that in no event shall any extraction be possible under the Guaranty that is excess of the limit of such validity, but such obligation shall be fulfilled to the maximum limit to such validity. The provisions of this paragraph shall control every other provision in this Guaranty.

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24. Assignment. This Guaranty shall be binding upon the heirs, successors and assigns of Guarantor and Lender, except that the Guarantor shall not assign any rights or delegate any obligations arising hereunder without prior written consent of Lender. Any attempted assignment or delegation by Guarantor without the required prior written consent of Lender shall be void.

25. Entire Agreement; No Oral Representations Limiting Enforcement, Loan Agreement, Etc. This Guaranty represents the entire agreement between the Parties concerning the liability of Guarantor for the Obligations and any oral statements regarding Guarantor’s liability for the Obligations have been included in the language of this Guaranty. The Guarantor understands that the Lender intends to rely upon and to enforce this Guaranty and that the Guarantor must not rely upon or believe to be authorized or lawful any statement or representation to the contrary. The Lender hereby disavows any such statement or representation by any person. Without limiting the foregoing, Guarantor acknowledges Lender’s intention to enforce this Guaranty in accordance with its terms and to the fullest extent possible and Guarantor acknowledges that Lender has made no oral statements to Guarantor that could be construed as a waiver of Lender’s right to enforce this Guaranty in accordance with its terms by all available legal means.

26. Applicable Law. This Guaranty shall be governed by the laws of the State of Tennessee. The validity, construction and enforcement of this Guaranty and all other documents executed with respect to the Obligations shall be determined according to the substantive law of Tennessee applicable to contracts executed, delivered, and performed in that state. The provisions hereof are subject to all applicable state and federal laws to the extent they are not effectively waived herein, and shall be read as to comply therewith.

27. Change of Entity Name. Guarantor shall not carry on business, trade as, be known as, use as, incorporate or reorganize under any other name or change its legal entity or current entity name without prior written notice to Lender and the prior written consent of Lender.

28. General Provisions. The Lender’s indulgence or failure to act upon the existence of a default or event of default in any Obligations or this Guaranty or any other course of dealing or departure from the terms of this Guaranty or any Obligations shall not prejudice Lender’s rights to make demand and recover from Guarantor in accordance with the terms hereof. The remedies provided Lender in this Guaranty are not exclusive of any other remedies that may be available to Lender under any other document or at law or in equity. No provision of this Guaranty can be amended or waived, except by a statement in writing signed by the Party against which enforcement of the amendment or waiver is sought. Should any provision of this Guaranty be invalid or unenforceable for any reason, the remaining provisions hereof shall remain in full effect. Words used herein indicating gender or number shall be read as context may require.

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29. Guarantor’s Books and Records; Lender’s Right to Inspect. Guarantor shall at all times keep proper books and records, maintain a system of accounting that enables Guarantor to produce financial statements in accordance with generally accepted accounting principles (“GAAP”), and maintain books and records that contain information as from time to time reasonably requested by Lender. Guarantor hereby authorizes Lender to make or cause to be made, at Guarantor’s reasonable expense and in such manner and at such times as Lender may reasonably require, during regular business hours and upon prior written notice (i) inspections and audits of any books, records and papers in the custody or control of Guarantor, relating to Guarantor’s financial or business conditions, including the making of copies thereof and extracts therefrom, and (ii) inspections and appraisals of any of Guarantor’s assets. Guarantor shall not modify or change its method of accounting (other than as may be required to conform to GAAP) in any material respect or enter into, modify, or terminate any agreement currently existing, or at any time hereafter entered into with any third party accounting firm or service bureau for the preparation and storage of Guarantor’s or any of their subsidiaries’ or affiliates’ accounting records without such accounting firm or service bureau agreeing to provide Lender information regarding the Guarantor’s (or subsidiaries’ or affiliates’) financial condition.

30. Captions Not Controlling. Captions and headings have been included in this Guaranty for the convenience of the parties, and shall not be construed as affecting the content of the respective paragraphs.

THE PARTIES HEREBY IRREVOCABLY WAIVE ALL RIGHT TO A TRIAL BY JURY IN ANY LITIGATION, ACTION OR OTHER PROCEEDING (A) LENDER BRINGS TO ENFORCE OR COLLECT THE OBLIGATIONS OF THIS GUARANTY; (B) ALLEGING THAT LENDER HAS BREACHED ANY DUTY, OBLIGATION OR AGREEMENT, EXPRESS OR IMPLIED, RELATING TO THE OBLIGATIONS OF THIS GUARANTY; (C) ALLEGING THAT ANY PARTY OR SUCH PARTY’S OFFICERS, EMPLOYEES, REPRESENTATIVES, ATTORNEYS OR AGENTS HAVE ACTED WRONGFULLY, NEGLIGENTLY OR TORTIOUSLY WITH RESPECT TO THE OBLIGATIONS OF ANY BORROWER, ENDORSER OR GUARANTOR; OR (D) BETWEEN THE PARTIES RELATED HERETO. THIS WAIVER OF JURY TRIAL DOES NOT WAIVE GUARANTOR’S OR LENDER’S RIGHT TO BRING A LAW SUIT THAT A JUDGE, WITHOUT A JURY, WOULD DECIDE. IN ADDITION, THE GUARANTOR ACKNOWLEDGES A THOROUGH UNDERSTANDING OF THE TERMS OF THIS GUARANTY AND AGREES TO BE BOUND THEREBY.

This Guaranty is executed and delivered to Lender to as of the Effective Date.

[Signature Page Follows]

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[Signature page to Continuing Guaranty]

GUARANTOR:

/s/ Kirk R. Manz

Kirk R. Manz

STATE OF TENNESSEE                   )

COUNTY OF RUTHERFORD           )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Kirk R. Manz, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), the within named bargainor, and who executed the foregoing instrument for the purpose therein contained.

Witness my hand and notary seal this 2^nd day of May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016 [Affix Notary Seal]

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EX-10

Exhibit 10.16

BUILDING LOAN AGREEMENT

THIS BUILDING LOAN AGREEMENT (this “Agreement”) is executed as of October 8, 2013, by and between GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”). The Borrower and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS

A. Borrower owns certain real property described in Exhibit A hereto (the “Property”) consisting of an existing addiction treatment center located at 1171 107^th Street, Grand Prairie, Texas.

B. Borrower has requested from Lender a loan for the purpose of refinancing existing indebtedness encumbering the Property held by Reliant Bank (the “Refinance”) and for the purpose of constructing an additional 34,000 square foot, 60-bed facility in accordance with the Plans and Specification (as hereinafter defined) on the Property.

NOW, THEREFORE, Borrower and Lender agree as follows:

ARTICLE 1. LOAN

1.1 LOAN. By and subject to the terms of this Agreement, Lender agrees to lend to Borrower and Borrower agrees to borrow from Lender the maximum principal sum of THIRTEEN MILLION ONE HUNDRED SIXTY-EIGHT THOUSAND FOUR HUNDRED EIGHTY-ONE AND NO/IOOTHS DOLLARS ($13,168,481.00) (the “Loan”), said sum to be evidenced by that Promissory Note Secured by Deed of Trust of even date herewith (the “Note”). The Note shall be secured, in part, by that certain Construction Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing of even date herewith, executed by Borrower, as trustor, to David C. Young, an individual, as trustee, for the benefit of Lender, as beneficiary, as hereafter amended, supplemented, replaced or modified (the “Deed of Trust”), encumbering certain real property and improvements as legally defined therein. The obligations of Borrower under the Loan will be guaranteed in whole or in part by BEHAVIORAL HEALTHCARE REALTY, LLC, a Delaware limited liability company (“Behavioral Healthcare Realty, LLC”), MICHAEL CARTWRIGHT, an individual (“Cartwright”), and JERROD MENZ, an individual (“Menz”) (each called a “Guarantor” and collectively called “Guarantors”), pursuant to one or more guaranty agreements of even date herewith (individually or collectively, the “Guaranty”). Amounts disbursed to or on behalf of Borrower pursuant to the Note shall be used for such other purposes and uses as may be permitted under this Agreement and the other Loan Documents, as described below. The Loan is not a revolving credit line, and no payments or credits shall increase the maximum amount of advances available from the Loan.

1.2 INTENTIONALLY DELETED.

1.3 LOAN DOCUMENTS; EFFECTIVE DATE. Borrower shall deliver to Lender concurrently with this Agreement the Note, the Deed of Trust and any other documents required by Lender, as hereafter amended, supplemented, replaced or modified, each properly executed and in recordable form, as applicable, described in Exhibit B (collectively, the “Loan Documents”), together with those documents described in Exhibit B as other related documents. The effective date (the “Effective Date”) of the Loan Documents shall be the earlier of (a) the date the Deed of Trust is recorded in the Office of the County Recorder of the county where the Property is located and (b) the date Lender authorizes the Loan proceeds to be released to Borrower.

1.4 MATURITY DATE. The maturity date of the Loan shall be October 31, 2014 (the “Maturity Date”).

1.5 FULL REPAYMENT AND RECONVEYANCE. Upon receipt of all sums owing and outstanding under the Loan Documents, Lender shall issue a full release and reconveyance of the Property and Improvements from the lien of the Deed of Trust; provided, however, that each of the following conditions shall be

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satisfied at the time of, and with respect to, such release and reconveyance: (a) Lender shall have received all escrow, closing and recording costs, the costs of preparing and delivering such release and reconveyance and any sums then due and payable under the Loan Documents; and (b) Lender shall have received a written release satisfactory to Lender of any set aside letter, letter of credit or other form of undertaking which Lender has issued to any surety, governmental agency or any other party in connection with the Loan and/or the Property; and (c) Lender’s obligation, if any, to make further disbursements under the Loan shall terminate as to any portion of the Loan undisbursed as of the date of issuance of such full release or reconveyance, and any commitment of Lender to lend any undisbursed portion of the Loan shall be cancelled.

1.6 OPTION TO EXTEND. Borrower shall have the option to extend the term of the Loan (the “Option to Extend”) from the Maturity Date to October 31, 2019 (the “Extended Maturity Date”), upon receipt of written notice from Borrower of Borrower’s request to exercise the Option to Extend, which notice shall be provided to Lender not more than ninety (90) days but not less than sixty (60) days prior to the Maturity Date, and upon satisfaction of each of the following conditions precedent:

a. As of both the Conversion Date (as hereinafter defined) and the Maturity Date, no Default (as hereinafter defined) shall have occurred and be continuing, and no event or condition which, with the giving of notice or the passage of time or both, would constitute a Default shall have occurred and be continuing, and Borrower shall so certify in writing;

b. Borrower shall execute or cause the execution of all documents reasonably required by Lender to exercise the Option to Extend and shall deliver to Lender, at Borrower’s sole cost and expense, such title insurance endorsements reasonably required by Lender;

c. There shall have occurred no material adverse change, as determined by Lender in its sole discretion, in the financial condition of Borrower or any Guarantor from that which existed as of the later of: (i) the Effective Date; or (ii) the date upon which the financial condition of such party was first represented to Lender;

d. Lender shall have determined that the ratio of (x) the total amount due under the Note on the Conversion Date to (y) the appraised “as proposed” value of the Property set forth in the Original Appraisal (as defined in Section 2.1 below), as adjusted by Lender in its sole discretion, does not exceed 65% (the “Conversion LTV”). In the event such “as proposed” value of the Property is not adequate to meet the Conversion LTV, then Borrower may either (i) immediately pay down the outstanding principal balance of the Loan such that said Conversion LTV is met, or (ii) deliver to Lender an updated appraisal of the Property, at Borrower’s sole cost and expense, indicating, to the reasonable satisfaction of Lender, an “as is” value of the Property that is adequate to meet the Conversion LTV, as adjusted by Lender in its sole discretion upon its review of such new appraisal. The valuation date of such updated appraisal shall be within thirty (30) days of the Conversion Date. In the event such “as is” value of the Property is not adequate to meet the Conversion LTV, then Borrower may immediately pay down the outstanding principal balance of the Loan such that the Conversion LTV is met. Any principal balance reduction shall reduce Lender’s commitment by a like amount and may not be re-borrowed.

e. Guarantor shall reaffirm its obligations under the existing Repayment Guaranty (as defined on Exhibit B attached hereto);

f. The Improvements shall be 100% complete as determined by an inspection thereof by Lender or Lender’s agents and as evidenced by receipt by Lender of the final certificate of occupancy for the Improvements, in form and substance satisfactory to Lender; and

g. Lender shall have received, at Borrower’s sole cost and expense, such title insurance endorsements reasonably required by Lender to the title policies issued by Stewart Title Company in connection with the Loan, including a Down-Date Endorsement pursuant to Procedural Rule P-9b(4), and other endorsements deleting any mechanic’s and materialmen’s lien exceptions and, if

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applicable, deleting the pending disbursements clause pursuant to Procedural Rule P-8b(2), and, if applicable, a Form T-38 Endorsement pursuant to Procedural Rule P-9b(3), each in form and content satisfactory to Lender, and

h. Borrower shall have reimbursed Lender for all fees and expenses incurred with such Option to Extend, including without limitation, the reasonable fees and expenses of Lender’s counsel, title insurance fees, appraisal fees, inspection fees and reasonable consultant’s fees, regardless of whether the Option to Extend is completed.

Except as modified by this Conversion Option, the terms and conditions of this Agreement and the other Loan Documents as modified and approved by Lender shall remain unmodified and in full force and effect; provided, however, that commencing on the first (1st) day of the first (1st) month after the Conversion Date, (i) Borrower shall commence making monthly principal payments with respect to the Loan as provided in the Note, and (ii) interest on the Loan shall accrue at a rate equal to the One-Month Rate (as defined in the Note) plus two and one-half percent (2.50%) in accordance with the terms of the Note. All terms, conditions and requirements of the Loan Documents shall remain in full force and effect after the exercise of the Conversion Option. The date, which date shall be no later than October 31, 2014, on which Borrower fulfills the requirements set forth in this Section 1.6 and Lender converts the Loan to a permanent loan is the “Conversion Date”.

In the event that Borrower shall fail to satisfy the foregoing conditions precedent on or before the Conversion Date or in the event that Borrower elects, for any reason whatsoever, not to exercise the Conversion Option, including, without limitation, Borrower’s election to repay the Loan in full on or before the Maturity Date or to refinance the Loan with the proceeds of a loan from a lender other than Lender, then Borrower shall pay to Lender a fee (the “Exit Fee”) in an amount equal to the product of (i) three percent (3%) and (ii) the outstanding principal balance of the Loan as of the Maturity Date, which Exit Fee shall be payable in full on the Maturity Date or on such earlier date on which Borrower shall have repaid the Loan in full.

ARTICLE 2. DISBURSEMENT

2.1 CONDITIONS PRECEDENT. Lender’s obligation to make any disbursements or take any other action under the Loan Documents shall be subject at all times to satisfaction of each of the following conditions precedent:

a. Lender shall have received fully executed originals of all Loan Documents, the Guaranty and any other documents, instruments, policies, and other materials requested by Lender under the terms of this Agreement or any of the other Loan Documents;

b. There shall exist no Default as defined in this Agreement or any of the other Loan Documents or any event, omission or failure of condition which would constitute a Default after notice or lapse of time, or both;    

c. Lender shall have received an executed copy of a current lease, in form and substance acceptable to Lender, executed by Borrower, as landlord, and Greenhouse Treatment Center, LLC, a Texas limited liability company (“Tenant”) and a wholly-owned subsidiary of American Addition Centers, Inc., a Nevada corporation (“AAC”), as tenant, for one hundred percent (100%) of the Property (the “Greenhouse Treatment Center Lease”);

d. Lender shall have received an executed copy of a guaranty the Lease, in form and substance acceptable to Lender, executed by AAC as guarantor;

e. Lender shall have received an executed amendment to Borrower’s operating agreement, in form and substance acceptable to Lender, reflecting that Behavioral Healthcare Realty, LLC owns one hundred percent (100%) of the membership interests of Borrower;

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f. Lender shall have received the final budget for the construction of the Improvements, in form and substance satisfactory to Lender;

g. Lender shall have obtained an appraisal of the Property (the “Original Appraisal”), at Borrower’s expense, indicating, to the reasonable satisfaction of Lender, that the ratio of (x) the total amount of the Loan to (y) the most recent appraised “as proposed” value of the Property (which shall include the estimated value of the Property upon completion of the Improvements), as adjusted by Lender in its sole discretion upon its review of the Original Appraisal, does not exceed 65%;

h. The representations and warranties contained in this Agreement and in all other Loan Documents are true and correct as of the date of the requested disbursement;

i. Such disbursement shall be secured by the Loan Documents and the lien of the Deed of Trust on the Property may be subject only to those exceptions to title approved by Lender as of the date hereof, as evidenced by title insurance endorsements satisfactory to Lender;

j. Borrower shall have paid all of Lender’s reasonable costs and expenses in connection with such disbursement (including the reasonable cost of Lender’s attorneys);

k. Any undisbursed Loan funds together with all sums, if any, to be provided by Borrower as shown in Exhibit C shall be at all times equal to or greater than the amount for the Refinance plus the amount which Lender from time to time determines reasonably necessary to: (i) pay through completion all costs of development and construction of the Property and Improvements in accordance with the Loan Documents; (ii) pay all sums which may accrue under the Loan Documents prior to Borrower’s obligation to repay the Loan; and (iii) enable Borrower to perform and satisfy all of the covenants of Borrower contained in the Loan Documents. If Lender determines at any time that the undisbursed Loan funds are insufficient for said purposes, Borrower shall deposit the amount of such deficiency with Lender within seven (7) days of Lender’s written demand. Except as otherwise provided in this Agreement, all funds which are deposited with Lender by Borrower pursuant to the terms and conditions of this Agreement (the “Borrower’s Funds”) shall be held by Lender for disbursement under this Agreement;

l. Lender shall have received and approved in form and substance satisfactory to Lender: (i) if requested by Lender, a soils report for the Property and Improvements; (ii) two sets of the Plans and Specifications (as defined in certain Assignment of Architectural Agreements and Plans and Specifications of even date herewith), certified as complete by the architect that prepared them, together with evidence of all necessary or appropriate approvals of governmental agencies or private parties required to construct the Improvements; (iii) copies of all agreements which are material to completion of the Improvements, including the Construction Agreement (as defined below) and Architect’s Agreement (as defined below); and (iv) copies of all building permits and similar permits, licenses, approvals, development agreements and other authorizations of governmental agencies or private parties required to develop the Property and Improvements, if required by Lender;

m. Borrower shall have delivered to Lender (i) a request for the advance, (ii) a copy of Contractor’s application for payment to Borrower, signed by an architect and confirmed by Lender’s inspector, on ATA Forms G702 and G703/G703A or other forms acceptable to Lender, (iii) if requested by Lender, paid invoices or receipts and unconditional statutory lien waivers for all construction work and costs included in the previous request for advance, and evidence reasonably satisfactory to Lender that all prior advances have been used for purposes described in this Agreement or the Financial Requirements Analysis; (iv) if requested by Lender, evidence that any inspection required by any governmental authority has been completed with results satisfactory to that governmental authority and allocated costs of any work to be performed under the Construction Agreement (defined below) on AIA Form G702 or such other forms as may be acceptable to Lender, (v) a true and correct current statement of all obligations incurred for labor performed and materials ordered or delivered, and (vi) such certifications of job progress, in form satisfactory to

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Lender, as Lender may request. In this regard, Lender shall have the right to inspect all books, records and accounts relating to such work, and may, at its option, require execution by Borrower and any contractors, subcontractors, laborers and materialmen of such affidavits, endorsements and releases as Lender deems reasonably necessary; and

n. Lender shall not be obligated to make the final disbursement of the Loan until (i) receipt by Lender of the final certificate of occupancy for the Improvements, in form and substance satisfactory to Lender, (ii) receipt of evidence, satisfactory to Lender, that the Improvements have been constructed prior to the Completion Date and in accordance with the Plans and Specifications, (iii) evidence satisfactory to Lender of lien-free completion of the Improvements or that the statutory lien filing period has expired including, without limitation, either evidence that no claim of lien, lien affidavit or stop notice has been filed or Lender has received releases with respect to the same, (iv) Lender or Lender’s agent shall have inspected the Property and the Improvements, and (v) Lender’s receipt, at Borrower’s sole cost and expense, of a Down-Date Endorsement pursuant to Procedural Rule P-9b(4), and other endorsements amending the mechanic’s and materialmen’s lien coverage and, if applicable, deleting the pending disbursements clause pursuant to Procedural Rule P-8b(2), and, if applicable, a Form T-38 Endorsement pursuant to Procedural Rule P-9b(3) to Lender’s title policy issued by Stewart Title Company in connection with the Loan, all in form and substance satisfactory to Lender, and (vi) performance of all other obligations of Borrower under the Loan Documents.

2.2 LOAN DISBURSEMENTS. Subject to all conditions precedent set forth in Section 2.1 above, the proceeds of the Loan and any Borrower’s Funds shall be disbursed in accordance with the Financial Requirements Analysis, attached hereto as Exhibit C, to pay for the Refinance and for costs of construction actually incurred, subject to a 10% retention, by deposit into an account with Lender, account number *** in the name of Borrower or Borrower’s designee (“Account”). In no event will Lender make disbursements (i) more frequently than monthly, or (ii) in excess of the percentage of construction completed. The maximum amount of advances which Borrower may request for the improvements or for any component or phase thereof shall be as set forth in the Financial Requirements Analysis. Lender shall not be obligated to disburse Loan proceeds for the payment of any cost if the amount of such cost, together with the amounts of other costs included within the same “line-item” in the Financial Requirements Analysis for which requests for advances have previously been submitted and approved, exceeds the amount set forth in the Financial Requirements Analysis for such line-item, unless Borrower furnishes to Lender documentary evidence satisfactory to Lender that any such excess cost is offset by a reduction, in nature satisfactory to Lender, of at least an equal amount in another line-item in the Financial Requirements Analysis, and Lender approves a revision to the Financial Requirements Analysis. At its option, Lender may make disbursements directly to Lender for the payment of interest which accrues and becomes due under the Note, if and to the extent the Financial Requirements Analysis includes interest reserve advances (exclusive of the amount for the Refinance). At its option, Lender may make disbursements to cover any expenses or charges which are to be borne by Borrower, including but not limited to, the cost of any required legal fees, appraisals, inspections, certifications or surveys. At its sole option, Lender may make any disbursements by payment to Borrower or jointly to Borrower and any contractor, subcontractor, supplier, or other person performing work or furnishing materials in connection with the construction of the Improvements. All disbursements shall be applied by Borrower solely for the purposes for which the funds have been disbursed. All disbursements shall be made first from Borrower’s Funds and then from available Loan funds. The Loan shall bear interest and be repaid in accordance with the provisions of the Note. If the outstanding principal balance of the Loan ever exceeds the maximum loan amount described in Section 1.1, all such amounts shall nonetheless be evidenced by the Note, guaranteed by the Guaranty and secured by the Deed of Trust; however, Borrower shall, within 5 business days after Lender’s demand or Borrower’s earlier discovery of such advance, pay to Lender an amount equal to such excess principal amount and accrued but unpaid interest thereon. All requests for advances shall clearly identify any amounts requested for payment to a Related Person. As used in this Agreement, “Related Person” means each Guarantor and any insider or affiliate (or insider or affiliate of any such insider or affiliate) of Borrower, determined by assuming that: (a) Borrower or such Guarantor or other affiliate or insider was a debtor at the time of determination of Related Person status; and (b) the terms “affiliate”, “insider” and “debtor” have the meanings provided for those terms by Section 101 of the federal Bankruptcy Code. Unless expressly set

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forth in the then effective Financial Requirements Analysis or this Agreement, no developer’s, management, consulting or brokerage fee or commission, developer profit or other payment to any Related Person will be paid directly or indirectly from any proceeds of the Loan without Lender’s prior written approval.

2.3 ACCOUNT PLEDGES. As additional security for Borrower’s performance under the Loan Documents, Borrower hereby irrevocably pledges and assigns to Lender all monies at any time deposited in the Account and all Borrower’s Funds.

2.4 FUNDS TRANSFER DISBURSEMENTS.

a. Borrower hereby authorizes Lender to disburse the proceeds of the Loan made by Lender or its affiliate pursuant to the Loan Documents as requested by an authorized representative of Borrower (as authenticated in accordance with the authentication procedures implemented by Lender, as the same may be changed from time to time, and communicated to Borrower) to any of the accounts designated in Exhibit D. Borrower agrees to be bound by any transfer request: (i) authorized or transmitted by Borrower; or, (ii) made in Borrower’s name and accepted by Lender in good faith and in compliance with the transfer instructions contained in Exhibit D, even if not properly authorized by Borrower. Borrower further agrees and acknowledges that Lender may rely solely on any bank routing number or identifying bank account number or name provided by Borrower to effect a wire or funds transfer even if the information provided by Borrower identifies a different bank or account holder than named by Borrower. Lender is not obligated or required in any way to take any actions to detect errors in information provided by Borrower. If Lender takes any actions in an attempt to detect errors in the transmission or content of transfer or requests or takes any actions in an attempt to detect unauthorized funds transfer requests, Borrower agrees that, no matter how many times Lender takes these actions, Lender will not in any situation be liable for failing to take or correctly perform these actions in the future, and such actions shall not become any part of the transfer disbursement procedures authorized under this provision or the Loan Documents. Borrower agrees to notify Lender of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within fourteen (14) days after Lender’s confirmation to Borrower of such transfer.

b. Lender will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. Lender may delay or refuse to accept a funds transfer request if the transfer would: (i) violate the terms of this Agreement; (ii) require use of a bank unacceptable to Lender or prohibited by government authority; (iii) cause Lender to violate any Federal Reserve or other regulatory risk control program or guideline; or (iv) otherwise cause Lender to violate any applicable law or regulation.

c. Lender shall not be liable to Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrower’s transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of Lender, (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Lender’s control, or (iii) any special, consequential, indirect or punitive damages, whether or not (A) any claim for these damages is based on tort or contract or (B) Lender or Borrower knew or should have known the likelihood of these damages in any situation. Lender makes no representations or warranties other than those expressly made in this Agreement.

2.5 WITHHOLDING OF ADVANCES; RETENTION. Lender may withhold advances under the following circumstances, in addition to the circumstances described in Sections 9.2 and 9.5:

a. Lender may withhold any advance if the request therefor is not accompanied by executed lien waivers for all work done, equipment leased and materials supplied through the date of the immediately preceding request for an advance.

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b. Ten percent (10%) of each advance shall be retained by Lender until (i) Architect has certified, and an inspector has confirmed, on AIA Form G704 or other appropriate form, that the relevant Improvements have been substantially completed in accordance with the Plans and Specifications in accordance with Section 3.1 below; (ii) each applicable governmental authority shall have duly inspected and approved the Improvements and issued the appropriate permit, license or certificate to evidence such approval; and (iii) thirty (30) days shall have elapsed from the later of (A) the date of completion of the Improvements, as specified in Texas Property Code §53.106, if the Affidavit of Completion provided for in this Agreement is filed within ten (10) days after such date of completion, or (B) the date of filing of such Affidavit of Completion if such Affidavit of Completion is filed ten (10) days or more after the date of the completion of the Improvements as specified in Texas Property Code §53.106. The retainage portion of each advance for labor, services and/or material will be disbursed following such timely completion of the Improvements unless Lender, in its sole discretion, agrees to disbursements at an earlier stage.

c. Any one or more advances may be withheld in whole or in part if Lender determines that the requested advance(s) would cause the total amount advanced with respect to the relevant Improvements (or any component thereof which represents a separate Financial Requirements Analysis “line item”) to exceed the advance limitations with respect to such Improvements (or component) set forth in the then effective Financial Requirements Analysis, or would cause a violation of the advance limitation provisions of Section 2.2.

ARTICLE 3. CONSTRUCTION

3.1 COMMENCEMENT AND COMPLETION. Lender and Borrower acknowledge that Borrower has commenced construction of the Improvements. Borrower shall complete construction of the Improvements, free and clear of any mechanics’ and materialmen’s liens and stop notices, as applicable, in accordance with the Plans and Specifications and other provisions of the Loan Documents, with all construction costs having been paid, on or before September 1, 2014 (the “Completion Date”).

3.2 FORCE MAJEURE. The time within which construction of the Improvements must be completed shall be extended for a period of time equal to the period of any delay directly affecting construction which is caused by fire, earthquake or other acts of God, strike, lockout, acts of public enemy, riot, insurrection, or governmental regulation of the sale or transportation of materials, supplies or labor; provided, however, that Borrower shall furnish Lender with written notice satisfactory to Lender evidencing any such delay within ten (10) days from Borrower’s knowledge of the occurrence of any such delay. In no event shall the time for completion of the Improvements be extended beyond the earlier of the Maturity Date or 60 days beyond the Completion Date.

3.3 CONSTRUCTION AGREEMENT. Borrower and FJW CONSTRUCTION, LLC, a Texas limited liability company (“Contractor”), have entered into that certain Standard Form of Agreement Between Owner and Contractor where the Basis of Payment is a Stipulated Sum dated July 30, 2013 (the “Construction Agreement”), as amended by that certain Amendment to the Construction Agreement dated October 1, 2013, pursuant to the terms and conditions of which Contractor is to construct the Improvements. Borrower shall require Contractor to perform in accordance with the terms of the Construction Agreement and shall not amend, modify or alter the responsibilities of Contractor under the Construction Agreement without Lender’s prior written consent. Borrower shall execute, upon Lender’s request, an assignment of Borrower’s rights under the Construction Agreement to Lender as security for Borrower’s obligations under this Agreement and the other Loan Documents and shall cause Contractor to consent to any such assignment.

3.4 ARCHITECT’S AGREEMENT. Borrower and JOHN E. WHEELER, III ARCHITECTS, INC., a Texas corporation (“Architect”), have entered into that certain Letter Agreement dated as of April 12, 2013 (the “Architect’s Agreement”) pursuant to which Architect is to design the Improvements. Borrower shall require Architect to perform in accordance with the terms of the Architect’s Agreement and shall not amend, modify or alter the material responsibilities of Architect under the Architect’s Agreement without Lender’s prior written consent. Upon Lender’s request, Borrower shall execute an assignment of the

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Architect’s Agreement and the Plans and Specifications to the extent prepared by Architect, to Lender as additional security for Borrower’s performance under this Agreement and the other Loan Documents and shall cause Architect to consent to any such assignment.

3.5 PLANS AND SPECIFICATIONS.

a. Changes; Lender Consent. Except as otherwise provided in this Agreement, Borrower shall not make any changes in the Plans and Specifications without Lender’s prior written consent if such change: (i) constitutes a material change in the building material or equipment specifications, or in the architectural or structural design, value or quality of any of the Improvements; (ii) would result in an increase of construction costs in excess of FIFTY THOUSAND AND NO/100THS DOLLARS ($50,000.00) for any single change or in excess of TWO HUNDRED FIFTY THOUSAND AND NO/100THS DOLLARS ($250,000.00) for all such changes; or (iii) would materially affect the structural integrity, quality of building materials, or overall efficiency of operating systems of the Improvements. Without limiting the above, Lender agrees that Borrower may make minor changes in the Plans and Specifications without Lender’s prior written consent, provided that such changes do not violate any of the conditions specified herein. Borrower shall at all times maintain, for inspection by Lender, a full set of the Plans and Specifications.

b. Changes; Submission Requirements. Borrower shall submit any material proposed change in the Plans and Specifications to Lender at least ten (10) days prior to the commencement of construction relating to such proposed change, whether or not such change is subject to Lender’s consent. Requests for any change which requires Lender’s consent shall be accompanied by working drawings and a written description of the proposed change, submitted on a change order form acceptable to Lender, signed by Borrower and, if required by Lender, also by Architect and Contractor. At its option, Lender may require Borrower to provide: (i) evidence satisfactory to Lender of the cost and time necessary to complete the proposed change; (ii) a deposit in the amount of any increased costs into Borrower’s Funds; and (iii) a complete set of “as built” Plans and Specifications for the completed Improvements.    

c. Consent Process. Borrower acknowledges that Lender’s review of any changes and required consent may result in delays in construction and hereby consents to any such delays.

d. Final Plans and Specifications. If requested by Lender, upon completion of the Improvements, Borrower shall deliver to Lender within ten (10) days a set of final Plans and Specifications.

3.6 CONTRACTOR/CONSTRUCTION INFORMATION. Within ten (10) days of Lender’s written request, Borrower shall deliver to Lender in a form acceptable to Lender: (a) a list detailing the name, address and phone number of each contractor, subcontractor and material supplier known to be employed or used for construction of the Improvements together with the dollar amount, including changes, if any, of each contract and subcontract, and the portion thereof, if any, paid through the date of such list; (b) copies of each contract and subcontract identified in such list, including any changes thereto; (c) a cost breakdown of the projected total cost of constructing the Improvements, and that portion, if any, of each cost item which has been incurred; and (d) a construction progress schedule detailing the progress of construction and the projected sequencing and completion time for uncompleted work, all as of the date of such schedule.

Borrower agrees that Lender may disapprove any contractor, subcontractor or material supplier which, in Lender’s good faith determination, is deemed financially or otherwise unqualified; provided, however, that the absence of any such disapproval shall not constitute a warranty or representation of qualification by Lender. Lender may contact any such contractor, subcontractor or material supplier to discuss the course of construction.

3.7 LIENS AND STOP NOTICES. If a claim of lien or lien affidavit is recorded which affects the Property or Improvements or a bonded stop notice is served upon Lender, Borrower shall, within twenty (20) calendar days of such recording or service or within five (5) business days of Lender’s demand, whichever

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occurs first: (a) pay and discharge the claim of lien or bonded stop notice; (b) effect the release thereof by recording or delivering to Lender a surety bond in sufficient form and amount; or (c) provide Lender with other assurances which Lender deems, in its sole discretion, to be satisfactory for the payment of such claim of lien or bonded stop notice and for the full and continuous protection of Lender from the effect of such lien or bonded stop notice.

3.8 CONSTRUCTION RESPONSIBILITIES. Borrower shall construct the Improvements in a workmanlike manner according to the Plans and Specifications and the recommendations of any soils or engineering report approved by Lender. Borrower shall make reasonable efforts to comply with any construction schedule furnished to Lender and shall comply all applicable laws, ordinances, rules, regulations, building restrictions, recorded covenants and restrictions, and requirements of all regulatory authorities having jurisdiction over the Property or Improvements. Each portion and all of the Improvements, except for approved off-site improvements, shall be constructed within building restriction and set-back lines, and shall not encroach upon, overhang or interfere with any easement, right-of-way, floodplain or other property, unless allowed otherwise whether through written agreement, variance or other governmental or third party approval. Borrower shall not commence the construction of any improvements on the Property, except for those set forth in the Plans and Specifications, without Lender’s prior written consent. Borrower shall be solely responsible for all aspects of Borrower’s business and conduct in connection with the Property and Improvements, including, without limitation, for the quality and suitability of the Plans and Specifications and their compliance with all governmental requirements, the supervision of the work of construction, the qualifications, financial condition and performance of all architects, engineers, contractors, material suppliers, consultants and property managers, and the accuracy of all applications for payment and the proper application of all disbursements. Lender is not obligated to supervise, inspect or inform Borrower or any third party of any aspect of the construction of the Improvements or any other matter referred to above. Except to the extent approved in writing by Lender, no materials, equipment or other personal property or fixture constituting part of the Improvements shall be purchased or installed under any security agreement, lease or other arrangement whereby any third party has a security interest, lien or right to remove or repossess any such item or to claim or assert a lien upon any such property, or to consider such property to constitute personal property after its incorporation into the Improvements.

3.9 ASSESSMENTS AND COMMUNITY FACILITIES DISTRICTS. Prior to the full release and reconveyance of the Property from the lien of the Deed of Trust and without Lender’s prior written consent, Borrower shall not cause or suffer to become effective or otherwise consent to the formation of any assessment district or community facilities district which includes all or any part of the Property and Improvements, nor shall Borrower cause or otherwise consent to the levying of special taxes or assessments against the Property and Improvements by any such assessment district or community facilities district. Borrower shall immediately give notice to Lender of any notification or advice that Borrower may receive from any municipality or other third party of any intent or proposal to include the Property and Improvements in a community facilities district or to levy any such special taxes or assessments. Lender shall have the right to file a written objection to the inclusion of all or any part of the Property and Improvements in a community facilities district, or to the levy of any such special taxes or assessments, either in its own name or in the name of Borrower, and to appear at, and participate in, any hearing with respect to the formation of any such district or the levy or such special taxes or assessments.

3.10 DELAY. Borrower shall promptly notify Lender in writing of any event causing delay or interruption of construction that is expected to last longer than five (5) business days, or the timely completion of construction. The notice shall specify the particular work delayed, and the cause and period of each delay.

3.11 INSPECTIONS. Lender or its agent shall have the right to enter upon the Property at all reasonable times to inspect the Improvements and the construction work to verify information disclosed or required pursuant to this Agreement. Any inspection or review of the Improvements by Lender or its agent is solely to determine whether Borrower is properly discharging its obligations to Lender and may not be relied upon by Borrower or by any third party as a representation or warranty of compliance with this Agreement or any other agreement. Lender owes no duty of care to Borrower or any third party to protect against, or to inform Borrower or any third party of, any negligent, faulty, inadequate or defective design or construction of the Improvements as determined by Lender.

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3.12 SURVEYS. Upon Lender’s written request, Borrower shall promptly deliver to Lender: (a) a perimeter survey of the Property; (b) upon completion of the foundations of the Improvements, a survey showing the location of the Improvements on the Property and confirming that the Improvements are located entirely within the Property and do not improperly encroach upon any easement, or breach or violate any governmental requirement; and (c) upon completion of the Improvements, an as-built survey of the Property and Improvements. All such surveys shall be performed and certified by a licensed engineer or surveyor acceptable to Lender and the title insurer, shall be prepared according to current ALTA/ACSM Minimum Standard Detail Requirements and any additional items required by Lender or the title insurer or Category 1A, Condition I survey pursuant to the most recent edition of the Manual of Practice for Land Surveying in the State of Texas, published by the Texas Society of Professional Surveyors, and shall be certified to Lender and the title insurer.

3.13 BONDS. Within five (5) calendar days of Lender’s request, Borrower shall procure from a surety acceptable to Lender, and deliver to Lender performance bonds with dual obligee rider and payment bonds in form, substance and amount acceptable to Lender. The payment bond shall conform to the requirements of Texas Property Code Section 53.201 et seq. and that bond, together with a copy or memorandum of the contract to which it relates (which payment bond shall contain the legal description of the Property) shall be recorded in the office of the County Clerk of the county where the Property is located.

3.14 NOTICE OF COMMENCEMENT. Within ten (10) days after the Effective Date, Borrower shall execute and cause the Contractor to execute and shall file in the Real Property Records of the county in which the Property is located, an affidavit of commencement pursuant to Texas Property Code Section 53.124 (the “Affidavit of Commencement”), in a form satisfactory to Lender. The date of commencement of the construction of the Improvements as set forth in such Affidavit of Commencement shall be a date after the date of the recordation of the Deed of Trust.

3.15 NOTICE OF COMPLETION. Within ten (10) days after the construction of the Improvements has been completed, Borrower shall execute and file in the Real Property Records of the county in which the Property is located, an affidavit of completion pursuant to Texas Property Code Section 53.106 (the “Affidavit of Completion”) in a form satisfactory to Lender, and shall send by certified mail, a copy of the Affidavit of Completion to the Contractor and to each other lien claimant, subcontractor or materialmen on or before the date of filing of the Affidavit of Completion or ten (10) days after written request for a copy of same.

ARTICLE 4. INSURANCE

Borrower shall, while any financial obligation of Borrower or any Guarantor under any Loan Document remains outstanding, maintain at Borrower’s sole expense, with licensed insurers approved by Lender, the following policies of insurance in form and substance satisfactory to Lender:

4.1 TITLE INSURANCE. A standard Texas promulgated form Mortgagee Policy of Title Insurance (the “Title Policy”), together with any endorsements which Lender may require, insuring Lender, in the principal amount of the Loan, of the validity and the priority of the lien of the Deed of Trust upon the Property and the Improvements, subject only to matters approved by Lender in writing. During the term of the Loan, Borrower shall deliver to Lender, within ten (10) days of Lender’s written request, such other endorsements to the Title Policy as Lender may reasonably require, including without limitation, a title update endorsement concurrently with each advance or certain advances of loan proceeds.

4.2 PROPERTY INSURANCE. A Builders All Risk/Special Form Completed Value (Non-Reporting Form) Hazard Insurance policy, including without limitation, theft coverage and such other coverages and endorsements as Lender may require, insuring Lender against damage to the Property and Improvements in an amount not less than 100% of the full replacement cost at the time of completion of the Improvements. Such coverage should adequately insure any and all Loan collateral, whether such collateral is onsite, stored offsite or otherwise. Lender shall be named on the policy as Mortgagee and named under a Lender’s Loss Payable Endorsement or a Standard Mortgagee Clause Endorsement (in form acceptable to Lender).

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4.3 FLOOD HAZARD INSURANCE. A policy of flood insurance, as required by applicable governmental regulations, or as deemed necessary by Lender, in an amount required by Lender, but in no event less than the amount sufficient to meet the requirements of applicable law and governmental regulation.

4.4 LIABILITY INSURANCE. A policy of Commercial General Liability insurance on an occurrence basis, with coverages and limits as required by Lender, insuring against liability for injury and/or death to any person and/or damage to any property occurring on the Property and/or in the Improvements. During the period of any construction, Borrower may cause its contractors and/or subcontractors to maintain in full force and effect any or all of the liability insurance required hereunder. Lender may require that Lender be named as an additional insured on any such policy. Whether Borrower employs a general contractor or performs as owner-builder, Lender may require that coverage include statutory workers’ compensation insurance.

4.5 OTHER COVERAGE. Borrower shall provide to Lender evidence of such other reasonable insurance in such reasonable amounts as Lender may from time to time request against such other insurable hazards which at the time are commonly insured against for property similar to the Property located in or around the region in which the Property is located. Such coverage requirements may include, but are not limited to, coverage for earthquake, acts of terrorism, mold, business income, delayed business income, rental loss, sink hole, soft costs, tenant improvement or environmental.

4.6 GENERAL. Borrower shall provide to Lender insurance certificates or other evidence of coverage in form acceptable to Lender, with coverage amounts, deductibles, limits and retentions as required by Lender. All insurance policies shall provide that the coverage shall not be cancelable or materially changed without ten (10) days prior written notice to Lender of any cancellation for nonpayment of premiums, and not less than thirty (30) days prior written notice to Lender of any other cancellation or any modification (including a reduction in coverage). Lender shall be named under a Lender’s Loss Payable Endorsement or Standard Mortgagee Clause Endorsement (in form acceptable to Lender) on all insurance policies which Borrower actually maintains with respect to the Property and Improvements. All insurance policies shall be issued and maintained by insurers approved to do business in the state in which the Property is located and must have an A.M. Best Company financial rating and policyholder surplus acceptable to Lender.

4.7 COLLATERAL PROTECTION INSURANCE NOTICE. (A) BORROWER IS REQUIRED TO: (i) KEEP THE PROPERTY AND IMPROVEMENTS INSURED AGAINST DAMAGE IN THE AMOUNT LENDER SPECIFIES; (ii) PURCHASE THE INSURANCE FROM AN INSURER THAT IS AUTHORIZED TO DO BUSINESS IN THE STATE OF TEXAS OR AN ELIGIBLE SURPLUS LINES INSURER; AND (iii) NAME LENDER AS THE PERSON TO BE PAID UNDER THE POLICY IN THE EVENT OF A LOSS; (B) BORROWER MUST, IF REQUIRED BY LENDER, DELIVER TO LENDER A COPY OF THE POLICY AND PROOF OF THE PAYMENT OF PREMIUMS THEREFOR; AND (C) IF BORROWER FAILS TO MEET ANY REQUIREMENT LISTED IN CLAUSES (A) OR (B) HEREOF, LENDER MAY OBTAIN COLLATERAL PROTECTION INSURANCE ON BEHALF OF BORROWER AT BORROWER’S EXPENSE.

ARTICLE 5. REPRESENTATIONS AND WARRANTIES

As a material inducement to Lender’s entry into this Agreement, Borrower represents and warrants to Lender, as of the Effective Date and continuing thereafter, until the full release and reconveyance of the lien of the Deed of Trust. As used in this Agreement, the phrase “to the best of Borrower’s knowledge” shall mean the actual knowledge of Cartwright and Menz after reasonable inquiry and investigation.

5.1 AUTHORITY/ENFORCE ABILITY. To the best of Borrower’s knowledge, Borrower is in compliance with all laws and regulations applicable to its organization, existence and transaction of business and has all necessary rights and powers to own, develop and operate the Property and Improvements as contemplated by the Loan Documents.

5.2 BINDING OBLIGATIONS. Borrower is authorized to execute, deliver and perform its obligations under the Loan Documents, and such obligations are the valid and binding obligations of Borrower.

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5.3 COMPLIANCE WITH LAWS; USE. To the best of Borrower’s knowledge, Borrower has, and at all times shall have, all permits, licenses, exemptions, and approvals necessary to construct, occupy, operate and market the Property and Improvements, and shall maintain compliance with all governmental requirements applicable to the Property and Improvements and all other applicable statutes, laws, regulations and ordinances necessary for the transaction of its business, and shall require its lessees or licensees to do the same. To the best of Borrower’s knowledge, the Property is a legal parcel lawfully created in full compliance with all subdivision laws and ordinances, and is properly zoned for the stated use of the Property as disclosed to Lender at the time of execution hereof. Borrower shall not initiate or acquiesce to a zoning change of the Property without prior notice to, and prior written consent from, Lender. Furthermore, Borrower shall not allow changes in the stated use of the Property from that disclosed to Lender at the time of execution hereof without prior notice to, and prior written consent from, Lender.

5.4 LITIGATION. Except as disclosed to Lender in writing and to the best of Borrower’s knowledge, there are no claims, actions, suits, or proceedings pending, or to the best of Borrower’s knowledge threatened, against Borrower or affecting the Property or Improvements.    

5.5 FINANCIAL CONDITION. All financial statements and information heretofore and hereafter delivered to Lender by Borrower, including, without limitation, information relating to the financial condition of Borrower, the Property, the Improvements, the partners, joint venturers or members of Borrower, and/or any Guarantors, fairly and accurately represent the financial condition of the subject thereof and have been prepared (except as noted therein) in accordance with generally accepted accounting principles consistently applied. Notwithstanding the use of generally accepted accounting principles, the calculation of liabilities shall NOT include any fair value adjustments to the carrying value of liabilities to record such liabilities at fair value pursuant to electing the fair value option election under FASB ASC 825-10-25 (formerly known as FAS 159, The Fair Value Option for Financial Asseis and Financial Liabilities) or other FASB standards allowing entities to elect fair value option for financial liabilities. Therefore, the amount of liabilities shall be the historical cost basis, which generally is the contractual amount owed adjusted for amortization or accretion of any premium or discount. Borrower acknowledges and agrees that Lender may request and obtain additional information from third parties regarding any of the above, including, without limitation, credit reports.

5.6 LOAN PROCEEDS AND ADEQUACY. To the best of Borrower’s knowledge, the undisbursed Loan proceeds, together with Borrower’s Funds and all other sums, if any, to be provided by Borrower as shown in Exhibit C, are sufficient to construct the Improvements in accordance with the terms and conditions of this Agreement.

5.7 ACCURACY. To the best of Borrower’s knowledge, all reports, documents, instruments, information and forms of evidence delivered to Lender concerning the Loan or security for the Loan or required by the Loan Documents are accurate, correct and sufficiently complete to give Lender true and accurate knowledge of their subject matter, and do not contain any misrepresentation or omission.

5.8 UTILITIES. All utility services, including, without limitation, gas, water, sewage, electrical and telephone, necessary for the development and occupancy of the Property and Improvements are available at or within the boundaries of the Property, or Borrower has taken all steps necessary to assure that all such services will be available upon completion of the Improvements.

5.9 BUSINESS LOAN. The Loan is a business loan transaction in the stated amount solely for the purpose of carrying on the business of Borrower and none of the proceeds of the Loan will be used for the personal, family or agricultural purposes of Borrower.

5.10 COMMENCEMENT OF CONSTRUCTION. Lender acknowledges that construction work or activity has been conducted at the Property prior to the recordation of the Deed of Trust.

5.11 PROJECT INFORMATION. (a) The recitals described in this Agreement with respect to the project are true and correct to the best of Borrower’s knowledge; (b) the Property includes, or will include upon the completion of construction, adequate on-site parking to comply with applicable legal requirements; (c) the

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Property currently abuts and has paved access to 107th Street, which is a completed and dedicated public thoroughfare in both directions; (d) all sanitary and storm sewer, natural gas (if applicable), electricity, refuse collection and telephone service, and police and fire protection, necessary for construction of the Improvements, and operation of the Property after completion, are available, and Borrower will cause such utilities to be installed and connected to the Property; (e) to the best of Borrower’s knowledge, no archaeological ruins, discoveries or specimens exist on the Property.

5.12 REAFFIRMATION AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Each request by Borrower for an advance under this Agreement shall constitute an affirmation on the part of Borrower and each Guarantor that the representations and warranties contained in this Agreement and the other Loan Documents and the Guaranty are true and correct as of the time of such request and that the relevant conditions precedent set forth in this Agreement have been fully satisfied. All representations and warranties made herein shall survive the execution of this Agreement, the making of all advances hereunder and the execution and delivery of all other documents and instruments in connection with the Loan, so long as Lender has any commitment to lend to Borrower hereunder and until the Loan has been paid in full or upon the full release and reconveyance of the Property from the lien of the Deed of Trust.

ARTICLE 6. HAZARDOUS MATERIALS

6.1 SPECIAL REPRESENTATIONS AND WARRANTIES. Without in any way limiting the other representations and warranties set forth in this Agreement, and after reasonable investigation and inquiry, Borrower hereby represents and warrants to the best of Borrower’s knowledge as of the date of this Agreement as follows:

a. Hazardous Materials. Except as previously disclosed to Lender in that certain Phase I Environmental Site Assessment report dated August 9, 2013, prepared by Partner Engineering and Science, Inc. (the “Environmental Report”), the Property is not and has not been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,” “regulated substances,” “industrial solid wastes,” or “pollutants” under the Hazardous Materials Laws, as described below, and/or other applicable environmental laws, ordinances and regulations (collectively, the “Hazardous Materials”). “Hazardous Materials” shall not include commercially reasonable amounts of such materials used in the ordinary course of operation or construction of the Property or Improvements which are used and stored in accordance with all applicable environmental laws, ordinances and regulations.

b. Hazardous Materials Laws. The Property and Improvements are in compliance with all laws, ordinances and regulations relating to Hazardous Materials (“Hazardous Materials Laws”), including, without limitation, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seg., the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901, et seq.) the Occupational Safety and Health Act, as amended, 29 U.S.C. Section 651, and applicable state and local laws, regulations or requirements relating to human health or the safety or protection of the environment.

c. Hazardous Materials Claims. There are no claims, actions, proceedings or investigations (“Hazardous Materials Claims”) pending or threatened against Borrower, Property or Improvements by any governmental entity or agency or by any other person or entity relating to Hazardous Materials or pursuant to the Hazardous Materials Laws.

d. Border Zone Property. There has been no occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to become contaminated through the migration of Hazardous Materials onto, above or under the Property.

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6.2 HAZARDOUS MATERIALS COVENANTS. Borrower agrees as follows:

a. No Hazardous Activities. Borrower shall not cause or permit the Property or the Improvements to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials.

b. Compliance. Borrower shall comply, and cause the Property, Tenant and the Improvements to comply, with all Hazardous Materials Laws.

c. Notices. Borrower shall immediately notify Lender in writing of: (i) the discovery of any Hazardous Materials on, under or about the Property and Improvements; (ii) any knowledge by Borrower that the Property or Improvements do not comply with any Hazardous Materials Laws; (iii) any Hazardous Materials Claims known to Borrower; and (iv) Borrower’s discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to become contaminated with Hazardous Materials.

d. Remedial Action. In response to the presence of any Hazardous Materials on, under or about the Property and Improvements, Borrower shall immediately take, at Borrower’s sole expense, all remedial action required by any Hazardous Materials Laws or any judgment, consent decree, settlement or compromise in respect to any Hazardous Materials Claims.

6.3 INSPECTION BY LENDER. Upon reasonable prior notice to Borrower, Lender, its employees and agents, may from time to time (whether before or after the commencement of a nonjudicial or judicial foreclosure proceeding) enter and inspect the Property and Improvements for the purpose of determining the existence, location, nature and magnitude of any past or present release or threatened release of any Hazardous Materials into, onto, beneath or from the Property and Improvements.

6.4 HAZARDOUS MATERIALS INDEMNITY. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER, LENDER’S PARENTS, SUBSIDIARIES OR AFFILIATES, ANY HOLDER OF OR PARTICIPANT IN THE LOAN, AND ALL DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS OF ANY OF THE FOREGOING (THE “INDEMNITEE^)”) FOR, FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES) WHICH ANY SUCH PARTY MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF THE USE, GENERATION, MANUFACTURE, STORAGE, DISPOSAL, THREATENED DISPOSAL, TRANSPORTATION OR PRESENCE OF HAZARDOUS MATERIALS IN, ON, UNDER OR ABOUT THE PROPERTY, ANY VIOLATION OR CLAIM OF VIOLATION OF ANY HAZARDOUS MATERIALS LAWS WITH RESPECT TO THE PROPERTY, OR ANY INDEMNITY CLAIM BY A THIRD PARTY AGAINST ONE OR MORE INDEMNITEES IN CONNECTION WITH ANY OF THE FOREGOING. Lender shall have the right at any time to appear in, and to participate in as a party if it so elects, and be represented by counsel of its own choice in, any action or proceeding initiated in connection with any Hazardous Materials Laws that affect the Property. Borrower shall immediately pay to Lender upon demand any amounts owing under this indemnity, together with interest from the date the indebtedness arises until paid at the rate of interest applicable to the principal balance of the Note.

6.5 LEGAL EFFECT OF SECTION. Borrower and Lender agree that Borrower’s duty to indemnify Lender hereunder shall survive: (i) any judicial or non-judicial foreclosure under the Deed of Trust, or transfer of the Property in lieu thereof; (ii) the release and reconveyance or cancellation of the Deed of Trust; and (iii) the satisfaction of all of Borrower’s obligations under the Loan Documents.

ARTICLE 7. COVENANTS OF BORROWER

7.1 EXPENSES. Borrower shall immediately pay to Lender upon demand: (a) all costs and expenses incurred by Lender in connection with the preparation, negotiation and administration of this Agreement, the other

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Loan Documents and any other documents required by Lender during the term of the Loan; and (b) the enforcement or satisfaction by Lender of any of Borrower’s or any Guarantor’s obligations under this Agreement, the other Loan Documents and the Guaranty. For all purposes of this Agreement, Lender’s costs and expenses shall include, without limitation, all appraisal and appraisal review fees, cost engineering and inspection fees, legal fees and expenses, accounting fees, environmental consultant fees, auditor fees, recording and filing fees, title examination and lien search fees, escrow fees, and the cost to Lender of any title insurance premiums, title surveys, tax service contracts, reconveyance and notary fees. If any of the services described above are provided by an employee of Lender, Lender’s costs and expenses for such services shall be calculated in accordance with Lender’s standard charge for such services.

7.2 LEASING. Borrower will lease the Property to Tenant pursuant to the Greenhouse Treatment Center Lease. In the event of the termination of the Greenhouse Treatment Center Lease, Borrower shall use commercially reasonable efforts to maintain all leasable space in the Property leased at no less than fair market rental rates.

7.3 APPROVAL OF LEASES. All leases of all or any part of the Property shall: (a) be upon terms and with tenants approved by Lender prior to Borrower’s execution of any such lease (which approval shall not be unreasonably withheld); and (b) include estoppel, subordination, attornment and mortgagee protection provisions satisfactory to Lender. All standard lease forms and any material deviation from any form shall be approved by Lender prior to execution of any lease using such form.

7.4 INCOME TO BE APPLIED TO DEBT SERVICE. After the occurrence of a Default and during the pendency of a Default, Borrower shall apply all gross operating income from the Property only to the payment of operating expenses directly attributable to the Property and the payment of accrued interest and outstanding principal on the Loan. To the extent such gross operating income exceeds such operating expenses, such excess shall be used first to pay accrued interest (regardless of any interest reserve). After the occurrence of a Default, no gross operating income shall be distributed to any partner, venturer, member or equity investor of Borrower until such Default has been cured.

7.5 SUBDIVISION MAPS. Prior to recording any final map, plat, parcel map, lot line adjustment or other subdivision map of any kind covering any portion of the Property (“Subdivision Map”), Borrower shall submit such Subdivision Map to Lender for Lender’s review and approval, which approval shall not be unreasonably withheld. Within ten (10) business days after Lender’s receipt of such Subdivision Map, Lender shall provide Borrower written notice if Lender disapproves of said Subdivision Map. Lender shall be deemed to have approved the Subdivision Map if such notice is not provided to Borrower within the foregoing ten (10) business day period, provided that Borrower’s request for Lender’s approval refers to this deemed approval provision. Within five (5) business days after Lender’s request, Borrower shall execute, acknowledge and deliver to Lender such amendments to the Loan Documents as Lender may reasonably require to reflect the change in the legal description of the Property resulting from the recordation of any Subdivision Map. In connection with and promptly after the recordation of any amendment or other modification to the Deed of Trust recorded in connection with such amendments, Borrower shall deliver to Lender, at Borrower’s sole expense, a title endorsement to the Title Policy in form and substance satisfactory to Lender insuring the continued first priority lien of the Deed of Trust. Subject to the execution and delivery by Borrower of any documents required under this Section, Lender shall, if required by applicable law, sign any Subdivision Map approved, or deemed to be approved, by Lender pursuant to this Section.

7.6 FURTHER ASSURANCES. Upon Lender’s request and at Borrower’s sole cost and expense, Borrower shall, and shall cause any person or entity affiliated with Borrower to, execute, acknowledge and deliver any other instalments, including replacement promissory notes, guaranties or other loan documents, and perform any other acts reasonably necessary, desirable or proper, as determined by Lender, to coitect clerical errors or omissions in any loan closing documentation, or to replace any lost or destroyed loan closing documentation, to carry out the purposes of this Agreement and the other Loan Documents or to perfect and preserve any liens created by the Loan Documents. This obligation shall survive any foreclosure or deed in lieu of foreclosure of the Property and Improvements.

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7.7 ASSIGNMENT. Without the prior written consent of Lender, Borrower shall not assign Borrower’s interest under any of the Loan Documents, or in any monies due or to become due thereunder, and any assignment without such consent shall be void. In this regard, Borrower acknowledges that Lender would not make this Loan except in reliance on Borrower’s expertise, reputation, prior experience in developing and constructing commercial real property for addiction treatment facilities, Lender’s knowledge of Borrower, and Lender’s understanding that this Agreement is more in the nature of an agreement involving personal services than a standard loan where Lender would rely on security which already exists.    

7.8 INDEMNITY. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FOR, FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES) WHICH LENDER MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF: (A) THE PURPOSE TO WHICH BORROWER APPLIES THE LOAN PROCEEDS; (B) THE FAILURE OF BORROWER TO PERFORM ANY OBLIGATIONS AS AND WHEN REQUIRED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; (C) ANY FAILURE AT ANY TIME OF ANY OF BORROWER’S REPRESENTATIONS OR WARRANTIES TO BE TRUE AND CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWER, ANY CONSTITUENT PARTNER OR MEMBER OF BORROWER, ANY CONTRACTOR, SUBCONTRACTOR OR MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY WITH RESPECT TO ANY OF THE PROPERTY. LENDER SHALL BE ENTITLED TO APPEAR IN ANY ACTION OR PROCEEDING WITH COUNSEL OF ITS OWN CHOICE, AND/OR TO SETTLE OR COMPROMISE ANY CLAIM ASSERTED AGAINST IT. BORROWER SHALL IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING UNDER THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL PAID AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTE. BORROWER’S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS THE INDEMNITEES DESCRIBED HEREIN SHALL SURVIVE CANCELLATION OF THE NOTE AND THE RELEASE, RECONVEYANCE OR PARTIAL RECONVEYANCE OF THE DEED OF TRUST.

7.9 CHANGE IN STRUCTURE OR MANAGEMENT. Borrower will (a) preserve its existence, and not make any material change in the nature or manner of its business activities, and (b) maintain executive personnel and management at a level of experience and ability equivalent to present executive personnel and management. Without the prior consent of Lender (which consent shall not be unreasonably withheld, except in the case of dissolution or liquidation) Borrower shall not, and shall not cause or permit any Guarantor to, dissolve or liquidate, or merge or consolidate with or into any other entity, or turn over the management or operation of its property, assets or business to any other person.

7.10 UPDATED APPRAISAL; REMARGIN REQUIREMENT. Lender shall have the right (but not the obligation) at any time, and from time to time, during the term of the Loan, in Lender’s discretion, to request and obtain from an appraiser acceptable to Lender, an updated appraisal of the Property, which includes an opinion of value and supporting information reasonably acceptable to Lender. Lender will do everything in its control to contain the cost of the appraisal. If such an appraisal is obtained, Borrower agrees to cooperate with any appraiser, allow access to the Property and provide copies of leases, operating statements, plans and any other information reasonably requested by such appraiser. Borrower shall pay to Lender, within thirty (30) days following demand: (a) the cost of the updated appraisal; provided, however, that Borrower shall not be required to pay for more than one such appraisal in a given calendar year if a Default does not then exist; (b) prior to the Maturity Date, or the Extended Maturity Date, as the case may be, the amount, if any, by which the then outstanding balance of the Loan exceeds 65% of the then most recent appraised value of the Property, as adjusted by Lender in its sole discretion upon its review of the appraisal. Upon Borrower’s payment for the updated appraisal and execution of Lender’s then standard form of appraisal indemnity agreement, Borrower may obtain a copy of the updated appraisal if a Default does not then exist.

7.11 DERIVATIVE DOCUMENTS. If Borrower purchases from Lender any swap, derivative, foreign exchange or hedge transaction or arrangement (or other similar transaction or arrangement howsoever described or defined) at any time in connection with the Loan, Borrower shall, upon receipt from Lender, execute promptly all documents evidencing such transaction, including without limitation, the ISDA Master Agreement, the Schedule to the ISDA Master Agreement and the ISDA Confirmation.    

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ARTICLE 8. REPORTING COVENANTS

8.1 FINANCIAL INFORMATION.

a. Borrower shall deliver its tax return, prepared by a certified public accountant (“CPA”) and signed by Borrower, to Lender within thirty (30) days after filing, but in no event later than November 15 of each year following the tax year to be reported, together with any other financial information including, without limitation, financial statements, cash flow projections, and operating statements as may be reasonably requested by Lender.

b. Borrower shall or shall cause Behavioral Healthcare Realty, LLC and Tenant to deliver to Lender their current CPA-audited, consolidated, annual financial statements (including, without limitation, an income and expense statement and a balance sheet) of as soon as available but in no event later than one hundred twenty (120) days after the end of each such entity’s fiscal year, and their signed CPA-prepared tax return within thirty (30) days after filing but in no event later than November 15 each year end following the tax year to be reported.

c. Borrower shall cause Cartwright, Menz and any other Guarantor who is an individual to deliver to Lender his or her self-prepared personal financial statement as soon as available, but in no event later than April 30 of each year following the tax year to be reported and his or her signed, CPA-prepared tax return within thirty (30) days after filing but in no event later than November 15 each year end following the tax year to be reported, so long as the guarantees of such individual Guarantors are in effect.

d. Within thirty (30) days of Lender’s written request, Borrower shall also deliver to Lender such quarterly and other financial information regarding any persons or entities in any way obligated on the Loan as Lender may reasonably specify. If audited financial information is prepared, Borrower shall deliver to Lender copies of that information within forty-five (45) days of its final preparation or not later than would be required by this Section 8.1, whichever is earlier. Except as otherwise agreed to by Lender, all such financial information shall be prepared in accordance with generally accepted accounting principles consistently applied.

8.2 LEASING REPORTS AND OPERATING STATEMENTS. Borrower shall deliver to Lender quarterly rent rolls, leasing schedules and reports, operating statements and/or such other leasing information as Lender shall request with respect to the Property and Improvements, each in form and substance satisfactory to Lender.

8.3 FINANCIAL CONDITION. Borrower shall maintain its financial condition during the term of this Agreement according to the following schedules, using generally accepted accounting principles, consistently applied:

a. Borrower shall maintain, as of any DSCR Determination Date (hereafter defined), a Debt Service Coverage Ratio of not less than 1.25 to 1.00. For purposes hereof, “Debt Service Coverage Ratio” shall mean, as of any DSCR Determination Date, the ratio of (i) Borrower’s annual net income for the fiscal year immediately preceding such DSCR Determination Date, plus depreciation expense and interest expense payable by Borrower during such fiscal year, plus or minus, as the case may be, the net amount of equity contributions to Borrower by Borrower’s members minus any distributions of income by Borrower to Borrower’s members during such fiscal year, to (ii) the principal and interest payments payable by Borrower on the Loan during such fiscal year. For

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purposes of this Section, “DSCR Determination Date” shall mean the date on which Lender determines Borrower’s compliance with the Debt Service Coverage Ratio, which date shall be on or after the date on which Lender receives Borrower’s annual financial statements and tax return pursuant to Section 8.1(a).    

ARTICLE 9. DEFAULTS AND REMEDIES

9.1 DEFAULT. The occurrence of any one or more of the following shall constitute an event of default (“Default”) under this Agreement and the other Loan Documents:

a. Monetary. Borrower’s failure to pay within five (5) days when due any sums payable under the Note or any of the other Loan Documents or Borrower’s failure to deposit any Borrower’s Funds as and when required under this Agreement; or

b. Performance of Obligations. Borrower’s failure to perform any obligation, covenant or condition under the Note or any of the other Loan Documents; provided, however, that if a cure period is provided for the remedy of such failure, Borrower’s failure to perform will not constitute a Default until such date as the specified cure period expires; or

c. Construction. The construction of the Improvements in accordance with the Loan Documents is prohibited, enjoined or delayed for a continuous period of more than 15 days (except as provided in Section 3.2 above); or

d. Lien; Attachment; Condemnation. (i) The recording of any claim of lien or lien affidavit against the Property or the Improvements or the giving to Borrower of any notice of unpaid claims for work, materials or specifically fabricated items or of a contractual retainage claim relating to the Property or Improvements, and the continuance of such claim of lien for thirty (30) days after such recording or receipt of notice without discharge, satisfaction or provision for payment being made by Borrower in a manner satisfactory to Lender; or (ii) the condemnation, seizure or appropriation of, or occurrence of uninsured casualty damage with respect to, any material portion of the Property or Improvements; or (iii) the sequestration or attachment of, or any levy or execution upon, any of the Property or Improvements or any other collateral provided by Borrower or any other party under any of the Loan Documents which is not released, expunged or dismissed within thirty (30) days; or

e. Representations and Warranties. (i) The failure of any representation or warranty of Borrower in any of the Loan Documents and the continuation of such failure for more than thirty (30) days after written notice to Borrower from Lender requesting that Borrower cure such failure; or (ii) any material adverse change in the financial condition of Borrower, any Guarantor, or any indemnitor from the financial condition represented to Lender as of the later of: (A) the Effective Date; or (B) the date upon which the financial condition of such party was first represented to Lender; or

f. Bankruptcy; Insolvency: Dissolution. (i) The filing by Borrower, any Guarantor, any indemnitor, or any partner or member of Borrower of a petition for relief under the Bankruptcy Reform Act of 1978 (II USC Section 101-1330) as now or hereafter amended or recodified (“Bankruptcy Code”), or under any other present or future state or federal law regarding bankruptcy, reorganization or other debtor relief law; (ii) the filing against Borrower, Guarantor, any indemnitor, or any partner or member of Borrower of an involuntary proceeding under the Bankruptcy Code or other debtor relief law and the failure of Borrower to effect a full dismissal of such proceeding within 30 days after the date of filing such proceeding; (iii) a general assignment by Borrower, Guarantor, any indemnitor, or any partner or member of Borrower for the benefit of creditors; or (iv) Borrower, Guarantor, any indemnitor, or any partner or member of Borrower applying for, or the appointment of, a receiver, trustee, custodian or liquidator of Borrower or any of its property; or

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g. Borrower; Key Person or Entity. The retirement, death, incapacity or withdrawal of Borrower, if an individual, the death or incapacity of any Guarantor, or the retirement, death, incapacity or withdrawal of Cartwright as manager of Borrower and Borrower’s failure to provide a substitute or replacement reasonably acceptable to Lender within thirty (30) days after the occurrence of any such retirement, death, incapacity or withdrawal; or

h. Transfer of Assets. The sale, assignment, pledge, hypothecation, mortgage or transfer of all or a substantial portion of the assets of Borrower or any Guarantor; or

i. Derivative Default. The occurrence of a default by Borrower or a termination event with respect to Borrower under any swap, derivative, foreign exchange or hedge transaction or arrangement (or other similar transaction or arrangement howsoever described or defined) at any time entered into between Borrower and Lender in connection with the Loan including, without limitation, the Swap Contract (as defined in the Guaranty); or

j. Default Under Guaranty. The occurrence of a default under any guaranty now or hereafter executed in connection with the Loan, including, without limitation, any Guarantor’s (defined parties) or other guarantor’s failure to perform any covenant, condition, or obligation thereunder; or

k. Default Under Unsecured Indemnity Agreement. The occurrence of a default under that certain Hazardous Materials Indemnity Agreement (Unsecured) executed by Guarantor, as Indemnitor, in favor of Lender, dated as of the date hereof, including without limitation, Indemnitor’s failure to perform any covenant, condition, or obligation thereunder; or

l. Default Under Greenhouse Treatment Center Lease. The occurrence of a default by either the landlord or tenant under, or the surrender, abandonment, termination or rescission of the Greenhouse Treatment Center Lease; or

m. Default Under Other Indebtedness. The occurrence of a default by Borrower or any Guarantor with respect to any other indebtedness, whether as a borrower or a guarantor thereunder, under any agreement with any lender, including without limitation, Lender.

9.2 ACCELERATION UPON DEFAULT; REMEDIES. Upon the occurrence of any Default specified herein, Lender may, at its sole option, declare all sums owing to Lender under the Note, this Agreement and the other Loan Documents immediately due and payable. Upon such acceleration, Lender may, in addition to all other remedies permitted under the Note and this Agreement and the other Loan Documents and at law or equity, apply Borrower’s Funds, if any, to the sums owing under the Loan Documents and any and all obligations of Lender to fund further disbursements under the Loan shall terminate.

9.3 DISBURSEMENTS TO THIRD PARTIES. Upon the occurrence of a Default occasioned by Borrower’s failure to pay money to a third party as required by this Agreement, Lender may but shall not be obligated to make such payment from the Loan proceeds, Borrower’s Funds, or other funds of Lender. If such payment is made from proceeds of the Loan or from Borrower’s Funds, Borrower shall immediately deposit with Lender, upon written demand, an amount equal to such payment within five (5) business days of such demand. If such payment is made from funds of Lender, Borrower shall immediately repay such funds upon written demand of Lender within five (5) business days of such demand. In either case, the Default with respect to which any such payment has been made by Lender shall not be deemed cured until such deposit or repayment (as the case may be) has been made by Borrower to Lender.

9.4 LENDER’S COMPLETION OF CONSTRUCTION. Upon the occurrence of a Default, Lender may, upon twenty (20) days prior written notice to Borrower, and with or without legal process, take possession of the Property and Improvements, remove Borrower and all agents, employees and contractors of Borrower from the Property and Improvements, complete the work of construction and market, operate and sell or lease the Property and/or Improvements. For this purpose, Borrower irrevocably appoints Lender as

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its attorney-in-fact, which agency is coupled with an interest. As attorney-in-fact, Lender may, in Borrower’s name, take or omit to take any action Lender may deem appropriate, including, without limitation, exercising Borrower’s rights under the Loan Documents and all contracts concerning the Property and/or Improvements.

9.5 LENDER’S RIGHT TO STOP CONSTRUCTION. If Lender determines at any time that the Improvements are not being constructed materially in accordance with the Plans and Specifications and all applicable governmental requirement, Lender may immediately cause all construction to cease on any of the Improvements affected by the condition of nonconformance and withhold further disbursements under the Loan. Borrower shall thereafter not allow any construction work, other than corrective work, to be performed on any of the Improvements affected by the condition of nonconformance until such time as Lender notifies Borrower in writing that the nonconforming condition has been corrected. Borrower shall notify Lender and Lender’s inspector immediately upon receipt of “red tag” or “stop order” notices from any applicable federal, state, county or municipal building inspector or of unsatisfactory compliance with any applicable building code, and in such event Borrower shall provide Lender and Lender’s inspector with a full and complete written explanation of the nature of such noncompliance.

9.6 SET OFF. Upon the occurrence of a Default, Lender may set off any and all amounts due by Borrower against any indebtedness or obligation of Lender to Borrower.

9.7 RIGHTS CUMULATIVE, NO WAIVER. All of Lender’s rights and remedies provided in this Agreement and the other Loan Documents, together with those granted by law or at equity, are cumulative and may be exercised by Lender at any time. Lender’s exercise of any right or remedy shall not constitute a cure of any Default unless all sums then due and payable to Lender under the Loan Documents are repaid and Borrower has cured all other Defaults. No waiver shall be implied from any failure of Lender to take, or any delay by Lender in taking, action concerning any Default or failure of condition under the Loan Documents, or from any previous waiver of any similar or unrelated Default or failure of condition. Any waiver or approval under any of this Agreement and the other Loan Documents must be in writing and shall be limited to its specific terms. Any funds expended by Lender in the exercise of its rights or remedies under this Agreement and the other Loan Documents shall be payable to Lender upon demand, together with interest at the rate applicable to the principal balance of the Note from the date the funds were expended.

ARTICLE 10. MISCELLANEOUS PROVISIONS

10.1 NOTICES. All notices, demands, or other communications under this Agreement and the other Loan Documents shall be in writing and shall be delivered in accordance with the notice provisions contained in the Deed of Trust.

10.2 RELATIONSHIP OF PARTIES. The relationship of Borrower and Lender under the Loan Documents is, and shall at all times remain, solely that of borrower and lender, and Lender neither undertakes nor assumes any responsibility or duty to Borrower or to any third party with respect to the Property or Improvements, except as expressly provided in this Agreement and the other Loan Documents.

10.3 ATTORNEYS’ FEES AND EXPENSES; ENFORCEMENT. If any attorney is engaged to enforce or defend any provision of this Agreement, any of the other Loan Documents or as a consequence of any Default under the Loan Documents, with or without the filing of any legal action or proceeding, and including, without limitation, any fees and expenses incurred in any bankruptcy proceeding or in connection with any appeal of a lower court decision, the prevailing Party, as agreed to by the Parties or as determined by the court, shall be entitled to its reasonable attorneys’ fees and expenses and all costs incurred in connection therewith.

10.4 IMMEDIATELY AVAILABLE FUNDS. All amounts payable by Borrower to Lender shall be (a) payable only in United States currency in immediately available funds, and (b) received by Lender at the Denver Wholesale Loan Servicing Center, in Denver, Colorado, or at such other places as may be designated in writing by Lender, no later than 11 AM Pacific Standard Time or Pacific Daylight Time, as applicable. Any amounts received after such time shall be credited the next business day.

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10.5 LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Borrower agrees that Lender may elect, at any time, to sell, assign or grant participations in all or any portion of its rights and obligations under the Loan Documents, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Lender’s sole discretion. Borrower further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property, the Improvements and their operation; (b) any party connected with the Loan (including, without limitation, Borrower, any constituent partner or member of Borrower, any Guarantor, any indemnitor and any non-borrower trustor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. The indemnity obligations of Borrower under the Loan Documents shall also apply with respect to any purchaser, assignee or participant.

10.6 SIGNS. Lender may place on the Property reasonable signs standard to construction loan transactions stating that construction financing is being provided by Lender and any other lenders or participants in the Loan.

10.7 LENDER’S AGENTS. Lender may designate an agent or independent contractor to exercise any of Lender’s rights under this Agreement and any of the other Loan Documents. Any reference to Lender in any of the Loan Documents shall include Lender’s agents, employees or independent contractors. Borrower shall pay the costs of such agent or independent contractor either directly to such person or to Lender in reimbursement of such costs, as applicable.

10.8 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

10.9 SEVERABILITY. If any provision or obligation under this Agreement and the other Loan Documents shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that provision shall be deemed severed from the Loan Documents and the validity, legality and enforceability of the remaining provisions or obligations shall remain in full force as though the invalid, illegal, or unenforceable provision had never been a part of the Loan Documents, provided, however, that if the rate of interest or any other amount payable under the Note or this Agreement or any other Loan Document, or the right of collectability therefor, are declared to be or become invalid, illegal or unenforceable, Lender’s obligations to make advances under the Loan Documents shall not be enforceable by Borrower.    

10.10 HEIRS, SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided under the terms and conditions of this Agreement, the terms of the Loan Documents shall bind and inure to the benefit of the heirs, successors and assigns of the Parties.

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10.11 ATTORNEY IN FACT. Borrower hereby irrevocably appoints and authorizes Lender, as Borrower’s attorney in fact, which agency is coupled with an interest, to execute and/or record in Lender’s or Borrower’s name any notices, instruments or documents that Lender deems appropriate to protect Lender’s interest under any of the Loan Documents. The attorney in fact automatically terminates upon the release and reconveyance of the Hen of the Deed of Trust.

10.12 TAX SERVICE. If the Maturity Date and any extension thereof is 18 months or longer from the date hereof, Lender is authorized, at Borrower’s expense, to obtain a tax service contract with a third party vendor which shall provide tax information on the Property and Improvements satisfactory to Lender.

10.13 TIME. Time is of the essence of each and every term of this Agreement.

10.14 GOVERNING LAW AND CONSENT TO JURISDICTION. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the state where the Property is located, except to the extent preempted by federal laws. Borrower and all persons and entities in any manner obligated to Lender under the Loan Documents and Lender submit to the jurisdiction of: (a) any state or federal court sitting in the State of Texas over any suit, action, or proceeding, arising out of or relating to the Loan Documents or the Loan; (b) any state or federal court sitting in the state where the Property is located or the state in which a Party’s principal place of business is located over any suit, action or proceeding, arising out of or relating to any of the Loan Documents or the Loan; (c) any state court sitting in the county of the state where the Property is located over any suit, action, or proceeding, brought by Lender to exercise its power to foreclose the Property or any action brought by Lender to enforce its rights with respect to any other collateral under the Loan Documents, and (d) consents to service of process by any means authorized by the law of the state where the Property is located or federal law. The Parties irrevocably waive, to the fullest extent permitted by law, any objection that the Parties may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum.

10.15 INTEGRATION; INTERPRETATION; INCONSISTENCIES. The Loan Documents contain or expressly incorporate by reference the entire agreement of the Parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. The Loan Documents shall not be modified except by written instrument executed by all Parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by the Parties in writing. In the event of any inconsistencies between the terms of this Loan Agreement and the terms of any other Loan Document, the terms of this Loan Agreement shall prevail.

10.16 JOINT AND SEVERAL LIABILITY. The liability of all persons and entities obligated in any manner under this Agreement and any of the Loan Documents shall be joint and several.

10.17 FORM OF DOCUMENTS. The form and substance of all documents, instruments, and forms of evidence to be delivered to Lender under the terms of this Agreement and any of the other Loan Documents shall be subject to Lender’s approval and shall not be modified, superseded or terminated in any respect without Lender’s prior written approval.

10.18 NO THIRD PARTIES BENEFITED. No person other than Lender and Borrower and their permitted successors and assigns shall have any right of action under any of the Loan Documents. None of the proceeds of the Loan shall constitute a fund for the benefit of any contractor, subcontractor or laborer or material supplier.    

10.19 ACTIONS. Borrower agrees that Lender, in exercising the rights, duties or liabilities of Lender or Borrower under the Loan Documents, may commence, appear in or defend any action or proceeding purporting to affect the Property, the Improvements or the Loan Documents and Borrower shall immediately reimburse Lender upon demand for all such expenses so incurred or paid by Lender, including, without limitation, attorneys’ fees and expenses and court costs.

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10.20 LENDER’S CONSENT. Wherever in this Agreement there is a requirement for Lender’s consent and/or a document to be provided or an action taken, it is understood that, except as expressly modified herein, Lender shall exercise its consent, right or judgment in a reasonable manner given the specific facts and circumstances applicable at the time.

10.21 HEADINGS. All article, section or other headings appearing in this Agreement and any of the other Loan Documents are for convenience of reference only and shall be disregarded in construing this Agreement and any of the other Loan Documents.

10.22 ELECTRONIC TRANSMISSION OF DATA. Lender and Borrower agree that certain data related to the Loan (including confidential information, documents, applications and reports) may be transmitted electronically, including transmission over the Internet. This data may be transmitted to, received from or circulated among agents and representatives of Borrower and/or Lender and their affiliates and other persons involved with the subject matter of this Agreement. Borrower acknowledges and agrees that (a) there are risks associated with the use of electronic transmission and that Lender does not control the method of transmittal or service providers, (b) Lender has no obligation or responsibility whatsoever and assumes no duty or obligation for the security, receipt or third party interception of any such transmission, and (c) Borrower will release, hold harmless and indemnify Lender for, from and against any claim, damage or loss, including that arising in whole or part from Lender’s strict liability or sole, comparative or contributory negligence, which is related to the electronic transmission of data.

10.23 COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each Party, or that the signature of all persons required to bind any Party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the Parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

10.24 ADDITIONAL SECURITY INTEREST. Borrower hereby grants and assigns to Lender a security interest, to secure payment and performance of all obligations, in all of Borrower’s right, title and interest, now or hereafter acquired, to the payment of money from Lender to Borrower under any swap, derivative, foreign exchange or hedge transaction or arrangement (or similar transaction or arrangement howsoever described or defined) at any time entered into between Borrower and Lender in connection with the Loan.

10.25 EXHIBITS INCORPORATED. All exhibits, schedules or other items attached hereto are incorporated into this Agreement by such attachment for all purposes.

10.26 POWERS OF ATTORNEY. The powers of attorney granted by Borrower to Lender in Section 9.10 above shall be unaffected by the disability of the principal so long as any portion of the Loan remains unpaid or unperformed. Lender shall have no obligation to exercise any of the foregoing rights and powers in any event. Lender hereby discloses that it may exercise the foregoing powers of attorney for Lender’s benefit, and such authority need not be exercised for Borrower’s best interest.    

ARTICLE 11. TEXAS STATE PROVISIONS

11.1 INTEREST PROVISIONS.

a. Savings Clause. It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply strictly with the applicable Texas law governing the maximum rate or amount of interest payable on the Note or the Related Indebtedness (as hereinafter defined) (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law). If the applicable law is ever judicially interpreted so as to render usurious any amount (i) contracted for, charged, taken,

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reserved or received pursuant to the Note, any of the other Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, (ii) contracted for, charged or received by reason of Lender’s exercise of the option to accelerate the maturity of the Note and/or the Related Indebtedness, or (iii) Borrower will have paid or Lender will have received by reason of any voluntary prepayment by Borrower of the Note and/or the Related Indebtedness, then it is Borrower’s and Lender’s express intent that all amounts charged in excess of the Maximum Lawful Rate (hereinafter defined) shall be automatically canceled, ab initio, and all amounts in excess of the Maximum Lawful Rate theretofore collected by Lender shall be credited on the principal balance of the Note and/or the Related Indebtedness (or, if the Note and all Related Indebtedness have been or would thereby be paid in full, refunded to Borrower), and the provisions of the Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if the Note has been paid in full before the end of the stated term of the Note, then Borrower and Lender agree that Lender shall, with reasonable promptness after Lender discovers or is advised by Borrower that interest was received in an amount in excess of the Maximum Lawful Rate, either refund such excess interest to Borrower and/or credit such excess interest against the Note and/or any Related Indebtedness then owing by Borrower to Lender. Borrower hereby agrees that as a condition precedent to any claim seeking usury penalties against Lender, Borrower will provide written notice to Lender, advising Lender in reasonable detail of the nature and amount of the violation, and Lender shall have 60 days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Borrower or crediting such excess interest against the Note and/or the Related Indebtedness then owing by Borrower to Lender. All sums contracted for, charged or received by Lender for the use, forbearance or detention of any debt evidenced by the Note and/or the Related Indebtedness shall, to the extent permitted by applicable law, be amortized or spread, using the actuarial method, throughout the stated term of the Note and/or the Related Indebtedness (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of the Note and/or the Related Indebtedness does not exceed the Maximum Lawful Rate from time to time in effect and applicable to the Note and/or the Related Indebtedness for so long as debt is outstanding. In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving triparty accounts) apply to the Note and/or the Related Indebtedness. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

b. Definitions. As used herein, the term “Maximum Lawful Rate” shall mean the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved by Lender in accordance with the applicable laws of the State of Texas (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all Charges (as herein defined) made in connection with the transaction evidenced by the Note and the other Loan Documents. As used herein, the term “Charges” shall mean all fees, charges and/or any other things of value, if any, contracted for, charged, received, taken or reserved by Lender in connection with the transactions relating to the Note and the other Loan Documents, which are treated as interest under applicable law. As used herein, the term “Related Indebtedness” shall mean any and all debt paid or payable by Borrower to Lender pursuant to the Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, except such debt which has been paid or is payable by Borrower to Lender under the Note.

c. Ceiling Election. To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to determine the Maximum Lawful Rate payable on the Note and/or the Related Indebtedness,

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Lender will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303, as amended. To the extent United States federal law permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law, Lender will rely on United States federal law instead of such Chapter 303 for the purpose of determining the Maximum Lawful Rate. Additionally, to the extent permitted by applicable law now or hereafter in effect, Lender may, at its option and from time to time, utilize any other method of establishing the Maximum Lawful Rate under such Chapter 303 or under other applicable law by giving notice, if required, to Borrower as provided by applicable law now or hereafter in effect.

11.2 WAIVER OF CONSUMER RIGHTS. BORROWER HEREBY WAIVES BORROWER’S RIGHTS UNDER THE PROVISIONS OF CHAPTER 17, SUBCHAPTER E, SECTION 17.41 THROUGH 17.63 INCLUSIVE OF THE TEXAS BUSINESS AND COMMERCE CODE, GENERALLY KNOWN AS THE “DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT,” A LAW THAT GIVES CONSUMERS SPECIAL RIGHTS AND PROTECTIONS. AFTER CONSULTATION WITH AN ATTORNEY OF BORROWER’S OWN SELECTION, BORROWER VOLUNTARILY CONSENTS TO THIS WAIVER. IT IS THE INTENT OF LENDER AND BORROWER THAT THE RIGHTS AND REMEDIES WITH RESPECT TO THIS TRANSACTION SHALL BE GOVERNED BY LEGAL PRINCIPLES OTHER THAN THE TEXAS DECEPTIVE TRADE PRACTICES-CONSUMER PROTECTION ACT. THE WAIVER SET FORTH HEREIN SHALL EXPRESSLY SURVIVE THE TERMINATION OF THE REFERENCED TRANSACTION. BORROWER REPRESENTS AND WARRANTS TO LENDER THAT BORROWER (i) IS A BUSINESS CONSUMER, (ii) HAS KNOWLEDGE AND EXPERIENCE IN FINANCIAL AND BUSINESS MATTERS THAT ENABLE BORROWER TO EVALUATE THE MERITS AND RISKS OF THE SUBJECT TRANSACTION, (iii) IS NOT IN A SIGNIFICANTLY DISPARATE BARGAINING POSITION WITH RESPECT TO THE SUBJECT TRANSACTION, AND (iv) HAS BEEN REPRESENTED BY INDEPENDENT LEGAL COUNSEL (WHO WAS NOT, DIRECTLY OR INDIRECTLY, IDENTIFIED, SUGGESTED OR SELECTED BY LENDER OR LENDER’S AGENTS) IN CONNECTION WITH THE REFERENCED TRANSACTION.

[Signature pages follow]

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BORROWER:
GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	President and Manager

Borrower’s Address:
115 East Park Drive, Suite 200
Brentwood, Tennessee 37027
Attention:	Michael Cartwright
Attention:	Kirk Manz

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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of the date appearing on the first page of this Agreement.

LENDER:
WELLS FARGO BANK,
NATIONAL ASSOCIATION
By:	/s/ Marcus Di Fiore
	Marcus Di Fiore
	Vice President

Lender’s Address:

WELLS FARGO BANK, NATIONAL ASSOCIATION

Carlsbad/Desert Commercial Banking Office

5901 Priestly Drive, 1^st Floor, Suite 130

Carlsbad, California 92008

MAC E2413-010

Attention: Marcus Di Fiore

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EXHIBIT A - DESCRIPTION OF PROPERTY

Exhibit A to BUILDING LOAN AGREEMENT between GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company, as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”.

All that certain real property located in the County of Dallas, State of Texas, described as follows:

Being a lot, tract or parcel of land situated in the J. Goodwin Survey, Abstract No. 595, and J.R. Parker Survey, Abstract No. 1227, City of Grand Prairie, Tarrant County, Texas, and being all of Revised Site 2, Blocks 1 and 13, Industrial Community No. 1, Great Southwest Industrial District, an addition to the City of Grand Prairie, Tarrant County, Texas, as recorded in Volume 388-29, Page 47, Plat Records, Tarrant County, Texas, and a portion of Revised Site 1, Blocks 1 and 13, Industrial Community No. 1 Great Southwest Industrial District, an addition to the City of Arlington, Tarrant County, Texas, as recorded in Volume 388-27, Page 457, Plat Records, Tarrant County, Texas, and being more particularly described as follows:

Commencing at the intersection of the North line of Avenue “H” East (80’ R.O.W.) and the West line of 107th Street (100’ R.O.W.); Thence North along the West line of said 107th Street for a distance of 827.31 feet to the Point of Beginning, said point being the most Easterly Northeast corner of a 19.368 acre tract of land as recorded in Volume 388-139, Page 37, Plat Records, Tarrant County, Texas;

Thence West along the North line of said 19.368 acre tract, a distance of 355.00 feet to a 1/2 inch iron rod found for corner;

Thence North, along an interior East line of said 19.368 acre tract, a distance of 52.00 feet to a 1/2 inch iron rod found for corner;

Thence South 89 degrees 59 minutes 32 seconds West, a distance of 104.22 feet to a 1/2 inch iron rod found for corner in the North line of Site 7, Block 13;

Thence South 89 degrees 22 minutes 41 seconds West, along the North line of Site 7, Block 13, a distance of 17.70 feet to a 1/2 inch iron rod found for corner;

Thence North 01 degrees 03 minutes 28 seconds East along the North line of Site 7, Block 13, a distance of 8.23 feet to a 1/2 inch iron rod found for corner;

Thence North 12 degrees 38 minutes 28 seconds West, a distance of 249.65 feet to a 1/2 inch iron rod for corner and the beginning of a curve to the left, having a radius of 294.12 feet, a central angle of 41 degrees 51 minutes 09 seconds, a chord bearing of North 33 degrees 26 minutes 11 seconds West, a chord distance of 210.10;

Thence long said curve to the left, an arc length of 214.84 feet to a 1/2 inch iron rod found for corner in the South line of Arlington Golf Club, Inc.;

Thence South 89 degrees 48 minutes 26 seconds East, along the South line of Arlington Golf Club, Inc., a distance of 187.67 feet to a 1/2 inch iron rod found for corner and being the Northwest corner of Site 2, Block 1 and 13, Industrial Community No. 1, Great Southwest Industrial District;

Thence East, along the North line of said Site 2, Block 1 and 13, Industrial Community No. 1, Great Southwest Industrial District, a distance of 473.38 feet to a 1/2 inch iron rod found for corner in the West line of said 107th Street and the intersection of a curve to the left, having a radius of 1158.84 feet, a central angle of 06 degrees 23 minutes 06 seconds, a chord bearing of South 07 degrees 42 minutes 13 seconds West, a chord distance of 129.08 feet;

Thence along said curve to the left, an arc length of 129.14 feet to a 1/2 inch iron rod found for corner and the point of compound curvature to the left, having a radius of 1226.46 feet, a central angle of 08 degrees 54 minutes 18 seconds, a chord bearing of South 00 degrees 03 minutes 31 seconds West, a chord distance of 190.43 feet;

Thence along said curve to the left, an arc length of 190.62 feet to a 1/2 inch iron rod found for corner and the point of reverse curvature to the right, having a radius of 1226.46 feet, a central angle of 04 degrees 23 minutes 38 seconds, a chord bearing of South 02 degrees 11 minutes 49 seconds East, a chord distance of 94.03 feet;

Thence along said curve to the right, an arc length of 94.05 feet to a 1/2 inch iron rod found for corner;

Thence South, continuing along said West R.O.W. line of 107^th Street, a distance of 66.02 feet to the Point of Beginning and containing 244,577.87 square feet or 5.615 acres of land, more or less.

Address: 1171 107^th Street, Grand Prairie, Dallas County, Texas

EXHIBIT B - DOCUMENTS

Exhibit B to BUILDING LOAN AGREEMENT (“Agreement”) between GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company, as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”.

1. LOAN DOCUMENTS. The documents listed below, numbered 1.1 through 1.9, inclusive below of even date herewith (unless otherwise specified), and amendments, modifications and supplements thereto which have received the prior written consent of Lender, together with any documents executed in the future that are approved by Lender and that recite that they are “Loan Documents” for purposes of this Agreement are collectively referred to herein as the Loan Documents.

1.1 This Agreement;

1.2 Note;

1.3 Deed of Trust;

1.4 Assignment of Construction Agreements executed by Borrower in favor of Lender and consented to by the Contractor;

1.5 Assignment of Architectural Agreements and Plans and Specifications executed by Borrower in favor of Lender and consented to by the Architect;

1.6 Uniform Commercial Code - National Financing Statement - Form UCC-I;

1.7 Limited Liability Company Borrowing Certificate executed by the sole member of Borrower;

1.8 Limited Liability Company Certificate Authorizing Limited Liability Company Activity and Execution of Guaranty and Indemnity executed by the members of Behavioral Healthcare Realty, LLC, a Delaware limited liability company; and

1.9 Subordination Agreement; Acknowledgment of Lease Assignment, Estoppel and Attornment Agreement executed by Borrower, Lender, and Greenhouse Treatment Center, LLC, a Texas limited liability company.

2. OTHER RELATED DOCUMENTS (WHICH ARE NOT LOAN DOCUMENTS)

2.1 Repayment Guaranty executed by Behavioral Healthcare Realty, LLC, a Delaware limited liability company, Michael Cartwright, an individual, and Jerrod Menz, an individual, collectively, as Guarantor, in favor of Lender;

2.2 Completion Guaranty executed by Behavioral Healthcare Realty, LLC, a Delaware limited liability company, Michael Cartwright, an individual, and Jerrod Menz, an individual, collectively, as Guarantor in favor of Lender;

2.3 Unsecured Hazardous Materials Indemnity Agreement executed by Behavioral Healthcare Realty, LLC, a Delaware limited liability company, Michael Cartwright, an individual, and Jerrod Menz, an individual, collectively, as Indemnitor, in favor of Lender; and

2.4 Agreement for Disbursement Prior to Recording and Amendment to Note executed by Borrower and Lender.

EXHIBIT C - FINANCIAL REQUIREMENT ANALYSIS

Exhibit C to BUILDING LOAN AGREEMENT between CONCORDE REAL ESTATE, LLC, a Nevada limited liability company, as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”.

The Financial Requirement Analysis set forth herein represents an analysis of the total costs necessary in Borrower’s estimation to perform Borrower’s obligations under the Loan Documents. Column A, “Total Costs”, sets forth Borrower’s representation of the maximum costs for each Item specified in Column A. Column B, “Costs Paid By Borrower”, sets forth Borrower’s representation of costs that Borrower has paid or has caused to be paid from other sources of funds for each Item specified in Column B. Column C, “Costs To Be Paid By Borrower”, sets forth Borrower’s representation of costs that Borrower will pay or will cause to be paid from other sources of funds for each Item specified in Column C. Column D, “Disbursement Budget”, sets forth the portion of the Loan and Borrower’s Funds which has been allocated for each Item specified in Column D and will be disbursed pursuant to the terms, covenants, conditions and provisions of this Agreement and the Loan Documents.

EXHIBIT D - TRANSFER AUTHORIZER DESIGNATION

(For Disbursement of Loan Proceeds by Funds Transfer)

¨  NEW                 ¨  REPLACE PREVIOUS DESIGNATION                ¨  ADD                 ¨  CHANGE                 ¨   DELETE LINE NUMBER

The following representatives of GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company (“Borrower”), are authorized to request the disbursement of Loan proceeds and initiate funds transfers between Wells Fargo Bank, National Association (“Bank”) and Borrower. Bank is authorized to rely on this Transfer Authorizer Designation until it has received a new Transfer Authorizer Designation signed by Borrower, even in the event that any or all of the foregoing information may have changed.

	Name	Title	Maximum Wire Amount
1.	Michael Cartwright	President and Manager	$	13,168,481.00
2.	Jerrod Menz		$	13,168,481.00
3.
4.
5.
6.

Beneficiary Bank and Account Holder Information

Transfer Funds to (Receiving Party Account Name):
Receiving Party Account Number:
Receiving Bank Name, City and State:	Receiving Bank Routing (ABA) Number:
Maximum Transfer Amount: $13,168,481.00
Further Credit Information/Instructions:

Dated as of October 8, 2013

[Signature page follows]

BORROWER:
GREENNHOUSE REAL ESTATE, LLC, a Texas limited liability company
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	President and Manager

EX-10

Exhibit 10.17

PROMISSORY NOTE SECURED BY DEED OF TRUST

(One-Month LIBO Rate; Adjusted Monthly)

$13,168,481.00 Date: October 8, 2013

1. PROMISE TO PAY. FOR VALUE RECEIVED, the undersigned, GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company (“Borrower”), promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), at the Denver Wholesale Loan Servicing Center, 1700 Lincoln Street Denver, Colorado, 80274, or at such other place as may be designated in writing by Lender, the principal sum of THIRTEEN MILLION ONE HUNDRED SIXTY-EIGHT THOUSAND FOUR HUNDRED EIGHTY-ONE AND NO/100THS DOLLARS ($13,168,481.00) or so much thereof as may from time to time be owing hereunder by reason of advances by Lender to or for the benefit or account of Borrower (the “Loan”), with interest thereon, per annum, at one or more of the Effective Rates (as hereinafter defined) calculated in accordance with the terms and provisions of the Fixed Rate Agreement attached to this note (this “Note”) as Exhibit A (based on a 360-day year and charged on the basis of actual days elapsed). All sums owing hereunder are payable in lawful money of the United States of America, in immediately available funds without offset, deduction or counterclaim of any kind.

2. INTEREST. Interest accrued on this Note shall be due and payable on the fifteenth (15th) day of each month (or, if such day is not a Business Day, on the next Business Day) commencing with the first (1st) month after the date of this Note.

3. INTEREST AND PRINCIPAL PAYMENTS AFTER OPTION TO EXTEND. In the event that the Maturity Date (defined below) is extended in accordance with Section 1.6 of the Loan Agreement (as defined in Exhibit A attached hereto), in addition to the interest payments due pursuant to Section 2 above, equal payments of principal in the amount of $73,158.23 shall be due and payable on the fifteenth (15th) day of each month (or, if such day is not a Business Day, on the next Business Day), commencing with the first (1st) month after the Conversion Date (as defined in the Loan Agreement), with a final installment consisting of all remaining unpaid principal plus accrued interest due and payable in full on the Extended Maturity Date (as defined below). Borrower acknowledges that the amount of such monthly principal and interest installments will be determined by Lender based on an amortization period of fifteen (15) years in accordance with the terms of Section 1.6 of the Loan Agreement.

4. BILL LEAD DATE REQUEST. By written notice to Lender, Borrower may request to receive monthly billings on a date (the “Bill Lead Date”) that is prior to the fifteenth (15^th) day of the month. Lender will submit to Borrower monthly billings, which will consist of actual interest and principal due through the Bill Lead Date plus projected interest and principal due through the balance of the month. Any necessary adjustments in the applicable interest rate and/or principal payments due or made between a Bill Lead Date and the end of the month will be reflected as an additional charge (or credit) in the billing for the next following month. Neither the failure of Lender to submit a Bill Lead Date billing nor any error in any such billing will excuse Borrower’s obligation to make full payment of all amounts due under this Note. In its sole discretion, Lender may cancel or modify the terms of such request which cancellation or modification will be effective upon written notification to Borrower. Should Borrower request a Bill Lead Date, Lender shall not be required to prepare a month end invoice.

5. MATURITY DATE; EXTENDED MATURITY DATE. The outstanding principal balance of this Note, together with all accrued and unpaid interest, shall be due and payable in full on October 31, 2014 (the “Maturity Date”); provided, however, that if Lender agrees to extend the Maturity Date pursuant to Section 1.6 of the Loan Agreement, the term “Maturity Date”, as used herein, shall mean October 31, 2019 (the “Extended Maturity Date”). Principal amounts outstanding hereunder, upon which repayment obligations exist and interest accrues, shall be determined by the records of the Lender, which shall be deemed to be conclusive in the absence of clear and convincing evidence to the contrary presented by Borrower.

6. SECURED BY DEED OF TRUST. This Note is secured by, among other things, that certain Construction Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and

1

Fixture Filing (the “Deed of Trust”) of even date herewith, executed by Borrower, as trustor, to a trustee for the benefit of Lender and the other Loan Documents as defined in that certain Loan Agreement of even date herewith, executed by Borrower and Lender (as the same may be amended or restated from time to time, the “Loan Agreement”). Reference is made to the Loan Agreement for a description of the terms and conditions upon which advances may be made under this Note and repayment of the indebtedness evidenced by this Note may be accelerated.

7. DIRECT DEBIT. In order to assure timely payment to Lender of accrued interest (except as set forth in Section 2.2 of the Loan Agreement regarding Interest Reserve), principal, fees and late charges due and owing under the loan evidenced by this Note, Borrower hereby irrevocably authorizes Lender to directly debit Borrower’s demand deposit account, account no. ***, with Lender for payment when due of all such amounts payable to Lender. Borrower represents and warrants to Lender that Borrower is the legal owner of said account. Written confirmation of the amount and purpose of any such direct debit shall be given to Borrower by Lender not less frequently than monthly. In the event any direct debit hereunder is returned for insufficient funds, Borrower shall pay Lender upon written demand, in immediately available funds, all amounts and expenses due and owing to Lender.

8. LATE CHARGE. If any interest or principal payment required hereunder is not received by Lender (whether by direct debit or otherwise) on or before the fifteenth (15th) calendar day of the month (regardless of whether the 15^th day falls on a Saturday, Sunday or legal holiday) in which it becomes due, Borrower shall pay, at Lender’s option, a late or collection charge equal to five percent (5%) of the amount of such unpaid payment (“Late Charge”).

9. PREPAYMENT. Borrower may prepay the Loan in part or in full at any time but shall be liable to Lender for all amounts otherwise due and owing: (i) under the Loan Documents (including any LIBO Rate Price Adjustment (as defined in Exhibit A attached hereto) which may be due for the early termination of a LIBO Rate fixing) and/or (ii) under any derivative contract(s) (including any early termination charges on an interest rate swap) associated with the Loan. Borrower acknowledges that any prepayment of the Loan shall cause Lender to lose its interest rate yield on the Loan and may cause Lender to have to reinvest the prepaid amount in loans with a lesser yield (including, without limitation, possibly in debt obligations other than first mortgage loans on commercial properties). As a consequence, Borrower understands and agrees that the foregoing condition of prepayment is an integral part of the consideration for Lender making the Loan or extension of the Maturity Date.

10. DEFAULT RATE. From and after the Maturity Date or the Extended Maturity Date, as the case may be, or such earlier date on which a Default exists under the Loan Agreement or any other Loan Document (as defined in Exhibit A), then at the option of Lender, all sums owing on this Note shall bear interest at a rate per annum equal to five (5%) in excess of the interest rate otherwise accruing under this Note (the “Default Rate”).

11. ACCELERATION. If: (a) Borrower shall fail to pay when due any sums payable hereunder; or (b) a Default (as defined in the Deed of Trust) occurs under the Deed of Trust or under any obligation secured thereby; THEN Lender may, at its sole option, declare all sums owing under this Note immediately due and payable; provided, however, that if any document related to this Note provides for automatic acceleration of payment of sums owing hereunder, all sums owing hereunder shall be automatically due and payable in accordance with the terms of that document.

12. JOINT AND SEVERAL LIABILITY. If this Note is executed by more than one (1) person or entity as Borrower, the obligations of each such person or entity shall be joint and several. No person or entity shall be a mere accommodation maker, but each shall be primarily and directly liable hereunder.

13. WAIVER. Except as otherwise provided, Borrower waives: presentment; demand; notice of dishonor; notice of default or delinquency; notice of acceleration; notice of protest and nonpayment; notice of costs, expenses or losses and interest thereon; notice of late charges; and diligence in taking any action to collect any sums owing under this Note or in proceeding against any of the rights or interests in or to properties securing payment of this Note.

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14. TIME OF THE ESSENCE. Time is of the essence with respect to every provision hereof.

15. GOVERNING LAW. This Note shall be governed by, and construed and enforced in accordance with, the laws of the state where the Property (as defined in the Deed of Trust) is located, except to the extent preempted by federal laws.

16. COMMERCIAL USE; MAXIMUM RATE PERMITTED BY LAW. Borrower hereby represents that this loan is for commercial use and not for personal, family or household purposes. It is the specific intent of the Borrower and Lender that this Note bear a lawful rate of interest, and if any court of competent jurisdiction should determine that the rate herein provided for exceeds that which is statutorily permitted for the type of transaction evidenced hereby, the interest rate shall be reduced to the highest rate permitted by applicable law, with any excess interest heretofore collected being applied against principal or, if such principal has been fully repaid, returned to Borrower on demand.

17. LENDER’S DAMAGES. Borrower recognizes that its default in making any payment as provided herein or in any other Loan Document as agreed to be paid when due, or the occurrence of any other Default hereunder or under any other Loan Document, will require Lender to incur additional expense in servicing and administering the Loan, in loss to Lender of the use of the money due and in frustration to Lender in meeting its other financial and loan commitments and that the damages caused thereby would be extremely difficult and impractical to ascertain. Borrower agrees (a) that an amount equal to the Late Charge plus the accrual of interest at the Default Rate is a reasonable estimate of the damage to Lender in the event of a late payment, and (b) that the accrual of interest at the Default Rate following any other Default is a reasonable estimate of the damage to Lender in the event of such other Default, regardless of whether there has been an acceleration of the loan evidenced hereby. Nothing in this Note shall be construed as an obligation on the part of Lender to accept, at any time, less than the full amount then due hereunder, or as a waiver or limitation of Lender’s right to compel prompt performance.

18. WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION HEREOF OR THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWER AND LENDER OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND BORROWER HEREBY AGREES AND CONSENTS THAT LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER TO THE WAIVER OF ANY RIGHT BORROWER MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

19. EXHIBITS. All exhibits, schedules or other items attached hereto are incorporated into this Note by such attachment for all purposes.

20. TEXAS INTEREST PROVISIONS. It is expressly stipulated and agreed to be the intent of Borrower and Lender at all times to comply strictly with the applicable Texas law governing the maximum rate or amount of interest payable on this Note or the Related Indebtedness (as hereafter defined) (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, reserve or receive a greater amount of interest than under Texas law). If the applicable law is ever judicially interpreted so as to render usurious any amount (i) contracted for, charged, taken, reserved or received pursuant to this Note, any of the other Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, (ii) contracted for, charged or received by reason of Lender’s exercise of the option to accelerate the maturity of this Note and/or the Related Indebtedness, or (iii) Borrower will have paid or Lender will have received

3

by reason of any voluntary prepayment by Borrower of this Note and/or the Related Indebtedness, then it is Borrower’s and Lender’s express intent that all amounts charged in excess of the Maximum Lawful Rate (hereinafter defined) shall be automatically canceled, ab initio, and all amounts in excess of the Maximum Lawful Rate theretofore collected by Lender shall be credited on the principal balance of this Note and/or the Related Indebtedness (or, if this Note and all Related Indebtedness have been or would thereby be paid in full, refunded to Borrower), and the provisions of this Note and the other Loan Documents immediately be deemed reformed and the amounts thereafter collectible hereunder and thereunder reduced, without the necessity of the execution of any new document, so as to comply with the applicable law, but so as to permit the recovery of the fullest amount otherwise called for hereunder and thereunder; provided, however, if this Note has been paid in full before the end of the stated term of this Note, then Borrower and Lender agree that Lender shall, with reasonable promptness after Lender discovers or is advised by Borrower that interest was received in an amount in excess of the Maximum Lawful Rate, either refund such excess interest to Borrower and/or credit such excess interest against this Note and/or any Related Indebtedness then owing by Borrower to Lender. Borrower hereby agrees that as a condition precedent to any claim seeking usury penalties against Lender, Borrower will provide written notice to Lender, advising Lender in reasonable detail of the nature and amount of the violation, and Lender shall have 60 days after receipt of such notice in which to correct such usury violation, if any, by either refunding such excess interest to Borrower or crediting such excess interest against this Note and/or the Related Indebtedness then owing by Borrower to Lender. All sums contracted for, charged or received by Lender for the use, forbearance or detention of any debt evidenced by this Note and/or the Related Indebtedness shall, to the extent permitted by applicable law, be amortized or spread, using the actuarial method, throughout the stated term of this Note and/or the Related Indebtedness (including any and all renewal and extension periods) until payment in full so that the rate or amount of interest on account of this Note and/or the Related Indebtedness does not exceed the Maximum Lawful Rate from time to time in effect and applicable to this Note and/or the Related Indebtedness for so long as debt is outstanding. In no event shall the provisions of Chapter 346 of the Texas Finance Code (which regulates certain revolving credit loan accounts and revolving triparty accounts) apply to this Note and/or the Related Indebtedness. Notwithstanding anything to the contrary contained herein or in any of the other Loan Documents, it is not the intention of Lender to accelerate the maturity of any interest that has not accrued at the time of such acceleration or to collect unearned interest at the time of such acceleration.

As used herein, the term “Maximum Lawful Rate” shall mean the maximum lawful rate of interest which may be contracted for, charged, taken, received or reserved by Lender in accordance with the applicable laws of the State of Texas (or applicable United States federal law to the extent that it permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law), taking into account all Charges (as herein defined) made in connection with the transaction evidenced by this Note and the other Loan Documents. As used herein, the term “Charges” shall mean all fees, charges and/or any other things of value, if any, contracted for, charged, received, taken or reserved by Lender in connection with the transactions relating to this Note and the other Loan Documents, which are treated as interest under applicable law. As used herein, the term “Related Indebtedness” shall mean any and all debt paid or payable by Borrower to Lender pursuant to the Loan Documents or any other communication or writing by or between Borrower and Lender related to the transaction or transactions that are the subject matter of the Loan Documents, except such debt which has been paid or is payable by Borrower to Lender under the Note.

To the extent that Lender is relying on Chapter 303 of the Texas Finance Code to determine the Maximum Lawful Rate payable on this Note and/or the Related Indebtedness, Lender will utilize the weekly ceiling from time to time in effect as provided in such Chapter 303, as amended. To the extent United States federal law permits Lender to contract for, charge, take, receive or reserve a greater amount of interest than under Texas law, Lender will rely on United States federal law instead of such Chapter 303 for the purpose of determining the Maximum Lawful Rate. Additionally, to the extent permitted by applicable law now or hereafter in effect, Lender may, at its option and from time to time, utilize any other method of establishing the Maximum Lawful Rate under such Chapter 303 or under other applicable law by giving notice, if required, to Borrower as provided by applicable law now or hereafter in effect.

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Notwithstanding anything in this Note to the contrary, if at any time (i) interest at the Effective Rate as herein provided, and (ii) the Charges computed over the full term of this Note, exceed the Maximum Lawful Rate, then the rate of interest payable hereunder, together with all Charges, shall be limited to the Maximum Lawful Rate; provided, however, that any subsequent reduction in the Effective Rate as herein provided shall not cause a reduction of the rate of interest payable hereunder below the Maximum Lawful Rate until the total amount of interest earned hereunder, together with all Charges, equals the total amount of interest which would have accrued at the Effective Rate as herein provided if such interest rate had at all times been in effect. Changes in The Effective Rate as herein provided resulting from a change in the One-Month LIBO Rate (as defined in Exhibit A attached hereto) shall be subject to the provisions of this paragraph.

[Signature page follows]

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This Exhibit is executed concurrently with and as part of the Note referred to and described first above.

BORROWER:
GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	President and Manager

6

EXHIBIT A

FIXED RATE AGREEMENT

Exhibit A to Promissory Note Secured by Deed of Trust (the “Note”) made by GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company, as Borrower, to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender.

RECITALS

Borrower has requested and Lender has agreed to provide the option to fix the rate of interest for specified periods on specified portions of the outstanding principal balance as a basis for calculating the Effective Rate on such portions of the principal amounts owing under this Note (the “One-Month LIBO Rate Option”). Borrower understands: (i) the process of exercising the One-Month LIBO Rate Option as provided herein; (ii) that amounts owing under this Note may bear interest at different rates and for different time periods; and (iii) that absent the terms and conditions hereof, it would be extremely difficult to calculate Lender’s additional costs, expenses, and damages in the event of a Default or prepayment by Borrower hereunder. Given the above, Borrower agrees that the provisions herein (including, without limitation, the One-Month LIBO Rate Price Adjustment defined below) provide for a reasonable and fair method for Lender to recover its additional costs, expenses and damages in the event of a Default or prepayment by Borrower.

1. RATES AND TERMS DEFINED. Various rates and terms not otherwise defined herein are defined and described as follows:

“Alternate Rate” is a rate of interest per annum five percent (5%) in excess of the applicable Effective Rate in effect from time to time.

“Business Day” is a day of the week (but not a Saturday, Sunday or holiday) on which the offices of Lender are open to the public for carrying on substantially all of Lender’s business functions.

“Effective Rate” is the rate of interest calculated in accordance with Section 2 below.

“Federal Funds Rate” is, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Lender from three Federal Funds brokers of recognized standing selected by Lender.

“Loan Agreement” is that certain Building Loan Agreement dated as of the date hereof between Borrower and Lender.

“Loan Documents” are the documents defined as such in the Building Loan Agreement.

“One-Month LIBO Rate” is the rate of interest equal to the sum of the rate of interest, rounded upward to the nearest whole multiple of one-eighth of one percent (0.125%), that is quoted by Lender from time to time as the London InterBank Offered Rate for deposits in U.S. Dollars, at approximately 9:00 a.m. (California time), for a period of one (1) month (the “One-Month Rate”), which rate is divided by one (1.00) minus the Reserve Percentage, plus (a) three percent (3.00%) through the earlier of the Maturity Date and (b) two and one-half percent (2.50%) after the Maturity Date through the Extended Maturity Date. Any change in an Effective Rate due to a change in the One-Month LIBO Rate shall become effective on the day each such change occurs.

A-1

Through the earlier of the Conversion Date and the Maturity Date:

Applicable LIBO Rate = 3.00%	+	LIBO Rate
		(1 - Reserve Percentage)

After the earlier of the Conversion Date and the Maturity Date through the Extended Maturity Date:

Applicable LIBO Rate =2.50%	+	LIBO Rate
		(1 - Reserve Percentage)

“One-Month LIBO Rate Period” is the period of 1 month from the fifteenth (15th) day of a calendar month (or, if such day is not a Business Day, on the next Business Day) to, but not including, the fifteenth (15th) day of the next calendar month (or, if such day is not a Business Day, on the next Business Day); provided, however, no One-Month LIBO Rate Period shall extend beyond the Maturity Date or the Extended Maturity Date, as the case may be.

“One-Month LIBO Rate Portion” is the then outstanding principal balance of this Note which is subject to a One-Month LIBO Rate. In the event Borrower is subject to a principal amortization schedule under the terms and conditions of the Loan Documents, the One-Month LIBO Rate Portion shall in no event exceed the maximum outstanding principal balance which will be permissible on the last day of the One-Month LIBO Rate Period.

“One-Month Rate” is the rate of interest defined in the definition of “One-Month LIBO Rate” above.

“Regulatory Costs” are, collectively, future, supplemental, emergency or other changes in Reserve Percentages, assessment rates imposed by the FDIC, or similar requirements or costs imposed by any domestic or foreign governmental authority and related in any manner to a One-Month LIBO Rate.

“Replacement Rate” is, for any day, a fluctuating rate of interest equal to 3.00% plus the Federal Funds Rate plus 1.50%.

“Reserve Percentage” is at any time the percentage announced within Lender as the reserve percentage under Regulation D of the Securities Act of 1933, as amended, for loans and obligations making reference to a One-Month LIBO Rate. The Reserve Percentage shall be based on Regulation D or other regulations from time to time in effect concerning reserves for Eurocurrency Liabilities as defined in Regulation D from related institutions as though Lender were in a net borrowing position, as promulgated by the Board of Governors of the Federal Reserve System, or its successor.

“Taxes” are, collectively, all withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to a One-Month LIBO Rate.

2. EFFECTIVE RATE. Provided no Default exists under this Note or under any other Loan Document, the “Effective Rate” upon which interest shall be calculated for this Note shall be one or more of the following:

2.1 Initial Disbursement; Subsequent Disbursements During Any Calendar Month. For the initial disbursement of principal under this Note, and for any subsequent disbursement of principal during any calendar month, the Effective Rate on such principal amount shall be the One-Month LIBO Rate on the date of disbursement as determined by Lender. Such Effective Rate shall apply to such principal amount from the date of disbursement through and including the date immediately preceding the fifteenth (15th) day of the next calendar month. On the fifteenth (15th) day of the next calendar month, any principal disbursed during the prior calendar month shall be added to (or become) the One-Month LIBO Rate Portion for purposes of calculation of the Effective Rate under Section 2.2 below. In the event that, for any determination made pursuant to this Section 2.1, the fifteenth (15th) day of a month is not a Business Day the relevant date shall be the next Business Day.

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2.2 Monthly Reset of One-Month LIBO Rate. Commencing with the fifteenth (15th) day of the first (1st) calendar month after the initial disbursement of principal under this Note, and continuing thereafter on the fifteenth (15th) day of each succeeding calendar month, the Effective Rate on the outstanding One-Month LIBO Rate Portion under this Note (i.e., all outstanding principal on such fifteenth (15th) day of the month) shall be reset to the One-Month LIBO Rate, as determined by Lender on each such fifteenth (15th) day of the month.

Notwithstanding the above, Borrower, by written notice to Lender not less than 3 Business Days prior to the fifteenth (15th) day of any calendar month, may elect that the Effective Rate for all or any part of the outstanding principal balance on this Note for the One-Month LIBO Rate Period commencing on such fifteenth (15th) day of the month shall be the One-Month LIBO Rate, as determined by Lender, reset daily. Each such election shall apply only to a single One-Month LIBO Rate Period. If Borrower makes this election consecutively for more than a single One- Month LIBO Rate Period, or if Borrower makes this election for more than a total of 3 One-Month LIBO Rate Periods during the term of this Note, THEN, the Effective Rate for each such additional One-Month LIBO Rate Period shall be 0.25% plus the One-Month LIBO Rate as determined by Lender, reset daily.

In the event that, for any determination made pursuant to this Section 2.2, the fifteenth (15th) day of a month is not a Business Day the relevant date shall be the next Business Day.

2.3 Written Requests. Any written request by Borrower to Lender shall be delivered to Lender at the Denver Wholesale Loan Servicing Center, 1700 Lincoln Street Denver, Colorado, 80274, with a copy to Lender at Carlsbad/Desert Commercial Banking Office 5901 Priestly Drive, 1^st Floor, Suite 130, Carlsbad, California 92008, MAC E2413-010, Attention: Marcus Di Fiore, or at such other place as may be designated in writing by Lender.

2.4 If One-Month LIBO Rate Becomes Unavailable. In the event the One-Month LIBO Rate, for any reason, should become prohibited or unavailable to Lender, or, if in Lender’s good faith judgment, it is not possible or practical for Lender to set a One-Month LIBO Rate, THEN, the Effective Rate shall be the Replacement Rate.

2.5. Post Maturity; Default Rate. From and after the Maturity Date or the Extended Maturity Date, as the case may be, or such earlier date on which a Default exists under the Loan Agreement or any other Loan Document, then at the option of Lender, all sums owing on this Note shall bear interest at a rate per annum equal to the Alternate Rate.

3. TAXES, REGULATORY COSTS AND RESERVE PERCENTAGES. Upon Lender’s written demand, Borrower shall pay to Lender, in addition to all other amounts which may be, or become, due and payable under this Note and Loan Documents, any and all Taxes and Regulatory Costs, to the extent they are not internalized by calculation of an Effective Rate. Further, at Lender’s option, each Effective Rate shall be automatically adjusted by adjusting the Reserve Percentage, as determined by Lender in its reasonable prudent banking judgment, from the date of imposition (or subsequent date selected by Lender) of any such Regulatory Costs. Lender shall give Borrower written notice of any Taxes and Regulatory Costs as soon as practicable after their occurrence, but Borrower shall be liable for any Taxes and Regulatory Costs regardless of whether or when notice is so given.

4. ONE-MONTH HBO RATE PRICE ADJUSTMENT. Borrower acknowledges that prepayment or acceleration of a One-Month LIBO Rate Portion during a One-Month LIBO Rate Period shall result in Lender’s incurring additional costs, expenses and/or liabilities and that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or liabilities. Therefore, on the date a One- Month LIBO Rate Portion is prepaid or the date all sums payable hereunder become due and payable, by acceleration or otherwise (the “Price Adjustment Date”), Borrower will pay Lender (in addition to all other

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sums then owing to Lender) an amount (“One-Month LIBO Rate Price Adjustment”) equal to the then present value of (a) the amount of interest that would have accrued on the One-Month LIBO Rate Portion for the remainder of the One-Month LIBO Rate Period at the One-Month LIBO Rate set on the fifteenth (15th) day of the month in which such amount is prepaid or becomes due (or if such day is not a Business Day, the next Business Day), less (b) the amount of interest that would accrue on the same One- Month LIBO Rate Portion for the same period if the One-Month LIBO Rate were set on The Price Adjustment Date at the One-Month LIBO Rate in effect on the Price Adjustment Date. The present value shall be calculated by using as a discount rate the One-Month Rate quoted on the Price Adjustment Date.

By initialing this provision where indicated below, Borrower confirms that Lender’s agreement to make the loan evidenced by this Note at the interest rates and on the other terms set forth herein and in the other Loan Documents constitutes adequate and valuable consideration, given individual weight by Borrower, for this agreement.

BORROWER INITIALS: /s/ MC

5. PURCHASE, SALE AND MATCHING OF FUNDS. Borrower understands, agrees and acknowledges the following: (a) Lender has no obligation to purchase, sell and/or match funds in connection with the use of a One-Month Rate as a basis for calculating an Effective Rate or a One-Month LIBO Rate Price Adjustment; (b) a One-Month Rate is used merely as a reference in determining an Effective Rate or a One- Month LIBO Rate Price Adjustment; and (c) Borrower has accepted a One-Month Rate as a reasonable and fair basis for calculating an Effective Rate or a One-Month LIBO Rate Price Adjustment. Borrower further agrees to pay the One-Month LIBO Rate Price Adjustment, Taxes and Regulatory Costs, if any, whether or not Lender elects to purchase, sell and/or match funds.

6. MISCELLANEOUS. As used in this Exhibit, the plural shall mean the singular and the singular shall mean the plural as the context requires.

[Signature page follows]

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This Exhibit is executed concurrently with and as part of the Note referred to and described first above.

BORROWER:
GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	President and Manager

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EX-10

Exhibit 10.18

REPAYMENT GUARANTY

(Secured Loan)

THIS REPAYMENT GUARANTY (“Guaranty”) is made, jointly and severally, as of October 8, 2013, by BEHAVIORAL HEALTHCARE REALTY, LLC, a Delaware limited liability company, MICHAEL CARTWRIGHT, an individual, and JERROD MENZ, an individual (collectively, “Guarantor”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”). The Guarantor and Lender are collectively referred to herein as the “Parties” and individually as a “Party”.

RECITALS:

A. Pursuant to the terms of that certain Building Loan Agreement of even date herewith (the “Loan Agreement”) executed by GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company (“Borrower”), and Lender, Lender has agreed to loan to Borrower the principal sum of THIRTEEN MILLION ONE HUNDRED SIXTY-EIGHT THOUSAND FOUR HUNDRED EIGHTY-ONE AND NO/IOOTHS DOLLARS ($13,168,481.00) (the “Loan”) for the purposes specified in the Loan Agreement, said purposes relating to the real property and improvements described in the Loan Agreement (which real property and improvements are collectively referred to herein as the “Property”).

B. The Loan Agreement provides that the Loan shall be evidenced by that certain Promissory Note Secured by Deed of Trust (the “Note”) executed by Borrower payable to the order of Lender in the principal amount of the Loan and shall be secured by that certain Construction Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing of even date herewith, executed by Borrower, as trustor, for the benefit of Lender, as beneficiary (as hereafter amended, supplemented, replaced or modified, the “Deed of Trust”) on the Property and by other security instruments, if any, specified in the Loan Agreement. The term “Loan Documents” for purposes hereof shall mean the Loan Agreement, the Deed of Trust, the Note and those other documents described in the Loan Agreement as “Loan Documents”. Capitalized terms not defined herein shall have the meaning ascribed thereto in the Loan Agreement.

THEREFORE, to induce Lender to enter into the Loan Agreement and to make the Loan, and in consideration thereof, Guarantor unconditionally guarantees and agrees as follows:

1. GUARANTY. Guarantor hereby guarantees and promises to pay to Lender or order, on demand, in lawful money of the United States, in immediately available funds, the principal sum of THIRTEEN MILLION ONE HUNDRED SIXTY-EIGHT THOUSAND FOUR HUNDRED EIGHTY-ONE AND NO/IOOTHS DOLLARS ($13,168,481.00) or so much thereof as may be due and owing under the Note, any of the other Loan Documents or any swap, derivative, foreign exchange or hedge transaction or arrangement (or other similar transaction or arrangement howsoever described or defined) at any time entered into between Borrower and Lender in connection with the Note (collectively, the “Swap Contract”), together with interest and any other sums payable under the Note, any of the other Loan Documents or any Swap Contract.

2. REMEDIES. If Guarantor fails to promptly perform its obligations under this Guaranty, Lender may from time to time, and without first requiring performance by Borrower or exhausting any or all security for the Loan, bring any action at law or in equity or both to compel Guarantor to perform its obligations hereunder, and to collect in any such action compensation for all loss, cost, damage, injury and expense sustained or incurred by Lender as a direct or indirect consequence of the failure of Guarantor to perform its obligations together with interest thereon at the rate of interest applicable to the principal balance of the Note.    

3. RIGHTS OF LENDER. Guarantor authorizes Lender, without giving notice to Guarantor or obtaining Guarantor’s consent and without affecting the liability of Guarantor, from time to time to: (a) renew or extend all or any portion of Borrower’s obligations under the Note or any of the other Loan Documents; (b) declare all sums owing to Lender under the Note and the other Loan Documents due and payable upon the

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occurrence of a Default (as defined in the Loan Agreement) under the Loan Documents; (c) make non-material changes in the dates specified for payments of any sums payable in periodic installments under the Note or any of the other Loan Documents; (d) otherwise modify the terms of any of the Loan Documents, except for (i) increases in the principal amount of the Note or changes in the manner by which interest rates, fees or charges are calculated under the Note and the other Loan Documents (Guarantor acknowledges that if the Note or other Loan Documents so provide, said interest rates, fees and charges may vary from time to time) or (ii) advancement of the Maturity Date of the Note where no Default has occurred under the Loan Documents; (e) take and hold security for the performance of Borrower’s obligations under the Note or the other Loan Documents and exchange, enforce, waive and release any such security; (f) apply such security and direct the order or manner of sale thereof as Lender in its discretion may determine; (g) release, substitute or add any one or more endorsers of the Note or guarantors of Borrower’s obligations under the Note or the other Loan Documents; (h) assign this Guaranty in whole or in part; and (i) assign, transfer or negotiate all or any part of the indebtedness guaranteed by this Guaranty.

4. GUARANTOR’S WAIVERS. Guarantor waives: (a) any defense based upon any legal disability or other defense of Borrower, any other guarantor or other person, or by reason of the cessation or limitation of the liability of Borrower from any cause other than full payment of all sums payable under the Note or any of the other Loan Documents; (b) any defense based upon any lack of authority of the officers, directors, partners, managers, members or agents acting or purporting to act on behalf of Borrower or any principal of Borrower or any defect in the formation of Borrower or any principal of Borrower; (c) any defense based upon the application by Borrower of the proceeds of the Loan for purposes other than the purposes represented by Borrower to Lender or intended or understood by Lender or Guarantor; (d) any and all rights and defenses arising out of an election of remedies by Lender; (e) any defense based upon Lender’s failure to disclose to Guarantor any information concerning Borrower’s financial condition or any other circumstances bearing on Borrower’s ability to pay all sums payable under the Note or any of the other Loan Documents; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (g) any defense based upon Lender’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute; (h) any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code; (i) any right of subrogation, any right to enforce any remedy which Lender may have against Borrower and any right to participate in, or benefit from, any security for the Note or the other Loan Documents now or hereafter held by Lender; (j) presentment, demand, protest and notice of any kind; (k) the benefit of any statute of limitations affecting the liability of Guarantor hereunder or the enforcement hereof; (1) any right to require Lender to institute suit or exhaust remedies against Borrower or others liable for any of such indebtedness, to enforce Lender’s rights against any collateral which shall have been given to secure the Loan, to enforce Lender’s rights against any other guarantors of such indebtedness, to join Borrower or any others liable on such indebtedness in any action seeking to enforce this Guaranty, to resort to any other means of obtaining payment of such indebtedness; (m) notices of disbursement of Loan proceeds, acceptance hereof, proof of non-payment, default under any Loan Document, notices and demands of any kind (it being Guarantor’s and Lender’s intent that Guarantor shall not be considered a “debtor” in accordance with Section 9.102 of the Texas Business and Commerce Code, as now existing or hereafter amended); and (n) the invalidity, illegality or unenforceability of all or any portion of the indebtedness guaranteed hereby or any of the Loan Documents for any reason whatsoever, including that interest on such indebtedness violates applicable usury laws, that Borrower or others liable for all or a portion thereof have valid defenses, claims or offsets to all or a portion of such indebtedness, or that the Note or other Loan Documents have been forged or otherwise are irregular or not genuine or authentic (it being agreed that Guarantor shall remain liable under this Guaranty regardless of whether Borrower or any other person shall be found not liable for repayment of all or a portion of such indebtedness). Guarantor further waives any and all rights and defenses that Guarantor may have because Borrower’s debt is secured by real property; this means, among other things, that: (1) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Lender forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Lender may collect from Guarantor even if Lender, by

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foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrower’s debt is secured by real property. These rights and defenses being waived by Guarantor include, but are not limited to, any rights or defenses based upon deficiency limitation, anti-deficiency, redemption or other similar rights. Without limiting the generality of the foregoing or any other provision hereof, Guarantor further expressly waives to the extent permitted by law any and all rights and defenses which might otherwise be available to Guarantor under Texas Property Code §§ 51.003, 51.004 and 51.005 or otherwise. Finally, Guarantor agrees that the performance of any act or any payment which tolls any statute of limitations applicable to the Loan Documents shall similarly operate to toll the statute of limitations applicable to Guarantor’s liability hereunder.

5. GUARANTOR’S WARRANTIES. Guarantor warrants and acknowledges that: (a) Lender would not make the Loan but for this Guaranty; (b) Guarantor has reviewed all of the terms and provisions of the Loan Agreement and the other Loan Documents; (c) there are no conditions precedent to the effectiveness of this Guaranty; (d) Guarantor has established adequate means of obtaining from sources other than Lender, on a continuing basis, financial and other information pertaining to Borrower’s financial condition, the Property and Borrower’s activities relating thereto and the status of Borrower’s performance of obligations under the Loan Documents, and Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor’s risks hereunder and Lender has made no representation to Guarantor as to any such matters; (e) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein, other than in the ordinary course of Guarantor’s business; and (f) Guarantor is not and will not be, as a consequence of the execution and delivery of this Guaranty, impaired or rendered “insolvent,” as that term is defined in either Texas Business and Commerce Code § 24.003 or Section 101 of the Federal Bankruptcy Code, or otherwise rendered unable to pay its debts as the same mature and will not have thereby undertaken liabilities in excess of the present fair value of its assets. Notwithstanding the foregoing, the calculation of liabilities shall NOT include any fair value adjustments to the carrying value of liabilities to record such liabilities at fair value pursuant to electing the fair value option election under FASB ASC 825-10-25 (formerly known as FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities) or other FASB standards allowing entities to elect fair value option for financial liabilities. Therefore, the amount of liabilities shall be the historical cost basis, which generally is the contractual amount owed adjusted for amortization or accretion of any premium or discount.

6. SUBORDINATION. Guarantor subordinates all present and future indebtedness owing by Borrower to Guarantor to the obligations at any time owing by Borrower to Lender under the Note and the other Loan Documents. Guarantor assigns all such indebtedness to Lender as security for this Guaranty, the Note and the other Loan Documents. Guarantor agrees to make no claim for such indebtedness until all obligations of Borrower under the Note and the other Loan Documents have been fully discharged. Guarantor further agrees not to assign all or any part of such indebtedness unless Lender is given prior notice and such assignment is expressly made subject to the terms of this Guaranty. If Lender so requests, (a) all instruments evidencing such indebtedness shall be duly endorsed and delivered to Lender, (b) all security for such indebtedness shall be duly assigned and delivered to Lender, (c) such indebtedness shall be enforced, collected and held by Guarantor as trustee for Lender and shall be paid over to Lender on account of the Loan but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty, and (d) Guarantor shall execute, file and record such documents and instruments and take such other action as Lender deems necessary or appropriate to perfect, preserve and enforce Lender’s rights in and to such indebtedness and any security therefor. If Guarantor fails to take any such action, Lender, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor. The foregoing power of attorney is coupled with an interest and cannot be revoked, but shall automatically terminate upon the satisfaction of Borrower’s obligations under the Loan Documents.

7. BANKRUPTCY OF BORROWER. In any bankruptcy or other proceeding in which the filing of claims is required by law, Guarantor shall file all claims which Guarantor may have against Borrower relating to any indebtedness of Borrower to Guarantor and shall assign to Lender all rights of Guarantor thereunder. If Guarantor does not file any such claim, Lender, as attorney-in-fact for Guarantor, is hereby authorized to

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do so in the name of Guarantor or, in Lender’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Lender’s nominee. The foregoing power of attorney is coupled with an interest and cannot be revoked, but shall automatically terminate upon the satisfaction of Borrower’s obligations under the Loan Documents. Lender or its nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Lender the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to Lender all of Guarantor’s rights to any such payments or distributions; provided, however. Guarantor’s obligations hereunder shall not be satisfied except to the extent that Lender receives cash by reason of any such payment or distribution. If Lender receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty. If all or any portion of the obligations guaranteed hereunder are paid or performed, the obligations of Guarantor hereunder shall continue and shall remain in full force and effect in the event that all or any part of such payment or performance is avoided or recovered directly or indirectly from Lender as a preference, fraudulent transfer or otherwise under the Bankruptcy Code or other similar laws, irrespective of (a) any notice of revocation given by Guarantor prior to such avoidance or recovery, or (b) full payment and performance of all of the indebtedness and obligations evidenced and secured by the Loan Documents.

8. LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Guarantor agrees that Lender may elect, at any time, to sell, assign, or grant participations in all or any portion of its rights and obligations under the Loan Documents and this Guaranty, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Lender’s sole discretion. Guarantor further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property and its operation; (b) any party connected with the Loan (including, without limitation, the Guarantor, the Borrower, any partner of Borrower, any constituent partner of Borrower, any other guarantor and any non-borrower trustor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. In the event of any such sale, assignment or participation, Lender and the parties to such transaction shall share in the rights and obligations of Lender as set forth in the Loan Documents only as and to the extent they agree among themselves. In connection with any such sale, assignment or participation, Guarantor further agrees that the Guaranty shall be sufficient evidence of the obligations of Guarantor to each purchaser, assignee, or participant, and upon written request by Lender, Guarantor shall consent to such amendments or modifications to the Loan Documents as may be reasonably required in order to evidence any such sale, assignment, or participation.

Anything in this Guaranty to the contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements of this Guaranty, including this Section, any lender may at any time and from time to time pledge and assign all or any portion of its rights under all or any of the Loan Documents to a Federal Reserve Bank; provided that no such pledge or assignment shall release such Lender from its obligations thereunder.

9. ADDITIONAL, INDEPENDENT AND UNSECURED OBLIGATIONS. This Guaranty is a continuing guaranty of payment and not of collection and cannot be revoked by Guarantor and shall continue to be effective with respect to any indebtedness referenced in Section 1 hereof arising or created after any attempted revocation hereof or after the death of Guarantor (if Guarantor is a natural person, in which event this Guaranty shall be binding upon Guarantor’s estate and Guarantor’s legal representatives and heirs). The obligations of Guarantor hereunder shall be in addition to and shall not limit or in any way affect the obligations of Guarantor under any other existing or future guaranties unless said other guaranties are expressly modified or revoked in writing. This Guaranty is independent of the obligations of Borrower under the Note, the Deed of Trust and the other Loan Documents. Lender may bring a separate action to enforce the provisions hereof against Guarantor without taking action against Borrower or any other party or joining Borrower or any other party as a party to such action. Except as otherwise provided in this Guaranty, this Guaranty is not secured and shall not be deemed to be secured by any security instrument unless such security instrument expressly recites that it secures this Guaranty.

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10. ATTORNEYS’ FEES: ENFORCEMENT. If any attorney is engaged to enforce or defend any provision of this Guaranty, or any of the other Loan Documents, or as a consequence of any Default under the Loan Documents, with or without the filing of any legal action or proceeding, the prevailing Party, as agreed to by the Parties or as determined by the court, shall be entitled to its attorneys’ fees and costs incurred in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Note as specified therein.

11. RULES OF CONSTRUCTION. The word “Borrower” as used herein shall include both the named Borrower and any other person at any time assuming or otherwise becoming primarily liable for all or any part of the obligations of the named Borrower under the Note and the other Loan Documents. The term “person” as used herein shall include any individual, company, trust or other legal entity of any kind whatsoever. If this Guaranty is executed by more than one person, the term “Guarantor” shall include all such persons, unless such person is signing on behalf of an entity in his or her official capacity in which case such entity shall be included in the definition of “Guarantor”. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and vice versa. All headings appearing in this Guaranty are for convenience only and shall be disregarded in construing this Guaranty.

12. CREDIT REPORTS. Each legal entity and individual obligated on this Guaranty hereby authorizes Lender to order and obtain, from a credit reporting agency of Lender’s choice, a third party credit report on such legal entity and individual.

13. GOVERNING LAW. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Texas, except to the extent preempted by federal laws. Guarantor and all persons and entities in any manner obligated to Lender under this Guaranty consent to the jurisdiction of any federal or state court within the county where the Property is located having proper venue and also consent to service of process by any means authorized by Texas or federal law.

14. MISCELLANEOUS. The provisions of this Guaranty will bind and benefit the heirs, executors, administrators, legal representatives, nominees, successors and assigns of Guarantor and Lender. The liability of all persons and entities who are in any manner obligated hereunder shall be joint and several. If Guarantor is a natural person, this Guaranty shall be binding against Guarantor’s sole and separate property and the community property (whether under sole or joint management) of Guarantor. If any provision of this Guaranty shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from this Guaranty and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable portion had never been part of this Guaranty.

15. ADDITIONAL PROVISIONS. Such additional terms, covenants and conditions as may be set forth on any exhibit executed by Guarantor and attached hereto which recites that it is an exhibit to this Guaranty are incorporated herein by this reference.

16. ENFORCEABILITY. Guarantor hereby acknowledges that: (a) the obligations undertaken by Guarantor in this Guaranty are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Lender’s consideration for entering into this transaction, Lender has specifically bargained for the waiver and relinquishment by Guarantor of all such defenses, and (d) Guarantor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Guarantor does hereby represent and confirm to Lender that Guarantor is fully informed regarding, and that Guarantor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Guarantor, and (iv) the legal consequences to Guarantor of waiving such defenses. Guarantor acknowledges that Guarantor makes this Guaranty with the intent that this Guaranty and all of the informed waivers herein shall each and all be fully enforceable by Lender, and that Lender is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof.

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17. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS GUARANTY, AND BY ITS ACCEPTANCE HEREOF, LENDER, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND LENDER HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS GUARANTY AND LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND LENDER TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

18. NOTICES. All notices or demands that are required or permitted to be given or served hereunder shall be given in the manner provided in the Loan Agreement. Guarantor acknowledges that its address for notice shall be the address set forth below with its name. Guarantor may change its address from time to time by giving ten (10) days’ prior written notice to Lender.

19. COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each Party, or that the signature of all persons required to bind any Party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the Parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

20. ARBITRATION.

(a) Arbitration. The Parties hereto agree, upon demand by any Party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise in any way arising out of or relating to (i) any credit subject hereto, or any of the Loan Documents, and their negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in the county where the Property is located selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the Parties; and (iii) be conducted by the AAA, or such other administrator as the Parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any Party who fails or refuses to submit to arbitration following a demand by any other Party shall bear all costs and expenses incurred by such other Party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any Party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

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(c) No Waiver of Provisional Remedies. Self-Help and Foreclosure. The arbitration requirement does not limit the right of any Party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any Party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. The arbitrator will be a neutral attorney licensed in the State of Texas or a neutral retired judge of the state or federal judiciary of Texas, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator will decide (by documents only or with a hearing at the arbitrator’s discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator shall resolve all disputes in accordance with the substantive law of Texas and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Texas Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any Party, including the plaintiff, to submit the controversy or claim to arbitration if any other Party contests such action for judicial relief. The Parties agree that the arbitrator’s decision is subject to review by the Superior Court and/or appellate courts to the greatest extent allowed by law.

(e) Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters directly relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the Party’s presentation and that no alternative means for obtaining information is available.

(f) Class Proceedings and Consolidations. No Party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except Parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

(g) Payment of Arbitration Costs and Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

(h) Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of Texas, thereby agreeing that all indebtedness and obligations of the Parties, and all

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mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with the Texas Code of Civil Procedure. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with the Texas Code of Civil Procedure.

(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the Parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other Party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a Party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the Parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the Parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the Parties.

(j) Small Claims Court. Notwithstanding anything herein to the contrary, each Party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction. Further, this arbitration provision shall apply only to disputes in which either Party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

[Signature page follows]

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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date appearing on the first page of this Guaranty.

GUARANTOR:

BEHAVIORAL HEALTHCARE REALTY, LLC
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	Managing Member

/s/ Michael Cartwright

MICHAEL CARTWRIGHT, an individual

/s/ Jerrod Menz

JERROD MENZ, an individual

Guarantor’s Address for notices:

115 Eastpark Drive, Suite 200

Brentwood, TN 37027

Lender’s Address for notices:

Wells Fargo Bank, National Association

Carlsbad/Desert Commercial Banking Office

5901 Priestly Drive, 1^st Floor, Suite 130

Carlsbad, California 92008

MAC E2413-010

Attention: Marcus Di Fiore

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EX-10

Exhibit 10.19

CONSENT AND FIRST AMENDMENT TO LOAN AGREEMENT

THIS CONSENT AND FIRST AMENDMENT TO LOAN AGREEMENT (this “Agreement”) is entered into as of April 15, 2014 (the “Effective Date”), by and among GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company (“Borrower”), MICHAEL T. CARTWRIGHT (“Cartwright”), JERROD N. MENZ (“Menz”), AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (“AAC”), BEHAVIORAL HEALTHCARE REALTY, LLC, a Delaware limited liability company (“BHR” and, together with AAC, Cartwright and Menz, each a “Guarantor” and collectively “Guarantors”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”).

R E C I T A L S

WHEREAS, Borrower and Guarantors are hereinafter collectively called the “Borrower Parties”;

WHEREAS, Lender made a loan to Borrower, in the amount of $13,168,481.00 (the “Loan”), and in connection with the Loan, Borrower executed and delivered to Lender that certain Promissory Note Secured by Deed of Trust (the “Note”) dated October 8, 2013, payable to the order of Lender in the original principal sum of $13,168,481.00, with interest and principal payable as therein provided.

WHEREAS, the payment of the Note is secured or further evidenced, inter alia, by:

(i) that certain Building Loan Agreement dated October 8, 2013 by and between Borrower and Lender (“Loan Agreement”); and

(ii) that certain Construction Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing (“Deed of Trust”) of even date therewith, recorded under Instrument # D213269290 in Tarrant County, Texas (the “Records”), encumbering certain real and personal property described therein (the “Property”);

(iii) that certain Repayment Guaranty of even date therewith executed by Guarantors in favor of Lender, as amended by the Amendment and Joinder (as defined below) (the “Repayment Guaranty”);

(iv) that certain Completion Guaranty of even date therewith executed by Guarantors in favor of Lender, as amended by the Amendment and Joinder (the “Completion Guaranty” and, together with the Repayment Guaranty, each a “Guaranty” and collectively “Guaranties”); and

(v) certain other Loan Documents.

WHEREAS, as of the Effective Date, Cartwright, Menz and Kirk Manz will transfer of all of the common equity interests of BHR to AAC Holdings, Inc. (“AACH”) (collectively, the “Initial BHR Equity Transfer”), and thereafter (i) AACH will transfer of all of the common

equity interests of BHR from AAC Holdings, Inc. to AAC, (ii) a merger sub that is 100% owned by AACH will merge with and into AAC pursuant to which AAC will become a direct wholly owned subsidiary of AACH and (iii) AAC may convert from a corporation into a limited liability company or other limited liability entity (collectively, the “Subsequent BHR Transactions”, and together with the Initial BHR Equity Transfer, the “Approved Transactions”), provided that the Subsequent BHR Transactions shall be consummated on or prior to March 31, 2015 and Borrower will notify Lender in writing promptly (but, in any event within thirty (30) days) after the consummation of the Subsequent BHR Transactions.

WHEREAS, BHR is and shall remain the sole member of Borrower and, upon the effectiveness of the Approved Transactions, the ownership structure of Borrower shall be as set forth on Exhibit A attached hereto and incorporated herein by reference;

WHEREAS, Borrower Parties have requested Lender’s consent to the Approved Transactions, and Lender is willing to so consent upon compliance with the terms and provisions of this Agreement;

WHEREAS, Lender is the owner and holder of the Note and Borrower is the owner of the legal and equitable title to the Property;

NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00), the matters set forth in the foregoing recitals, the estoppels, certifications, warranties, covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows:

1. Defined Terms; Interpretation. All capitalized terms used in this Agreement (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement.

2. Consent to Approved Transactions. Lender hereby approves and consents to the Approved Transactions; provided that (i) the Initial BHR Equity Transfer shall be consummated on or prior to the Effective Date and (ii) the Subsequent BHR Transactions shall be consummated on or prior to March 31, 2015 and Borrower shall notify Lender in writing promptly (but, in any event within thirty (30) days) after the consummation of the Subsequent BHR Transactions. Lender acknowledges and agrees that, notwithstanding any provision in the Loan Documents to the contrary, the Approved Transactions shall not constitute a default under the Deed of Trust or the other Loan Documents. Lender’s acknowledgment shall not be construed as a consent to any subsequent transfer which requires Lender’s consent pursuant to the terms of the Loan Documents.

3. Amendments to Loan Agreement.

(a) All references in the Loan Agreement and other Loan Documents to a Guarantor or Guarantors or a Indemnitor or Indemnitors shall refer to each of the Guarantors referred to in this Agreement, including BHR, and each of the Repayment Guaranty, Completion Guaranty and the Unsecured Hazardous Materials Indemnity Agreement delivered by the Guarantors (including BHR) shall for all purposes constitute

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a Loan Document. In connection with this Agreement, (i) the Guarantors shall deliver an Amendment and Joinder to Repayment Guaranty, Completion Guaranty and Hazardous Materials Indemnity Agreement, dated as of the Effective Date, to Lender (the “Amendment and Joinder”) and (ii) AAC shall deliver a Corporate Resolution Authorizing Execution of Guaranty and Indemnity and Endorsement and Hypothecation of Property to Lender.

(b) Section 7.11 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“7.11 DERIVATIVE DOCUMENTS.

On or prior to July 14, 2014, Borrower shall enter into an interest rate swap transaction with Lender or with another counterparty reasonably acceptable to Lender (such transaction, together with all documents and agreements relating thereto, including any ISDA Master Agreement, Schedule and/or Confirmation, together with all modifications, extensions, renewals and replacement thereof, is hereinafter referred to as the “swap contract”) to cover a notional amount of not less than 100% of the outstanding principal amount of the Loan for the full term of the Loan and shall maintain in full force and effect such swap contract for the full term of the Loan.”

(c) Section 9.1(m) of the Loan Agreement is hereby amended by inserting the following at the end thereof:

“, or any Disqualified Equity Interests of Borrower, any Guarantor or any of their respective subsidiaries shall be payable or otherwise be required to be paid (if the required payments exceed in the aggregate $500,000) or an event of default (if the outstanding amount of such Disqualified Equity Interests exceeds $500,000) thereunder shall occur. As used herein, the term “Disqualified Equity Interests” means any equity interest that, by its terms (or by the terms of any security or other equity interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loan), (ii) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (iii) provides for the scheduled payments of dividends in cash, or (iv) is or becomes convertible into or exchangeable for indebtedness or any other equity interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 180 days after the latest maturity date of the Loan; and the term “Qualified Equity Interests” means any equity interests issued by AAC Holdings, Inc., a Nevada corporation (“Holdings”), (and not by any of its subsidiaries) that is not a Disqualified Equity Interest.”

(d) Exhibit B (Documents) to the Loan Agreement is hereby amended by including item 2.1 (Repayment Guaranty), item 2.2 (Completion Guaranty) and item 2.3 (Unsecured Hazardous Materials Indemnity Agreement) in the definition of “Loan Documents”.

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4. Representations, Warranties and Covenants of the Borrower Parties. The Borrower Parties hereby represent, warrant, certify and covenant to Lender that:

(a) The Borrower Parties understand and hereby acknowledge all of the terms and provisions of the Loan Documents.

(b) Each person executing this Agreement as a representative of the Borrower Parties has been duly authorized and has full power to execute and deliver this Agreement on behalf of the Borrower Parties and to bind the Borrower Parties to the terms and conditions hereof and thereof.

(c) The representations, warranties and certifications set forth herein are given with the knowledge that Lender will rely upon the truth of the statements made herein.

(d) To the knowledge of Borrower Parties, no Default exists under any of the Loan Documents and no condition or event has occurred and is continuing which after notice and/or the lapse of time would constitute a Default under the Loan Documents.

(e) This Agreement constitutes the legal, valid and binding obligations of the Borrower Parties, as applicable, enforceable in accordance with their terms.

(f) The execution and delivery of, and performance under this Agreement are within the Borrower Parties’ power and authority without the joinder or consent of any other party and have been duly authorized by all requisite action and are not in contravention of law or the Borrower Parties’ respective organizational agreement(s), or any indenture, agreement or undertaking to which any of the Borrower Parties is a party or by which any of them is bound.

5. Further Assurances. The Borrower Parties, upon request from Lender, agree to execute such other and further documents as may be reasonably necessary or appropriate to consummate the transactions contemplated herein or to perfect the liens and security interests intended to secure the payment of the Loan.

6. Effect of Amendment; Other Provisions Unchanged. On and after the Effective Date, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Loan Agreement, and each reference in the other Loan Documents to the “Loan Agreement”, “thereunder”, “thereof” or words of like import referring to the Loan Agreement shall mean and be a reference to the Loan Agreement, as amended by this Agreement. Except as specifically provided herein, the terms and provisions of the Loan Documents shall remain unchanged and shall remain in full force and effect. In particular, this Agreement shall each be construed as a Loan Documents.

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7. Lien Status. Borrower hereby acknowledges and agrees that all liens, security interests, mortgages and assignments granted or created by or existing under the Deeds of Trust and the other Loan Documents remain unchanged and continue, unabated, in full force and effect, to secure Borrower’s obligation to repay the Note.

8. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.

9. Severability of Provisions. If any covenant, condition, or provision herein contained is held to be invalid by final judgment of any court of competent jurisdiction, the invalidity of such covenant, condition, or provision shall not in any way affect any other covenant, condition or provision herein contained.

10. Time of the Essence. It is expressly agreed by the parties hereto that time is of the essence with respect to this Agreement.

11. Representation by Counsel. The parties acknowledge and confirm that each of their respective attorneys has participated jointly in the review and revision of this Agreement and that it has not been written solely by counsel for one party. The parties hereto therefore stipulate and agree that the rule of construction to the effect that any ambiguities are to or may be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor either party against the other.

12. Successors and Assigns. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and assigns, including, each other person or entity which holds or which may hereafter hold an interest in any of the Loan Documents and any person or entity which acquires all or any part of the Property including by purchase of the Property at a foreclosure sale or by acceptance of a deed in lieu of foreclosure.

13. Paragraph Headings. The paragraph headings set forth in this Agreement are for the convenience of the parties only, and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs in this Agreement.

14. Governing Law. This Agreement and the rights and duties of the parties hereunder shall be governed for all purposes by the law of the State of Texas and the law of the United States applicable to transactions within said State.

15. Reaffirmation. Each of the Guarantors hereby acknowledges and agrees that the Guaranties and the other Loan Documents to which it is a party shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Agreement. Each Guarantor acknowledges and agrees that (i) such Guarantor is not required by the terms of the Loan Agreement or any other Loan Document to consent to the amendments to the Loan Agreement effected pursuant to this Agreement and (ii) nothing in the Loan Agreement, this Agreement or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendments to the Loan Agreement. The Borrower and the Guarantors hereby confirm that the Maturity Date of the Loan is October 31, 2014.

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16. General Release.

(a) Effective on the date hereof, each Borrower Party, for itself and on behalf of its successors, assigns, and officers, directors, employees, agents and attorneys, and any Person acting for or on behalf of, or claiming through it, hereby waives, releases, remises and forever discharges Lender, each of its Affiliates, and each of its successors in title, past, present and future officers, directors, employees, limited partners, general partners, investors, attorneys, assigns, subsidiaries, shareholders, trustees, agents and other professionals and all other Persons to whom any member of the Lender would be liable if such Persons were found to be liable to such Borrower Party (each a “Releasee” and collectively, the “Releasees”), from any and all past, present and future claims, suits, liens, lawsuits, adverse consequences, amounts paid in settlement, debts, deficiencies, diminution in value, disbursements, demands, obligations, liabilities, causes of action, damages, losses, costs and expenses of any kind or character, whether based in equity, law, contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law (each a “Claim” and collectively, the “Claims”), whether known or unknown, fixed or contingent, direct, indirect, or derivative, asserted or unasserted, matured or unmatured, foreseen or unforseen, past or present, liquidated or unliquidated, suspected or unsuspected, which such Borrower Party ever had from the beginning of the world to the date hereof, now has, or might hereafter have against any such Releasee which relates, directly or indirectly to the Loan Agreement, any other Loan Document, or to any acts or omissions of any such Releasee with respect to the Loan Agreement or any other Loan Document, or to the lender-borrower relationship evidenced by the Loan Documents. As to each and every Claim released hereunder, each Borrower Party hereby represents that it has received the advice of legal counsel with regard to the releases contained herein, and having been so advised, specifically waives the benefit of the provisions of Section 1542 of the Civil Code of California which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

As to each and every Claim released hereunder, each Borrower Party also waives the benefit of each other similar provision of applicable federal or state law (including without limitation the laws of the state of Texas), if any, pertaining to general releases after having been advised by its legal counsel with respect thereto.

Each Borrower Party acknowledges that it may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such Claims and agrees that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. Each Borrower Party understands, acknowledges and agrees that the release set forth above may be pleaded as

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a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

(b) Each Borrower Party, for itself and on behalf of its successors, assigns, and officers, directors, employees, agents and attorneys, and any Person acting for or on behalf of, or claiming through it, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee above that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by such Person pursuant to the above release. Each Borrower Party further agrees that it shall not dispute the validity or enforceability of the Loan Agreement or any of the other Loan Documents or any of its obligations thereunder, or the validity, priority, enforceability or the extent of Lender’s lien on any item of collateral under the Loan Agreement or the other Loan Documents. If any Borrower Party or any of their respective successors, assigns, or officers, directors, employees, agents or attorneys, or any Person acting for or on behalf of, or claiming through it violate the foregoing covenant, such Person, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Releasee as a result of such violation.

[Remainder of Page Intentionally Left Blank. Signature Page Follows.]

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the Effective Date.

BORROWER:
GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company
By:	/s/ Michael T. Cartwright
Name:	Michael T. Cartwright
Title:	Manager
GUARANTORS:
/s/ Michael T. Cartwright
MICHAEL T. CARTWRIGHT
/s/ Jerrod N. Menz
JERROD N. MENZ
AMERICAN ADDICTION CENTERS, INC., a Nevada corporation
By:	/s/ Michael T. Cartwright
Name:	Michael T. Cartwright
Title:	Chairman and Chief Executive Officer
BEHAVIORAL HEALTHCARE REALTY, LLC, a Delaware limited liability company
By:	/s/ Michael T. Cartwright
Name:	Michael T. Cartwright
Title:	Manager

LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ Alan Prohaska
Name:	Alan Prohaska
Title:	VP

EXHIBIT A

POST-TRANSACTION STRUCTURE

EX-10

Exhibit 10.20

Loan No. 476300

LOAN AGREEMENT

THIS LOAN AGREEMENT (“Agreement”) is executed as of May 15, 2013, by and between CONCORDE REAL ESTATE, LLC, a Nevada limited liability company (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”). The Borrower and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS

A. Borrower owns or will own certain real property described in Exhibit A hereto (“Property”).

B. Borrower has requested from Lender a loan for the purpose of financing the Property.

NOW, THEREFORE, Borrower and Lender agree as follows:

ARTICLE 1. LOAN

1.1 LOAN. By and subject to the terms of this Agreement, Lender agrees to lend to Borrower and Borrower agrees to borrow from Lender the principal sum of NINE MILLION FIVE HUNDRED EIGHTY-ONE THOUSAND AND NO/100 DOLLARS ($9,581,000.00) (“Loan”), said sum to be evidenced by a Promissory Note Secured by Deed of Trust of even date herewith (“Note”). The Note shall be secured, in part, by that certain Construction Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing dated June 27, 2012, executed by Borrower, as trustor, to American Securities Company of Nevada, a Nevada corporation, as trustee, for the benefit of Lender, as beneficiary, and recorded on July 10, 2012 as Instrument No. 201207100000082 in the official records of Clark County, Nevada (“Official Records”) as modified by that certain Modification Agreement (“Modification Agreement”) of even date herewith by and between Borrower and Lender, a memorandum (“Memorandum”) of which is being recorded concurrently herewith in the Official Records (as modified, and as hereafter amended, supplemented, replaced or modified, the “Deed of Trust”), encumbering certain real property and improvements as legally defined therein. The obligations of the Borrower under the Loan will be guaranteed by MICHAEL CARTWRIGHT, an individual (“Cartwright”), JERROD MENZ, an individual (“Menz”), and AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (“AAC” and, together with Cartwright and Menz individually and collectively, “Guarantor”) pursuant to that certain Repayment Guaranty of even date herewith (“Guaranty”). Amounts disbursed to or on behalf of Borrower pursuant to the Note shall be used to finance the Property and for such other purposes and uses as may be permitted under this Agreement and the other Loan Documents, as described below.

1.2 LOAN DOCUMENTS; EFFECTIVE DATE. Borrower shall deliver to Lender concurrently with this Agreement the Note, the Modification Agreement, the Memorandum and any other documents required by Lender, as hereafter amended, supplemented, replaced or modified, each properly executed and in recordable form, as applicable, described in Exhibit B (“Loan Documents”) together with those documents described in Exhibit B as other related documents. The effective date (“Effective Date”) of the Loan Documents shall be the earlier of (a) the date the Memorandum is recorded in the Official Records is located and (b) the date Lender authorizes the Loan proceeds to be released to Borrower.

1.3 MATURITY DATE. The maturity date of the Loan shall be May 15, 2018 (“Maturity Date”).

1.4 FULL REPAYMENT AND SATISFACTION. Upon receipt of all sums owing and outstanding under the Loan Documents, Lender shall issue a full release and reconveyance of the Property and Improvements from the lien of the Deed of Trust; provided, however, that each of the following conditions shall be satisfied at the time of, and with respect to, such release and reconveyance: (a) Lender shall have received all escrow, closing and recording costs, the costs of preparing and delivering such satisfaction and any sums then due and payable under the Loan Documents; (b) Lender shall have received a written release

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satisfactory to Lender of any set aside letter, letter of credit or other form of undertaking which Lender has issued to any surety, governmental agency or any other party in connection with the Loan and/or the Property; and (c) Lender’s obligation, if any, to make further disbursements under the Loan shall terminate as to any portion of the Loan undisbursed as of the date of issuance of such release and reconveyance, and any commitment of Lender to lend any undisbursed portion of the Loan shall be cancelled.

ARTICLE 2. DISBURSEMENT

2.1 CONDITIONS PRECEDENT. Lender’s obligation to make the disbursement of the Loan shall be subject to satisfaction of each of the following conditions precedent:

(a) Lender shall have received fully executed originals of all Loan Documents, the Guaranty and any other documents, instruments, policies, title endorsements, and other materials requested by Lender under the terms of this Agreement or any of the other Loan Documents;

(b) There shall exist no Default as defined in this Agreement or any of the other Loan Documents or any event, omission or failure of condition which would constitute a Default after notice or lapse of time, or both;

(c) The Property shall be 100% leased to Concorde Treatment Center, LLC, a Nevada limited liability company (“CTC”) in accordance with that certain lease (“CTC Lease”), executed by Borrower, as “Landlord”, and CTC, as “Tenant”;

(d) Lender shall have received an executed copy of the CTC lease, in form and substance acceptable to Lender;

(e) Lender shall have obtained an appraisal of the Property, at Borrower’s expense, indicating, to the reasonable satisfaction of Lender, that the ratio of (x) the principal balance of the Loan to (y) the most recent appraised value of the Property based on the appraisal obtained by Lender prior to the date hereof, as adjusted by Lender in its sole discretion upon its review of the most recent appraisal does not exceed 65%; and

(f) Lender shall have received a copy of AAC’s annual financial statements for the fiscal year ending December 31, 2012, which financial statements shall be audited by an independent certified public accountant (“CPA”) acceptable to Lender.

2.2 FUNDS TRANSFER DISBURSEMENTS.

(a) Borrower hereby authorizes Lender to disburse the proceeds of the Loan made by Lender or its affiliate pursuant to the Loan Documents as requested by an authorized representative of the Borrower to any of the accounts designated in Exhibit C. Borrower agrees to be bound by any transfer request: (i) authorized or transmitted by Borrower; or, (ii) made in Borrower’s name and accepted by Lender in good faith and in compliance with these transfer instructions, even if not properly authorized by Borrower. Borrower further agrees and acknowledges that Lender may rely solely on any bank routing number or identifying bank account number or name provided by Borrower to affect a wire or funds transfer even if the information provided by Borrower identifies a different bank or account holder than named by the Borrower. Lender is not obligated or required in any way to take any actions to detect errors in information provided by Borrower. If Lender takes any actions in an attempt to detect errors in the transmission or content of transfer or requests or takes any actions in an attempt to detect unauthorized funds transfer requests, Borrower agrees that no matter how many times Lender takes these actions Lender will not in any situation be liable for failing to take or correctly perform these actions in the future and such actions shall not become any part of the transfer disbursement procedures authorized under this provision, the Loan Documents, or any agreement between Lender and Borrower, Borrower agrees to notify Lender of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within 14 days after Lender’s confirmation to Borrower of such transfer.

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(b) Lender will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. Lender may delay or refuse to accept a funds transfer request if the transfer would: (i) violate the terms of this authorization; (ii) require use of a bank unacceptable to Lender or prohibited by government authority; (iii) cause Lender to violate any Federal Reserve or other regulatory risk control program or guideline; or (iv) otherwise cause Lender to violate any applicable law or regulation.

(c) Lender shall not be liable to Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrower’s transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of the Lender, (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Lender’s control, or (iii) any special, consequential, indirect or punitive damages, whether or not (A) any claim for these damages is based on tort or contract or (B) Lender or Borrower knew or should have known the likelihood of these damages in any situation. Lender makes no representations or warranties other than those expressly made in this Agreement.

ARTICLE 3. INSURANCE

Borrower shall, while any obligation of Borrower or Guarantor under any Loan Document remains outstanding, maintain at Borrower’s sole expense, with licensed insurers approved by Lender, the following policies of insurance in form and substance satisfactory to Lender:

3.1 TITLE INSURANCE. A CLTA 110.10 endorsement to Lender’s existing extended coverage ALTA Policy of Title Insurance, policy number 549986-lst (“Title Policy”) issued by First American Title Insurance Company, insuring Lender, in the principal amount of the Loan, of the validity and the priority of the lien of the Deed of Trust upon the Property, subject only to matters approved by Lender in writing. During the term of the Loan, Borrower shall deliver to Lender, within 5 days of Lender’s written request, such other endorsements to the Title Policy as Lender may reasonably require.

3.2 PROPERTY INSURANCE. An All Risk/Special Form Property Insurance policy, including without limitation, theft coverage and such other coverages and endorsements as Lender may require, insuring Lender against damage to the Property in an amount not less than 100% of the full replacement cost of the Property. Such coverage shall adequately insure any and all Loan collateral, whether such collateral is onsite, stored offsite or otherwise. Lender shall be named on the policy as Mortgagee and named under a Lender’s Loss Payable Endorsement or Standard Mortgagee Clause Endorsement (in form acceptable to Lender).

3.3 FLOOD HAZARD INSURANCE. A policy of flood insurance, as required by applicable governmental regulations, or as deemed necessary by Lender, in an amount required by Lender, but in no event less than the amount sufficient to meet the requirements of applicable law and governmental regulation.

3.4 LIABILITY INSURANCE. A policy of Commercial General Liability insurance on an occurrence basis, with coverages and limits as required by Lender, insuring against liability for injury and/or death to any person and/or damage to any property occurring on the Property.

3.5 OTHER COVERAGE. Borrower shall provide to Lender evidence of such other reasonable insurance in such reasonable amounts as Lender may from time to time request against such other insurable hazards which at the time are commonly insured against for property similar to the Property located in or around the region in which the Property is located. Such coverage requirements may include but are not limited to coverage for earthquake, acts of terrorism, mold, business income, delayed business income, rental loss, sink hole, soft costs, tenant improvement or environmental.

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3.6 GENERAL. Borrower shall provide to Lender insurance certificates or other evidence of coverage in form acceptable to Lender, with coverage amounts, deductibles, limits and retentions as required by Lender. All insurance policies shall provide that the coverage shall not be cancelable or materially changed without 10 days prior written notice to Lender of any cancellation for nonpayment of premiums, and not less than 30 days prior written notice to Lender of any other cancellation or any modification (including a reduction in coverage). Lender shall be named under a Lender’s Loss Payable Endorsement or a Standard Mortgagee Clause Endorsement (in form acceptable to Lender) on all insurance policies which Borrower actually maintains with respect to the Property. All insurance policies shall be issued and maintained by insurers approved to do business in the state in which the Property is located and must have an A.M. Best Company financial rating and policyholder surplus acceptable to Lender.

ARTICLE 4. REPRESENTATIONS AND WARRANTIES

As a material inducement to Lender’s entry into this Agreement, Borrower represents and warrants to Lender as of the Effective Date and continuing thereafter the following. As used in this Agreement, the phrase “to the best of Borrower’s knowledge” shall mean the actual knowledge of Cartwright and Menz after reasonable investigation and inquiry.

4.1 AUTHORITY/ENFORCEABILITY. To the best of Borrower’s knowledge, Borrower is in compliance with all laws and regulations applicable to its organization, existence and transaction of business and has all necessary rights and powers to own and operate the Property as contemplated by the Loan Documents.

4.2 BINDING OBLIGATIONS. Borrower is authorized to execute, deliver and perform its obligations under the Loan Documents, and such obligations are the valid and binding obligations of Borrower.

4.3 COMPLIANCE WITH LAWS. To the best of Borrower’s knowledge, Borrower has, and at all times shall have, all permits, licenses, exemptions, and approvals necessary to occupy, operate and market the Property, and shall maintain compliance with all governmental requirements applicable to the Property, and all other applicable statutes, laws, regulations and ordinances necessary for the transaction of its business. To the best of Borrower’s knowledge, the Property is a legal parcel lawfully created in full compliance with all subdivision laws and ordinances. Without limiting the generality of the foregoing, CTC has, and at all times shall have, all permits, licenses, exemptions, and approvals necessary to use and operate the Property as a drug and alcohol residential treatment facility, and such use and operation of the Property constitutes a permitted use under all applicable zoning regulations.

4.4 LITIGATION. Except as disclosed to Lender in writing, to the best of Borrower’s knowledge, there are no claims, actions, suits, or proceedings pending, or to the best of Borrower’s knowledge threatened, against Borrower or Guarantor or affecting the Property.

4.5 FINANCIAL CONDITION. All financial statements and information heretofore and hereafter delivered to Lender by Borrower, including, without limitation, information relating to the financial condition of Borrower, the Property, the partners, joint venturers or members of Borrower, and/or Guarantor, fairly and accurately represent the financial condition of the subject thereof and have been prepared (except as noted therein) in accordance with generally accepted accounting principles consistently applied. Borrower acknowledges and agrees that Lender may request and obtain additional information from third parties regarding any of the above, including, without limitation, credit reports.

4.6 ACCURACY. To the best of Borrower’s knowledge, all reports, documents, instruments, information and forms of evidence delivered to Lender concerning the Loan or security for the Loan or required by the Loan Documents are accurate, correct and sufficiently complete to give Lender true and accurate knowledge of their subject matter, and do not contain any misrepresentation or omission.

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4.7 UTILITIES. All utility services, including, without limitation, gas, water, sewage, electrical and telephone, necessary for the occupancy of the Property are available at the Property.

4.8 BUSINESS LOAN. The Loan is a business loan transaction in the stated amount solely for the purpose of carrying on the business of Borrower and none of the proceeds of the Loan will be used for the personal, family or agricultural purposes of Borrower.

4.9 COMMENCEMENT OF CONSTRUCTION. No construction work or activity is presently being conducted at the Property or with respect to the improvements and no contractor, subcontractor or materialman is presently performing any construction work or other services or delivering any materials to or for the benefit of Borrower, the Property or the Improvements.

ARTICLE 5. HAZARDOUS MATERIALS

5.1 SPECIAL REPRESENTATIONS AND WARRANTIES. Without in any way limiting the other representations and warranties set forth in this Agreement, and after reasonable investigation and inquiry, Borrower hereby represents and warrants to the best of Borrower’s knowledge as of the date of this Agreement as follows:

(a) Hazardous Materials. Except as previously disclosed to Lender in that certain Phase I Environmental Site Assessment report dated December 27, 2011, prepared by Terracon Consultants, Inc., the Property is not and has not been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,” “regulated substances,” “industrial solid wastes,” or “pollutants or contaminants” under the Hazardous Materials Laws, as described below, and/or any other applicable environmental laws, ordinances and regulations (collectively, the “Hazardous Materials”). “Hazardous Materials” shall not include commercially reasonable amounts of such materials used in the ordinary course of operation of the Property which are used and stored in accordance with all applicable environmental laws, ordinances and regulations.

(b) Hazardous Materials Laws. The Properly is in compliance with all laws, ordinances and regulations relating to Hazardous Materials (“Hazardous Materials Laws”), including, without limitation: any and all applicable federal, state or local directive, statute, law, rule, regulation, ordinance or rule of common law in effect and any judicial or administrative decisions, including any judicial or administrative order, consent decree or judgment, relating to the control of any pollutant or hazardous material, the protection of the environment or the effect of the environment on human health, including the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq., the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1252 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 el seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f el seq.; the Hazardous Materials Transportation Act, as amended 49 U.S.C. Section 1801 et seq.; the Atomic Energy Act, as amended, 42 U.S.C. Section 2011 et seq., the Federal Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. Section 136 et seq., the Occupational Safety and Health Act, as amended, 20 U.S.C. Section 651 et seq., and applicable state and local laws, regulations or requirements that govern (i) the existence, cleanup and/or remedy of contamination on Property; (ii) the protection of the environment from released, spilled, deposited or otherwise emplaced contamination; (iii) the control of hazardous wastes; or (iv) the use, generation, transport, treatment, removal or recovery of Hazardous Materials, including any and all building materials.

(c) Hazardous Materials Claims. There are no claims or actions (“Hazardous Materials Claims”) known to, pending or threatened against Borrower or the Property by any governmental entity or agency or by any other person or entity relating to Hazardous Materials or pursuant to the Hazardous Materials Laws.

(d) Border Zone Property. There has been no occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to become contaminated through the migration of Hazardous Materials onto, above or under the Property.

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5.2 HAZARDOUS MATERIALS COVENANTS. Borrower agrees as follows:

(a) No Hazardous Activities. Borrower shall not cause or permit the Property to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials.

(b) Compliance. Borrower shall comply and cause the Property to comply with all Hazardous Materials Laws.

(c) Notices. Borrower shall immediately notify Lender in writing of: (i) the discovery of any Hazardous Materials on, under or about the Property; (ii) any knowledge by Borrower that the Property do not comply with any Hazardous Materials Laws; (iii) any Hazardous Materials Claims; and (iv) the discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to become contaminated with Hazardous Materials.

(d) Removal and/or Remedial Action. In response to the presence of any Hazardous Materials on, under or about the Property, Borrower shall immediately take, at Borrower’s sole expense, all actions required by any Hazardous Materials Laws or any regulatory agency, governing body, judgment, consent decree, settlement or compromise with respect to any Hazardous Materials Claims.

5.3 INSPECTION BY LENDER. Upon reasonable prior notice to Borrower, Lender, its employees and agents, may from time to time (whether before or after the commencement of a nonjudicial or judicial foreclosure proceeding) enter and inspect the Property for the purpose of determining the existence, location, nature and magnitude of any past or present release or threatened release of any Hazardous Materials into, onto, beneath or from the Property.

5.4 HAZARDOUS MATERIALS INDEMNITY. Borrower hereby agrees to defend, indemnify and hold harmless Lender, its directors, officers, employees, agents, successors and assigns from and against any and all losses, damages, liabilities, claims, actions, judgments, court costs and legal or other expenses (including, without limitation, attorneys’ fees and expenses) which Lender may incur as a director indirect consequence of the use, generation, release, manufacture, storage, disposal, threatened disposal, transportation or presence of Hazardous Materials in, on, under or about the Property. Borrower shall immediately pay to Lender upon demand any amounts owing under this indemnity, together with interest from the date the indebtedness arises until paid at the rate of interest applicable to the principal balance of the Note. Borrower’s duty and obligations to defend, indemnify and hold harmless Lender shall survive the cancellation of the Note and the release, reconveyance or partial reconveyance of the Deed of Trust.

5.5 LEGAL EFFECT OF SECTION. Borrower and Lender agree that each provision in this Article (together with any indemnity applicable to a breach of any such provision) with respect to the environmental condition of the real property security is intended by Lender and Borrower to be an “environmental provision” for purposes of Nevada Revised Statutes Section 40.502, and as such it is expressly understood that Borrower’s duty to indemnify Lender hereunder shall survive: (i) any judicial or non-judicial foreclosure under the Deed of Trust, or transfer of the Property in lieu thereof; (ii) the release and reconveyance or cancellation of the Deed of Trust; and (iii) the satisfaction of all of Borrower’s obligations under the Loan Documents.

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5.6 ENVIRONMENTAL IMPAIRMENT. If any portion of the Property is determined to be “environmentally impaired” (as “environmentally impaired” is defined in Nevada Revised Statutes Section 40.503), then, without otherwise limiting or in any way affecting the Lender’s or the Trustee’s (as defined in the Deed of Trust) rights and remedies under the Deed of Trust, the Lender may elect to exercise its right under Nevada Revised Statutes Section 40.512, to (1) waive its lien on such environmentally impaired portion of the Property and (2) exercise (i) the rights and remedies of an unsecured creditor, including reduction of its claim against the Borrower to judgment, and (ii) any other rights and remedies permitted by law. All costs and expenses, including, without limitation, attorneys’ fees, incurred by the Lender in connection with any action commenced under this Section, plus interest thereon at the default rate of interest set forth in the Note until paid shall be added to the obligations secured by the Deed of Trust and shall be due and payable to the Lender upon its demand made at any time following the conclusion of such action.

ARTICLE 6. COVENANTS OF BORROWER

6.1 EXPENSES. Borrower shall immediately pay to Lender upon demand: (a) all costs and expenses incurred by Lender in connection with the administration of this Agreement, the other Loan Documents and any other documents required by Lender during the term of the Loan; and (b) the enforcement or satisfaction by Lender of any of Borrower’s or Guarantor’s obligations under this Agreement, the other Loan Documents and the Guaranty. For all purposes of this Agreement, Lender’s costs and expenses shall include, without limitation, all appraisal fees, cost engineering and inspection fees, legal fees and expenses, accounting fees, environmental consultant fees, auditor fees, and the cost to Lender of any title insurance premiums, title surveys, tax service contract fees, recording fees, mortgage registration taxes, release, reconveyance and notary fees. If any of the services described above are provided by an employee of Lender, Lender’s costs and expenses for such services shall be calculated in accordance with Lender’s standard charge for such services.

6.2 LEASING. Borrower will lease the Property to CTC pursuant to the CTC Lease. In the event of the termination of the CTC Lease, Borrower shall use commercially reasonable efforts to maintain all leasable space in the Property leased at no less than fair market rental rates.

6.3 APPROVAL OF LEASES. All leases of all or any part of the Property shall: (a) be upon terms and with tenants approved by Lender prior to Borrower’s execution of any such lease; and (b) include estoppel, subordination, attornment and mortgagee protection provisions satisfactory to Lender. All standard lease forms and any material deviation from any form, shall be approved by Lender prior to execution of any lease using such form.

6.4 INCOME TO BE APPLIED TO DEBT SERVICE. After the occurrence of a Default and during the pendency of a Default, Borrower shall apply all gross operating income from the Property and Improvements only to the payment of operating expenses directly attributable to the Property and the payment of accrued interest and outstanding principal on the Loan. To the extent such gross operating income exceeds such operating expenses, such excess shall be used first to pay accrued interest (regardless of any interest reserve) and then to pay the outstanding principal on the Loan. After the occurrence of a Default, no gross operating income shall be distributed to any partner, venturer, member or equity investor of Borrower until such Default has been cured.

6.5 SUBDIVISION MAPS. Prior to recording any final map, plat, parcel map, lot line adjustment or other subdivision map of any kind covering any portion of the Property (‘‘Subdivision Map”), Borrower shall submit such Subdivision Map to Lender for Lender’s review and approval, which approval shall not be unreasonably withheld. Within 10 Business Days after Lender’s receipt of such Subdivision Map, Lender shall provide Borrower written notice if Lender disapproves of said Subdivision Map. Lender shall be deemed to have approved the Subdivision Map if such notice is not provided to Borrower. Within 5 Business Days after Lender’s request, Borrower shall execute, acknowledge and deliver to Lender such amendments to the Loan Documents as Lender may reasonably require to reflect the change in the legal description of the Property resulting from the recordation of any Subdivision Map. In connection with and promptly after the recordation of any amendment or other modification to the Deed of Trust recorded in

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connection with such amendments, Borrower shall deliver to Lender, at Borrower’s sole expense, a title endorsement to the Title Policy in form and substance satisfactory to Lender insuring the continued first priority lien of the Deed of Trust. Subject to the execution and delivery by Borrower of any documents required under this Section, Lender shall, if required by applicable law, sign any Subdivision Map approved, or deemed to be approved, by Lender pursuant to this Section.

6.6 FURTHER ASSURANCES. Upon Lender’s request and at Borrower’s sole cost and expense, Borrower shall execute, acknowledge and deliver any other instruments and perform any other acts necessary, desirable or proper, as determined by Lender, to carry out the purposes of this Agreement and the other Loan Documents or to perfect and preserve any liens created by the Loan Documents.

6.7 ASSIGNMENT. Without the prior written consent of Lender, Borrower shall not assign Borrower’s interest under any of the Loan Documents, or in any monies due or to become due thereunder, and any assignment without such consent shall be void. In this regard, Borrower acknowledges that Lender would not make this Loan except in reliance on Borrower’s expertise, reputation, prior experience in developing and constructing commercial real property for dependency treatment facilities. Lender’s knowledge of Borrower, and Lender’s understanding that this Agreement is more in the nature of an agreement involving personal services than a standard loan where Lender would rely on security which already exists.

6.8 INDEMNITY. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES) WHICH LENDER MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF: (A) THE PURPOSE TO WHICH BORROWER APPLIES THE LOAN PROCEEDS; (B) THE FAILURE OF BORROWER TO PERFORM ANY OBLIGATIONS AS AND WHEN REQUIRED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; (C) ANY FAILURE AT ANY TIME OF ANY OF BORROWER’S REPRESENTATIONS OR WARRANTIES TO BE TRUE AND CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWER, CONSTITUENT PARTNER OR MEMBER OF BORROWER, ANY CONTRACTOR, SUBCONTRACTOR OR MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY WITH RESPECT TO ANY OF THE PROPERTY. BORROWER SHALL IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING UNDER THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL PAID AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTE. BORROWER’S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER SHALL SURVIVE CANCELLATION OF THE NOTE AND THE RELEASE OR RECONVEYANCE OF THE DEED OF TRUST.

6.9 DERIVATIVE DOCUMENTS. If required by Lender, Borrower shall execute promptly all documents evidencing an interest rate swap transaction entered into by Borrower and Lender or with another counterparty acceptable to Lender (such transaction, together with all documents and agreements relating thereto, including any ISDA Master Agreement, Schedule and/or Confirmation, together with all modifications, extensions, renewals and replacements thereof, is hereinafter referred to as the “Swap Contract”).

ARTICLE 7. REPORTING COVENANTS

7.1 FINANCIAL INFORMATION. Borrower shall deliver its tax return, prepared by a CPA and signed by Borrower, to Lender within 30 days after filing, but in no event later than November 15 of each year following the tax year to be reported, together with any other financial information including, without limitation, financial statements, cash flow projections, and operating statements as may be reasonably requested by Lender. Borrower shall also deliver to Lender the current CPA-audited, consolidated, annual financial statements (including, without limitation, an income and expense statement and a balance sheet) of AAC as soon as available but in no event later than 120 days after the end of its fiscal year. Borrower shall also deliver to Lender the internally prepared, consolidated, quarterly financial statements (including,

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without limitation, an income and expense statement and a balance sheet) of AAC as soon as available but in no event later than 45 days after the end of each fiscal quarter. Borrower shall cause each of Cartwright and Menz to deliver to Lender his self-prepared personal financial statement as soon as available, but in no event later than April 30 of each year following the tax year to be reported and his signed, CPA-prepared tax return within 30 days after filing but in no event later than November 15 each year end following the tax year to be reported. Notwithstanding the foregoing, subject to Borrower’s satisfaction of the conditions set forth in Section 5.4 of the Deed of Trust as modified by the Modification Agreement, Cartwright and Menz shall not be required to furnish their financial statements and tax returns to Lender.

Within 30 days of Lender’s request, Borrower shall also deliver to Lender such annual or quarterly and other financial information, as the case may be, regarding any persons or entities in any way obligated on the Loan as Lender may specify. If audited financial information is prepared, Borrower shall deliver to Lender copies of that information within 45 days of its final preparation or not later than would be required by this Section 7.1, whichever is earlier. Except as otherwise agreed to by Lender, all such financial information shall be prepared in accordance with generally accepted accounting principles consistently applied.

7.2 LEASING REPORTS AND OPERATING STATEMENTS. Borrower shall deliver to Lender quarterly rent rolls, leasing schedules and reports, operating statements and/or such other leasing information as Lender shall request with respect to the Property, each in form and substance satisfactory to Lender.

7.3 UPDATED APPRAISAL; REMARGIN REQUIREMENT. Lender shall have the right (but not the obligation) at any time, and from time to time, during the term of the Loan, in Lender’s discretion, to request and obtain from an appraiser acceptable to Lender, an updated appraisal of the Property, which includes an opinion of value and supporting information reasonably acceptable to Lender. Lender will do everything in its control to contain the cost of the appraisal. If such an appraisal is obtained, Borrower agrees to cooperate with any appraiser, allow access to the Property and provide copies of leases, operating statements, plans and any other information reasonably requested by such appraiser. Borrower shall pay to Lender, within thirty (30) days following demand: (a) the cost of the updated appraisal; provided, however, that Borrower shall not be required to pay for more than one such appraisal in a given calendar year if a Default does not then exist; and (b) the amount, if any, by which the then outstanding balance of the Loan exceeds 65% of the then most recent appraised value of the Property, as adjusted by Lender in its sole discretion upon its review of the appraisal. Upon Borrower’s payment for the updated appraisal and execution of Lender’s then standard form of appraisal indemnity agreement, Borrower may obtain a copy of the updated appraisal if a Default does not then exist.

7.4 FINANCIAL CONDITION. Borrower shall maintain its financial condition, and cause AAC to maintain its financial condition, during the term of this Agreement according to the following schedules, using generally accepted accounting principles, consistently applied:

(a) Prior to the Assignment Effective Date (as defined in Section 5.4 of the Deed of Trust as modified by the Modification Agreement), Borrower shall maintain, as of any DSCR Determination Date, a Debt Service Coverage Ratio of not less than 1.25 to 1.00. For purposes hereof, “Debt Service Coverage Ratio” shall mean, as of any DSCR Determination Date, the ratio of (i) Borrower’s annual net income for the fiscal year immediately preceding such DSCR Determination Date, plus depreciation expense and interest expense payable by Borrower during such fiscal year, plus or minus, as the case may be, the net amount of equity contributions to Borrower by Borrower’s members minus any distributions of income by Borrower to Borrower’s members during such fiscal year, to (ii) the principal and interest payments payable by Borrower on the Loan during such fiscal year. For purposes of this Section, “DSCR Determination Date” shall mean the date on which Lender determines Borrower’s compliance with the Debt Service Coverage Ratio, which date shall be on or after the date on which Lender receives Borrower’s annual financial statements and tax return pursuant to Section 7.1.

(b) From and after the Assignment Effective Date, Borrower shall cause AAC to maintain, as of any FCCR Determination Date, a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00. For

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purposes hereof, “Fixed Charge Coverage Ratio” shall mean, as of any FCCR Determination Date, the ratio of (i) AAC’s annualized quarterly net income for the fiscal quarter immediately preceding such FCCR Determination Date, plus depreciation expense and interest expense payable by AAC during such fiscal quarter, annualized, plus or minus, as the case may be, the net amount of equity contributions to AAC by AAC’s shareholders minus any distributions of income by AAC to AAC’s shareholders during such fiscal quarter, annualized, to (ii) the principal and interest payments payable by AAC on any indebtedness during such fiscal quarter, annualized, plus all payments payable by AAC with respect to capital lease obligations during such fiscal quarter, annualized. For purposes of this Section, “FCCR Determination Date” shall mean the date on which Lender determines AAC’s compliance with the Fixed Charge Coverage Ratio, which date shall be on or after the date on which Lender receives AAC’s quarterly financial statements pursuant to Section 7.1.

ARTICLE 8. DEFAULTS AND REMEDIES

8.1 DEFAULT. The occurrence of any one or more of the following shall constitute an event of default (“Default”) under this Agreement and the other Loan Documents:

(a) Monetary. Borrower’s failure to pay within 5 days when due any sums payable under the Note or any of the other Loan Documents or Borrower’s failure to deposit any funds as and when required under this Agreement; or

(b) Performance of Obligations. Borrower’s failure to perform any obligation, covenant or condition under the Note or any of the other Loan Documents; provided, however, that if a cure period is provided for the remedy of such failure, Borrower’s failure to perform will not constitute a Default until such date as the specified cure period expires; or

(c) Lien; Attachment: Condemnation. (i) The recording or service upon Lender of any claim of lien against the Property and the continuance of such claim of lien for 30 days after such recording or service without discharge, satisfaction or provision for payment being made by Borrower in a manner satisfactory to Lender; or (ii) the condemnation, seizure or appropriation of or occurrence of an uninsured casualty with respect to, any material portion of the Property; or (iii) the sequestration or attachment, or any levy or execution upon, any of the Property or any other collateral provided by Borrower or any other party under any of the Loan Documents which is not released, expunged or dismissed within 30 days; or

(d) Representations and Warranties. (i) The failure of any representation or warranty of Borrower in any of the Loan Documents or by Guarantor in the Guaranty and the continuation of such failure for more than 30 days after written notice to Borrower from Lender requesting that Borrower cure such failure; or (ii) any material adverse change in the financial condition of Borrower, Guarantor, or any indemnitor from the financial condition represented to Lender as of the later of: (A) the Effective Date; or (B) the date upon which the financial condition of such party was first represented to Lender; or

(e) Bankruptcy; Insolvency: Dissolution. (i) The filing of by Borrower, Guarantor, any partner or member of Borrower, any indemnitor or any non-borrower trustor of a petition for relief under the Bankruptcy Reform Act of 1978 (11 USC Section 101-1330) as now or hereafter amended or recodified (“Bankruptcy Code”), or under any other present or future state or federal law regarding bankruptcy, reorganization or other debtor relief law; (ii) the filing against Borrower, any Guarantor, any partner or member of Borrower, any indemnitor or any non-borrower trustor of an involuntary proceeding under the Bankruptcy Code or other debtor relief law and the failure of Borrower to effect a full dismissal of such proceeding within 30 days after the date of filing such proceeding ; (iii) a general assignment by Borrower, Guarantor, any partner or member of Borrower, any indemnitor or any non-borrower trustor for the benefit of creditors; or (iv) Borrower, Guarantor, any partner or member of Borrower, any indemnitor or any non- borrower trustor applying for, or the appointment of, a receiver, trustee, custodian or liquidator of Borrower or any of its property; or

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(f) Borrower; Key Person or Entity. The retirement, death, incapacity or withdrawal of Borrower or Guarantor, if an individual, or the retirement, death, incapacity or withdrawal of Michael Cartwright as manager of Borrower and Borrower’s failure to provide a substitute or replacement reasonably acceptable to Lender within 30 days after the occurrence of any such retirement, death, incapacity or withdrawal; or

(g) Transfer of Assets. The sale, assignment, pledge, hypothecation, mortgage or transfer of all or a substantial portion of the assets of Borrower; or

(h) Derivative Default. The occurrence of a default by Borrower or a termination event with respect to Borrower under any swap, derivative, foreign exchange or hedge transaction or arrangement (or other similar transaction or arrangement howsoever described or defined) at any time entered into between Borrower and Lender in connection with the Loan including, without limitation, the Swap Contract; or

(i) Default Under Guaranty. The occurrence of a default under any guaranty now or hereafter executed in connection with the Loan, including, without limitation, Guarantor’s (defined parties) or other guarantor’s failure to perform any covenant, condition, or obligation thereunder; or

(j) Default Under Unsecured Indemnity Agreement. The occurrence of a default under that certain Hazardous Materials Indemnity Agreement (Unsecured) executed by Guarantor as Indemnitor, in favor of Lender, of even date herewith, including without limitation, Indemnitor’s failure to perform any covenant, condition, or obligation thereunder; or

(k) Default Under CTC Lease. The occurrence of a default by either landlord or tenant under, or the surrender, abandonment, termination or rescission of the CTC Lease; or

(l) Default Under Other Indebtedness. The occurrence of a default by Borrower or any Guarantor or any affiliate of Borrower or Guarantor with respect to any other indebtedness, whether as a borrower or a guarantor thereunder, under any agreement with any lender, including without limitation, Lender.

8.2 ACCELERATION UPON DEFAULT; REMEDIES. Upon the occurrence of any Default specified herein, Lender may, at its sole option, declare all sums owing to Lender under the Note, this Agreement and the other Loan Documents immediately due and payable. Upon such acceleration, Lender may, in addition to all other remedies permitted under the Note and this Agreement and the other Loan Documents and at law or equity, apply the funds of Borrower in its possession, if any, to the sums owing under the Loan Documents and any and all obligations of Lender to fund further disbursements under the Loan shall terminate.

8.3 DISBURSEMENTS TO THIRD PARTIES. Upon the occurrence of a Default occasioned by Borrower’s failure to pay money to a third party as required by this Agreement, Lender may but shall not be obligated to make such payment from the Loan proceeds or other funds of Lender. If such payment is made from proceeds of the Loan, Borrower shall deposit with Lender, upon written demand, an amount equal to such payment within five (5) days of such demand. If such payment is made from funds of Lender, Borrower shall repay such funds upon written demand of Lender within five (5) days of such demand. In either case, the Default with respect to which any such payment has been made by Lender shall not be deemed cured until such deposit or repayment (as the case may be) has been made by Borrower to Lender.

8.4 SET OFF. Upon the occurrence of a Default, Lender may set off any and all amounts due by Borrower against any indebtedness or obligation of Lender to Borrower.

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8.5 RIGHTS CUMULATIVE; NO WAIVER. All Lender’s rights and remedies provided in this Agreement, the other Loan Documents and the Guaranty, together with those granted by law or at equity, are cumulative and may be exercised by Lender at any time. Lender’s exercise of any right or remedy shall not constitute a cure of any Default unless all sums then due and payable to Lender under the Loan Documents are repaid and Borrower has cured all other Defaults. No waiver shall be implied from any failure of Lender to take, or any delay by Lender in taking, action concerning any Default or failure of condition under the Loan Documents, or from any previous waiver of any similar or unrelated Default or failure of condition. Any waiver or approval under any of the Loan Documents must be in writing and shall be limited to its specific terms. Any funds expended by Lender in the exercise of its rights or remedies under this Agreement and the other Loan Documents shall be payable to Lender upon demand, together with interest at the rate applicable to the principal balance of the Note from the date the funds were expended.

ARTICLE 9. MISCELLANEOUS PROVISIONS

9.1 NOTICES. All notices, demands, requests or other communications under this Agreement and the other Loan Documents shall be in writing and shall be delivered in accordance with the notice provisions contained in the Deed of Trust.

9.2 RELATIONSHIP OF PARTIES. The relationship of Borrower and Lender under the Loan Documents is, and shall at all times remain, solely that of borrower and lender, and Lender neither undertakes nor assumes any responsibility or duty to Borrower or to any third party with respect to the Property, except as expressly provided in this Agreement and the other Loan Documents.

9.3 ATTORNEYS’ FEES AND EXPENSES; ENFORCEMENT. If any attorney is engaged to enforce or defend any provision of this Agreement, any of the other Loan Documents or as a consequence of any Default under the Loan Documents, with or without the filing of any legal action or proceeding, and including, without limitation, any fees and expenses incurred in any bankruptcy proceeding of Borrower or in connection with any appeal of a lower court decision, the prevailing Party, as agreed to by the Parties or as determined by the court, shall be entitled to its attorneys’ fees and expenses and all costs incurred in connection therewith.

9.4 IMMEDIATELY AVAILABLE FUNDS. All amounts payable by Borrower to Lender shall be (a) payable only in United States currency in immediately available funds, and (b) received by Lender at the Minneapolis Loan Center, 608 2nd Ave South, 11th Floor, Minneapolis, Minnesota, or at such other places as may be designated in writing by Lender, no later than 11 AM Pacific Standard Time or Pacific Daylight Time, as applicable. Any amounts received after such time shall be credited the next business day.    

9.5 LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Borrower agrees that Lender may elect, at any time, to sell, assign or grant participations in all or any portion of its rights and obligations under the Loan Documents, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Lender’s sole discretion. Borrower further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property and its operation; (b) any party connected with the Loan (including, without limitation, the Borrower, any partner of Borrower, any constituent partner or member of Borrower, Guarantor, any indemnitor and any non- borrower mortgagor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. The indemnity obligations of Borrower under the Loan Documents shall also apply with respect to any purchaser, assignee or participant.

9.6 LENDER’S AGENTS. Lender may designate an agent or independent contractor to exercise any of Lender’s rights under this Agreement and any of the other Loan Documents. Any reference to Lender in any of the Loan Documents shall include Lender’s agents, employees or independent contractors. Borrower shall pay the costs of such agent or independent contractor either directly to such person or to Lender in reimbursement of such costs, as applicable.

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9.7 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED UNDER APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

9.8 SEVERABILITY. If any provision or obligation under this Agreement and the other Loan Documents shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that provision shall be deemed severed from the Loan Documents and the validity, legality and enforceability of the remaining provisions or obligations shall remain in full force as though the invalid, illegal, or unenforceable provision had never been a part of the Loan Documents, provided, however, that if the rate of interest or any other amount payable under the Note or this Agreement or any other Loan Document, or the right of collectibility therefor, are declared to be or become invalid, illegal or unenforceable, Lender’s obligations to make any additional advances under the Loan Documents shall not be enforceable by Borrower.

9.9 HEIRS, SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided under the terms and conditions of this Agreement, the terms of the Loan Documents shall bind and inure to the benefit of the heirs, successors and assigns of the Parties.

9.10 ATTORNEY IN FACT. Borrower hereby irrevocably appoints and authorizes Lender, as Borrower’s attorney in fact, which agency is coupled with an interest, to execute and/or record in Lender’s or Borrower’s name any notices, instruments or documents that Lender deems appropriate to protect Lender’s interest under any of the Loan Documents.

9.11 TAX SERVICE. Lender is authorized, at Borrower’s expense, to obtain a tax service contract with a third party vendor which shall provide tax information on the Property satisfactory to Lender.

9.12 TIME. Time is of the essence of each and every term of this Agreement.

9.13 GOVERNING LAW. This Agreement shall be governed by, and construed and enforced in accordance with the laws of the state where the Property is located, except to the extent preempted by federal laws. Borrower and all persons and entities in any manner obligated to Lender under the Loan Documents and Lender submit to the jurisdiction of: (a) any state or federal court sitting in the state of Nevada over any suit, action, or proceeding, arising out of or relating to the Loan Documents or the Loan; (b) any state or federal court sitting in the stale where the Property is located or the state in which a Party’s principal place of business is located over any suit, action or proceeding, arising out of or relating to any of the Loan Documents or the Loan; (c) any state court sitting in the county of the state where the Property is located over any suit, action, or proceeding, brought by Lender to exercise its power to foreclose the Property or any action brought by Lender to enforce its rights with respect to any other collateral under the Loan Documents, and (d) consents to service of process by any means authorized by the law of the state where the Property is located or federal law. The Parties waive, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum.

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9.14 INTEGRATION; INTERPRETATION; INCONSISTENCIES. The Loan Documents contain or expressly incorporate by reference the entire agreement of the Parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. The Loan Documents shall not be modified except by written instrument executed by all Parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by the Parties in writing. In the event of any inconsistencies between the terms of this Loan Agreement and the terms of any other Loan Document, the terms of this Loan Agreement shall prevail.

9.15 JOINT AND SEVERAL LIABILITY. The liability of all persons and entities obligated in any manner under this Agreement and any of the Loan Documents shall be joint and several.

9.16 FORM OF DOCUMENTS. The form and substance of all documents, instruments, and forms of evidence to be delivered to Lender under the terms of this Agreement and any of the other Loan Documents shall be subject to Lender’s approval and shall not be modified, superseded or terminated in any respect without Lender’s prior written approval.

9.17 NO THIRD PARTIES BENEFITED. No person other than Lender and Borrower and their permitted successors and assigns shall have any right of action under any of the Loan Documents.

9.18 ACTIONS. Borrower agrees that Lender, in exercising the rights, duties or liabilities of Lender or Borrower under the Loan Documents, may commence, appear in or defend any action or proceeding purporting to affect the Property or the Loan Documents and Borrower shall immediately reimburse Lender upon demand for all such expenses so incurred or paid by Lender, including, without limitation, attorneys’ fees and expenses and court costs.

9.19 LENDER’S CONSENT. Wherever in this Agreement there is a requirement for Lender’s consent and/or a document to be provided or an action taken, it is understood that, except as expressly stated herein, Lender shall exercise its consent, right or judgment in a reasonable manner given the specific facts and circumstance applicable at the time.

9.20 HEADINGS. All article, section or other headings appearing in this Agreement and any of the other Loan Documents are for convenience of reference only and shall be disregarded in construing this Agreement and any of the other Loan Documents.    

9.21 COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of alt persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

9.22 ARBITRATION.

(a) Arbitration. The Parties hereto agree, upon demand by any Party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the Loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Nevada selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act

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(Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the Parties; and (iii) be conducted by the AAA, or such other administrator as the Parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any Party who fails or refuses to submit to arbitration following a demand by any other Party shall bear all costs and expenses incurred by such other party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any Party that is a bank of the protections afforded to it under 12 U.S.C, §91 or any similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any Party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any Party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this Section 9.22(c).

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. Any arbitrator(s) will be a neutral attorney licensed in the Slate of Nevada or a neutral retired judge of the slate or federal judiciary of Nevada, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator(s) will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator(s) will decide (by documents only or with a hearing at the arbitrator’s(s’) discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator(s) shall resolve all disputes in accordance with the substantive law of Nevada and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator(s) shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator(s) deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Nevada Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator(s) upon a showing that the request for discovery is essential for the Party’s presentation and that no alternative means for obtaining information is available.

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(f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding.

(g) Payment of Arbitration Costs and Fees. The arbitrator(s) shall award all costs and expenses of the arbitration proceeding.

(h) Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of Nevada, thereby agreeing that all indebtedness and obligations of the Parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable.

(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the Parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other Party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a Party required in the ordinary course of its business or by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the Parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the Parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the Parties.

9.23 EXHIBITS INCORPORATED. Exhibits A, B, and C attached hereto, are hereby incorporated into this Agreement by this reference.

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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of the appearing on the first page of this Agreement.

LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ Neal S. Crapo
	Neal S. Crapo
	Senior Vice President

Lender’s Address:

WELLS FARGO BANK, NATIONAL ASSOCIATION

Carlsbad Regional Commercial Banking Office

5901 Priestly Drive, Suite 306, 3rd FL

Carlsbad, CA 92008

MAC E2413-030

Attention: Marcus Di Fiore

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BORROWER:
CONCORDE REAL ESTATE, LLC, a Nevada limited liability company
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	President and Manager

Borrower’s Address:

115 Eastpark Drive, Suite 100

Brentwood, TN 37027

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EXHIBIT A

DESCRIPTION OF PROPERTY

Exhibit A to TERM LOAN AGREEMENT between CONCORDE REAL ESTATE, LLC, a Nevada limited liability company, as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”.

All that certain real property located in the County of Clark, State of Nevada, described as follows:

GOVERNMENT LOT THIRTY-SEVEN (37) IN SECTION 13, TOWNSHIP 21 SOUTH, RANGE 61 EAST, M.D.B. & M., COUNTY OF CLARK, NEVADA.

EXCEPT THAT PORTION CONVEYED TO THE COUNTY OF CLARK FOR ROAD PURPOSES BY DEED RECORDED JANUARY 17, 1996 IN BOOK 960117 AS DOCUMENT NO. 01463 OF OFFICIAL RECORDS.

EXHIBIT B

DOCUMENTS

Exhibit B to LOAN AGREEMENT between CONCORDE REAL ESTATE, LLC, a Nevada limited liability company, as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”, dated as of May 15, 2013 (“Agreement”).

1. LOAN DOCUMENTS. The documents listed below, numbered 1.1 through 1.8, inclusive, below of even date herewith (unless otherwise specified), and amendments, modifications and supplements thereto which have received the prior written consent of Lender, together with any documents executed in the future that are approved by Lender and that recite that they are “Loan Documents” for purposes of this Agreement are collectively referred to herein as the Loan Documents.

1.1 This Agreement.

1.2 Note.

1.3 Modification Agreement.

1.4 Memorandum.

1.5 Uniform Commercial Code National Financing Statement Form UCC 1.

1.6 Limited Liability Company Borrowing Certificate executed by Borrower.

1.7 Corporate Resolution Authorizing Execution of Guaranty and Endorsement and Hypothecation of Property certified by the Secretary of American Addiction Centers, Inc., a Nevada corporation.

1.8 Subordination Agreement; Acknowledgment of Lease Assignment, Estoppel and Attornment Agreement executed by Borrower, Lender, and Concorde Treatment Center, LLC, a Nevada corporation.

2. OTHER RELATED DOCUMENTS (WHICH ARE NOT LOAN DOCUMENTS)

2.1 Repayment Guaranty executed by Guarantor in favor of Lender.

2.2 Unsecured Hazardous Materials Indemnity Agreement executed by Guarantor in favor of Lender.

2.3 Agreement for Disbursement Prior to Recording and Amendment to Note executed by Borrower and Lender.

EXHIBIT C

TRANSFER AUTHORIZER DESIGNATION

(For Disbursement of Loan Proceeds by Funds Transfer)

¨  NEW    ¨   REPLACE PREVIOUS DESIGNATION    ¨  ADD    ¨  CHANGE    ¨  DELETE LINE NUMBER

The following representatives of GREENHOUSE REAL ESTATE, LLC, a Texas limited liability company (“Borrower”), are authorized to request the disbursement of Loan proceeds and initiate funds transfers for Loan Number 476300 dated May 15, 2013 between Wells Fargo Bank, National Association (“Bank”) and Borrower. Bank is authorized to rely on this Transfer Authorizer Designation until it has received a new Transfer Authorizer Designation signed by Borrower, even in the event that any or all of the foregoing information may have changed.

	Name	Title	Maximum Wire Amount
1.	Michael Cartwright	Manager	$	9,581,000.00
2.
3.
4.
5.

Beneficiary Bank and Account Holder Information

Transfer Funds to (Receiving Party Account Name):
Receiving Party Account Number:
Receiving Bank Name, City and State:	Receiving Bank Routing (ABA) Number:
Maximum Transfer Amount: $
Further Credit Information/Instructions:

Date: May 15, 2013

BORROWER:
CONCORDE REAL ESTATE, LLC, a Nevada limited liability company
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	President and Manager

EX-10

Exhibit 10.21

Loan No. 476300

PROMISSORY NOTE SECURED BY DEED OF TRUST

(One-Month LIBO Rate; Adjusted Monthly)

$9,581,000.00 Date: May 15, 2013

1. PROMISE TO PAY. FOR VALUE RECEIVED, the undersigned CONCORDE REAL ESTATE, LLC, a Nevada limited liability company (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), at the Minneapolis Loan Center, 608 2nd Ave South, 11^th Floor, Minneapolis, MN 55402, or at such other place as may be designated in writing by Lender, the principal sum of NINE MILLION FIVE HUNDRED EIGHTY-ONE THOUSAND AND NO/1OOTHS DOLLARS ($9,581,000.00) or so much thereof as may from time to time be owing hereunder by reason of advances by Lender to or for the benefit or account of Borrower (“Loan”), with interest thereon, per annum, at one or more of the Effective Rates (as hereinafter defined) calculated in accordance with the terms and provisions of the Fixed Rate Agreement attached to this note (“Note”) as Exhibit A (based on a 360-day year and charged on the basis of actual days elapsed). All sums owing hereunder are payable in lawful money of the United States of America, in immediately available funds without offset, deduction or counterclaim of any kind. The Borrower and Lender are collectively referred to herein as the “Parties.”

2. INTEREST. Interest accrued on this Note shall be due and payable on the fifteenth (15^th) day of each month (or, if such day is not a Business Day, on the next Business Day) commencing with the first (lst) month after the date of this Note.

3. INTEREST AND PRINCIPAL PAYMENTS. Monthly principal installments in the amount of $53,227.78 shall be due and payable on the fifteenth (15^th) day of each month (or, if such day is not a Business Day, on the next Business Day), commencing with June 15, 2013, with a final installment consisting of all remaining unpaid principal and accrued interest due and payable in full on the Maturity Date (as defined below).

4. BILL LEAD DATE REQUEST. By written notice to Lender, Borrower may request to receive monthly billings on a date (the “Bill Lead Date”) that is prior to the fifteenth (15^th) day of the month. Lender will submit to Borrower monthly billings, which will consist of actual interest and principal due through the Bill Lead Date plus projected interest and principal due through the balance of the month. Any necessary adjustments in the applicable interest rate and/or principal payments due or made between a Bill Lead Date and the end of the month will be reflected as an additional charge (or credit) in the billing for the next following month. Neither the failure of Lender to submit a Bill Lead Date billing nor any error in any such billing will excuse Borrower’s obligation to make full payment of all amounts due under this Note. In its sole discretion, Lender may cancel or modify the terms of such request which cancellation or modification will be effective upon written notification to Borrower. Should Borrower request a Bill Lead Date, Lender shall not be required to prepare a month end invoice.

5. MATURITY DATE. The outstanding principal balance of this Note, together with all accrued and unpaid interest, shall be due and payable in full on May 15, 2018 (“Maturity Date”). Principal amounts outstanding hereunder, upon which repayment obligations exist and interest accrues, shall be determined by the records of the Lender, which shall be deemed to be conclusive in the absence of clear and convincing evidence to the contrary presented by Borrower.

6. SECURED BY DEED OF TRUST. This Note is secured by, among other things, that certain Construction Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing dated June 27, 2012, executed by Borrower, as trustor, to American Securities Company of Nevada, a Nevada corporation, as trustee, for the benefit of Lender, as beneficiary, and recorded on July 10,

2012 as Instrument No. 201207100000082 in the official records of Clark County, Nevada (“Official Records”) as modified by that certain Modification Agreement (“Modification Agreement”) of even date herewith by and between Borrower and Lender, a memorandum (“Memorandum”), of which is being recorded concurrently herewith in the Official Records (as modified, the “Deed of Trust’’), and the other Loan Documents as defined in that certain Loan Agreement of even date herewith, executed by Borrower and Lender (as the same may be amended or restated from time to time, the “Loan Agreement”). Reference is made to the Loan Agreement for a description of the terms and conditions upon which advances may be made under this Note and repayment of the indebtedness evidenced by this Note may be accelerated.

7. DIRECT DEBIT. In order to assure timely payment to Lender of accrued interest, principal, fees and late charges due and owing under the loan evidenced by this Note, Borrower hereby irrevocably authorizes Lender to directly debit Borrower’s demand deposit account, account no. ***, with Lender for payment when due of all such amounts payable to Lender. Borrower represents and warrants to Lender that Borrower is the legal owner of said account. Written confirmation of the amount and purpose of any such direct debit shall be given to Borrower by Lender not less frequently than monthly. In the event any direct debit hereunder is returned for insufficient funds, Borrower shall pay Lender upon demand, in immediately available funds, all amounts and expenses due and owing to Lender.

8. LATE CHARGE. If any interest or principal payment required hereunder is not received by Lender (whether by direct debit or otherwise) on or before the 15^th calendar day of the month (regardless of whether the 15^th day falls on a Saturday, Sunday or legal holiday) in which ii becomes due, Borrower shall pay, at Lender’s option, a late or collection charge equal to 5% of the amount of such unpaid payment (“Late Charge”).

9. PREPAYMENT. Borrower may prepay the Loan in part or in full at any time but shall be liable to Lender for ail amounts otherwise due and owing: (i) under the Loan Documents (including any LIBO Rate Price Adjustment which may be due for the early termination of a LIBO Rate fixing) and/or (ii) under any derivative contract(s) (including any early termination charges on an interest rate swap) associated with the Loan. Borrower acknowledges that any prepayment of the Loan shall cause Lender to lose its interest rate yield on the Loan and may cause Lender to have to reinvest the prepaid amount in loans with a lesser yield (including, without limitation, possibly in debt obligations other than first mortgage loans on commercial properties). As a consequence, Borrower understands and agrees that the foregoing condition of prepayment is an integral part of the consideration for Lender making the Loan or extension of the Maturity Date.

10. DEFAULT RATE. From and after the Maturity Date or such earlier date on which a Default exists under the Loan Agreement or any other Loan Document (as defined in Exhibit A), then at the option of Lender, all sums owing on this Note shall bear interest at a rate per annum equal to 5% in excess of the interest rate otherwise accruing under this Note (“Default Rate”).

11. ACCELERATION. If: (a) Borrower shall fail to pay when due any sums payable hereunder; or (b) a Default (as defined in the Deed of Trust) occurs under the Deed of Trust or under any obligation secured thereby; THEN Lender may, at its sole option, declare all sums owing under this Note immediately due and payable; provided, however, that if any document related to this Note provides for automatic acceleration of payment of sums owing hereunder, all sums owing hereunder shall be automatically due and payable in accordance with the terms of that document.

12. JOINT AND SEVERAL LIABILITY. If this Note is executed by more than one (1) person or entity as Borrower, the obligations of each such person or entity shall be joint and several. No person or entity shall be a mere accommodation maker, but each shall be primarily and directly liable hereunder.

13. WAIVER. Except as otherwise provided, Borrower waives: presentment; demand; notice of dishonor; notice of default or delinquency; notice of acceleration; notice of protest and nonpayment; notice of costs, expenses or losses and interest thereon; notice of late charges; and diligence in taking any action to collect any sums owing under this Note or in proceeding against any of the rights or interests in or to properties securing payment of this Note.

14. TIME OF THE ESSENCE. Time is of the essence with respect to every provision hereof.

15. GOVERNING LAW. This Note shall be governed by, and construed and enforced in accordance with, the laws of the state where the Property (as defined in the Deed of Trust) is located, except to the extent preempted by federal laws.

16. COMMERCIAL USE; MAXIMUM RATE PERMITTED BY LAW. Borrower hereby represents that this loan is for commercial use and not for personal, family or household purposes. It is the specific intent of the Borrower and Lender that this Note bear a lawful rate of interest, and if any court of competent jurisdiction should determine that the rate herein provided for exceeds that which is statutorily permitted for the type of transaction evidenced hereby, the interest rate shall be reduced to the highest rate permitted by applicable law, with any excess interest heretofore collected being applied against principal or, if such principal has been fully repaid, returned to Borrower on demand.

17. LENDER’S DAMAGES. Borrower recognizes that its default in making any payment as provided herein or in any other Loan Document as agreed to be paid when due, or the occurrence of any other Default hereunder or under any other Loan Document, will require Lender to incur additional expense in servicing and administering the Loan, in loss to Lender of the use of the money due and in frustration to Lender in meeting its other financial and loan commitments and that the damages caused thereby would be extremely difficult and impractical to ascertain. Borrower agrees (a) that an amount equal to the Late Charge plus the accrual of interest at the Default Rate is a reasonable estimate of the damage to Lender in the event of a late payment, and (b) that the accrual of interest at the Default Rate following any other Default is a reasonable estimate of the damage to Lender in the event of such other Default, regardless of whether there has been an acceleration of the loan evidenced hereby. Nothing in this Note shall be construed as an obligation on the part of Lender to accept, at any time, less than the full amount then due hereunder, or as a waiver or limitation of Lender’s right to compel prompt performance.

18. WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED UNDER APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION HEREOF OR THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWER AND LENDER OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND BORROWER HEREBY AGREES AND CONSENTS THAT LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER TO THE WAIVER OF ANY RIGHT BORROWER MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

19. EXHIBITS. All exhibits, schedules or other items attached hereto are incorporated into this Note by such attachment for all purposes.

IN WITNESS WHEREOF, this Note has been executed as of the date first above written.

BORROWER:
CONCORDE REAL ESTATE. LLC, a Nevada limited liability company
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	President and Manager

EXHIBIT A

FIXED RATE AGREEMENT

Exhibit A to Promissory Note Secured by Deed of Trust (“Note”) made by CONCORDE REAL ESTATE, LLC, a Nevada limited liability company, as Borrower, to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender.

RECITALS

Borrower has requested and Lender has agreed to provide the option to fix the rate of interest for specified periods on specified portions of the outstanding principal balance as a basis for calculating the Effective Rate on such portions of the principal amounts owing under this Note (the “One-Month LIBO Rate Option”). Borrower understands: (i) the process of exercising the One-Month LIBO Rate Option as provided herein; (ii) that amounts owing under this Note may bear interest at different rates and for different lime periods; and (iii) that absent the terms and conditions hereof, it would be extremely difficult to calculate Lender’s additional costs, expenses, and damages in the event of a Default or prepayment by Borrower hereunder. Given the above, Borrower agrees that the provisions herein (including, without limitation, the One-Month LIBO Rate Price Adjustment defined below) provide for a reasonable and fair method for Lender to recover its additional costs, expenses and damages in the event of a Default or prepayment by Borrower.

1. RATES AND TERMS DEFINED. Various rates and terms not otherwise defined herein are defined and described as follows:

“Alternate Rate” is a rate of interest per annum 5% in excess of the applicable Effective Rate in effect from time to time.

“Business Day” is a day of the week (but not a Saturday, Sunday or holiday) on which the offices of Lender are open to the public for carrying on substantially all of Lender’s business functions.

“Effective Rate” is the rate of interest calculated in accordance with Section 2 below.

“Federal Funds Rate” is, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Lender from three Federal Funds brokers of recognized standing selected by Lender.

“Loan Agreement” is that certain Loan Agreement dated as of the date hereof between Borrower and Lender.

“Loan Documents” are the documents defined as such in the Loan Agreement.

“One-Month LIBO Rate” is the rate of interest equal to the sum of: (a) 2.50% plus (b) the rate of interest, rounded upward to the nearest whole multiple of one-eighth of one percent (0.125%), that is quoted by- Lender from time to time as the London InterBank Offered Rate for deposits in U.S. Dollars, at approximately 9:00 a.m. (California time), for a period of 1 month (“One-Month Rate”), which rate is divided by one (1.00) minus die Reserve Percentage. Any change in an Effective Rate due to a change in the One-Month LIBO Rate shall become effective on the day each such change occurs.

One-Month LIBO Rate = 2.50%	+	One-Month Rate
		(1 - Reserve Percentage)

“One-Month LIBO Rate Period” is the period of 1 month from the fifteenth (15^th) day of a calendar month (or, if such day is not a Business Day, on the next Business Day) to, but not including, the fifteenth (15^th) day of the next calendar month (or, if such day is not a Business Day, on the next Business Day); provided, however, no One-Month LIBO Rate Period shall extend beyond the Maturity Date.

“One-Month LIBO Rate Portion” is the then outstanding principal balance of this Note which is subject to a One-Month LIBO Rate. In the event Borrower is subject to a principal amortization schedule under the terms and conditions of the Loan Documents, the One-Month LIBO Rate Portion shall in no event exceed the maximum outstanding principal balance which will be permissible on the last day of the One-Month LIBO Rate Period.

“One-Month Rate” is the rate of interest defined in the definition of “One-Month LIBO Rate” above.

“Regulatory Costs” are, collectively, future, supplemental, emergency or other changes in Reserve Percentages, assessment rates imposed by the FDIC, or similar requirements or costs imposed by any domestic or foreign governmental authority and related in any manner to a One-Month LIBO Rate.

“Replacement Rate” is, for any day, a fluctuating rate of interest equal to 2.50% plus the Federal Funds Rate plus 1.50%.

“Reserve Percentage” is at any time the percentage announced within Lender as the reserve percentage under Regulation D for loans and obligations making reference to a One-Month LIBO Rate. The Reserve Percentage shall be based on Regulation D or other regulations from time to time in effect concerning reserves for Eurocurrency Liabilities as defined in Regulation D from related institutions as though Lender were in a net borrowing position, as promulgated by the Board of Governors of the Federal Reserve System, or its successor.

“Taxes” are, collectively, all withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to a One-Month LIBO Rate.

2. EFFECTIVE RATE. Provided no Default exists under this Note or under any other Loan Document, the “Effective Rate” upon which interest shall be calculated for this Note shall be one or more of the following:

2.1 Initial Disbursement: Subsequent Disbursements During Any Calendar Month. For the initial disbursement of principal under this Note, and for any subsequent disbursement of principal during any calendar month, the Effective Rate on such principal amount shall be the One-Month LIBO Rate on the date of disbursement as determined by Lender. Such Effective Rate shall apply to such principal amount from the date of disbursement through and including the date immediately preceding the fifteenth (15th) day of the next calendar month. On the fifteenth (15th) day of the next calendar month, any principal disbursed during the prior calendar month shall be added to (or become) the One-Month LIBO Rate Portion for purposes of calculation of the Effective Rate under Section 2.2 below, in the event that, for any determination made pursuant to this Section 2.1. the fifteenth (15th) day of a month is not a Business Day the relevant date shall be the next Business Day.

2.2 Monthly Reset of One-Month LIBO Rate. Commencing with the fifteenth (15^th) day of the first (1^st) calendar month after the initial disbursement of principal under this Note, and continuing thereafter on the fifteenth (15^th) day of each succeeding calendar month, the Effective Rate on the outstanding One-Month LIBO Rate Portion under this Note (i.e., all outstanding principal on such fifteenth (15^th) day of the month) shall be reset to the One-Month LIBO Rate, as determined by Lender on each such fifteenth (15^th) day of the month.

Notwithstanding the above, Borrower, by written notice to Lender not less than 3 Business Days prior to the fifteenth (15^th) day of any calendar month, may elect that the Effective Rate for all or

any part of the outstanding principal balance on this Note for the One-Month LIBO Rate Period commencing on such fifteenth (15^th) day of the month shall be the One-Month LIBO Rate, as determined by Lender, reset daily. Each such election shall apply only to a single One-Month LIBO Rate Period. If Borrower makes this election consecutively for more than a single One- Month LIBO Rate Period, or if Borrower makes this election for more than a total of 3 One-Month LIBO Rate Periods during the term of this Note, THEN, the Effective Rate for each such additional One-Month LIBO Rate Period shall be 0.25% plus the One-Month LIBO rate as determined by Lender, reset daily.

In the event that, for any determination made pursuant to this Section 2.2, the fifteenth (15th) day of a month is not a Business Day the relevant date shall be the next Business Day.

2.3 Written Requests. Any written request by Borrower to Lender shall be delivered to Lender at the Minneapolis Loan Center, 608 2nd Ave South, 11^th Floor, Minneapolis, MN 55402, with a copy to Lender at Carlsbad Regional Commercial Banking Office 5901 Priestly Drive, Suite 306, 3rd Floor, Carlsbad, CA 92008, MAC E2413-030, Attention: Marcus Di Fiore, or at such other place as may be designated in writing by Lender.

2.4 If One-Month LIBO Rate Becomes Unavailable. In the event the One-Month LIBO Rate, for any reason, should become prohibited or unavailable to Lender, or, if in Lender’s good faith judgment, it is not possible or practical for Lender to set a One-Month LIBO Rate, THEN, the Effective Rate shall be the Replacement Rate.

2.5. Post Maturity; Default Rate. From and after the Maturity Date or such earlier date on which a Default exists under the Loan Agreement or any other Loan Document, then at the option of Lender, all sums owing on this Note shall bear interest at a rate per annum equal to the Alternate Rate.

3. TAXES, REGULATORY COSTS AND RESERVE PERCENTAGES. Upon Lender’s demand, Borrower shall pay to Lender, in addition to all other amounts which may be, or become, due and payable under this Note and Loan Documents, any and all Taxes and Regulatory Costs, to the extent they are not internalized by calculation of an Effective Rate. Further, at Lender’s option, each Effective Rate shall be automatically adjusted by adjusting the Reserve Percentage, as determined by Lender in its prudent banking judgment, from the date of imposition (or subsequent date selected by Lender) of any such Regulatory Costs. Lender shall give Borrower notice of any Taxes and Regulatory Costs as soon as practicable after their occurrence, but Borrower shall be liable for any Taxes and Regulatory Costs regardless of whether or when notice is so given.

4. ONE-MONTH LIBO RATE PRICE ADJUSTMENT. Borrower acknowledges that prepayment or acceleration of a One-Month LIBO Rate Portion during a One-Month LIBO rate Period shall result in Lender’s incurring additional costs, expenses and/or liabilities and that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or liabilities. Therefore, on the date a One-Month LIBO Rate Portion is prepaid or the date all sums payable hereunder become due and payable, by acceleration or otherwise (“Price Adjustment Date”), Borrower will pay Lender (in addition to all other sums then owing to Lender) an amount (“One- Month LIBO Rate Price Adjustment”) equal to the then present value of (a) the amount of interest that would have accrued on the One-Month LIBO Rate Portion for the remainder of the One-Month LIBO Rate Period at the One-Month LIBO Rate set on the fifteenth (15^th) day of the month in which such amount is prepaid or becomes due (or if such day is not a Business Day, the next Business Day), less (b) the amount of interest that would accrue on the same One-Month LIBO Rate Portion tor the same period if the One-Month) LIBO Rate were set on the Price Adjustment Date at the One-Month LIBO Rate in effect on the Price Adjustment Date. The present value shall be calculated by using as a discount rate the One-Month Rate quoted on the Price Adjustment Date.

By initialing this provision where indicated below, Borrower confirms that Lender’s agreement to make the loan evidenced by this Note at the interest rates and on the other terms set forth herein and in the other Loan Documents constitutes adequate and valuable consideration, given individual weight by Borrower, for this agreement.

BORROWER INITIALS :    /s/ MC

5. PURCHASE, SALE AND MATCHING OF FUNDS. Borrower understands, agrees and acknowledges the following: (a) Lender has no obligation to purchase, sell and/or match funds in connection with the use of a One-Month Rate as a basis for calculating an Effective Rate or a One-Month LIBO Rate Price Adjustment; (b) a One-Month rate is used merely as a reference in determining an Effective Rate or a One-Month LIBO Rate Price Adjustment; and (c) Borrower has accepted a One-Month Rate as a reasonable and fair basis for calculating an Effective Rate or a One-Month LIBO Rate Price Adjustment. Borrower further agrees to pay the One-Month LIBO Rate Price Adjustment, Taxes and Regulatory Costs, if any, whether or not Lender elects to purchase, sell and/or match funds.

6. MISCELLANEOUS. As used in this Exhibit, the plural shall mean the singular and the singular shall mean the plural as the context requires.

This Exhibit is executed concurrently with and as part of the Note referred to and described first above.

BORROWER:
CONCORDE REAL ESTATE, LLC, a Nevada limited liability company
By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	President and Manager

EX-10

Exhibit 10.22

Loan No. 476300

REPAYMENT GUARANTY

(Secured Loan)

THIS REPAYMENT GUARANTY (“Guaranty”) is made, jointly and severally, as of May 15, 2013, by MICHAEL CARTWRIGHT, an individual (“Cartwright”), JERROD MENZ, an individual (“Menz”), and AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (“AAC” and, together with Cartwright and Menz collectively, “Guarantor”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”). The Guarantor and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS:

A. Pursuant to the terms of a term loan agreement between CONCORDE REAL ESTATE, LLC, a Nevada limited liability company (“Borrower”), and Lender dated as of the date hereof (“Loan Agreement”), Lender has agreed to loan to Borrower the principal sum of NINE MILLION FIVE HUNDRED EIGHTY-ONE THOUSAND AND NO/IOOTHS DOLLARS ($9,581,000.00) (“Loan”) for the purposes specified in the Loan Agreement, said purposes relating to the real property and improvements described in the Loan Agreement (which real property and improvements are collectively referred to herein as the “Property”).

B. The Loan Agreement provides that the Loan shall be evidenced by a promissory note (“Note”) executed by Borrower payable to the order of Lender in the principal amount of the Loan and shall be secured by that certain Construction Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing dated June 27, 2012, executed by Borrower, as trustor, to American Securities Company of Nevada, a Nevada corporation, as trustee, for the benefit of Lender, as beneficiary, and recorded on July 10, 2012 as Instrument No. 201207100000082 in the official records of Clark County, Nevada (“Official Records”) as modified by that certain Modification Agreement (“Modification Agreement”) of even date herewith by and between Borrower and Lender, a memorandum (“Memorandum”), of which is being recorded concurrently herewith in the Official Records (as modified, the “Deed of Trust”) and by other security instruments, if any, specified in the Loan Agreement. The term “Loan Documents” for purposes hereof shall mean the Loan Agreement, the Deed of Trust, the Note and those other documents described in the Loan Agreement as Loan Documents.

THEREFORE, to induce Lender to enter into the Loan Agreement and to make the Loan, and in consideration thereof, Guarantor unconditionally guarantees and agrees as follows:

1. GUARANTY. Guarantor hereby guarantees and promises to pay to Lender or order, on demand, in lawful money of the United States, in immediately available funds, the principal sum of NINE MILLION FIVE HUNDRED EIGHTY-ONE THOUSAND AND NO/100THS DOLLARS ($9,581,000.00) or so much thereof as may be due and owing under the Note, any of the other Loan Documents or any swap, derivative, foreign exchange or hedge transaction or arrangement (or other similar transaction or arrangement howsoever described or defined) at any time entered into between Borrower and Lender in connection with the Note (collectively, “Swap Contract”), together with interest and any other sums payable under the Note, any of the other Loan Documents or any Swap Contract. Subject to Borrower’s satisfaction of the conditions set forth in Section 5.4 of the Deed of Trust as modified by the Modification Agreement, Cartwright and Menz shall be released from their obligations under this Guaranty to the extent such obligations first arise after the Acquisition Effective Date (as defined in Section 5.4 of the Deed of Trust as modified by the Modification Agreement).

2. REMEDIES. If Guarantor fails to promptly perform its obligations under this Guaranty, Lender may from time to time, and without first requiring performance by Borrower or exhausting any or all security for the Loan, bring any action at law or in equity or both to compel Guarantor to perform its obligations hereunder, and to collect in any such action compensation for all loss, cost, damage, injury and expense sustained or incurred by Lender as a direct or indirect consequence of the failure of Guarantor to perform its obligations together with interest thereon at the rate of interest applicable to the principal balance of the Note.

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3. RIGHTS OF LENDER. Guarantor authorizes Lender, without giving notice to Guarantor or obtaining Guarantor’s consent and without affecting the liability of Guarantor, from time to time to: (a) renew or extend all or any portion of Borrower’s obligations under the Note or any of the other Loan Documents; (b) declare all sums owing to Lender under the Note and the other Loan Documents due and payable upon the occurrence of a Default (as defined in the Loan Agreement) under the Loan Documents; (c) make non-material changes in the dates specified for payments of any sums payable in periodic installments under the Note or any of the other Loan Documents; (d) otherwise modify the terms of any of the Loan Documents, except for (i) increases in the principal amount of the Note or changes in the manner by which interest rates, fees or charges are calculated under the Note and the other Loan Documents (Guarantor acknowledges that if the Note or other Loan Documents so provide, said interest rates, fees and charges may vary from time to time) or (ii) advancement of the Maturity Date of the Note where no Default has occurred under the Loan Documents; (e) take and hold security for the performance of Borrower’s obligations under the Note or the other Loan Documents and exchange, enforce, waive and release any such security; (f) apply such security and direct the order or manner of sale thereof as Lender in its discretion may determine; (g) release, substitute or add any one or more endorsers of the Note or guarantors of Borrower’s obligations under the Note or the other Loan Documents; (h) assign this Guaranty in whole or in part; and (i) assign, transfer or negotiate all or any part of the indebtedness guaranteed by this Guaranty.

4. GUARANTOR’S WAIVERS. Guarantor waives: (a) any defense based upon any legal disability or other defense of Borrower, any other guarantor or other person, or by reason of the cessation or limitation of the liability of Borrower from any cause other than full payment of all sums payable under the Note or any of the other Loan Documents; (b) any defense based upon any lack of authority of the officers, directors, partners, managers, members or agents acting or purporting to act on behalf of Borrower or any principal of Borrower or any defect in the formation of Borrower or any principal of Borrower; (c) any defense based upon the application by Borrower of the proceeds of the Loan for purposes other than the purposes represented by Borrower to Lender or intended or understood by Lender or Guarantor; (d) any and all rights and defenses arising out of an election of remedies by Lender; (e) any defense based upon Lender’s failure to disclose to Guarantor any information concerning Borrower’s financial condition or any other circumstances bearing on Borrower’s ability to pay all sums payable under the Note or any of the other Loan Documents; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (g) any defense based upon Lender’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute; (h) any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code; (i) any right of subrogation, any right to enforce any remedy which Lender may have against Borrower and any right to participate in, or benefit from, any security for the Note or the other Loan Documents now or hereafter held by Lender; (j) presentment, demand, protest and notice of any kind; and (k) the benefit of any statute of limitations affecting the liability of Guarantor hereunder or the enforcement hereof. Guarantor further waives any and all rights and defenses that Guarantor may have because Borrower’s debt is secured by real property; this means, among other things, that Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrower’s debt is secured by real property. These rights and defenses being waived by Guarantor include, but are not limited to, any rights or defenses based upon deficiency limitation or anti-deficiency, redemption or other similar rights. Without limiting the generality of the foregoing or any other provision hereof, Guarantor further expressly waives to the extent permitted by law any and all rights and defenses which might otherwise be available to Guarantor under the Nevada one action rule, Nevada Revised Statutes Section 40.430. Finally, Guarantor agrees that the performance of any act or any payment which tolls any statute of limitations applicable to the Loan Documents shall similarly operate to toll the statute of limitations applicable to Guarantor’s liability hereunder.

5. GUARANTOR’S WARRANTIES. Guarantor warrants and acknowledges that: (a) Lender would not make the Loan but for this Guaranty; (b) Guarantor has reviewed all of the terms and provisions of the Loan Agreement and the other Loan Documents; (c) there are no conditions precedent to the effectiveness of this Guaranty; (d) Guarantor has established adequate means of obtaining from sources other than

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Lender, on a continuing basis, financial and other information pertaining to Borrower’s financial condition, the Property and Borrower’s activities relating thereto and the status of Borrower’s performance of obligations under the Loan Documents, and Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor’s risks hereunder and Lender has made no representation to Guarantor as to any such matters; (e) the most recent financial statements of Guarantor previously delivered to Lender are true and correct in all respects, have been prepared in accordance with generally accepted accounting principles consistently applied (or other principles acceptable to Lender) and fairly present the financial condition of Guarantor as of the respective dates thereof, and no material adverse change has occurred in the financial condition of Guarantor since the respective dates thereof; and (f) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein, other than in the ordinary course of Guarantor’s business; and (g) Guarantor is not and will not be, as a consequence of the execution and delivery of this Guaranty, impaired or rendered “insolvent,” as that term is defined in either Nevada Revised Statutes §112.160 or Section 101 of the federal Bankruptcy Code, or otherwise rendered unable to pay its debts as the same mature and will not have thereby undertaken liabilities in excess of the present fair value of its assets. Notwithstanding the foregoing, the calculation of liabilities shall NOT include any fair value adjustments to the carrying value of liabilities to record such liabilities at fair value pursuant to electing the fair value option election under FASB ASC 825-10-25 (formerly known as FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities) or other FASB standards allowing entities to elect fair value option for financial liabilities. Therefore, the amount of liabilities shall be the historical cost basis, which generally is the contractual amount owed adjusted for amortization or accretion of any premium or discount.

6. SUBORDINATION. Guarantor subordinates all present and future indebtedness owing by Borrower to Guarantor to the obligations at any time owing by Borrower to Lender under the Note and the other Loan Documents. Guarantor assigns all such indebtedness to Lender as security for this Guaranty, the Note and the other Loan Documents. Guarantor agrees to make no claim for such indebtedness until all obligations of Borrower under the Note and the other Loan Documents have been fully discharged. Guarantor further agrees not to assign all or any part of such indebtedness unless Lender is given prior notice and such assignment is expressly made subject to the terms of this Guaranty. If Lender so requests, (a) all instruments evidencing such indebtedness shall be duly endorsed and delivered to Lender, (b) all security for such indebtedness shall be duly assigned and delivered to Lender, (c) such indebtedness shall be enforced, collected and held by Guarantor as trustee for Lender and shall be paid over to Lender on account of the Loan but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty, and (d) Guarantor shall execute, file and record such documents and instruments and take such other action as Lender deems necessary or appropriate to perfect, preserve and enforce Lender’s rights in and to such indebtedness and any security therefor. If Guarantor fails to take any such action, Lender, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor. The foregoing power of attorney is coupled with an interest and cannot be revoked.

7. BANKRUPTCY OF BORROWER. In any bankruptcy or other proceeding in which the filing of claims is required by law, Guarantor shall file all claims which Guarantor may have against Borrower relating to any indebtedness of Borrower to Guarantor and shall assign to Lender all rights of Guarantor thereunder. If Guarantor does not file any such claim, Lender, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in Lender’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Lender’s nominee. The foregoing power of attorney is coupled with an interest and cannot be revoked. Lender or its nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Lender the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to Lender all of Guarantor’s rights to any such payments or distributions; provided, however. Guarantor’s obligations hereunder shall not be satisfied except to the extent that Lender receives cash by reason of any such payment or distribution. If Lender receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty. If all or any portion of the obligations guaranteed hereunder are paid or

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performed, the obligations of Guarantor hereunder shall continue and shall remain in full force and effect in the event that all or any part of such payment or performance is avoided or recovered directly or indirectly from Lender as a preference, fraudulent transfer or otherwise under the Bankruptcy Code or other similar laws, irrespective of (a) any notice of revocation given by Guarantor prior to such avoidance or recovery, or (b) full payment and performance of all of the indebtedness and obligations evidenced and secured by the Loan Documents.

8. LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Guarantor agrees that Lender may elect, at any time, to sell, assign, or grant participations in all or any portion of its rights and obligations under the Loan Documents and this Guaranty, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Lender’s sole discretion. Guarantor further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property and its operation; (b) any party connected with the Loan (including, without limitation, the Guarantor, the Borrower, any partner of Borrower, any constituent partner of Borrower, any other guarantor and any non-borrower trustor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. In the event of any such sale, assignment or participation, Lender and the parties to such transaction shall share in the rights and obligations of Lender as set forth in the Loan Documents only as and to the extent they agree among themselves. In connection with any such sale, assignment or participation, Guarantor further agrees that the Guaranty shall be sufficient evidence of the obligations of Guarantor to each purchaser, assignee, or participant, and upon written request by Lender, Guarantor shall consent to such amendments or modifications to the Loan Documents as may be reasonably required in order to evidence any such sale, assignment, or participation.

Anything in this Guaranty to the contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements of this Guaranty, including this Section, Lender may at any time and from time to time pledge and assign all or any portion of its rights under all or any of the Loan Documents to a Federal Reserve Bank; provided that no such pledge or assignment shall release Lender from its obligations thereunder.

9. ADDITIONAL, INDEPENDENT AND UNSECURED OBLIGATIONS. This Guaranty is a continuing guaranty of payment and not of collection and cannot be revoked by Guarantor and shall continue to be effective with respect to any indebtedness referenced in Section 1 hereof arising or created after any attempted revocation hereof or after the death of Guarantor (if Guarantor is a natural person, in which event this Guaranty shall be binding upon Guarantor’s estate and Guarantor’s legal representatives and heirs). The obligations of Guarantor hereunder shall be in addition to and shall not limit or in any way affect the obligations of Guarantor under any other existing or future guaranties unless said other guaranties are expressly modified or revoked in writing. This Guaranty is independent of the obligations of Borrower under the Note, the Deed of Trust and the other Loan Documents. Lender may bring a separate action to enforce the provisions hereof against Guarantor without taking action against Borrower or any other party or joining Borrower or any other party as a party to such action. Except as otherwise provided in this Guaranty, this Guaranty is not secured and shall not be deemed to be secured by any security instrument unless such security instrument expressly recites that it secures this Guaranty.

10. ATTORNEYS’ FEES; ENFORCEMENT. If any attorney is engaged to enforce or defend any provision of this Guaranty, or any of the other Loan Documents, or as a consequence of any Default under the Loan Documents, with or without the filing of any legal action or proceeding, the prevailing Party, as agreed to by the Parties or as determined by the court, shall be entitled to its attorneys’ fees and costs incurred in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Note as specified therein.

11. RULES OF CONSTRUCTION. The word “Borrower” as used herein shall include both the named Borrower and any other person at any time assuming or otherwise becoming primarily liable for all or any part of the obligations of the named Borrower under the Note and the other Loan Documents. The term “person” as used herein shall include any individual, company, trust or other legal entity of any kind

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whatsoever. If this Guaranty is executed by more than one person, the term “Guarantor” shall include all such persons. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and vice versa. All headings appearing in this Guaranty are for convenience only and shall be disregarded in construing this Guaranty.

12. CREDIT REPORTS. Each legal entity and individual obligated on this Guaranty hereby authorizes Lender to order and obtain, from a credit reporting agency of Lender’s choice, a third party credit report on such legal entity and individual.

13. GOVERNING LAW. This Guaranty shall be governed by, and construed in accordance with, the laws of the State of Nevada, except to the extent preempted by federal laws. Guarantor and all persons and entities in any manner obligated to Lender under this Guaranty consent to the jurisdiction of any federal or state court within Clark County, State of Nevada having proper venue and also consent to service of process by any means authorized by Nevada or federal law.

14. MISCELLANEOUS. The provisions of this Guaranty will bind and benefit the heirs, executors, administrators, legal representatives, nominees, successors and assigns of Guarantor and Lender. The liability of all persons and entities who are in any manner obligated hereunder shall be joint and several. If Guarantor is a natural person, this Guaranty shall be binding against Guarantor’s sole and separate property and the property now or hereafter owned by the marital community of Guarantor. If any provision of this Guaranty shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from this Guaranty and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable portion had never been part of this Guaranty.

15. ADDITIONAL PROVISIONS. Such additional terms, covenants and conditions as may be set forth on any exhibit executed by Guarantor and attached hereto which recites that it is an exhibit to this Guaranty are incorporated herein by this reference.

16. ENFORCEABILITY. Guarantor hereby acknowledges that: (a) the obligations undertaken by Guarantor in this Guaranty are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Lender’s consideration for entering into this transaction, Lender has specifically bargained for the waiver and relinquishment by Guarantor of all such defenses, and (d) Guarantor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Guarantor does hereby represent and confirm to Lender that Guarantor is fully informed regarding, and that Guarantor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Guarantor, and (iv) the legal consequences to Guarantor of waiving such defenses. Guarantor acknowledges that Guarantor makes this Guaranty with the intent that this Guaranty and all of the informed waivers herein shall each and all be fully enforceable by Lender, and that Lender is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof.

17. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS GUARANTY, AND BY ITS ACCEPTANCE HEREOF, LENDER, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND LENDER HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS GUARANTY AND LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND LENDER TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

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18. NOTICES. All notices or demands that are required or permitted to be given or served hereunder shall be given in the manner provided in the Loan Agreement. Guarantor acknowledges that its address for notice shall be the address set forth below with its name. Guarantor may change its address from time to time by giving ten (10) days’ prior written notice to Lender.

19. COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each Party, or that the signature of all persons required to bind any Party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the Parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

20. ARBITRATION.

(a) Arbitration. The Parties hereto agree, upon demand by any Party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in Nevada selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the Parties; and (iii) be conducted by the AAA, or such other administrator as the Parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any Party who fails or refuses to submit to arbitration following a demand by any other Party shall bear all costs and expenses incurred by such other Party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any Party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any Party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any Party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. Any arbitrator will be a neutral attorney licensed in the State of Nevada or a neutral

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retired judge of the state or federal judiciary of Nevada, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator(s) will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator(s) will decide (by documents only or with a hearing at the arbitrator’s(s’) discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator(s) shall resolve all disputes in accordance with the substantive law of Nevada and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator(s) shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the Nevada Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any Party, including the plaintiff, to submit the controversy or claim to arbitration if any other Party contests such action for judicial relief.

(e) Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the Party’s presentation and that no alternative means for obtaining information is available.

(f) Class Proceedings and Consolidations. No Party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except Parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

(g) Payment Of Arbitration Costs And Fees. The arbitrator(s) shall award all costs and expenses of the arbitration proceeding.

(h) Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of Nevada, thereby agreeing that all indebtedness and obligations of the Parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable.

(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the Parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other Party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a Party required in the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the Parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the Parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the Parties.

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(j) Small Claims Court. Notwithstanding anything herein to the contrary, each Party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction. Further, this arbitration provision shall apply only to disputes in which either Party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

(Signatures commence on the following page)

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IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date appearing on the first page of this Guaranty.

GUARANTOR:

AMERICAN ADDICTION CENTERS, INC.,

a Nevada corporation.

By:	/s/ Michael Cartwright
Name:	Michael Cartwright
Title:	Secretary

Address for notices:

115 Eastpark Drive, Suite 100

Brentwood, TN 37027

/s/ Michael Cartwright

MICHAEL CARTWRIGHT, an individual

Address for notices:

115 Eastpark Drive, Suite 100

Brentwood, TN 37027

/s/ Jerrod Menz

JERROD MENZ, an individual

Address for notices:

115 Eastpark Drive, Suite 100

Brentwood, TN 37027

Lender’s Address for notices:

WELLS FARGO BANK, NATIONAL ASSOCIATION

Carlsbad Regional Commercial Banking Office

5901 Priestly Drive, Suite 306, 3^rd FL

Carlsbad, CA 92008

MAC E2413-030

Attention: Marcus Di Fiore

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EX-10

Exhibit 10.23

CONSENT AND FIRST AMENDMENT TO LOAN AGREEMENT

THIS CONSENT AND FIRST AMENDMENT TO LOAN AGREEMENT (this “Agreement”) is entered into as of April 15, 2014 (the “Effective Date”), by and among CONCORDE REAL ESTATE, LLC, a Nevada limited liability company (“Borrower”), MICHAEL T. CARTWRIGHT (“Cartwright”), JERROD N. MENZ (“Menz”), AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (“AAC”), BEHAVIORAL HEALTHCARE REALTY, LLC, a Delaware limited liability company (“BHR” and, together with AAC, Cartwright and Menz, each a “Guarantor” and collectively “Guarantors”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”).

R E C I T A L S

WHEREAS, Borrower and Guarantors are hereinafter collectively called the “Borrower Parties”;

WHEREAS, Lender made a loan to Borrower, in the amount of $9,581,000.00 (the “Loan”), and in connection with the Loan, Borrower executed and delivered to Lender that certain Promissory Note Secured by Deed of Trust (the “Note”) dated May 15, 2013, payable to the order of Lender in the original principal sum of $9,581,000.00, with interest and principal payable as therein provided.

WHEREAS, the payment of the Note is secured or further evidenced, inter alia, by:

(i) that certain Loan Agreement dated May 15, 2013 by and between Borrower and Lender (“Loan Agreement”); and

(ii) that certain Construction Deed of Trust with Absolute Assignment of Leases and Rents, Security Agreement and Fixture Filing of even date therewith, recorded under Instrument # 201207100000083 in Clark County, Nevada (the “Records”), as modified by that certain Modification Agreement of even date therewith (as modified, and as hereafter amended, restated, supplemented or otherwise modified from time to time, the “Deed of Trust”), encumbering certain real and personal property described therein (the “Property”);

(iii) that certain Repayment Guaranty of even date therewith executed by Guarantors in favor of Lender, as amended by the Amendment and Joinder (as defined below) (the “Guaranty”); and

(iv) certain other Loan Documents.

WHEREAS, as of the Effective Date, Cartwright, Menz and Kirk Manz will transfer of all of the common equity interests of BHR to AAC Holdings, Inc. (“AACH”) (collectively, the “Initial BHR Equity Transfer”), and thereafter (i) AACH will transfer of all of the common equity interests of BHR from AAC Holdings, Inc. to AAC, (ii) a merger sub that is 100% owned by AACH will merge with and into AAC pursuant to which AAC will become a direct wholly owned subsidiary of AACH and (iii) AAC may convert from a corporation into a limited

liability company or other limited liability entity (collectively, the “Subsequent BHR Transactions”, and together with the Initial BHR Equity Transfer, the “Approved Transactions”), provided that the Subsequent BHR Transactions shall be consummated on or prior to March 31, 2015 and Borrower will notify Lender in writing promptly (but, in any event within thirty (30) days) after the consummation of the Subsequent BHR Transactions.

WHEREAS, BHR is and shall remain the sole member of Borrower and, upon the effectiveness of the Approved Transactions, the ownership structure of Borrower shall be as set forth on Exhibit A attached hereto and incorporated herein by reference;

WHEREAS, Borrower Parties have requested Lender’s consent to the Approved Transactions, and Lender is willing to so consent upon compliance with the terms and provisions of this Agreement;

WHEREAS, Lender is the owner and holder of the Note and Borrower is the owner of the legal and equitable title to the Property;

NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00), the matters set forth in the foregoing recitals, the estoppels, certifications, warranties, covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows:

1. Defined Terms; Interpretation. All capitalized terms used in this Agreement (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement.

2. Consent to Approved Transactions. Lender hereby approves and consents to the Approved Transactions; provided that (i) the Initial BHR Equity Transfer shall be consummated on or prior to the Effective Date and (ii) the Subsequent BHR Transactions shall be consummated on or prior to March 31, 2015 and Borrower shall notify Lender in writing promptly (but, in any event within thirty (30) days) after the consummation of the Subsequent BHR Transactions. Lender acknowledges and agrees that, notwithstanding any provision in the Loan Documents to the contrary, the Approved Transactions shall not constitute a default under the Deed of Trust or the other Loan Documents. Lender’s acknowledgment shall not be construed as a consent to any subsequent transfer which requires Lender’s consent pursuant to the terms of the Loan Documents.

3. Amendments to Loan Agreement.

(a) All references in the Loan Agreement and other Loan Documents to a Guarantor or Guarantors or a Indemnitor or Indemnitors shall refer to each of the Guarantors referred to in this Agreement, including BHR, and each of the Repayment Guaranty and the Unsecured Hazardous Materials Indemnity Agreement delivered by the Guarantors (including BHR) shall for all purposes constitute a Loan Document. In connection with this Agreement, (i) the Guarantors shall deliver an Amendment and Joinder to Repayment Guaranty and Hazardous Materials Indemnity Agreement, dated as of the Effective Date, to Lender (the “Amendment and Joinder”) and (ii) BHR shall deliver a Limited Liability Company Certificate Authorizing Limited Liability Company Activity and Execution of Guaranty and Indemnity to Lender.

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(b) Section 6.9 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“6.9 DERIVATIVE DOCUMENTS.

On or prior to July 14, 2014, Borrower shall enter into an interest rate swap transaction with Lender or with another counterparty reasonably acceptable to Lender (such transaction, together with all documents and agreements relating thereto, including any ISDA Master Agreement, Schedule and/or Confirmation, together with all modifications, extensions, renewals and replacement thereof, is hereinafter referred to as the “Swap Contract”) to cover a notional amount of not less than 100% of the outstanding principal amount of the Loan for the full term of the Loan and shall maintain in full force and effect such Swap Contract for the full term of the Loan.”

(c) Section 8.1(l) of the Loan Agreement is hereby amended by inserting the following at the end thereof:

“, or any Disqualified Equity Interests of Borrower, any Guarantor or any of their respective subsidiaries shall be payable or otherwise be required to be paid (if the required payments exceed in the aggregate $500,000) or an event of default (if the outstanding amount of such Disqualified Equity Interests exceeds $500,000) thereunder shall occur. As used herein, the term “Disqualified Equity Interests” means any equity interest that, by its terms (or by the terms of any security or other equity interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Qualified Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loan), (ii) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (iii) provides for the scheduled payments of dividends in cash, or (iv) is or becomes convertible into or exchangeable for indebtedness or any other equity interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 180 days after the latest maturity date of the Loan; and the term “Qualified Equity Interests” means any equity interests issued by AAC Holdings, Inc., a Nevada corporation (“Holdings”), (and not by any of its subsidiaries) that is not a Disqualified Equity Interest.”

(d) Exhibit B (Documents) to the Loan Agreement is hereby amended by including item 2.1 (Repayment Guaranty executed by Guarantor in favor of Lender) and item 2.2 (Unsecured Hazardous Materials Indemnity Agreement executed by Guarantor in favor of Lender) in the definition of “Loan Documents”.

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4. Representations, Warranties and Covenants of the Borrower Parties. The Borrower Parties hereby represent, warrant, certify and covenant to Lender that:

(a) The Borrower Parties understand and hereby acknowledge all of the terms and provisions of the Loan Documents.

(b) Each person executing this Agreement as a representative of the Borrower Parties has been duly authorized and has full power to execute and deliver this Agreement on behalf of the Borrower Parties and to bind the Borrower Parties to the terms and conditions hereof and thereof.

(c) The representations, warranties and certifications set forth herein are given with the knowledge that Lender will rely upon the truth of the statements made herein.

(d) To the knowledge of Borrower Parties, no Default exists under any of the Loan Documents and no condition or event has occurred and is continuing which after notice and/or the lapse of time would constitute a Default under the Loan Documents.

(e) This Agreement constitutes the legal, valid and binding obligations of the Borrower Parties, as applicable, enforceable in accordance with their terms.

(f) The execution and delivery of, and performance under this Agreement are within the Borrower Parties’ power and authority without the joinder or consent of any other party and have been duly authorized by all requisite action and are not in contravention of law or the Borrower Parties’ respective organizational agreement(s), or any indenture, agreement or undertaking to which any of the Borrower Parties is a party or by which any of them is bound.

5. Further Assurances. The Borrower Parties, upon request from Lender, agree to execute such other and further documents as may be reasonably necessary or appropriate to consummate the transactions contemplated herein or to perfect the liens and security interests intended to secure the payment of the Loan.

6. Effect of Amendment; Other Provisions Unchanged. On and after the Effective Date, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Loan Agreement, and each reference in the other Loan Documents to the “Loan Agreement”, “thereunder”, “thereof” or words of like import referring to the Loan Agreement shall mean and be a reference to the Loan Agreement, as amended by this Agreement. Except as specifically provided herein, the terms and provisions of the Loan Documents shall remain unchanged and shall remain in full force and effect. In particular, this Agreement shall each be construed as a Loan Documents.

7. Lien Status. Borrower hereby acknowledges and agrees that all liens, security interests, mortgages and assignments granted or created by or existing under the Deeds of Trust and the other Loan Documents remain unchanged and continue, unabated, in full force and effect, to secure Borrower’s obligation to repay the Note.

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8. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.

9. Severability of Provisions. If any covenant, condition, or provision herein contained is held to be invalid by final judgment of any court of competent jurisdiction, the invalidity of such covenant, condition, or provision shall not in any way affect any other covenant, condition or provision herein contained.

10. Time of the Essence. It is expressly agreed by the parties hereto that time is of the essence with respect to this Agreement.

11. Representation by Counsel. The parties acknowledge and confirm that each of their respective attorneys has participated jointly in the review and revision of this Agreement and that it has not been written solely by counsel for one party. The parties hereto therefore stipulate and agree that the rule of construction to the effect that any ambiguities are to or may be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor either party against the other.

12. Successors and Assigns. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and assigns, including, each other person or entity which holds or which may hereafter hold an interest in any of the Loan Documents and any person or entity which acquires all or any part of the Property including by purchase of the Property at a foreclosure sale or by acceptance of a deed in lieu of foreclosure.

13. Paragraph Headings. The paragraph headings set forth in this Agreement are for the convenience of the parties only, and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs in this Agreement.

14. Governing Law. This Agreement and the rights and duties of the parties hereunder shall be governed for all purposes by the law of the State of Nevada and the law of the United States applicable to transactions within said State.

15. Reaffirmation. Each of the Guarantors hereby acknowledges and agrees that the Guaranty and the other Loan Documents to which it is a party shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Agreement. Each Guarantor acknowledges and agrees that (i) such Guarantor is not required by the terms of the Loan Agreement or any other Loan Document to consent to the amendments to the Loan Agreement effected pursuant to this Agreement and (ii) nothing in the Loan Agreement, this Agreement or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendments to the Loan Agreement. The Borrower and the Guarantors hereby confirm that the Maturity Date of the Loan is May 15, 2018.

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16. General Release.

(a) Effective on the date hereof, each Borrower Party, for itself and on behalf of its successors, assigns, and officers, directors, employees, agents and attorneys, and any Person acting for or on behalf of, or claiming through it, hereby waives, releases, remises and forever discharges Lender, each of its Affiliates, and each of its successors in title, past, present and future officers, directors, employees, limited partners, general partners, investors, attorneys, assigns, subsidiaries, shareholders, trustees, agents and other professionals and all other Persons to whom any member of the Lender would be liable if such Persons were found to be liable to such Borrower Party (each a “Releasee” and collectively, the “Releasees”), from any and all past, present and future claims, suits, liens, lawsuits, adverse consequences, amounts paid in settlement, debts, deficiencies, diminution in value, disbursements, demands, obligations, liabilities, causes of action, damages, losses, costs and expenses of any kind or character, whether based in equity, law, contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law (each a “Claim” and collectively, the “Claims”), whether known or unknown, fixed or contingent, direct, indirect, or derivative, asserted or unasserted, matured or unmatured, foreseen or unforseen, past or present, liquidated or unliquidated, suspected or unsuspected, which such Borrower Party ever had from the beginning of the world to the date hereof, now has, or might hereafter have against any such Releasee which relates, directly or indirectly to the Loan Agreement, any other Loan Document, or to any acts or omissions of any such Releasee with respect to the Loan Agreement or any other Loan Document, or to the lender-borrower relationship evidenced by the Loan Documents. As to each and every Claim released hereunder, each Borrower Party hereby represents that it has received the advice of legal counsel with regard to the releases contained herein, and having been so advised, specifically waives the benefit of the provisions of Section 1542 of the Civil Code of California which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

As to each and every Claim released hereunder, each Borrower Party also waives the benefit of each other similar provision of applicable federal or state law (including without limitation the laws of the state of Nevada), if any, pertaining to general releases after having been advised by its legal counsel with respect thereto.

Each Borrower Party acknowledges that it may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such Claims and agrees that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. Each Borrower Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

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(b) Each Borrower Party, for itself and on behalf of its successors, assigns, and officers, directors, employees, agents and attorneys, and any Person acting for or on behalf of, or claiming through it, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee above that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by such Person pursuant to the above release. Each Borrower Party further agrees that it shall not dispute the validity or enforceability of the Loan Agreement or any of the other Loan Documents or any of its obligations thereunder, or the validity, priority, enforceability or the extent of Lender’s lien on any item of collateral under the Loan Agreement or the other Loan Documents. If any Borrower Party or any of their respective successors, assigns, or officers, directors, employees, agents or attorneys, or any Person acting for or on behalf of, or claiming through it violate the foregoing covenant, such Person, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Releasee as a result of such violation.

[Remainder of Page Intentionally Left Blank. Signature Page Follows.]

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the Effective Date.

BORROWER:
CONCORDE REAL ESTATE, LLC, a Nevada limited liability company
By:	/s/ Michael T. Cartwright
Name:	Michael T. Cartwright
Title:	Manager
GUARANTORS:
/s/ Michael T. Cartwright
MICHAEL T. CARTWRIGHT
/s/ Jerrod N. Menz
JERROD N. MENZ
AMERICAN ADDICTION CENTERS, INC., a Nevada corporation
By:	/s/ Jerrod N. Menz
Name:	Jerrod N. Menz
Title:	President
BEHAVIORAL HEALTHCARE REALTY, LLC, a Delaware limited liability company
By:	/s/ Michael T. Cartwright
Name:	Michael T. Cartwright
Title:	Manager

LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ Alan Prohaska
Name:	Alan Prohaska
Title:	VP

EXHIBIT A

POST-TRANSACTION STRUCTURE

EX-10

Exhibit 10.24

Loan No. 3327114701

LOAN AGREEMENT

THIS LOAN AGREEMENT (“Agreement”) is executed as of May 10, 2013, by and between THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company (“Borrower”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”). The Borrower and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS

A. Borrower owns or will own certain real property described in Exhibit A hereto (“Property”).

B. Borrower has requested from Lender a loan for the purpose of acquiring fee title to the Property.

NOW, THEREFORE, Borrower and Lender agree as follows:

ARTICLE 1. LOAN

1.1 LOAN. By and subject to the terms of this Agreement, Lender agrees to lend to Borrower and Borrower agrees to borrow from Lender the principal sum of THREE MILLION SIX HUNDRED SEVEN THOUSAND FIVE HUNDRED AND NO/IOOTHS DOLLARS ($3,607,500.00) (“Loan”), said sum to be evidenced by a Promissory Note Secured by Mortgage of even date herewith (“Note”). The Note shall be secured, in part, by that certain Mortgage and Assignment (as hereafter amended, supplemented, replaced or modified “Mortgage”), executed by Borrower, as mortgagor, to Lender, as mortgagee, to be recorded in the official records of Hillsborough County, Florida (“Official Records”) and by other security instruments, if any, specified in this Agreement, encumbering certain real property and improvements as legally defined therein. The obligations of the Borrower under the Loan will be guaranteed by MICHAEL CARTWRIGHT, an individual (“Cartwright”), JERROD MENZ, an individual (“Menz”), and AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (“AAC” and, together with Cartwright and Menz individually and collectively, “Guarantor”) pursuant to that certain Repayment Guaranty of even date herewith (“Guaranty”). Amounts disbursed to or on behalf of Borrower pursuant to the Note shall be used to finance the Property and for such other purposes and uses as may be permitted under this Agreement and the other Loan Documents, as described below.

1.2 LOAN DOCUMENTS; EFFECTIVE DATE. Borrower shall deliver to Lender concurrently with this Agreement the Note and any other documents required by Lender, as hereafter amended, supplemented, replaced or modified, each properly executed and in recordable form, as applicable, described in Exhibit B (“Loan Documents”) together with those documents described in Exhibit B as other related documents. The effective date (“Effective Date”) of the Loan Documents shall be the earlier of (a) the date the Mortgage is recorded in the Official Records is located and (b) the date Lender authorizes the Loan proceeds to be released to Borrower.

1.3 MATURITY DATE. The maturity date of the Loan shall be November 10, 2013 (“Maturity Date”).

1.4 FULL REPAYMENT AND SATISFACTION. Upon receipt of all sums owing and outstanding under the Loan Documents, Lender shall issue a full release of the Property and Improvements from the lien of the Mortgage; provided, however, that each of the following conditions shall be satisfied at the time of, and with respect to, such release: (a) Lender shall have received all escrow, closing and recording costs, the costs of preparing and delivering such satisfaction and any sums then due and payable under the Loan Documents; (b) Lender shall have received a written release satisfactory to Lender of any set aside letter, letter of credit or other form of undertaking which Lender has issued to any surety, governmental agency or any other party in connection with the Loan and/or the Property; and (c) Lender’s obligation, if any, to make further disbursements under the Loan shall terminate as to any portion of the Loan undisbursed as of the date of issuance of such release, and any commitment of Lender to lend any undisbursed portion of the Loan shall be cancelled.

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ARTICLE 2. DISBURSEMENT

2.1 CONDITIONS PRECEDENT. Lender’s obligation to make the disbursement of the Loan shall be subject to satisfaction of each of the following conditions precedent:

(a) Lender shall have received fully executed originals of all Loan Documents, the Guaranty and any other documents, instruments, policies, title endorsements, and other materials requested by Lender under the terms of this Agreement or any of the other Loan Documents;

(b) There shall exist no Default as defined in this Agreement or any of the other Loan Documents or any event, omission or failure of condition which would constitute a Default after notice or lapse of time, or both;

(c) Lender shall have obtained an appraisal of the Property, at Borrower’s expense, indicating, to the reasonable satisfaction of Lender, that the ratio of (x) the principal balance of the Loan to (y) the most recent appraised value of the Property based on the appraisal obtained by Lender prior to the date hereof, as adjusted by Lender in its sole discretion upon its review of the most recent appraisal does not exceed 65%; and

(d) Lender shall have received a copy of AAC’s annual financial statements for the fiscal year ending December 31, 2012, which financial statements shall be audited by an independent certified public accountant (“CPA”) acceptable to Lender.

2.2 FUNDS TRANSFER DISBURSEMENTS.

(a) Borrower hereby authorizes Lender to disburse the proceeds of the Loan made by Lender or its affiliate pursuant to the Loan Documents as requested by an authorized representative of the Borrower to any of the accounts designated in Exhibit C. Borrower agrees to be bound by any transfer request: (i) authorized or transmitted by Borrower; or, (ii) made in Borrower’s name and accepted by Lender in good faith and in compliance with these transfer instructions, even if not properly authorized by Borrower. Borrower further agrees and acknowledges that Lender may rely solely on any bank routing number or identifying bank account number or name provided by Borrower to affect a wire or funds transfer even if the information provided by Borrower identifies a different bank or account holder than named by the Borrower. Lender is not obligated or required in any way to take any actions to detect errors in information provided by Borrower. If Lender takes any actions in an attempt to detect errors in the transmission or content of transfer or requests or takes any actions in an attempt to detect unauthorized funds transfer requests, Borrower agrees that no matter how many times Lender takes these actions Lender will not in any situation be liable for failing to take or correctly perform these actions in the future and such actions shall not become any part of the transfer disbursement procedures authorized under this provision, the Loan Documents, or any agreement between Lender and Borrower. Borrower agrees to notify Lender of any errors in the transfer of any funds or of any unauthorized or improperly authorized transfer requests within 14 days after Lender’s confirmation to Borrower of such transfer.

(b) Lender will, in its sole discretion, determine the funds transfer system and the means by which each transfer will be made. Lender may delay or refuse to accept a funds transfer request if the transfer would: (i) violate the terms of this authorization; (ii) require use of a bank unacceptable to Lender or prohibited by government authority; (iii) cause Lender to violate any Federal Reserve or other regulatory risk control program or guideline; or (iv) otherwise cause Lender to violate any applicable law or regulation.

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(c) Lender shall not be liable to Borrower or any other parties for (i) errors, acts or failures to act of others, including other entities, banks, communications carriers or clearinghouses, through which Borrower’s transfers may be made or information received or transmitted, and no such entity shall be deemed an agent of the Lender, (ii) any loss, liability or delay caused by fires, earthquakes, wars, civil disturbances, power surges or failures, acts of government, labor disputes, failures in communications networks, legal constraints or other events beyond Lender’s control, or (iii) any special, consequential, indirect or punitive damages, whether or not (A) any claim for these damages is based on tort or contract or (B) Lender or Borrower knew or should have known the likelihood of these damages in any situation. Lender makes no representations or warranties other than those expressly made in this Agreement.

ARTICLE 3. INSURANCE

Borrower shall, while any obligation of Borrower or Guarantor under any Loan Document remains outstanding, maintain at Borrower’s sole expense, with licensed insurers approved by Lender, the following policies of insurance in form and substance satisfactory to Lender:

3.1 TITLE INSURANCE. A Lender’s extended coverage ALTA Policy of Title Insurance (“Title Policy”) issued by Chicago Title Insurance Company, insuring Lender, in the principal amount of the Loan, of the validity and the priority of the lien of the Mortgage upon the Property, subject only to matters approved by Lender in writing. During the term of the Loan, Borrower shall deliver to Lender, within 5 days of Lender’s written request, such other endorsements to the Title Policy as Lender may reasonably require.

3.2 PROPERTY INSURANCE. An All Risk/Special Form Property Insurance policy, including without limitation, theft coverage and such other coverages and endorsements as Lender may require, insuring Lender against damage to the Property in an amount not less than 100% of the full replacement cost of the Property. Such coverage shall adequately insure any and all Loan collateral, whether such collateral is onsite, stored offsite or otherwise. Lender shall be named on the policy as Mortgagee and named under a Lender’s Loss Payable Endorsement or Standard Mortgagee Clause Endorsement (in form acceptable to Lender).

3.3 FLOOD HAZARD INSURANCE. A policy of flood insurance, as required by applicable governmental regulations, or as deemed necessary by Lender, in an amount required by Lender, but in no event less than the amount sufficient to meet the requirements of applicable law and governmental regulation.

3.4 LIABILITY INSURANCE. A policy of Commercial General Liability insurance on an occurrence basis, with coverages and limits as required by Lender, insuring against liability for injury and/or death to any person and/or damage to any property occurring on the Property.

3.5 OTHER COVERAGE. Borrower shall provide to Lender evidence of such other reasonable insurance in such reasonable amounts as Lender may from time to time request against such other insurable hazards which at the time are commonly insured against for property similar to the Property located in or around the region in which the Property is located. Such coverage requirements may include but are not limited to coverage for earthquake, acts of terrorism, mold, business income, delayed business income, rental loss, sink hole, soft costs, tenant improvement or environmental.

3.6 GENERAL. Borrower shall provide to Lender insurance certificates or other evidence of coverage in form acceptable to Lender, with coverage amounts, deductibles, limits and retentions as required by Lender. All insurance policies shall provide that the coverage shall not be cancelable or materially changed without 10 days prior written notice to Lender of any cancellation for nonpayment of premiums, and not less than 30 days prior written notice to Lender of any other cancellation or any modification (including a reduction in coverage). Lender shall be named under a Lender’s Loss Payable Endorsement or a Standard Mortgagee Clause Endorsement (in form acceptable to Lender) on all insurance policies which Borrower actually maintains with respect to the Property. All insurance policies shall be issued and maintained by insurers approved to do business in the state in which the Property is located and must have an A.M. Best Company financial rating and policyholder surplus acceptable to Lender.

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ARTICLE 4. REPRESENTATIONS AND WARRANTIES

As a material inducement to Lender’s entry into this Agreement, Borrower represents and warrants to Lender as of the Effective Date and continuing thereafter the following. As used in this Agreement, the phrase “to the best of Borrower’s knowledge” shall mean the actual knowledge of Michael Cartwright and Jerrod Menz after reasonable investigation and inquiry.

4.1 AUTHORITY/ENFORCE ABILITY. To the best of Borrower’s knowledge, Borrower is in compliance with all laws and regulations applicable to its organization, existence and transaction of business and has all necessary rights and powers to own and operate the Property as contemplated by the Loan Documents.

4.2 BINDING OBLIGATIONS. Borrower is authorized to execute, deliver and perform its obligations under the Loan Documents, and such obligations are the valid and binding obligations of Borrower.

4.3 COMPLIANCE WITH LAWS. To the best of Borrower’s knowledge, Borrower has, and at all times shall have, all permits, licenses, exemptions, and approvals necessary to occupy, operate and market the Property, and shall maintain compliance with all governmental requirements applicable to the Property, and all other applicable statutes, laws, regulations and ordinances necessary for the transaction of its business. To the best of Borrower’s knowledge, the Property is a legal parcel lawfully created in full compliance with all subdivision laws and ordinances.

4.4 LITIGATION. Except as disclosed to Lender in writing, to the best of Borrower’s knowledge there are no claims, actions, suits, or proceedings pending, or to the best of Borrower’s knowledge threatened, against Borrower or Guarantor or affecting the Property.

4.5 FINANCIAL CONDITION. All financial statements and information heretofore and hereafter delivered to Lender by Borrower, including, without limitation, information relating to the financial condition of Borrower, the Property, the partners, joint venturers or members of Borrower, and/or Guarantor, fairly and accurately represent the financial condition of the subject thereof and have been prepared (except as noted therein) in accordance with generally accepted accounting principles consistently applied. Borrower acknowledges and agrees that Lender may request and obtain additional information from third parties regarding any of the above, including, without limitation, credit reports.

4.6 ACCURACY. To the best of Borrower’s knowledge, all reports, documents, instruments, information and forms of evidence delivered to Lender concerning the Loan or security for the Loan or required by the Loan Documents are accurate, correct and sufficiently complete to give Lender true and accurate knowledge of their subject matter, and do not contain any misrepresentation or omission.

4.7 UTILITIES. To the best of Borrower’s knowledge, all utility services, including, without limitation, gas, water, sewage, electrical and telephone, necessary for the occupancy of the Property are available at the Property.

4.8 BUSINESS LOAN. The Loan is a business loan transaction in the stated amount solely for the purpose of carrying on the business of Borrower and none of the proceeds of the Loan will be used for the personal, family or agricultural purposes of Borrower.

4.9 COMMENCEMENT OF CONSTRUCTION. No construction work or activity is presently being conducted at the Property or with respect to the Improvements and no contractor, subcontractor or materialman is presently performing any construction work or other services or delivering any materials to or for the benefit of Borrower, the Property or the Improvements.

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ARTICLE 5. HAZARDOUS MATERIALS

5.1 SPECIAL REPRESENTATIONS AND WARRANTIES. Without in any way limiting the other representations and warranties set forth in this Agreement, and after reasonable investigation and inquiry, Borrower hereby represents and warrants to the best of Borrower’s knowledge as of the date of this Agreement as follows:

(a) Hazardous Materials. Except as previously disclosed to Lender in that certain Phase I Environmental Site Assessment report dated March 20, 2013, prepared by GLE Facilities and Environmental Consultants, the Property is not and has not been a site for the use, generation, manufacture, storage, treatment, release, threatened release, discharge, disposal, transportation or presence of any oil, flammable explosives, asbestos, urea formaldehyde insulation, radioactive materials, hazardous wastes, toxic or contaminated substances or similar materials, including, without limitation, any substances which are “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “wastes,” “regulated substances,” “industrial solid wastes,” or “pollutants or contaminants” under the Hazardous Materials Laws, as described below, and/or any other applicable environmental laws, ordinances and regulations (collectively, the “Hazardous Materials”). “Hazardous Materials” shall not include commercially reasonable amounts of such materials used in the ordinary course of operation of the Property which are used and stored in accordance with all applicable environmental laws, ordinances and regulations.

(b) Hazardous Materials Laws. The Property is in compliance with all laws, ordinances and regulations relating to Hazardous Materials (“Hazardous Materials Laws”), including, without limitation: any and all applicable federal, state or local directive, statute, law, rule, regulation, ordinance or rule of common law in effect and any judicial or administrative decisions, including any judicial or administrative order, consent decree or judgment, relating to the control of any pollutant or hazardous material, the protection of the environment or the effect of the environment on human health, including the Comprehensive Environment Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601 et seq:, the Resource Conservation and Recovery Act, as amended, 42 U.S.C. Section 6901 et seq.; the Federal Water Pollution Control Act, as amended, 33 U.S.C. Section 1252 et seq.; the Toxic Substances Control Act, as amended, 15 U.S.C. Section 2601 et seq.; the Clean Air Act, as amended, 42 U.S.C. Section 7401 et seq.; the Safe Drinking Water Act, as amended, 42 U.S.C. Section 300f et seq.; the Hazardous Materials Transportation Act, as amended 49 U.S.C. Section 1801 et seq.; the Atomic Energy Act, as amended, 42 U.S.C. Section 2011 et seq.; the Federal Insecticide, Fungicide and Rodenticide Act, as amended, 7 U.S.C. Section 136 et seq.; the Occupational Safety and Health Act, as amended, 20 U.S.C. Section 651 et seq.; and applicable state and local laws, regulations or requirements that govern (i) the existence, cleanup and/or remedy of contamination on Property; (ii) the protection of the environment from released, spilled, deposited or otherwise emplaced contamination; (iii) the control of hazardous wastes; or (iv) the use, generation, transport, treatment, removal or recovery of Hazardous Materials, including any and all building materials.

(c) Hazardous Materials Claims. There are no claims or actions (“Hazardous Materials Claims”) known to, pending or threatened against Borrower or the Property by any governmental entity or agency or by any other person or entity relating to Hazardous Materials or pursuant to the Hazardous Materials Laws.

(d) Border Zone Property. There has been no occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to become contaminated through the migration of Hazardous Materials onto, above or under the Property.

5.2 HAZARDOUS MATERIALS COVENANTS. Borrower agrees as follows:

(a) No Hazardous Activities. Borrower shall not cause or permit the Property to be used as a site for the use, generation, manufacture, storage, treatment, release, discharge, disposal, transportation or presence of any Hazardous Materials.

(b) Compliance. Borrower shall comply and cause the Property to comply with all Hazardous Materials Laws.

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(c) Notices. Borrower shall immediately notify Lender in writing of: (i) the discovery of any Hazardous Materials on, under or about the Property; (ii) any knowledge by Borrower that the Property do not comply with any Hazardous Materials Laws; (iii) any Hazardous Materials Claims; and (iv) the discovery of any occurrence or condition on any real property adjoining or in the vicinity of the Property that could cause the Property or any part thereof to become contaminated with Hazardous Materials.

(d) Removal and/or Remedial Action. In response to the presence of any Hazardous Materials on, under or about the Property, Borrower shall immediately take, at Borrower’s sole expense, all actions required by any Hazardous Materials Laws or any regulatory agency, governing body, judgment, consent decree, settlement or compromise with respect to any Hazardous Materials Claims.

5.3 INSPECTION BY LENDER. Upon reasonable prior notice to Borrower, Lender, its employees and agents, may from time to time (whether before or after the commencement of a nonjudicial or judicial foreclosure proceeding) enter and inspect the Property for the purpose of determining the existence, location, nature and magnitude of any past or present release or threatened release of any Hazardous Materials into, onto, beneath or from the Property.

5.4 HAZARDOUS MATERIALS INDEMNITY. Borrower hereby agrees to defend, indemnify and hold harmless Lender, its directors, officers, employees, agents, successors and assigns from and against any and all losses, damages, liabilities, claims, actions, judgments, court costs and legal or other expenses (including, without limitation, attorneys’ fees and expenses) which Lender may incur as a direct or indirect consequence of the use, generation, release, manufacture, storage, disposal, threatened disposal, transportation or presence of Hazardous Materials in, on, under or about the Property. Borrower shall immediately pay to Lender upon demand any amounts owing under this indemnity, together with interest from the date the indebtedness arises until paid at the rate of interest applicable to the principal balance of the Note. Borrower’s duty and obligations to defend, indemnify and hold harmless Lender shall survive the cancellation of the Note and the release or partial release of the Mortgage.

5.5 LEGAL EFFECT OF SECTION. Borrower and Lender agree that each provision in this Article (together with any indemnity applicable to a breach of any such provision) with respect to the environmental condition of the real property security is intended by Lender and Borrower to be an “environmental provision” for purposes of California Code of Civil Procedure Section 736, and as such it is expressly understood that Borrower’s duty to indemnify Lender hereunder shall survive: (i) any judicial or non-judicial foreclosure under the Mortgage, or transfer of the Property in lieu thereof; (ii) the release and reconveyance or cancellation of the Mortgage; and (iii) the satisfaction of all of Borrower’s obligations under the Loan Documents.

5.6 ENVIRONMENTAL IMPAIRMENT. Upon any Default under the Loan Documents, in addition to any other remedies provided in the Loan Documents and applicable law, Lender shall have the right to waive its lien against the Property or any portion thereof, whether fixtures or personal property, to the extent such property is found to be environmentally impaired in accordance with California Code of Civil Procedure Section 726.5 and to exercise any and all rights and remedies of an unsecured creditor against Borrower and all of Borrower’s assets and property for the recovery of any deficiency, including, but not limited to, seeking an attachment order pursuant to California Code of Civil Procedure Section 483.010. As between Lender and Borrower, for purposes of California Code of Civil Procedure Section 726.5, Borrower shall have the burden of proving that Borrower or any related party (or any affiliate or agent of Borrower or any related party) was not in any way negligent in permitting the release or threatened release of the Hazardous Substances. Borrower acknowledges and agrees that notwithstanding any term or provision contained herein or in the Loan Documents, all judgments and awards entered against Borrower under this Section and California Code of Civil Procedure Section 726.5 shall be exceptions to any non-recourse or exculpatory provisions of the Note, and Borrower shall be fully and personally liable for all such judgments and awards entered against Borrower.

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ARTICLE 6. COVENANTS OF BORROWER

6.1 EXPENSES. Borrower shall immediately pay to Lender upon demand: (a) all costs and expenses incurred by Lender in connection with the administration of this Agreement, the other Loan Documents and any other documents required by Lender during the term of the Loan; and (b) the enforcement or satisfaction by Lender of any of Borrower’s or Guarantor’s obligations under this Agreement, the other Loan Documents and the Guaranty. For all purposes of this Agreement, Lender’s costs and expenses shall include, without limitation, all appraisal fees, cost engineering and inspection fees, legal fees and expenses, accounting fees, environmental consultant fees, auditor fees, and the cost to Lender of any title insurance premiums, title surveys, tax service contract fees, recording fees, mortgage registration taxes, mortgage taxes, intangible taxes, documentary stamp taxes, and release, reconveyance and notary fees. If any of the services described above are provided by an employee of Lender, Lender’s costs and expenses for such services shall be calculated in accordance with Lender’s standard charge for such services.

6.2 LEASING. Borrower shall use its best efforts to maintain all leasable space in the Property leased at no less than fair market rental rates.

6.3 APPROVAL OF LEASES. All leases of all or any part of the Property shall: (a) be upon terms and with tenants approved by Lender prior to Borrower’s execution of any such lease; and (b) include estoppel, subordination, attornment and mortgagee protection provisions satisfactory to Lender. All standard lease forms and any material deviation from any form, shall be approved by Lender prior to execution of any lease using such form.

6.4 INCOME TO BE APPLIED TO DEBT SERVICE. After the occurrence of a Default and during the pendency of a Default, Borrower shall apply all gross operating income from the Property and Improvements only to the payment of operating expenses directly attributable to the Property and the payment of accrued interest and outstanding principal on the Loan. To the extent such gross operating income exceeds such operating expenses, such excess shall be used first to pay accrued interest (regardless of any interest reserve) and then to pay the outstanding principal on the Loan. After the occurrence of a Default, no gross operating income shall be distributed to any partner, venturer, member or equity investor of Borrower until such Default has been cured.

6.5 SUBDIVISION MAPS. Prior to recording any final map, plat, parcel map, lot line adjustment or other subdivision map of any kind covering any portion of the Property (“Subdivision Map”), Borrower shall submit such Subdivision Map to Lender for Lender’s review and approval, which approval shall not be unreasonably withheld. Within 10 Business Days after Lender’s receipt of such Subdivision Map, Lender shall provide Borrower written notice if Lender disapproves of said Subdivision Map. Lender shall be deemed to have approved the Subdivision Map if such notice is not provided to Borrower. Within 5 Business Days after Lender’s request, Borrower shall execute, acknowledge and deliver to Lender such amendments to the Loan Documents as Lender may reasonably require to reflect the change in the legal description of the Property resulting from the recordation of any Subdivision Map. In connection with and promptly after the recordation of any amendment or other modification to the Mortgage recorded in connection with such amendments, Borrower shall deliver to Lender, at Borrower’s sole expense, a title endorsement to the Title Policy in form and substance satisfactory to Lender insuring the continued first priority lien of the Mortgage. Subject to the execution and delivery by Borrower of any documents required under this Section, Lender shall, if required by applicable law, sign any Subdivision Map approved, or deemed to be approved, by Lender pursuant to this Section.

6.6 FURTHER ASSURANCES. Upon Lender’s request and at Borrower’s sole cost and expense, Borrower shall execute, acknowledge and deliver any other instruments and perform any other acts necessary, desirable or proper, as determined by Lender, to carry out the purposes of this Agreement and the other Loan Documents or to perfect and preserve any liens created by the Loan Documents.

6.7 ASSIGNMENT. Without the prior written consent of Lender, Borrower shall not assign Borrower’s interest under any of the Loan Documents, or in any monies due or to become due thereunder, and any assignment without such consent shall be void. In this regard, Borrower acknowledges that Lender would

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not make this Loan except in reliance on Borrower’s expertise, reputation, prior experience in developing and constructing commercial real property for dependency treatment facilities, Lender’s knowledge of Borrower, and Lender’s understanding that this Agreement is more in the nature of an agreement involving personal services than a standard loan where Lender would rely on security which already exists.

6.8 INDEMNITY. BORROWER HEREBY AGREES TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER, ITS DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, SUCCESSORS AND ASSIGNS FROM AND AGAINST ANY AND ALL LOSSES, DAMAGES, LIABILITIES, CLAIMS, ACTIONS, JUDGMENTS, COURT COSTS AND LEGAL OR OTHER EXPENSES (INCLUDING, WITHOUT LIMITATION, ATTORNEYS’ FEES AND EXPENSES) WHICH LENDER MAY INCUR AS A DIRECT OR INDIRECT CONSEQUENCE OF: (A) THE PURPOSE TO WHICH BORROWER APPLIES THE LOAN PROCEEDS; (B) THE FAILURE OF BORROWER TO PERFORM ANY OBLIGATIONS AS AND WHEN REQUIRED BY THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS; (C) ANY FAILURE AT ANY TIME OF ANY OF BORROWER’S REPRESENTATIONS OR WARRANTIES TO BE TRUE AND CORRECT; OR (D) ANY ACT OR OMISSION BY BORROWER, CONSTITUENT PARTNER OR MEMBER OF BORROWER, ANY CONTRACTOR, SUBCONTRACTOR OR MATERIAL SUPPLIER, ENGINEER, ARCHITECT OR OTHER PERSON OR ENTITY WITH RESPECT TO ANY OF THE PROPERTY. BORROWER SHALL IMMEDIATELY PAY TO LENDER UPON DEMAND ANY AMOUNTS OWING UNDER THIS INDEMNITY, TOGETHER WITH INTEREST FROM THE DATE THE INDEBTEDNESS ARISES UNTIL PAID AT THE RATE OF INTEREST APPLICABLE TO THE PRINCIPAL BALANCE OF THE NOTE. BORROWER’S DUTY AND OBLIGATIONS TO DEFEND, INDEMNIFY AND HOLD HARMLESS LENDER SHALL SURVIVE CANCELLATION OF THE NOTE AND THE RELEASE OR RECONVEYANCE OF THE MORTGAGE.

6.9 DERIVATIVE DOCUMENTS. If required by Lender, Borrower shall execute promptly all documents evidencing an interest rate swap transaction entered into by Borrower and Lender or with another counterparty acceptable to Lender (such transaction, together with all documents and agreements relating thereto, including any ISDA Master Agreement, Schedule and/or Confirmation, together with all modifications, extensions, renewals and replacements thereof, is hereinafter referred to as the “Swap Contract”).

ARTICLE 7. REPORTING COVENANTS

7.1 FINANCIAL INFORMATION. Borrower shall deliver its tax return, prepared by a CPA and signed by Borrower, to Lender within 30 days after filing, but in no event later than November 15 of each year following the tax year to be reported, together with any other financial information including, without limitation, financial statements, cash flow projections, and operating statements as may be reasonably requested by Lender. Borrower shall also deliver to Lender the current CPA-audited, consolidated, annual financial statements (including, without limitation, an income and expense statement and a balance sheet) of AAC as soon as available but in no event later than 120 days after the end of its fiscal year. Borrower shall also deliver to Lender the internally prepared, consolidated, quarterly financial statements (including, without limitation, an income and expense statement and a balance sheet) of AAC as soon as available but in no event later than 45 days after the end of each fiscal quarter. Borrower shall cause each of Cartwright and Menz to deliver to Lender his self-prepared personal financial statement as soon as available, but in no event later than April 30 of each year following the tax year to be reported and his signed, CPA-prepared tax return within 30 days after filing but in no event later than November 15 each year end following the tax year to be reported. Notwithstanding the foregoing, subject to Borrower’s satisfaction of the conditions set forth in Section 4.13 of the Mortgage, Cartwright and Menz shall not be required to furnish their financial statements and tax returns to Lender.

Within 30 days of Lender’s request, Borrower shall also deliver to Lender such annual or quarterly and other financial information, as the case may be, regarding any persons or entities in any way obligated on the Loan as Lender may specify. If audited financial information is prepared, Borrower shall deliver to Lender copies of that information within 45 days of its final preparation or not later than would be required by this Section 7.1, whichever is earlier. Except as otherwise agreed to by Lender, all such financial information shall be prepared in accordance with generally accepted accounting principles consistently applied.

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7.2 LEASING REPORTS AND OPERATING STATEMENTS. Borrower shall deliver to Lender quarterly rent rolls, leasing schedules and reports, operating statements and/or such other leasing information as Lender shall request with respect to the Property, each in form and substance satisfactory to Lender.

7.3 UPDATED APPRAISAL; REMARGIN REQUIREMENT. Lender shall have the right (but not the obligation) at any time, and from time to time, during the term of the Loan, in Lender’s discretion, to request and obtain from an appraiser acceptable to Lender, an updated appraisal of the Property, which includes an opinion of value and supporting information reasonably acceptable to Lender. Lender will do everything in its control to contain the cost of the appraisal. If such an appraisal is obtained, Borrower agrees to cooperate with any appraiser, allow access to the Property and provide copies of leases, operating statements, plans and any other information reasonably requested by such appraiser. Borrower shall pay to Lender, within thirty (30) days following demand: (a) the cost of the updated appraisal; provided, however, that Borrower shall not be required to pay for more than one such appraisal in a given calendar year if a Default does not then exist; and (b) the amount, if any, by which the then outstanding balance of the Loan exceeds 65% of the then most recent appraised value of the Property, as adjusted by Lender in its sole discretion upon its review of the appraisal. Upon Borrower’s payment for the updated appraisal and execution of Lender’s then standard form of appraisal indemnity agreement, Borrower may obtain a copy of the updated appraisal if a Default does not then exist.

7.4 FINANCIAL CONDITION. Borrower shall cause Guarantor to maintain its financial condition during the term of this Agreement according to the following schedules, using generally accepted accounting principles, consistently applied:

(a) Borrower shall cause AAC to maintain, as of any FCCR Determination Date, a Fixed Charge Coverage Ratio of not less than 1.25 to 1.00. For purposes hereof, “Fixed Charge Coverage Ratio” shall mean, as of any FCCR Determination Date, the ratio of (i) AAC’s annualized quarterly net income for the fiscal quarter-immediately preceding such FCCR Determination Date, plus depreciation expense and interest expense payable by AAC during such fiscal quarter, annualized, plus or minus, as the case may be, the net amount of equity contributions to AAC by AAC’s shareholders minus any distributions of income by AAC to AAC’s shareholders during such fiscal quarter, annualized, to (ii) the principal and interest payments payable by AAC on any indebtedness during such fiscal quarter, annualized, plus all payments payable by AAC with respect to capital lease obligations during such fiscal quarter, annualized. For purposes of this Section, “FCCR Determination Date” shall mean the date on which Lender determines AAC’s compliance with the Fixed Charge Coverage Ratio, which date shall be on or after the date on which Lender receives AAC’s quarterly financial statements pursuant to Section 7.1.

ARTICLE 8. DEFAULTS AND REMEDIES

8.1 DEFAULT. The occurrence of any one or more of the following shall constitute an event of default (“Default”) under this Agreement and the other Loan Documents:

(a) Monetary. Borrower’s failure to pay within 5 days when due any sums payable under the Note or any of the other Loan Documents or Borrower’s failure to deposit any funds as and when required under this Agreement; or

(b) Performance of Obligations. Borrower’s failure to perform any obligation, covenant or condition under the Note or any of the other Loan Documents; provided, however, that if a cure period is provided for the remedy of such failure, Borrower’s failure to perform will not constitute a Default until such date as the specified cure period expires; or

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(c) Lien; Attachment; Condemnation. (i) The recording or service upon Lender of any claim of lien against the Property and the continuance of such claim of lien for 30 days after such recording or service without discharge, satisfaction or provision for payment being made by Borrower in a manner satisfactory to Lender; or (ii) the condemnation, seizure or appropriation of or occurrence of an uninsured casualty with respect to, any material portion of the Property; or (iii) the sequestration or attachment, or any levy or execution upon, any of the Property or any other collateral provided by Borrower or any other party under any of the Loan Documents which is not released, expunged or dismissed within 30 days; or

(d) Representations and Warranties. (i) The failure of any representation or warranty of Borrower in any of the Loan Documents or by Guarantor in the Guaranty and the continuation of such failure for more than 30 days after written notice to Borrower from Lender requesting that Borrower cure such failure; or (ii) any material adverse change in the financial condition of Borrower, Guarantor, or any indemnitor from the financial condition represented to Lender as of the later of: (A) the Effective Date; or (B) the date upon which the financial condition of such party was first represented to Lender; or

(e) Bankruptcy; Insolvency; Dissolution. (i) The filing of by Borrower, Guarantor, any partner or member of Borrower, any indemnitor or any non-borrower trustor of a petition for relief under the Bankruptcy Reform Act of 1978 (11 USC Section 101-1330) as now or hereafter amended or recodified (“Bankruptcy Code”), or under any other present or future state or federal law regarding bankruptcy, reorganization or other debtor relief law; (ii) the filing against Borrower, Guarantor, any partner or member of Borrower, any indemnitor or any non-borrower trustor of an involuntary proceeding under the Bankruptcy Code or other debtor relief law and the failure of Borrower to effect a full dismissal of such proceeding within 30 days after the date of filing such proceeding ; (iii) a general assignment by Borrower, Guarantor, any partner or member of Borrower, any indemnitor or any non-borrower trustor for the benefit of creditors; or (iv) Borrower, Guarantor, any partner or member of Borrower, any indemnitor or any non-borrower trustor applying for, or the appointment of, a receiver, trustee, custodian or liquidator of Borrower or any of its property; or

(f) Borrower; Key Person or Entity. The retirement, death, incapacity or withdrawal of Borrower or Guarantor, if an individual, or the retirement, death, incapacity or withdrawal of Jerrod Menz as President of Borrower’s sole member or Michael Cartwright as Secretary and Treasurer of Borrower’s sole member and Borrower’s failure to provide a substitute or replacement reasonably acceptable to Lender within 30 days after the occurrence of any such retirement, death, incapacity or withdrawal; or

(g) Transfer of Assets. The sale, assignment, pledge, hypothecation, mortgage or transfer of all or a substantial portion of the assets of Borrower; or

(h) Derivative Default. The occurrence of a default by Borrower or a termination event with respect to Borrower under any swap, derivative, foreign exchange or hedge transaction or arrangement (or other similar transaction or arrangement howsoever described or defined) at any time entered into between Borrower and Lender in connection with the Loan including, without limitation, the Swap Contract; or

(i) Default Under Guaranty. The occurrence of a default under any guaranty now or hereafter executed in connection with the Loan, including, without limitation, Guarantor’s (defined parties) or other guarantor’s failure to perform any covenant, condition, or obligation thereunder; or

(j) Default Under Unsecured Indemnity Agreement. The occurrence of a default under that certain Hazardous Materials Indemnity Agreement (Unsecured) executed by Guarantor as Indemnitor, in favor of Lender, of even date herewith, including without limitation, Indemnitor’s failure to perform any covenant, condition, or obligation thereunder; or

(k) Default Under Other Indebtedness. The occurrence of a default by Borrower or Guarantor or any affiliate of Borrower or Guarantor with respect to any other indebtedness, whether as a borrower or a guarantor thereunder, under any agreement with any lender, including without limitation, Lender.

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8.2 ACCELERATION UPON DEFAULT; REMEDIES. Upon the occurrence of any Default specified herein, Lender may, at its sole option, declare all sums owing to Lender under the Note, this Agreement and the other Loan Documents immediately due and payable. Upon such acceleration, Lender may, in addition to all other remedies permitted under the Note and this Agreement and the other Loan Documents and at law or equity, apply the funds of Borrower in its possession, if any, to the sums owing under the Loan Documents and any and all obligations of Lender to fund further disbursements under the Loan shall terminate.

8.3 DISBURSEMENTS TO THIRD PARTIES. Upon the occurrence of a Default occasioned by Borrower’s failure to pay money to a third party as required by this Agreement, Lender may but shall not be obligated to make such payment from the Loan proceeds or other funds of Lender. If such payment is made from proceeds of the Loan, Borrower shall deposit with Lender, upon written demand, an amount equal to such payment within 5 days of such demand. If such payment is made from funds of Lender, Borrower shall repay such funds upon written demand of Lender within 5 days of such demand. In either case, the Default with respect to which any such payment has been made by Lender shall not be deemed cured until such deposit or repayment (as the case may be) has been made by Borrower to Lender.

8.4 SET OFF. Upon the occurrence of a Default, Lender may set off any and all amounts due by Borrower against any indebtedness or obligation of Lender to Borrower.

8.5 RIGHTS CUMULATIVE; NO WAIVER. All Lender’s rights and remedies provided in this Agreement, the other Loan Documents and the Guaranty, together with those granted by law or at equity, are cumulative and may be exercised by Lender at any time. Lender’s exercise of any right or remedy shall not constitute a cure of any Default unless all sums then due and payable to Lender under the Loan Documents are repaid and Borrower has cured all other Defaults. No waiver shall be implied from any failure of Lender to take, or any delay by Lender in taking, action concerning any Default or failure of condition under the Loan Documents, or from any previous waiver of any similar or unrelated Default or failure of condition. Any waiver or approval under any of the Loan Documents must be in writing and shall be limited to its specific terms. Any funds expended by Lender in the exercise of its rights or remedies under this Agreement and the other Loan Documents shall be payable to Lender upon demand, together with interest at the rate applicable to the principal balance of the Note from the date the funds were expended.

ARTICLE 9. MISCELLANEOUS PROVISIONS

9.1 NOTICES. All notices, demands, requests or other communications under this Agreement and the other Loan Documents shall be in writing and shall be delivered in accordance with the notice provisions contained in the Mortgage.

9.2 RELATIONSHIP OF PARTIES. The relationship of Borrower and Lender under the Loan Documents is, and shall at all times remain, solely that of borrower and lender, and Lender neither undertakes nor assumes any responsibility or duty to Borrower or to any third party with respect to the Property, except as expressly provided in this Agreement and the other Loan Documents.

9.3 ATTORNEYS’ FEES AND EXPENSES; ENFORCEMENT. If any attorney is engaged to enforce or defend any provision of this Agreement, any of the other Loan Documents or as a consequence of any Default under the Loan Documents, with or without the filing of any legal action or proceeding, and including, without limitation, any fees and expenses incurred in any bankruptcy proceeding of Borrower or in connection with any appeal of a lower court decision, the prevailing Party, as agreed to by the Parties or as determined by the court, shall be entitled to its attorneys’ fees and expenses and all costs incurred in connection therewith.

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9.4 IMMEDIATELY AVAILABLE FUNDS. All amounts payable by Borrower to Lender shall be (a) payable only in United States currency in immediately available funds, and (b) received by Lender at the Minneapolis Wholesale Loan Servicing Center, in Minneapolis, Minnesota, or at such other places as may be designated in writing by Lender, no later than 11 AM Pacific Standard Time or Pacific Daylight Time, as applicable. Any amounts received after such time shall be credited the next business day.

9.5 LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Borrower agrees that Lender may elect, at any time, to sell, assign or grant participations in all or any portion of its rights and obligations under the Loan Documents, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Lender’s sole discretion. Borrower further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property and its operation; (b) any party connected with the Loan (including, without limitation, the Borrower, any partner of Borrower, any constituent partner or member of Borrower, Guarantor, any indemnitor and any non-borrower mortgagor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. The indemnity obligations of Borrower under the Loan Documents shall also apply with respect to any purchaser, assignee or participant.

9.6 LENDER’S AGENTS. Lender may designate an agent or independent contractor to exercise any of Lender’s rights under this Agreement and any of the other Loan Documents. Any reference to Lender in any of the Loan Documents shall include Lender’s agents, employees or independent contractors. Borrower shall pay the costs of such agent or independent contractor either directly to such person or to Lender in reimbursement of such costs, as applicable.

9.7 WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS AGREEMENT HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED UNDER APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF ANY RIGHT THEY MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

9.8 SEVERABILITY. If any provision or obligation under this Agreement and the other Loan Documents shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that provision shall be deemed severed from the Loan Documents and the validity, legality and enforceability of the remaining provisions or obligations shall remain in full force as though the invalid, illegal, or unenforceable provision had never been a part of the Loan Documents, provided, however, that if the rate of interest or any other amount payable under the Note or this Agreement or any other Loan Document, or the right of collectibility therefor, are declared to be or become invalid, illegal or unenforceable, Lender’s obligations to make any additional advances under the Loan Documents shall not be enforceable by Borrower.

9.9 HEIRS, SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided under the terms and conditions of this Agreement, the terms of the Loan Documents shall bind and inure to the benefit of the heirs, successors and assigns of the Parties.

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9.10 ATTORNEY IN FACT. Borrower hereby irrevocably appoints and authorizes Lender, as Borrower’s attorney in fact, which agency is coupled with an interest, to execute and/or record in Lender’s or Borrower’s name any notices, instruments or documents that Lender deems appropriate to protect Lender’s interest under any of the Loan Documents.

9.11 TAX SERVICE. Lender is authorized, at Borrower’s expense, to obtain a tax service contract with a third party vendor which shall provide tax information on the Property satisfactory to Lender.

9.12 TIME. Time is of the essence of each and every term of this Agreement.

9.13 GOVERNING LAW. This Agreement was executed by Lender in the State of California, which state the Parties agree has a substantial relationship to the Parties and to the underlying transaction embodied hereby. Accordingly, this Agreement shall be governed by, and construed and enforced in accordance with the laws of the State of California, except to the extent preempted by federal laws. Borrower and all persons and entities in any manner obligated to Lender under the Loan Documents and Lender submit to the jurisdiction of: (a) any state or federal court sitting in the state of California over any suit, action, or proceeding arising out of or relating to the Loan Documents or the Loan; (b) any state or federal court sitting in the state where the Property is located or the state in which a Party’s principal place of business is located over any suit, action or proceeding arising out of or relating to any of the Loan Documents or the Loan; (c) any state court sitting in the county of the state where the Property is located over any suit, action, or proceeding brought by Lender to exercise its power to foreclose the Property or any action brought by Lender to enforce its rights with respect to any other collateral under the Loan Documents, and (d) consents to service of process by any means authorized by the law of the state where the actions described above may be brought or federal law. The Parties waive, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of venue of any such suit, action, or proceeding brought in any such court and any claim that any such suit, action, or proceeding brought in any such court has been brought in an inconvenient forum.

9.14 INTEGRATION; INTERPRETATION; INCONSISTENCIES. The Loan Documents contain or expressly incorporate by reference the entire agreement of the Parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. The Loan Documents shall not be modified except by written instrument executed by all Parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by the Parties in writing. In the event of any inconsistencies between the terms of this Loan Agreement and the terms of any other Loan Document, the terms of this Loan Agreement shall prevail.

9.15 JOINT AND SEVERAL LIABILITY. The liability of all persons and entities obligated in any manner under this Agreement and any of the Loan Documents shall be joint and several.

9.16 FORM OF DOCUMENTS. The form and substance of all documents, instruments, and forms of evidence to be delivered to Lender under the terms of this Agreement and any of the other Loan Documents shall be subject to Lender’s approval and shall not be modified, superseded or terminated in any respect without Lender’s prior written approval.

9.17 NO THIRD PARTIES BENEFITED. No person other than Lender and Borrower and their permitted successors and assigns shall have any right of action under any of the Loan Documents.

9.18 ACTIONS. Borrower agrees that Lender, in exercising the rights, duties or liabilities of Lender or Borrower under the Loan Documents, may commence, appear in or defend any action or proceeding purporting to affect the Property or the Loan Documents and Borrower shall immediately reimburse Lender upon demand for all such expenses so incurred or paid by Lender, including, without limitation, attorneys’ fees and expenses and court costs.

9.19 LENDER’S CONSENT. Wherever in this Agreement there is a requirement for Lender’s consent and/or a document to be provided or an action taken, it is understood that, except as expressly stated herein, Lender shall exercise its consent, right or judgment in a reasonable manner given the specific facts and circumstance applicable at the time.

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9.20 HEADINGS. All article, section or other headings appearing in this Agreement and any of the other Loan Documents are for convenience of reference only and shall be disregarded in construing this Agreement and any of the other Loan Documents.

9.21 COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

9.22 ARBITRATION.

(a) Arbitration. The Parties hereto agree, upon demand by any Party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise arising out of or relating to in any way (i) the Loan and related Loan Documents which are the subject of this Agreement and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination; or (ii) requests for additional credit.

(b) Governing Rules. Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the Parties; and (iii) be conducted by the AAA, or such other administrator as the Parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any Party who fails or refuses to submit to arbitration following a demand by any other Party shall bear all costs and expenses incurred by such other Party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any Party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

(c) No Waiver of Provisional Remedies, Self-Help and Foreclosure. The arbitration requirement does not limit the right of any Party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any Party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this Section 9.22(c).

(d) Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and

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deliberations. Any arbitrator(s) will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator(s) will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator(s) will decide (by documents only or with a hearing at the arbitrator’s(s’) discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator(s) shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator(s) shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator(s) deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any party, including the plaintiff, to submit the controversy or claim to arbitration if any other party contests such action for judicial relief.

(e) Discovery. In any arbitration proceeding discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator(s) upon a showing that the request for discovery is essential for the Party’s presentation and that no alternative means for obtaining information is available.

(f) Class Proceedings and Consolidations. The resolution of any dispute arising pursuant to the terms of this Agreement shall be determined by a separate arbitration proceeding and such dispute shall not be consolidated with other disputes or included in any class proceeding.

(g) Payment of Arbitration Costs and Fees. The arbitrator(s) shall award all costs and expenses of the arbitration proceeding.

(h) Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the Parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.

(i) Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the Parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other Party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a Party required in the ordinary course of its business or by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the Parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the Parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the Parties.

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9.23 EXHIBITS INCORPORATED. Exhibits A, B, and C attached hereto, are hereby incorporated into this Agreement by this reference.

16

IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of the date appearing on the first page of this Agreement.

LENDER:

WELLS FARGO BANK,

NATIONAL ASSOCIATION

By:	/s/ Marcus Di Fiore
	Marcus Di Fiore
	Vice President

Lender’s Address:

WELLS FARGO BANK, NATIONAL ASSOCIATION

Carlsbad Regional Commercial Banking Office

5901 Priestly Drive, Suite 306, 3rd FL

Carlsbad, CA 92008

MAC E2413-030

Attention: Marcus Di Fiore

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BORROWER:

THE ACADEMY REAL ESTATE, LLC,

a Delaware limited liability company

By:	American Addiction Centers, Inc.,
	a Nevada corporation
	its sole member
	By:	/s/ Jerrod Menz
	Name:	Jerrod Menz
	Title:	CEO

Borrower’s Address:

115 Eastpark Drive, Suite 100

Brentwood, TN 37027

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EXHIBIT A

DESCRIPTION OF PROPERTY

Exhibit A to TERM LOAN AGREEMENT between THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company, as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”.

All that certain real property located in the County of Hillsborough, State of Florida, described as follows:

PARCEL I:

The Northeast  ¹⁄₄ of the Southwest  ¹⁄₄ of Section 22, Township 30 South, Range 20 East, Hillsborough County, Florida, LESS the South 210 feet of the West 420 feet thereof and LESS the East 495 feet thereof, and ALSO LESS the right-of-way for existing road along the South boundary thereof.

PARCEL II:

Tract beginning 210 feet East of the Southwest corner of the Northeast  ¹⁄₄ of the Southwest  ¹⁄₄ of Section 22, Township 30 South, Range 20 East, Hillsborough County, Florida; run thence North 210 feet to a point; run thence East 210 feet to a point; run thence South 210 feet to a point; and run thence West 210 feet to the Point of Beginning, LESS road right-of-way for existing road along the South boundary thereof.

AND LESS portion deeded to Hillsborough County by Quit-Claim Deed recorded in Official Records Book 6849, Page 201, Public Records of Hillsborough County, Florida.

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EXHIBIT B

DOCUMENTS

Exhibit B to LOAN AGREEMENT between THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company, as “Borrower”, and WELLS FARGO BANK, NATIONAL ASSOCIATION, as “Lender”, dated as of May 10, 2013 (“Agreement”).

1. LOAN DOCUMENTS. The documents listed below, numbered 1.1 through 1.6, inclusive, below of even date herewith (unless otherwise specified), and amendments, modifications and supplements thereto which have received the prior written consent of Lender, together with any documents executed in the future that are approved by Lender and that recite that they are “Loan Documents” for purposes of this Agreement are collectively referred to herein as the Loan Documents.

1.1 This Agreement.

1.2 Note.

1.3 Mortgage.

1.4 Uniform Commercial Code National Financing Statement Form UCC l.

1.5 Limited Liability Company Borrowing Certificate executed by Borrower.

1.6 Corporate Resolution Authorizing Execution of Guaranty and Endorsement and Hypothecation of Property certified by the Secretary of American Addiction Centers, Inc., a Nevada corporation.

2. OTHER RELATED DOCUMENTS (WHICH ARE NOT LOAN DOCUMENTS)

2.1 Repayment Guaranty executed by Guarantor in favor of Lender.

2.2 Unsecured Hazardous Materials Indemnity Agreement executed by Guarantor in favor of Lender.

2.3 Agreement for Disbursement Prior to Recording and Amendment to Note executed by Borrower and Lender.

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EXHIBIT C

TRANSFER AUTIIORIZER DESIGNATION

(For Disbursement of Loan Proceeds by Funds Transfer)

¨  NEW   ¨  REPLACE PREVIOUS DESIGNATION   ¨  ADD   ¨  CHANGE   ¨  DELETE LINE NUMBER                       

The following representatives of THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company (“Borrower”) are authorized to request the disbursement of Loan Proceeds and initiate funds transfers for Loan Number 3327114701 dated May 10, 2013 between Wells Fargo Bank, National Association (“Bank”) and Borrower. Bank is authorized to rely on this Transfer Authorizer Designation until it has received a new Transfer Authorizer Designation signed by Borrower, even in the event that any or all of the foregoing information may have changed.

	Name	Title	Maximum Wire Amount
1.	Michael Cartwright	Secretary / Treasurer of Borrower’s Sole Member	$	3,607,500.00
2.	Jerrod Menz	President of Borrower’s Sole Member	$	3,607,500.00
3.
4.
5.

Beneficiary Bank and Account Holder Information

Transfer Funds to (Receiving Party Account Name):
Receiving Party Account Number:
Receiving Bank Name, City and State:	Receiving Bank Routing (ABA) Number:
Maximum Transfer Amount: $
Further Credit Information/Instructions:

[Signature Page follows.]

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Date: May 10, 2013

BORROWER:

THE ACADEMY REAL ESTATE, LLC,

a Delaware limited liability company

By:	American Addiction Centers, Inc.,
	a Nevada corporation
	its sole member
	By:	/s/ Jerrod Menz
	Name:	Jerrod Menz
	Title:	CEO

22

EX-10

Exhibit 10.25

Loan No. 3327114701

PROMISSORY NOTE SECURED BY MORTGAGE

(One-Month LIBO Rate; Adjusted Monthly)

$3,607,500.00 Date: May 10, 2013

1. PROMISE TO PAY. FOR VALUE RECEIVED, the undersigned THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company (“Borrower”) promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), at the Minneapolis Loan Center, 608 2nd Ave South, 11th Floor, Minneapolis, MN 55402, or at such other place as may be designated in writing by Lender, the principal sum of THREE MILLION SIX HUNDRED SEVEN THOUSAND FIVE HUNDRED AND NO/100THS DOLLARS ($3,607,500.00) or so much thereof as may from time to time be owing hereunder by reason of advances by Lender to or for the benefit or account of Borrower (“Loan”), with interest thereon, per annum, at one or more of the Effective Rates (as hereinafter defined) calculated in accordance with the terms and provisions of the Fixed Rate Agreement attached to this note (“Note”) as Exhibit A (based on a 360-day year and charged on the basis of actual days elapsed). All sums owing hereunder are payable in lawful money of the United States of America, in immediately available funds without offset, deduction or counterclaim of any kind. The Borrower and Lender are collectively referred to herein as the “Parties.”

2. INTEREST. Interest accrued on this Note shall be due and payable on the fifteenth (15th) day of each month (or, if such day is not a Business Day, on the next Business Day) commencing with the first (1st) month after the date of this Note.

3. PRINCIPAL PAYMENTS. All unpaid principal and accrued interest due and payable shall be payable in full on the Maturity Date (as defined below).

4. BILL LEAD DATE REQUEST: By written notice to Lender, Borrower may request to receive monthly billings on a date (the “Bill Lead Date”) that is prior to the fifteenth (15th) day of the month. Lender will submit to Borrower monthly billings, which will consist of actual interest and principal due through the Bill Lead Date plus projected interest and principal due through the balance of the month. Any necessary adjustments in the applicable interest rate and/or principal payments due or made between a Bill Lead Date and the end of the month will be reflected as an additional charge (or credit) in the billing for the next following month. Neither the failure of Lender to submit a Bill Lead Date billing nor any error in any such billing will excuse Borrower’s obligation to make full payment of all amounts due under this Note. In its sole discretion, Lender may cancel or modify the terms of such request which cancellation or modification will be effective upon written notification to Borrower. Should Borrower request a Bill Lead Date, Lender shall not be required to prepare a month end invoice.

5. MATURITY DATE. The outstanding principal balance of this Note, together with all accrued and unpaid interest, shall be due and payable in full on November 10, 2013 (“Maturity Date”). Principal amounts outstanding hereunder, upon which repayment obligations exist and interest accrues, shall be determined by the records of the Lender, which shall be deemed to be conclusive in the absence of clear and convincing evidence to the contrary presented by Borrower.

6. SECURED BY MORTGAGE. This Note is secured by, among other things, that certain Mortgage and Assignment (“Mortgage”), executed by Borrower, as mortgagor, to Lender, as mortgagee, to be recorded in the official records of Hillsborough County, Florida (“Official Records”) and by other security instruments, if any, specified in that certain Loan Agreement of even date herewith, executed by Borrower and Lender (as the same may be amended or restated from time to time, the “Loan Agreement”). Reference is made to the Loan Agreement for a description of the terms and conditions upon which advances may be made under this Note and repayment of the indebtedness evidenced by this Note may be accelerated.

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7. DIRECT DEBIT. In order to assure timely payment to Lender of accrued interest, principal, fees and late charges due and owing under the loan evidenced by this Note, Lender has been irrevocably authorized, pursuant to that certain Automatic Transfer Authorization of even date herewith, by American Addiction Centers, Inc., a Nevada corporation (“AAC”), the sole member of Borrower, to debit AAC’s demand deposit account, account no. ***, with Lender for payment when due of all such amounts payable to Lender. Borrower represents and warrants to Lender that AAC is the legal owner of said account. Written confirmation of the amount and purpose of any such direct debit shall be given to Borrower by Lender not less frequently than monthly. In the event any direct debit hereunder is returned for insufficient funds, Borrower shall pay Lender upon demand, in immediately available funds, all amounts and expenses due and owing to Lender.

8. LATE CHARGE. If any interest or principal payment required hereunder is not received by Lender (whether by direct debit or otherwise) on or before the 15th calendar day of the month (regardless of whether the 15th day falls on a Saturday, Sunday or legal holiday) in which it becomes due, Borrower shall pay, at Lender’s option, a late or collection charge equal to 5% of the amount of such unpaid payment (“Late Charge”).

9. PREPAYMENT. Borrower may prepay the Loan in part or in full at any time but shall be liable to Lender for all amounts otherwise due and owing: (i) under the Loan Documents (including any LIBO Rate Price Adjustment which may be due for the early termination of a LIBO Rate fixing) and/or (ii) under any derivative contract(s) (including any early termination charges on an interest rate swap) associated with the Loan. Borrower acknowledges that any prepayment of the Loan shall cause Lender to lose its interest rate yield on the Loan and may cause Lender to have to reinvest the prepaid amount in loans with a lesser yield (including, without limitation, possibly in debt obligations other than first mortgage loans on commercial properties). As a consequence, Borrower understands and agrees that the foregoing condition of prepayment is an integral part of the consideration for Lender making the Loan or extension of the Maturity Date.

10. DEFAULT RATE. From and after the Maturity Date or such earlier date on which a Default exists under the Loan Agreement or any other Loan Document (as defined in Exhibit A), then at the option of Lender, all sums owing on this Note shall bear interest at a rate per annum equal to 5% in excess of the interest rate otherwise accruing under this Note (“Default Rate”).

11. ACCELERATION. If: (a) Borrower shall fail to pay when due any sums payable hereunder; or (b) a Default (as defined in the Mortgage ) occurs under the Mortgage or under any obligation secured thereby; THEN Lender may, at its sole option, declare all sums owing under this Note immediately due and payable; provided, however, that if any document related to this Note provides for automatic acceleration of payment of sums owing hereunder, all sums owing hereunder shall be automatically due and payable in accordance with the terms of that document.

12. JOINT AND SEVERAL LIABILITY. If this Note is executed by more than one (1) person or entity as Borrower, the obligations of each such person or entity shall be joint and several. No person or entity shall be a mere accommodation maker, but each shall be primarily and directly liable hereunder.

13. WAIVER. Except as otherwise provided, Borrower waives: presentment; demand; notice of dishonor; notice of default or delinquency; notice of acceleration; notice of protest and nonpayment; notice of costs, expenses or losses and interest thereon; notice of late charges; and diligence in taking any action to collect any sums owing under this Note or in proceeding against any of the rights or interests in or to properties securing payment of this Note.

14. TIME OF THE ESSENCE. Time is of the essence with respect to every provision hereof.

15. GOVERNING LAW. This Note was accepted by Lender in the State of California, which state the Parties agree has a substantial relationship to the Parties and to the underlying transaction embodied hereby. Accordingly, this Note shall be governed by, and construed and enforced in accordance with, the laws of the State of California, except to the extent preempted by federal laws.

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16. COMMERCIAL USE; MAXIMUM RATE PERMITTED BY LAW. Borrower hereby represents that this loan is for commercial use and not for personal, family or household purposes. It is the specific intent of the Borrower and Lender that this Note bear a lawful rate of interest, and if any court of competent jurisdiction should determine that the rate herein provided for exceeds that which is statutorily permitted for the type of transaction evidenced hereby, the interest rate shall be reduced to the highest rate permitted by applicable law, with any excess interest heretofore collected being applied against principal or, if such principal has been fully repaid, returned to Borrower on demand.

17. LENDER’S DAMAGES. Borrower recognizes that its default in making any payment as provided herein or in any other Loan Document as agreed to be paid when due, or the occurrence of any other Default hereunder or under any other Loan Document, will require Lender to incur additional expense in servicing and administering the Loan, in loss to Lender of the use of the money due and in frustration to Lender in meeting its other financial and loan commitments and that the damages caused thereby would be extremely difficult and impractical to ascertain. Borrower agrees (a) that an amount equal to the Late Charge plus the accrual of interest at the Default Rate is a reasonable estimate of the damage to Lender in the event of a late payment, and (b) that the accrual of interest at the Default Rate following any other Default is a reasonable estimate of the damage to Lender in the event of such other Default, regardless of whether there has been an acceleration of the loan evidenced hereby. Nothing in this Note shall be construed as an obligation on the part of Lender to accept, at any time, less than the full amount then due hereunder, or as a waiver or limitation of Lender’s right to compel prompt performance.

18. WAIVER OF RIGHT TO TRIAL BY JURY. BORROWER HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED UNDER APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS NOTE OR ANY OTHER LOAN DOCUMENT, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION HEREOF OR THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF BORROWER AND LENDER OR ANY OF THEM WITH RESPECT TO THIS NOTE OR ANY OTHER LOAN DOCUMENT (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND BORROWER HEREBY AGREES AND CONSENTS THAT LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF BORROWER TO THE WAIVER OF ANY RIGHT BORROWER MIGHT OTHERWISE HAVE TO TRIAL BY JURY.

19. EXHIBITS. All exhibits, schedules or other items attached hereto are incorporated into this Note by such attachment for all purposes.

[Signature page follows]

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IN WITNESS WHEREOF, this Note has been executed as of the date first above written.

BORROWER:

THE ACADEMY REAL ESTATE, LLC,

a Delaware limited liability company

By:	American Addiction Centers, Inc.,
	A Nevada corporation
	its sole member
	By:	/s/ Jerrod Menz
	Name:	Jerrod Menz
	Title:	CEO

4

EXHIBIT A

FIXED RATE AGREEMENT

Exhibit A to Promissory Note Secured by Mortgage (“Note”) made by THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company, as Borrower, to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION, as Lender.

RECITALS

Borrower has requested and Lender has agreed to provide the option to fix the rate of interest for specified periods on specified portions of the outstanding principal balance as a basis for calculating the Effective Rate on such portions of the principal amounts owing under this Note (the “One-Month LIBO Rate Option”). Borrower understands: (i) the process of exercising the One-Month LIBO Rate Option as provided herein; (ii) that amounts owing under this Note may bear interest at different rates and for different time periods; and (iii) that absent the terms and conditions hereof, it would be extremely difficult to calculate Lender’s additional costs, expenses, and damages in the event of a Default or prepayment by Borrower hereunder. Given the above, Borrower agrees that the provisions herein (including, without limitation, the One-Month LIBO Rate Price Adjustment defined below) provide for a reasonable and fair method for Lender to recover its additional costs, expenses and damages in the event of a Default or prepayment by Borrower.

1. RATES AND TERMS DEFINED. Various rates and terms not otherwise defined herein are defined and described as follows:

“Alternate Rate” is a rate of interest per annum 5% in excess of the applicable Effective Rate in effect from time to time.

“Business Day” is a day of the week (but not a Saturday, Sunday or holiday) on which the offices of Lender are open to the public for carrying on substantially all of Lender’s business functions.

“Effective Rate” is the rate of interest calculated in accordance with Section 2 below.

“Federal Funds Rate” is, for any period, a fluctuating interest rate per annum equal for each day during such period to the weighted average of the rates on overnight Federal Funds transactions with members of the Federal Reserve System arranged by Federal Funds brokers, as published for such day (or, if such day is not a Business Day, for the next preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such transactions received by Lender from three Federal Funds brokers of recognized standing selected by Lender.

“Loan Agreement” is that certain Loan Agreement dated as of the date hereof between Borrower and Lender.

“Loan Documents” are the documents defined as such in the Loan Agreement.

“One-Month LIBO Rate” is the rate of interest equal to the sum of: (a) 3.00% plus (b) the rate of interest, rounded upward to the nearest whole multiple of one-eighth of one percent (0.125%), that is quoted by Lender from time to time as the London InterBank Offered Rate for deposits in U.S. Dollars, at approximately 9:00 a.m. (California time), for a period of 1 month (“One-Month Rate”), which rate is divided by one (1.00) minus the Reserve Percentage. Any change in an Effective Rate due to a change in the One-Month LIBO Rate shall become effective on the day each such change occurs.

One-Month LI BO Rate = 3.00%	+	One-Month Rate
		(1 - Reserve Percentage)

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“One-Month LIBO Rate Period” is the period of 1 month from the fifteenth (15th) day of a calendar month (or, if such day is not a Business Day, on the next Business Day) to, but not including, the fifteenth (15th) day of the next calendar month (or, if such day is not a Business Day, on the next Business Day); provided, however, no One-Month LIBO Rate Period shall extend beyond the Maturity Date.

“One-Month LIBO Rate Portion” is the then outstanding principal balance of this Note which is subject to a One-Month LIBO Rate. In the event Borrower is subject to a principal amortization schedule under the terms and conditions of the Loan Documents, the One-Month LIBO Rate Portion shall in no event exceed the maximum outstanding principal balance which will be permissible on the Jast day of the One-Month LIBO Rate Period.

“One-Month Rate” is the rate of interest defined in the definition of “One-Month LIBO Rate” above.

“Regulatory Costs” are, collectively, future, supplemental, emergency or other changes in Reserve Percentages, assessment rates imposed by the FDIC, or similar requirements or costs imposed by any domestic or foreign governmental authority and related in any manner to a One-Month LIBO Rate.

“Replacement Rate” is, for any day, a fluctuating rate of interest equal to 3.00% plus the Federal Funds Rate plus 1.50%.

“Reserve Percentage” is at any time the percentage announced within Lender as the reserve percentage under Regulation D for loans and obligations making reference to a One-Month LIBO Rate. The Reserve Percentage shall be based on Regulation D or other regulations from time to time in effect concerning reserves for Eurocurrency Liabilities as defined in Regulation D from related institutions as though Lender were in a net borrowing position, as promulgated by the Board of Governors of the Federal Reserve System, or its successor.

“Taxes” are, collectively, all withholdings, interest equalization taxes, stamp taxes or other taxes (except income and franchise taxes) imposed by any domestic or foreign governmental authority and related in any manner to a One-Month LIBO Rate.

2. EFFECTIVE RATE. Provided no Default exists under this Note or under any other Loan Document, the “Effective Rate” upon which interest shall be calculated for this Note shall be one or more of the following:

2.1 Initial Disbursement; Subsequent Disbursements During Any Calendar Month. For the initial disbursement of principal under this Note, and for any subsequent disbursement of principal during any calendar month, the Effective Rate on such principal amount shall be the One-Month LIBO Rate on the date of disbursement as determined by Lender. Such Effective Rate shall apply to such principal amount from the date of disbursement through and including the date immediately preceding the fifteenth (15th) day of the next calendar month. On the fifteenth (15th) day of the next calendar month, any principal disbursed during the prior calendar month shall be added to (or become) the One-Month LIBO Rate Portion for purposes of calculation of the Effective Rate under Section 2.2 below. In the event that, for any determination made pursuant to this Section 2.1, the fifteenth (15th) day of a month is not a Business Day the relevant date shall be the next Business Day.

2.2 Monthly Reset of One-Month LIBO Rate. Commencing with the fifteenth (15th) day of the first (1st) calendar month after the initial disbursement of principal under this Note, and continuing thereafter on the fifteenth (15th) day of each succeeding calendar month, the Effective Rate on the outstanding One-Month L1BO Rate Portion under this Note (i.e., all outstanding principal on such fifteenth (15th) day of the month) shall be reset to the One-Month LIBO Rate, as determined by Lender on each such fifteenth (15th) day of the month.

Notwithstanding the above, Borrower, by written notice to Lender not less than 3 Business Days prior to the fifteenth (15th) day of any calendar month, may elect that the Effective Rate for all or

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any part of the outstanding principal balance on this Note for the One-Month LIBO Rate Period commencing on such fifteenth (15th) day of the month shall be the One-Month LIBO Rate, as determined by Lender, reset daily. Each such election shall apply only to a single One-Month LIBO Rate Period. If Borrower makes this election consecutively for more than a single One- Month LIBO Rate Period, or if Borrower makes this election for more than a total of 3 One-Month LIBO Rate Periods during the term of this Note, THEN, the Effective Rate for each such additional One-Month LIBO Rate Period shall be 0.25% plus the One-Month LIBO Rate as determined by Lender, reset daily.

In the event that, for any determination made pursuant to this Section 2.2, the fifteenth (15th) day of a month is not a Business Day the relevant date shall be the next Business Day.

2.3 Written Requests. Any written request by Borrower to Lender shall be delivered to Lender at the Minneapolis Loan Center, 608 2nd Ave South, 11th Floor, Minneapolis, MN 55402, with a copy to Lender at Carlsbad Regional Commercial Banking Office 5901 Priestly Drive, Suite 306, 3rd Floor, Carlsbad, CA 92008, MAC E2413-030, Attention: Marcus Di Fiore, or at such other place as may be designated in writing by Lender.

2.4 If One-Month LIBO Rate Becomes Unavailable. In the event the One-Month LIBO Rate, for any reason, should become prohibited or unavailable to Lender, or, if in Lender’s good faith judgment, it is not possible or practical for Lender to set a One-Month LIBO Rate, THEN, the Effective Rate shall be the Replacement Rate.

2.5. Post Maturity; Default Rate. From and after the Maturity Date or such earlier date on which a Default exists under the Loan Agreement or any other Loan Document, then at the option of Lender, all sums owing on this Note shall bear interest at a rate per annum equal to the Alternate Rate.

3. TAXES, REGULATORY COSTS AND RESERVE PERCENTAGES. Upon Lender’s demand, Borrower shall pay to Lender, in addition to all other amounts which may be, or become, due and payable under this Note and Loan Documents, any and all Taxes and Regulatory Costs, to the extent they are not internalized by calculation of an Effective Rate. Further, at Lender’s option, each Effective Rate shall be automatically adjusted by adjusting the Reserve Percentage, as determined by Lender in its prudent banking judgment, from the date of imposition (or subsequent date selected by Lender) of any such Regulatory Costs. Lender shall give Borrower notice of any Taxes and Regulatory Costs as soon as practicable after their occurrence, but Borrower shall be liable for any Taxes and Regulatory Costs regardless of whether or when notice is so given.

4. ONE-MONTH LIBO RATE PRICE ADJUSTMENT. Borrower acknowledges that prepayment or acceleration of a One-Month LIBO Rate Portion during a One-Month LIBO Rate Period shall result in Lender’s incurring additional costs, expenses and/or liabilities and that it is extremely difficult and impractical to ascertain the extent of such costs, expenses and/or liabilities. Therefore, on the date a One- Month LIBO Rate Portion is prepaid or the date all sums payable hereunder become due and payable, by acceleration or otherwise (“Price Adjustment Date”), Borrower will pay Lender (in addition to all other sums then owing to Lender) an amount (“One-Month LIBO Rate Price Adjustment”) equal to the then present value of (a) the amount of interest that would have accrued on the One-Month LIBO Rate Portion for the remainder of the One-Month LIBO Rate Period at the One-Month LIBO Rate set on the fifteenth (15th) day of the month in which such amount is prepaid or becomes due (or if such day is not a Business Day, the next Business Day), less (b) the amount of interest that would accrue on the same One-Month LIBO Rate Portion for the same period if the One-Month LIBO Rate were set on the Price Adjustment Date at the One-Month LIBO Rate in effect on the Price Adjustment Date. The present value shall be calculated by using as a discount rate the One-Month Rate quoted on the Price Adjustment Date.

By initialing this provision where indicated below, Borrower confirms that Lender’s agreement to make the loan evidenced by this Note at the interest rates and on the other terms set forth herein and in the other Loan Documents constitutes adequate and valuable consideration, given individual weight by Borrower, for this agreement.

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BORROWER INITIALS.             

5. PURCHASE, SALE AND MATCHING OF FUNDS. Borrower understands, agrees and acknowledges the following: (a) Lender has no obligation to purchase, sell and/or match funds in connection with the use of a One-Month Rate as a basis for calculating an Effective Rate or a One-Month LIBO Rate Price Adjustment; (b) a One-Month Rate is used merely as a reference in determining an Effective Rate or a One- Month LIBO Rate Price Adjustment; and (c) Borrower has accepted a One-Month Rate as a reasonable and fair basis for calculating an Effective Rate or a One-Month LIBO Rate Price Adjustment. Borrower further agrees to pay the One-Month LIBO Rate Price Adjustment, Taxes and Regulatory Costs, if any, whether or not Lender elects to purchase, sell and/or match funds.

6. MISCELLANEOUS. As used in this Exhibit, the plural shall mean the singular and the singular shall mean the plural as the context requires.

[Signature page follows.]

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This Exhibit is executed concurrently with and as part of the Note referred to and described first above.

BORROWER:

THE ACADEMY REAL ESTATE, LLC,

a Delaware limited liability company

By:	American Addiction Centers, Inc.,
	A Nevada corporation
	its sole member
	By:	/s/ Jerrod N. Menz
	Name:	Jerrod N. Menz
	Title:	Chief Executive Officer

9

EX-10

Exhibit 10.26

Loan No. 3327114701

REPAYMENT GUARANTY

(Secured Loan)

THIS REPAYMENT GUARANTY (“Guaranty”) is made, jointly and severally, as of May 10, 2013, by MICHAEL CARTWRIGHT, an individual (“Cartwright”), JERROD MENZ, an individual (“Menz”), and AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (“AAC” and, together with Cartwright and Menz collectively, “Guarantor”), in favor of WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”). The Guarantor and Lender are collectively referred to herein as the “Parties” and individually as a “Party.”

RECITALS:

A. Pursuant to the terms of a term loan agreement between THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company (“Borrower”), and Lender dated as of the date hereof (“Loan Agreement”), Lender has agreed to loan to Borrower the principal sum of THREE MILLION SIX HUNDRED SEVEN THOUSAND FIVE HUNDRED AND NO/IOOTHS DOLLARS ($3,607,500.00) (“Loan”) for the purposes specified in the Loan Agreement, said purposes relating to the real property and improvements described in the Loan Agreement (which real property and improvements are collectively referred to herein as the “Property”).

B. The Loan Agreement provides that the Loan shall be evidenced by a promissory note (“Note”) executed by Borrower payable to the order of Lender in the principal amount of the Loan and shall be secured by a Mortgage and Assignment (“Mortgage”), executed by Borrower, as mortgagor, to Lender, as mortgagee, to be recorded in the official records of Hillsborough County, Florida (“Official Records”) and by other security instruments, if any, specified in the Loan Agreement. The term “Loan Documents” for purposes hereof shall mean the Loan Agreement, the Mortgage, the Note and those other documents described in the Loan Agreement as Loan Documents.

THEREFORE, to induce Lender to enter into the Loan Agreement and to make the Loan, and in consideration thereof, Guarantor unconditionally guarantees and agrees as follows:

1. GUARANTY. Guarantor hereby guarantees and promises to pay to Lender or order, on demand, in lawful money of the United States, in immediately available funds, the principal sum of THREE MILLION SIX HUNDRED SEVEN THOUSAND FIVE HUNDRED AND NO/100THS DOLLARS ($3,607,500.00) or so much thereof as may be due and owing under the Note, any of the other Loan Documents or any swap, derivative, foreign exchange or hedge transaction or arrangement (or other similar transaction or arrangement howsoever described or defined) at any time entered into between Borrower and Lender in connection with the Note (collectively, “Swap Contract”), together with interest and any other sums payable under the Note, any of the other Loan Documents or any Swap Contract. Subject to Borrower’s satisfaction of the conditions set forth in Section 4.13 of the Mortgage, Cartwright and Menz shall be released from their obligations under this Guaranty to the extent such obligations first arise after the Listing Effective Date (as defined in Section 4.13 of the Mortgage).

2. REMEDIES. If Guarantor fails to promptly perform its obligations under this Guaranty, Lender may from time to time, and without first requiring performance by Borrower or exhausting any or all security for the Loan, bring any action at law or in equity or both to compel Guarantor to perform its obligations hereunder, and to collect in any such action compensation for all loss, cost, damage, injury and expense sustained or incurred by Lender as a direct or indirect consequence of the failure of Guarantor to perform its obligations together with interest thereon at the rate of interest applicable to the principal balance of the Note.

3. RIGHTS OF LENDER. Guarantor authorizes Lender, without giving notice to Guarantor or obtaining Guarantor’s consent and without affecting the liability of Guarantor, from time to time to: (a) renew or extend all or any portion of Borrower’s obligations under the Note or any of the other Loan Documents; (b) declare all sums owing to Lender under the Note and the other Loan Documents due and payable upon the occurrence of a Default (as defined in the Loan Agreement) under the Loan Documents; (c) make non-material

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changes in the dates specified for payments of any sums payable in periodic installments under the Note or any of the other Loan Documents; (d) otherwise modify the terms of any of the Loan Documents, except for (i) increases in the principal amount of the Note or changes in the manner by which interest rates, fees or charges are calculated under the Note and the other Loan Documents (Guarantor acknowledges that if the Note or other Loan Documents so provide, said interest rates, fees and charges may vary from time to time) or (ii) advancement of the Maturity Date of the Note where no Default has occurred under the Loan Documents; (e) take and hold security for the performance of Borrower’s obligations under the Note or the other Loan Documents and exchange, enforce, waive and release any such security; (f) apply such security and direct the order or manner of sale thereof as Lender in its discretion may determine; (g) release, substitute or add any one or more endorsers of the Note or guarantors of Borrower’s obligations under the Note or the other Loan Documents; (h) assign this Guaranty in whole or in part; and (i) assign, transfer or negotiate all or any part of the indebtedness guaranteed by this Guaranty.

4. GUARANTOR’S WAIVERS. Guarantor waives: (a) any defense based upon any legal disability or other defense of Borrower, any other guarantor or other person, or by reason of the cessation or limitation of the liability of Borrower from any cause other than full payment of all sums payable under the Note or any of the other Loan Documents; (b) any defense based upon any lack of authority of the officers, directors, partners or agents acting or purporting to act on behalf of Borrower or any principal of Borrower or any defect in the formation of Borrower or any principal of Borrower; (c) any defense based upon the application by Borrower of the proceeds of the Loan for purposes other than the purposes represented by Borrower to Lender or intended or understood by Lender or Guarantor; (d) any and all rights and defenses arising out of an election of remedies by Lender, even though that election of remedies, such as a nonjudicial foreclosure with respect to security for a guaranteed obligation, has destroyed Guarantor’s rights of subrogation and reimbursement against the principal by the operation of Section 580d of the California Code of Civil Procedure or otherwise; (e) any defense based upon Lender’s failure to disclose to Guarantor any information concerning Borrower’s financial condition or any other circumstances bearing on Borrower’s ability to pay all sums payable under the Note or any of the other Loan Documents; (f) any defense based upon any statute or rule of law which provides that the obligation of a surety must be neither larger in amount nor in any other respects more burdensome than that of a principal; (g) any defense based upon Lender’s election, in any proceeding instituted under the Federal Bankruptcy Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code or any successor statute; (h) any defense based upon any borrowing or any grant of a security interest under Section 364 of the Federal Bankruptcy Code; (i) any right of subrogation, any right to enforce any remedy which Lender may have against Borrower and any right to participate in, or benefit from, any security for the Note or the other Loan Documents now or hereafter held by Lender; (j) presentment, demand, protest and notice of any kind; and (k) the benefit of any statute of limitations affecting the liability of Guarantor hereunder or the enforcement hereof. Guarantor further waives any and all rights and defenses that Guarantor may have because Borrower’s debt is secured by real property; this means, among other things, that: (1) Lender may collect from Guarantor without first foreclosing on any real or personal property collateral pledged by Borrower; (2) if Lender forecloses on any real property collateral pledged by Borrower, then (A) the amount of the debt may be reduced only by the price for which that collateral is sold at the foreclosure sale, even if the collateral is worth more than the sale price, and (B) Lender may collect from Guarantor even if Lender, by foreclosing on the real property collateral, has destroyed any right Guarantor may have to collect from Borrower. The foregoing sentence is an unconditional and irrevocable waiver of any rights and defenses Guarantor may have because Borrower’s debt is secured by real property. These rights and defenses being waived by Guarantor include, but are not limited to, any rights or defenses based upon Section 580a, 580b, 580d or 726 of the California Code of Civil Procedure. Without limiting the generality of the foregoing or any other provision hereof, Guarantor further expressly waives to the extent permitted by law any and all rights and defenses, including without limitation any rights of subrogation, reimbursement, indemnification and contribution, which might otherwise be available to Guarantor under California Civil Code Sections 2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil Procedure Sections 580a, 580b, 580d and 726, or any of such sections. Finally, Guarantor agrees that the performance of any act or any payment which tolls any statute of limitations applicable to the Note or any of the other Loan Documents shall similarly operate to toll the statute of limitations applicable to Guarantor’s liability hereunder.

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5. GUARANTOR’S WARRANTIES. Guarantor warrants and acknowledges that: (a) Lender would not make the Loan but for this Guaranty; (b) Guarantor has reviewed all of the terms and provisions of the Loan Agreement and the other Loan Documents; (c) there are no conditions precedent to the effectiveness of this Guaranty; (d) Guarantor has established adequate means of obtaining from sources other than Lender, on a continuing basis, financial and other information pertaining to Borrower’s financial condition, the Property and Borrower’s activities relating thereto and the status of Borrower’s performance of obligations under the Loan Documents, and Guarantor agrees to keep adequately informed from such means of any facts, events or circumstances which might in any way affect Guarantor’s risks hereunder and Lender has made no representation to Guarantor as to any such matters; (e) the most recent financial statements of Guarantor previously delivered to Lender are true and correct in all respects, have been prepared in accordance with generally accepted accounting principles consistently applied (or other principles acceptable to Lender) and fairly present the financial condition of Guarantor as of the respective dates thereof, and no material adverse change has occurred in the financial condition of Guarantor since the respective dates thereof; and (f) Guarantor has not and will not, without the prior written consent of Lender, sell, lease, assign, encumber, hypothecate, transfer or otherwise dispose of all or substantially all of Guarantor’s assets, or any interest therein, other than in the ordinary course of Guarantor’s business. Notwithstanding the foregoing, the calculation of liabilities shall NOT include any fair value adjustments to the carrying value of liabilities to record such liabilities at fair value pursuant to electing the fair value option election under FASB ASC 825-10-25 (formerly known as FAS 159, The Fair Value Option for Financial Assets and Financial Liabilities) or other FASB standards allowing entities to elect fair value option for financial liabilities. Therefore, the amount of liabilities shall be the historical cost basis, which generally is the contractual amount owed adjusted for amortization or accretion of any premium or discount.

6. SUBORDINATION. Guarantor subordinates all present and future indebtedness owing by Borrower to Guarantor to the obligations at any time owing by Borrower to Lender under the Note and the other Loan Documents. Guarantor assigns all such indebtedness to Lender as security for this Guaranty, the Note and the other Loan Documents. Guarantor agrees to make no claim for such indebtedness until all obligations of Borrower under the Note and the other Loan Documents have been fully discharged. Guarantor further agrees not to assign all or any part of such indebtedness unless Lender is given prior notice and such assignment is expressly made subject to the terms of this Guaranty. If Lender so requests, (a) all instruments evidencing such indebtedness shall be duly endorsed and delivered to Lender, (b) all security for such indebtedness shall be duly assigned and delivered to Lender, (c) such indebtedness shall be enforced, collected and held by Guarantor as trustee for Lender and shall be paid over to Lender on account of the Loan but without reducing or affecting in any manner the liability of Guarantor under the other provisions of this Guaranty, and (d) Guarantor shall execute, file and record such documents and instruments and take such other action as Lender deems necessary or appropriate to perfect, preserve and enforce Lender’s rights in and to such indebtedness and any security therefor. If Guarantor fails to take any such action, Lender, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor. The foregoing power of attorney is coupled with an interest and cannot be revoked.

7. BANKRUPTCY OF BORROWER. In any bankruptcy or other proceeding in which the filing of claims is required by law, Guarantor shall file all claims which Guarantor may have against Borrower relating to any indebtedness of Borrower to Guarantor and shall assign to Lender all rights of Guarantor thereunder. If Guarantor does not file any such claim, Lender, as attorney-in-fact for Guarantor, is hereby authorized to do so in the name of Guarantor or, in Lender’s discretion, to assign the claim to a nominee and to cause proof of claim to be filed in the name of Lender’s nominee. The foregoing power of attorney is coupled with an interest and cannot be revoked. Lender or its nominee shall have the right, in its reasonable discretion, to accept or reject any plan proposed in such proceeding and to take any other action which a party filing a claim is entitled to do. In all such cases, whether in administration, bankruptcy or otherwise, the person or persons authorized to pay such claim shall pay to Lender the amount payable on such claim and, to the full extent necessary for that purpose, Guarantor hereby assigns to Lender all of Guarantor’s rights to any such payments or distributions; provided, however. Guarantor’s obligations hereunder shall not be satisfied except to the extent that Lender receives cash by reason of any such payment or distribution. If Lender receives anything hereunder other than cash, the same shall be held as collateral for amounts due under this Guaranty. If all or any portion of the obligations guaranteed hereunder are paid or

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performed, the obligations of Guarantor hereunder shall continue and shall remain in full force and effect in the event that all or any part of such payment or performance is avoided or recovered directly or indirectly from Lender as a preference, fraudulent transfer or otherwise under the Bankruptcy Code or other similar laws, irrespective of (a) any notice of revocation given by Guarantor prior to such avoidance or recovery, or (b) full payment and performance of all of the indebtedness and obligations evidenced and secured by the Loan Documents.

8. LOAN SALES AND PARTICIPATIONS; DISCLOSURE OF INFORMATION. Guarantor agrees that Lender may elect, at any time, to sell, assign, or grant participations in all or any portion of its rights and obligations under the Loan Documents and this Guaranty, and that any such sale, assignment or participation may be to one or more financial institutions, private investors, and/or other entities, at Lender’s sole discretion. Guarantor further agrees that Lender may disseminate to any such actual or potential purchaser(s), assignee(s) or participant(s) all documents and information (including, without limitation, all financial information) which has been or is hereafter provided to or known to Lender with respect to: (a) the Property and its operation; (b) any party connected with the Loan (including, without limitation, the Guarantor, the Borrower, any partner of Borrower, any constituent partner of Borrower, any other guarantor and any non- borrower trustor); and/or (c) any lending relationship other than the Loan which Lender may have with any party connected with the Loan. In the event of any such sale, assignment or participation, Lender and the parties to such transaction shall share in the rights and obligations of Lender as set forth in the Loan Documents only as and to the extent they agree among themselves. In connection with any such sale, assignment or participation, Guarantor further agrees that the Guaranty shall be sufficient evidence of the obligations of Guarantor to each purchaser, assignee, or participant, and upon written request by Lender, Guarantor shall consent to such amendments or modifications to the Loan Documents as may be reasonably required in order to evidence any such sale, assignment, or participation.

Anything in this Guaranty to the contrary notwithstanding, and without the need to comply with any of the formal or procedural requirements of this Guaranty, including this Section, Lender may at any time and from time to time pledge and assign all or any portion of its rights under all or any of the Loan Documents to a Federal Reserve Bank; provided that no such pledge or assignment shall release Lender from its obligations thereunder.

9. ADDITIONAL, INDEPENDENT AND UNSECURED OBLIGATIONS. This Guaranty is a continuing guaranty of payment and not of collection and cannot be revoked by Guarantor and shall continue to be effective with respect to any indebtedness referenced in Section 1 hereof arising or created after any attempted revocation hereof or after the death of Guarantor (if Guarantor is a natural person, in which event this Guaranty shall be binding upon Guarantor’s estate and Guarantor’s legal representatives and heirs). The obligations of Guarantor hereunder shall be in addition to and shall not limit or in any way affect the obligations of Guarantor under any other existing or future guaranties unless said other guaranties are expressly modified or revoked in writing. This Guaranty is independent of the obligations of Borrower under the Note, the Mortgage and the other Loan Documents. Lender may bring a separate action to enforce the provisions hereof against Guarantor without taking action against Borrower or any other party or joining Borrower or any other party as a party to such action. Except as otherwise provided in this Guaranty, this Guaranty is not secured and shall not be deemed to be secured by any security instrument unless such security instrument expressly recites that it secures this Guaranty.

10. ATTORNEYS’ FEES; ENFORCEMENT. If any attorney is engaged by Lender to enforce or defend any provision of this Guaranty, or any of the other Loan Documents, or as a consequence of any Default under the Loan Documents, with or without the filing of any legal action or proceeding, Guarantor shall pay to Lender, immediately upon demand all attorneys’ fees and costs incurred by Lender in connection therewith, together with interest thereon from the date of such demand until paid at the rate of interest applicable to the principal balance of the Note as specified therein.

11. RULES OF CONSTRUCTION. The word “Borrower” as used herein shall include both the named Borrower and any other person at any time assuming or otherwise becoming primarily liable for all or any part of the obligations of the named Borrower under the Note and the other Loan Documents. The term “person” as used herein shall include any individual, company, trust or other legal entity of any kind

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whatsoever. If this Guaranty is executed by more than one person, the term “Guarantor” shall include all such persons. When the context and construction so require, all words used in the singular herein shall be deemed to have been used in the plural and vice versa. All headings appearing in this Guaranty are for convenience only and shall be disregarded in construing this Guaranty.

12. CREDIT REPORTS. Each legal entity and individual obligated on this Guaranty hereby authorizes Lender to order and obtain, from a credit reporting agency of Lender’s choice, a third party credit report on such legal entity and individual.

13. GOVERNING LAW. This Guaranty was accepted by Lender in the State of California, which state the Parties agree has a substantial relationship to the Parties and to the underlying transaction embodied hereby. Accordingly, this Guaranty shall be governed by, and construed in accordance with, the laws of the State of California, except to the extent preempted by federal laws. Guarantor and all persons and entities in any manner obligated to Lender under this Guaranty consent to the jurisdiction of any federal or state court within the State of California having proper venue and also consent to service of process by any means authorized by California or federal law.

14. MISCELLANEOUS. The provisions of this Guaranty will bind and benefit the heirs, executors, administrators, legal representatives, nominees, successors and assigns of Guarantor and Lender. The liability of all persons and entities who are in any manner obligated hereunder shall be joint and several. If Guarantor is a natural person, this Guaranty shall be binding against Guarantor’s sole and separate property and the property now or hereafter owned by the marital community of Guarantor. If any provision of this Guaranty shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from this Guaranty and the remaining parts shall remain in full force as though the invalid, illegal or unenforceable portion had never been part of this Guaranty.

15. ADDITIONAL PROVISIONS. Such additional terms, covenants and conditions as may be set forth on any exhibit executed by Guarantor and attached hereto which recites that it is an exhibit to this Guaranty are incorporated herein by this reference.

16. ENFORCEABILITY. Guarantor hereby acknowledges that: (a) the obligations undertaken by Guarantor in this Guaranty are complex in nature, and (b) numerous possible defenses to the enforceability of these obligations may presently exist and/or may arise hereafter, and (c) as part of Lender’s consideration for entering into this transaction, Lender has specifically bargained for the waiver and relinquishment by Guarantor of all such defenses, and (d) Guarantor has had the opportunity to seek and receive legal advice from skilled legal counsel in the area of financial transactions of the type contemplated herein. Given all of the above, Guarantor does hereby represent and confirm to Lender that Guarantor is fully informed regarding, and that Guarantor does thoroughly understand: (i) the nature of all such possible defenses, and (ii) the circumstances under which such defenses may arise, and (iii) the benefits which such defenses might confer upon Guarantor, and (iv) the legal consequences to Guarantor of waiving such defenses. Guarantor acknowledges that Guarantor makes this Guaranty with the intent that this Guaranty and all of the informed waivers herein shall each and all be fully enforceable by Lender, and that Lender is induced to enter into this transaction in material reliance upon the presumed full enforceability thereof.

17. WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS GUARANTY, AND BY ITS ACCEPTANCE HEREOF, HEREBY EXPRESSLY WAIVES, TO THE FULLEST EXTENT NOW OR HEREAFTER PERMITTED UNDER APPLICABLE LAW, ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE LOAN DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE LOAN DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY AND LENDER HEREBY AGREES

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AND CONSENTS THAT ANY PARTY TO THIS GUARANTY AND LENDER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND LENDER TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.

18. NOTICES. All notices or demands that are required or permitted to be given or served hereunder shall be given in the manner provided in the Loan Agreement. Guarantor acknowledges that its address for notice shall be the address set forth below with its name. Guarantor may change its address from time to time by giving ten (10) days’ prior written notice to Lender.

19. COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of, each Party, or that the signature of all persons required to bind any Party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the Parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

20. ARBITRATION.

a. Arbitration. The Parties hereto agree, upon demand by any Party, to submit to binding arbitration all claims, disputes and controversies between or among them (and their respective employees, officers, directors, attorneys, and other agents), whether in tort, contract or otherwise, in any way arising out of or relating to this Guaranty and its negotiation, execution, collateralization, administration, repayment, modification, extension, substitution, formation, inducement, enforcement, default or termination.

b. Governing Rules. Any arbitration proceeding will (i) proceed in a location in California selected by the American Arbitration Association (“AAA”); (ii) be governed by the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the documents between the Parties; and (iii) be conducted by the AAA, or such other administrator as the Parties shall mutually agree upon, in accordance with the AAA’s commercial dispute resolution procedures, unless the claim or counterclaim is at least $1,000,000.00 exclusive of claimed interest, arbitration fees and costs in which case the arbitration shall be conducted in accordance with the AAA’s optional procedures for large, complex commercial disputes (the commercial dispute resolution procedures or the optional procedures for large, complex commercial disputes to be referred to herein, as applicable, as the “Rules”). If there is any inconsistency between the terms hereof and the Rules, the terms and procedures set forth herein shall control. Any Party who fails or refuses to submit to arbitration following a demand by any other Party shall bear all costs and expenses incurred by such other Party in compelling arbitration of any dispute. Nothing contained herein shall be deemed to be a waiver by any Party that is a bank of the protections afforded to it under 12 U.S.C. §91 or any similar applicable state law.

c. No Waiver of Provisional Remedies. Self-Help and Foreclosure. The arbitration requirement does not limit the right of any Party to (i) foreclose against real or personal property collateral; (ii) exercise self-help remedies relating to collateral or proceeds of collateral such as setoff or repossession; or (iii) obtain provisional or ancillary remedies such as replevin, injunctive relief, attachment or the appointment of a receiver, before during or after the pendency of any arbitration proceeding. This exclusion does not constitute a waiver of the right or obligation of any Party to submit any dispute to arbitration or reference hereunder, including those arising from the exercise of the actions detailed in sections (i), (ii) and (iii) of this paragraph.

d. Arbitrator Qualifications and Powers. Any arbitration proceeding in which the amount in controversy is $5,000,000.00 or less will be decided by a single arbitrator selected according to the Rules, and who shall not render an award of greater than $5,000,000.00. Any dispute in which the

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amount in controversy exceeds $5,000,000.00 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. Any arbitrator will be a neutral attorney licensed in the State of California or a neutral retired judge of the state or federal judiciary of California, in either case with a minimum of ten years experience in the substantive law applicable to the subject matter of the dispute to be arbitrated. The arbitrator(s) will determine whether or not an issue is arbitratable and will give effect to the statutes of limitation in determining any claim. In any arbitration proceeding the arbitrator(s) will decide (by documents only or with a hearing at the arbitrator’s(s’) discretion) any pre-hearing motions which are similar to motions to dismiss for failure to state a claim or motions for summary adjudication. The arbitrator(s) shall resolve all disputes in accordance with the substantive law of California and may grant any remedy or relief that a court of such state could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award. The arbitrator(s) shall also have the power to award recovery of all costs and fees, to impose sanctions and to take such other action as the arbitrator(s) deems necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction. The institution and maintenance of an action for judicial relief or pursuit of a provisional or ancillary remedy shall not constitute a waiver of the right of any Party, including the plaintiff, to submit the controversy or claim to arbitration if any other Party contests such action for judicial relief.

e. Discovery. In any arbitration proceeding, discovery will be permitted in accordance with the Rules. All discovery shall be expressly limited to matters relevant to the dispute being arbitrated and must be completed no later than 20 days before the hearing date. Any requests for an extension of the discovery periods, or any discovery disputes, will be subject to final determination by the arbitrator upon a showing that the request for discovery is essential for the Party’s presentation and that no alternative means for obtaining information is available.

f. Class Proceedings and Consolidations. No Party hereto shall be entitled to join or consolidate disputes by or against others in any arbitration, except Parties who have executed this Guaranty or any other contract, instrument or document relating to any Indebtedness, or to include in any arbitration any dispute as a representative or member of a class, or to act in any arbitration in the interest of the general public or in a private attorney general capacity.

g. Payment Of Arbitration Costs And Fees. The arbitrator shall award all costs and expenses of the arbitration proceeding.

h. Real Property Collateral; Judicial Reference. Notwithstanding anything herein to the contrary, no dispute shall be submitted to arbitration if the dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the Parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. If any such dispute is not submitted to arbitration, the dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA’s selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645.

i. Miscellaneous. To the maximum extent practicable, the AAA, the arbitrators and the Parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the dispute with the AAA. No arbitrator or other Party to an arbitration proceeding may disclose the existence, content or results thereof, except for disclosures of information by a Party required in

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the ordinary course of its business or by applicable law or regulation. If more than one agreement for arbitration by or between the Parties potentially applies to a dispute, the arbitration provision most directly related to the documents between the Parties or the subject matter of the dispute shall control. This arbitration provision shall survive termination, amendment or expiration of any of the documents or any relationship between the Parties.

j. Small Claims Court. Notwithstanding anything herein to the contrary, each Party retains the right to pursue in Small Claims Court any dispute within that court’s jurisdiction. Further, this arbitration provision shall apply only to disputes in which either Party seeks to recover an amount of money (excluding attorneys’ fees and costs) that exceeds the jurisdictional limit of the Small Claims Court.

(Signatures commence on the following page)

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IN WITNESS WHEREOF, Borrower and Lender have executed this Agreement as of the date appearing on the first page of this Agreement.

GUARANTOR:

AMERICAN ADDICTION CENTERS, INC.

A Nevada corporation

By:	/s/ Jerrod Menz
Name:	Jerrod Menz
Title:	CEO

Address for notices:

115 Eastpark Drive, Suite 100

Brentwood, TN 37027

/s/ Michael Cartwright

MICHAEL CARTWRIGHT, an individual

Address for notices:

115 Eastpark Drive, Suite 100

Brentwood, TN 37027

/s/ Jerrod Menz

JERROD MENZ, an individual

Address for notices:

115 Eastpark Drive, Suite 100

Brentwood, TN 37027

WELLS FARGO BANK, NATIONAL ASSOCIATION

Carlsbad Regional Commercial Banking Office

5901 Priestly Drive, Suite 306, 3rd FL

Carlsbad, CA 92008

MAC E2413-030

Attention: Marcus Di Fiore

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EX-10

Exhibit 10.27

MODIFICATION AGREEMENT

Loan No. 3327114701

THIS MODIFICATION AGREEMENT (“Agreement”) dated as of November 7, 2013 is entered into by and between WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”), and THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company (“Borrower”).

RECITALS

A. Pursuant to that certain Loan Agreement dated May 10, 2013 (“Loan Agreement”), Lender has made a loan to Borrower in the principal amount of THREE MILLION SIX HUNDRED SEVEN THOUSAND FIVE HUNDRED AND NO/IOOTHS DOLLARS ($3,607,500.00) (“Loan”). The Loan is evidenced by that certain Promissory Note Secured by Mortgage dated May 10, 2013 (“Note”). The Note is secured, in part, by that certain Mortgage and Assignment dated May 10, 2013, from Borrower in favor of Lender, which was recorded on May 13, 2013, in the public records of Hillsborough County, Florida (“Official Records”), as Instrument Number 2013186456 in Book 21874, Pages 1407-1424 (“Mortgage”), encumbering certain real property and improvements located in Hillsborough County, Florida (“Property”), as legally defined therein.

B. The outstanding principal balance of the Loan is $3,607,500.00.

C. In connection with the Loan, Michael Cartwright, an individual, Jerrod Menz, an individual, and American Addiction Centers, Inc., a Nevada corporation (collectively “Guarantor”), each guaranteed certain obligations of Borrower under the Note pursuant to a Repayment Guaranty, dated May 10, 2013 (“Guaranty”).

D. The Note, the Mortgage, the Guaranty, this Agreement, the other documents described in the Note as “Loan Documents”, together with all modifications and amendments thereto and any document required hereunder, are collectively referred to herein as the “Loan Documents”.

E. The Maturity Date (as defined in the Note) of the Loan is November 10, 2013. Borrower has requested that Lender agree to extend the Maturity Date to February 10, 2014. Lender is prepared to so extend the Maturity Date, subject to the terms and conditions set forth in this Agreement.

F. By this Agreement, Borrower and Lender intend to modify and amend certain terms and provisions of the Loan Documents.

NOW, THEREFORE, Borrower and Lender agree as follows:

1. RECITALS; DEFINED TERMS. The foregoing recitals arc incorporated herein by this reference and Borrower hereby acknowledges that such recitals are true and correct in all material respects. Capitalized terms used, but not otherwise defined, herein shall have the respective meanings set forth in the Loan Documents.

2. CONDITIONS PRECEDENT. The following are conditions precedent to Lender’s obligations under this Agreement:

2.1 Receipt by Lender of an executed original of this Agreement;

2.2 Guarantor shall have consented to the extension of the Maturity Date as provided in this Agreement and shall have reaffirmed its obligations under the Guaranty by each executing the Guarantor’s Consent attached hereto;

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2.3 Reimbursement to Lender by Borrower of Lender’s costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby, including, without limitation, reasonable attorneys’ fees, and documentation costs and charges, whether such services arc furnished by Lender’s employees or agents or by independent contractors;

2.4 No Default shall have occurred and be continuing;

2.5 The representations and warranties contained in this Agreement are true and correct; and

2.6 All payments due and owing to Lender under the Loan Documents have been paid current as of the effective date of this Agreement.

3. REPRESENTATIONS AND WARRANTIES. Borrower hereby represents and warrants that no breach or failure of condition has occurred, or would exist with notice or the lapse of time or both, under any of the Loan Documents (as modified by this Agreement) and that all representations and warranties herein and in the other Loan Documents arc true and correct, which representations and warranties shall survive execution of this Agreement.

4. MODIFICATION OF LOAN DOCUMENTS. The Loan Documents are hereby supplemented and modified to incorporate the following, which shall supersede and prevail over any conflicting provisions of the Loan Documents:

4.1 The Maturity Date of the Loan, as set forth in Section 1.3 of the Loan Agreement and in Section 5 of the Note, is hereby amended by deleting the reference therein to “November 10, 2013” and substituting therefor a reference to “February 10, 2014”. From and after the date of this Agreement, each reference in the Loan Documents to the “Maturity Date” shall be deemed to refer to February 10, 2014.

5. FORMATION AND ORGANIZATIONAL DOCUMENTS. Borrower has previously delivered to Lender all of the relevant formation and organizational documents of Borrower and of all guarantors of the Loan, and all such formation documents remain in full force and effect and have not been amended or modified since they were delivered to Lender. Borrower hereby certifies that: (i) the above documents are all of the relevant formation and organizational documents of Borrower; (ii) they remain in full force and effect; and (iii) they have not been amended or modified since they were previously delivered to Lender.

6. HAZARDOUS MATERIALS. Without in any way limiting any other provision of this Agreement, Borrower expressly reaffirms as of the date hereof, and continuing hereafter: (i) each and every representation and warranty in the Loan Documents respecting “Hazardous Materials”; and (ii) each and every covenant and indemnity in the Loan Documents respecting “Hazardous Materials”.

7. WAIVERS. In further consideration of Lender entering into this Agreement, Borrower waives, with respect to the Loan, any and all rights to which Borrower is or may be entitled pursuant to any anti deficiency or similar laws which limit, qualify or reduce Borrower’s obligations under the Loan Documents.

8. NON-IMPAIRMENT; RESERVATION OF RIGHTS. Except as expressly provided herein, nothing in this Agreement shall alter or affect any provision, condition, or covenant contained in the Note or other Loan Documents or affect or impair any rights, powers, or remedies of Lender, it being the intent of the parties hereto that the provisions of the Note and other Loan Documents shall continue unmodified and in full force and effect except as expressly modified hereby. Without limiting the generality of the foregoing. Lender’s agreement to extend the Maturity Date of the Loan as provided herein shall not constitute a waiver of Lender’s right to exercise its rights and remedies under the Guaranty, the Note, the Mortgage or the other Loan Documents.

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9. MISCELLANEOUS. This Agreement and the other Loan Documents shall be governed by and interpreted in accordance with the laws of the State of California, except if preempted by federal law. In any action brought or arising out of this Agreement or the Loan Documents, Borrower hereby consents to the jurisdiction of any federal or state court having proper venue within the State of California and also consent to the service of process by any means authorized by California or federal law. The headings used in this Agreement are for convenience only and shall be disregarded in interpreting the substantive provisions of this Agreement. All capitalized terms used herein, which are not defined herein, shall have the meanings given to them in the other Loan Documents. Time is of the essence of each term of the Loan Documents, including this Agreement. If any provision of this Agreement or any of the other Loan Documents shall be determined by a court of competent jurisdiction to be invalid, illegal or unenforceable, that portion shall be deemed severed from this Agreement and the remaining parts shall remain in full force as though the invalid, illegal, or unenforceable portion had never been a part thereof.

10. INTEGRATION; INTERPRETATION. The Loan Documents, including this Agreement, contain or expressly incorporate by reference the entire agreement of the parties with respect to the matters contemplated therein and supersede all prior negotiations or agreements, written or oral. The Loan Documents shall not be modified except by written instrument executed by all parties. Any reference to the Loan Documents includes any amendments, renewals or extensions now or hereafter approved by Lender in writing.

11. EXECUTION IN COUNTERPARTS. To facilitate execution, this document may be executed in as many counterparts as may be convenient or required. It shall not be necessary that the signature of, or on behalf of each party, or that the signature of all persons required to bind any party, appear on each counterpart. All counterparts shall collectively constitute a single document. It shall not be necessary in making proof of this document to produce or account for more than a single counterpart containing the respective signatures of, or on behalf of, each of the parties hereto. Any signature page to any counterpart may be detached from such counterpart without impairing the legal effect of the signatures thereon and thereafter attached to another counterpart identical thereto except having attached to it additional signature pages.

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IN WITNESS WHEREOF, Borrower and Lender have caused this Agreement to be duly executed as of the date first above written.

“BORROWER”

THE ACADEMY REAL ESTATE, LLC,

a Delaware limited liability company

By:	American Addiction Centers, Inc.,
	a Nevada corporation
	its sole member
	By:	/s/ Michael T. Cartwright
	Name:	Michael T. Cartwright
	Title:	CEO

“LENDER”

WELLS FARGO BANK, NATIONAL ASSOCIATION

By:	/s/ Marcus Di Fiore
Name:	Marcus Di Fiore
Title:	Vice President

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GUARANTOR’S CONSENT

Each of the undersigned (collectively, “Guarantor”), consents to the foregoing Modification Agreement and the transactions contemplated thereby, including, without limitation, the extension of the Maturity Date from November 10, 2013 to February 10, 2014 and each reaffirms his or its obligations under that certain Repayment Guaranty (“Guaranty”) dated as of May 10, 2013, and his or its waivers, as set forth in the Guaranty, of each and every one of the possible defenses to such obligations. Guarantor further reaffirms that his or its obligations under the Guaranty are separate and distinct from Borrower’s obligations.

Dated as of: November     , 2013

“GUARANTOR”

/s/ Michael T. Cartwright

MICHAEL CARTWRIGHT, an individual

/s/ Jerrod Menz

JERROD MENZ, an individual

AMERICAN ADDITION CENTERS, INC.,

a Nevada corporation

By:	/s/ Michael T. Cartwright
Name:	Michael T. Cartwright
Title:	CEO

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EX-10

Exhibit 10.28

CONSENT AND AMENDMENT TO LOAN AGREEMENT AND NOTE

THIS CONSENT AND AMENDMENT TO LOAN AGREEMENT AND NOTE (this “Agreement”) is entered into as of April 15, 2014 (the “Effective Date”), by and among THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company (“Borrower”), MICHAEL T. CARTWRIGHT (“Cartwright”), JERROD N. MENZ (“Menz”), AMERICAN ADDICTION CENTERS, INC., a Nevada corporation (“AAC”), BEHAVIORAL HEALTHCARE REALTY, LLC, a Delaware limited liability company (“BHR” and, together with AAC, Cartwright and Menz, each a “Guarantor” and collectively “Guarantors”), and WELLS FARGO BANK, NATIONAL ASSOCIATION (“Lender”).

R E C I T A L S

WHEREAS, Borrower and Guarantors are hereinafter collectively called the “Borrower Parties”;

WHEREAS, Lender made a loan to Borrower, in the amount of $3,607,000.00 (the “Loan”), and in connection with the Loan, Borrower executed and delivered to Lender that certain Promissory Note Secured by Mortgage (the “Note”) dated May 10, 2013, as amended by the Modification Agreement thereto, dated as of November 7, 2013 (the “Modification Agreement”), payable to the order of Lender in the original principal sum of $3,607,000.00, with interest and principal payable as therein provided.

WHEREAS, the payment of the Note is secured or further evidenced, inter alia, by:

(i) that certain Loan Agreement dated May 10, 2013 by and between Borrower and Lender, as amended by the Modification Agreement (“Loan Agreement”); and

(ii) that certain Mortgage and Assignment (“Mortgage”) of even date therewith, recorded under Instrument # 2013186456 with the Clerk of the Circuit Court For Hillsborough County, Florida (the “Records”), encumbering certain real and personal property described therein (the “Property”);

(iii) that certain Repayment Guaranty of even date therewith executed by Guarantors in favor of Lender, as amended by the Amendment and Joinder (as defined below) (the “Guaranty”); and

(iv) certain other Loan Documents.

WHEREAS, as of the Effective Date, Cartwright, Menz and Kirk Manz will transfer of all of the common equity interests of BHR to AAC Holdings, Inc. (“AACH”) (collectively, the “Initial BHR Equity Transfer”), and thereafter (i) AACH will transfer of all of the common equity interests of BHR from AAC Holdings, Inc. to AAC, (ii) a merger sub that is 100% owned by AACH will merge with and into AAC pursuant to which AAC will become a direct wholly owned subsidiary of AACH and (iii) AAC may convert from a corporation into a limited liability company or other limited liability entity (collectively, the “Subsequent BHR Transactions”, and together with the Initial BHR Equity Transfer, the “Approved Transactions”), provided that the Subsequent BHR Transactions shall be consummated on or prior to March 31, 2015 and Borrower will notify Lender in writing promptly (but, in any event within thirty (30) days) after the consummation of the Subsequent BHR Transactions.

WHEREAS, BHR is and shall remain the sole member of Borrower and, upon the effectiveness of the Approved Transactions, the ownership structure of Borrower shall be as set forth on Exhibit A attached hereto and incorporated herein by reference;

WHEREAS, Borrower Parties have requested Lender’s consent to the Approved Transactions and the extension of the Maturity Date to July 14, 2014, and Lender is willing to so consent upon compliance with the terms and provisions of this Agreement;

WHEREAS, Lender is the owner and holder of the Note and Borrower is the owner of the legal and equitable title to the Property;

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NOW, THEREFORE, for and in consideration of Ten Dollars ($10.00), the matters set forth in the foregoing recitals, the estoppels, certifications, warranties, covenants and agreements set forth below, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the parties, the parties hereto agree as follows:

1. Defined Terms; Interpretation. All capitalized terms used in this Agreement (including in the recitals hereof) and not otherwise defined herein shall have the meanings assigned to them in the Loan Agreement.

2. Consent to Approved Transactions. Lender hereby approves and consents to the Approved Transactions; provided that (i) the Initial BHR Equity Transfer shall be consummated on or prior to the Effective Date and (ii) the Subsequent BHR Transactions shall be consummated on or prior to March 31, 2015 and Borrower shall notify Lender in writing promptly (but, in any event within thirty (30) days) after the consummation of the Subsequent BHR Transactions. Lender acknowledges and agrees that, notwithstanding any provision in the Loan Documents to the contrary, the Approved Transactions shall not constitute a default under the Mortgage or the other Loan Documents. Lender’s acknowledgment shall not be construed as a consent to any subsequent transfer which requires Lender’s consent pursuant to the terms of the Loan Documents.

3. Amendments to Loan Agreement.

(a) All references in the Loan Agreement and other Loan Documents to a Guarantor or Guarantors or a Indemnitor or Indemnitors shall refer to each of the Guarantors referred to in this Agreement, including BHR, and each of the Repayment Guaranty and the Unsecured Hazardous Materials Indemnity Agreement delivered by the Guarantors (including BHR) shall for all purposes constitute a Loan Document. In connection with this Agreement, (i) the Guarantors shall deliver an Amendment and Joinder to Repayment Guaranty and Hazardous Materials Indemnity Agreement, dated as of the Effective Date, to Lender (the “Amendment and Joinder”) and (ii) BHR shall deliver a Limited Liability Company Certificate Authorizing Limited Liability Company Activity and Execution of Guaranty and Indemnity to Lender.

(b) Section 6.9 of the Loan Agreement is hereby amended and restated to read in its entirety as follows:

“6.9 DERIVATIVE DOCUMENTS.

On or prior to December 31, 2014, Borrower shall enter into an interest rate swap transaction with Lender or with another counterparty reasonably acceptable to Lender (such transaction, together with all documents and agreements relating thereto, including any ISDA Master Agreement, Schedule and/or Confirmation, together with all modifications, extensions, renewals and replacement thereof, is hereinafter referred to as the “Swap Contract”) to cover a notional amount of not less than 100% of the outstanding principal amount of the Loan for the full term of the Loan and shall maintain in full force and effect such Swap Contract for the full term of the Loan.”

(c) Section 8.1(k) of the Loan Agreement is hereby amended by inserting the following at the end thereof:

“, or any Disqualified Equity Interests of Borrower, any Guarantor or any of their respective subsidiaries shall be payable or otherwise be required to be paid (if the required payments exceed in the aggregate $500,000) or an event of default (if the outstanding amount of such Disqualified Equity Interests exceeds $500,000) thereunder shall occur. As used herein, the term “Disqualified Equity Interests” means any equity interest that, by its terms (or by the terms of any security or other equity interests into which it is convertible or for which it is exchangeable), or upon the happening of any event or condition (i) matures or is mandatorily redeemable (other than solely for Qualified

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Equity Interests), pursuant to a sinking fund obligation or otherwise (except as a result of a change of control or asset sale so long as any rights of the holders thereof upon the occurrence of a change of control or asset sale event shall be subject to the prior repayment in full of the Loan), (ii) is redeemable at the option of the holder thereof (other than solely for Qualified Equity Interests), in whole or in part, (iii) provides for the scheduled payments of dividends in cash, or (iv) is or becomes convertible into or exchangeable for indebtedness or any other equity interests that would constitute Disqualified Equity Interests, in each case, prior to the date that is 180 days after the latest maturity date of the Loan; and the term “Qualified Equity Interests” means any equity interests issued by AAC Holdings, Inc., a Nevada corporation (“Holdings”), (and not by any of its subsidiaries) that is not a Disqualified Equity Interest.”

(d) Exhibit B (Documents) to the Loan Agreement is hereby amended by including item 2.1 (Repayment guaranty executed by Guarantor in favor of Lender) and item 2.2 (Unsecured Hazardous Materials Indemnity Agreement executed by Guarantor in favor of Lender) in the definition of “Loan Documents”.

4. Extension of Maturity Date. The Maturity Date of the Loan, as set forth in Section 1.3 of the Loan Agreement and in Section 5 of the Note, is hereby amended by deleting the reference therein to “February 10, 2014” and substituting therefor a reference to “July 14, 2014”. From and after the date of this Agreement, each reference in the Loan Documents to the “Maturity Date” shall be deemed to refer to July 14, 2014.

5. Representations, Warranties and Covenants of the Borrower Parties. The Borrower Parties hereby represent, warrant, certify and covenant to Lender that:

(a) The Borrower Parties understand and hereby acknowledge all of the terms and provisions of the Loan Documents.

(b) Each person executing this Agreement as a representative of the Borrower Parties has been duly authorized and has full power to execute and deliver this Agreement on behalf of the Borrower Parties and to bind the Borrower Parties to the terms and conditions hereof and thereof.

(c) The representations, warranties and certifications set forth herein are given with the knowledge that Lender will rely upon the truth of the statements made herein.

(d) To the knowledge of Borrower Parties, no Default exists under any of the Loan Documents and no condition or event has occurred and is continuing which after notice and/or the lapse of time would constitute a Default under the Loan Documents.

(e) This Agreement constitutes the legal, valid and binding obligations of the Borrower Parties, as applicable, enforceable in accordance with their terms.

(f) The execution and delivery of, and performance under this Agreement are within the Borrower Parties’ power and authority without the joinder or consent of any other party and have been duly authorized by all requisite action and are not in contravention of law or the Borrower Parties’ respective organizational agreement(s), or any indenture, agreement or undertaking to which any of the Borrower Parties is a party or by which any of them is bound.

6. Further Assurances. The Borrower Parties, upon request from Lender, agree to execute such other and further documents as may be reasonably necessary or appropriate to consummate the transactions contemplated herein or to perfect the liens and security interests intended to secure the payment of the Loan.

7. Effect of Amendment; Other Provisions Unchanged. On and after the Effective Date, each reference in the Loan Agreement to “this Agreement”, “hereunder”, “hereof”, “herein” or words of like import referring to the Loan Agreement, and each reference in the other Loan Documents to the “Loan Agreement”, “thereunder”, “thereof” or words of like import referring to the Loan Agreement shall mean and be a reference to the Loan Agreement, as amended by this Agreement. On and after the Effective Date, each reference in the Note to “this Note”, “hereunder”, “hereof’, “herein” or words of like import referring to the Note, and each reference in the other Loan Documents to the “Note”, “thereunder”, “thereof” or words of like import referring to the Note shall mean and be a reference to the Note, as amended by this Agreement. Except as specifically provided herein, the terms and provisions of the Loan Documents shall remain unchanged and shall remain in full force and effect. In particular, this Agreement shall each be construed as a Loan Documents.

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8. Lien Status. Borrower hereby acknowledges and agrees that all liens, security interests, mortgages and assignments granted or created by or existing under the Deeds of Trust and the other Loan Documents remain unchanged and continue, unabated, in full force and effect, to secure Borrower’s obligation to repay the Note.

9. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all parties hereto had signed the same document. All such counterparts shall be construed together and shall constitute one instrument, but in making proof hereof it shall only be necessary to produce one such counterpart.

10. Severability of Provisions. If any covenant, condition, or provision herein contained is held to be invalid by final judgment of any court of competent jurisdiction, the invalidity of such covenant, condition, or provision shall not in any way affect any other covenant, condition or provision herein contained.

11. Time of the Essence. It is expressly agreed by the parties hereto that time is of the essence with respect to this Agreement.

12. Representation by Counsel. The parties acknowledge and confirm that each of their respective attorneys has participated jointly in the review and revision of this Agreement and that it has not been written solely by counsel for one party. The parties hereto therefore stipulate and agree that the rule of construction to the effect that any ambiguities are to or may be resolved against the drafting party shall not be employed in the interpretation of this Agreement to favor either party against the other.

13. Successors and Assigns. The terms and provisions hereof shall be binding upon and inure to the benefit of the parties hereto, their heirs, personal representatives, successors and assigns, including, each other person or entity which holds or which may hereafter hold an interest in any of the Loan Documents and any person or entity which acquires all or any part of the Property including by purchase of the Property at a foreclosure sale or by acceptance of a deed in lieu of foreclosure.

14. Paragraph Headings. The paragraph headings set forth in this Agreement are for the convenience of the parties only, and shall in no way enlarge or limit the scope or meaning of the various and several paragraphs in this Agreement.

15. Governing Law. This Agreement and the rights and duties of the parties hereunder shall be governed for all purposes by the law of the State of California and the law of the United States applicable to transactions within said State.

16. Reaffirmation. Each of the Guarantors hereby acknowledges and agrees that the Guaranty and the other Loan Documents to which it is a party shall continue in full force and effect and that all of its obligations thereunder shall be valid and enforceable and shall not be impaired or limited by the execution or effectiveness of this Agreement. Each Guarantor acknowledges and agrees that (i) such Guarantor is not required by the terms of the Loan Agreement or any other Loan Document to consent to the amendments to the Loan Agreement effected pursuant to this Agreement and (ii) nothing in the Loan Agreement, this Agreement or any other Loan Document shall be deemed to require the consent of such Guarantor to any future amendments to the Loan Agreement. The Borrower and the Guarantors hereby confirm that the Maturity Date of the Loan is July 14, 2014.

17. General Release.

(a) Effective on the date hereof, each Borrower Party, for itself and on behalf of its successors, assigns, and officers, directors, employees, agents and attorneys, and any Person acting for or on behalf of, or claiming through it, hereby waives, releases, remises and forever discharges Lender, each of its Affiliates, and each of its successors in title, past, present and future officers, directors, employees, limited partners, general partners, investors, attorneys, assigns, subsidiaries, shareholders, trustees, agents

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and other professionals and all other Persons to whom any member of the Lender would be liable if such Persons were found to be liable to such Borrower Party (each a “Releasee” and collectively, the “Releasees”), from any and all past, present and future claims, suits, liens, lawsuits, adverse consequences, amounts paid in settlement, debts, deficiencies, diminution in value, disbursements, demands, obligations, liabilities, causes of action, damages, losses, costs and expenses of any kind or character, whether based in equity, law, contract, tort, implied or express warranty, strict liability, criminal or civil statute or common law (each a “Claim” and collectively, the “Claims”), whether known or unknown, fixed or contingent, direct, indirect, or derivative, asserted or unasserted, matured or unmatured, foreseen or unforseen, past or present, liquidated or unliquidated, suspected or unsuspected, which such Borrower Party ever had from the beginning of the world to the date hereof, now has, or might hereafter have against any such Releasee which relates, directly or indirectly to the Loan Agreement, any other Loan Document, or to any acts or omissions of any such Releasee with respect to the Loan Agreement or any other Loan Document, or to the lender-borrower relationship evidenced by the Loan Documents. As to each and every Claim released hereunder, each Borrower Party hereby represents that it has received the advice of legal counsel with regard to the releases contained herein, and having been so advised, specifically waives the benefit of the provisions of Section 1542 of the Civil Code of California which provides as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH A CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER, MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR”

As to each and every Claim released hereunder, each Borrower Party also waives the benefit of each other similar provision of applicable federal or state law (including without limitation the laws of the state of California), if any, pertaining to general releases after having been advised by its legal counsel with respect thereto.

Each Borrower Party acknowledges that it may hereafter discover facts different from or in addition to those now known or believed to be true with respect to such Claims and agrees that this instrument shall be and remain effective in all respects notwithstanding any such differences or additional facts. Each Borrower Party understands, acknowledges and agrees that the release set forth above may be pleaded as a full and complete defense and may be used as a basis for an injunction against any action, suit or other proceeding which may be instituted, prosecuted or attempted in breach of the provisions of such release.

(b) Each Borrower Party, for itself and on behalf of its successors, assigns, and officers, directors, employees, agents and attorneys, and any Person acting for or on behalf of, or claiming through it, hereby absolutely, unconditionally and irrevocably, covenants and agrees with and in favor of each Releasee above that it will not sue (at law, in equity, in any regulatory proceeding or otherwise) any Releasee on the basis of any Claim released, remised and discharged by such Person pursuant to the above release. Each Borrower Party further agrees that it shall not dispute the validity or enforceability of the Loan Agreement or any of the other Loan Documents or any of its obligations thereunder, or the validity, priority, enforceability or the extent of Lender’s lien on any item of collateral under the Loan Agreement or the other Loan Documents. If any Borrower Party or any of their respective successors, assigns, or officers, directors, employees, agents or attorneys, or any Person acting for or on behalf of, or claiming through it violate the foregoing covenant, such Person, for itself and its successors, assigns and legal representatives, agrees to pay, in addition to such other damages as any Releasee may sustain as a result of such violation, all attorneys’ fees and costs incurred by such Releasee as a result of such violation.

[Remainder of Page Intentionally Left Blank. Signature Page Follows.]

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IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to be executed as of the Effective Date.

BORROWER:
THE ACADEMY REAL ESTATE, LLC, a Delaware limited liability company
By:	AMERICAN ADDICTION CENTERS, INC., its sole member
	By:	/s/ Jerrod N. Menz
	Name:	Jerrod N. Menz
	Title:	President

GUARANTORS:

/s/ Michael T. Cartwright

MICHAEL T. CARTWRIGHT

/s/ Jerrod N. Menz

JERROD N. MENZ

AMERICAN ADDICTION CENTERS. INC., a Nevada corporation
By:	/s/ Jerrod N. Menz
Name:	Jerrod N. Menz
Title:	President

BEHAVIORAL HEALTHCARE REALTY, LLC, a Delaware limited liability company
By:	/s/ Michael T. Cartwright
Name:	Michael T. Cartwright
Title:	Manager

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LENDER:
WELLS FARGO BANK, NATIONAL ASSOCIATION
By:	/s/ Alan Prohaska
Name:	Alan Prohaska
Title:	VP

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EXHIBIT A

POST-TRANSACTION STRUCTURE

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EX-10

Exhibit 10.30

EXECUTION COPY

LICENSE AGREEMENT

This License Agreement (this “Agreement”) is made and entered into this 31st day of August 2012 by and between AJG Solutions, Inc., a Florida corporation (“Licensor”), and American Addiction Centers, Inc. f/k/a Forterus, Inc., a Nevada corporation (“Licensee”).

W I T N E S S E T H:

WHEREAS, Licensor and Licensee have entered into that certain Asset Purchase Agreement, dated as of August 31, 2012 (the “Purchase Agreement”) pursuant to which Licensee acquired from Licensor, certain assets which were used in the operation of Licensor’s business which Licensee intends to operate on and after the date hereof;

WHEREAS, all capitalized, but undefined terms contained in this Agreement shall have the meanings as set forth in the Purchase Agreement; and

WHEREAS, pursuant to the Purchase Agreement, Licensor agreed to grant Licensee an exclusive royalty free license to use the name “Treatment Solutions” and “Treatment Solutions Network” and derivatives thereof, including abbreviations (the “Marks”) in accordance with the terms of this Agreement.

WHEREAS, pursuant to the Purchase Agreement, Licensor agreed to grant Licensee an exclusive royalty free license to use the telephone numbers set forth on Exhibit B hereto in conjunction with the Marks (the “Telephone Numbers”) in accordance with the terms of this Agreement.

NOW, THEREFORE, in consideration of the foregoing recitals, the promises, covenants and agreements hereinafter set forth, the inducement of Licensee to enter into the Purchase Agreement and to consummate the transactions described in and contemplated by the Purchase Agreement, and other good and valuable consideration, the receipt and sufficiency of such consideration is hereby acknowledged by the parties to this Agreement, Licensor and Licensee hereby agree as follows:

l. Grant of Rights. Licensor hereby grants to Licensee the fully paid, exclusive right and license to use the Marks and Telephone Numbers in connection with Licensee’s operation of the assets purchased by Licensee pursuant to the Purchase Agreement. In addition, Licensor hereby grants to Licensee the fully paid, exclusive right and license to use the domain names listed on Exhibit A attached hereto (the “Domain Names” and collectively, with the Marks and the Telephone Numbers, the “License”).

2. Term. This Agreement shall commence on the date first written above and shall continue in effect, unless terminated as provided herein, for three (3) years following the date hereof (the “Term”). If upon the completion of the Term, there shall be no uncured non-payment for any reason, whether by default or not, under the Subordinated Promissory Note issued by Licensee to James D. Bevell or Michael Blackburn under the Purchase Agreement, the Purchase Agreement or the employment agreements with James Bevell or Michael Blackburn executed in

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connection with the Purchase Agreement (collectively the “Transaction Agreements”) of which Licensee has been given written notice and a thirty (30) day opportunity to cure, the License provided for herein shall be converted to an assignment of all right, title and interest in and to the Marks and the Domain Names from Licensor to Licensee. If during the Term, there is an uncured non-payment for any reason, whether by default or not, under the Transaction Agreements that has not been cured within thirty (30) days of written notice to Licensee, Licensor may terminate the License upon written notice to Licensee and all rights of Licensee under this Agreement shall cease; provided, however, if the non-payment under the Subordinated Promissory Note issued by Licensee to James D. Bevell or Michael Blackburn under the Purchase Agreement is due to a prohibition imposed by the terms of any Senior Secured Bank Debt as defined in that agreement, the cure period for such breach shall be extended to ninety (90) days from written notice to Licensee.

3. Representations and Warranties of Licensor. Licensor represents and warrants to Licensee as follows:

a. Licensor has the full power, authority and capacity, as the case may be, to enter into and perform its obligations under this Agreement.

b. This Agreement is a valid and binding obligation of Licensor, enforceable against Licensor in accordance with its terms.

c. Licensor’s execution and performance under this Agreement is not and will not be prohibited by, and does not and will not cause a breach of, any agreement or understanding to which Licensor is a party or judgment or judicial or administrative order to which Licensor is subject.

d. Licensor’s performance under this Agreement will be in compliance with all applicable laws, ordinances and regulations.

4. Representations and Warranties of Licensee.

a. Licensee has the full power, authority and capacity, as the case may be, to enter into and perform its obligations under this Agreement.

b. This Agreement is a valid and binding obligation of Licensee, enforceable against Licensor in accordance with its terms.

c. Licensee’s execution and performance under this Agreement is not and will not be prohibited by, and does not and will not cause a breach of, any agreement or understanding to which Licensor is a party or judgment or judicial or administrative order to which Licensee is subject.

d. Licensee’s performance under this Agreement will be in compliance with all applicable laws, ordinances and regulations.

2

5. Protection and Use of the Marks.

a. During the Term, Licensee may prosecute any claim for infringement of the Marks, or any mark confusingly similar to the Marks. Licensor will immediately report to Licensee any information of which Licensor may become aware regarding any infringement of the Marks and will provide Licensee, at Licensee’s sole cost and expense, with such reasonable assistance as Licensee may reasonably request in order to prevent or enjoin such infringement or recover damages arising therefrom.

b. Licensor agrees that all uses of the Marks by Licensee and goodwill established thereby shall inure to the benefit of Licensee, subject to the terms and conditions of this Agreement.

6. Indemnification.

a. Licensee’s Indemnification. Licensee agrees to defend, indemnify and hold Licensor, its officers, directors, shareholders, employees, legal representatives, successors and assigns harmless of, from and against any loss, claim, damage, liability, penalty or other cost or expense (including reasonable attorneys’ fees) incurred or sustained at any time by any of them on account of or relating to any service rendered by Licensee under or in connection with the Marks or the breach by Licensee of any of its representations, warranties, covenants, duties or obligations under this Agreement.

b. Licensor’s Indemnification. Licensor agrees to defend, indemnify and hold Licensee, its officers, directors, shareholders, employees, legal representatives, successors and assigns harmless of, from and against any loss, claim, damage, liability, penalty or other cost or expense (including reasonable attorneys’ fees) incurred or sustained at any time by any of them on account of or relating to any claims that the Marks infringe the intellectual property rights of any third party or the breach by Licensor of any of its representations, warranties, covenants, duties or obligations under this Agreement. This indemnity is subject to the limitations on indemnification set forth in Section 11.4 of the Purchase Agreement.

7. Relationship of the Parties. Nothing in this Agreement shall be construed to create or constitute a partnership, joint venture, or any other agency or employment relationship between the parties hereto.

8. Miscellaneous.

a. Binding Effect; No Third Party Beneficiaries. This Agreement will be binding upon and inure to the benefit of Licensor and Licensee, and their respective legal representatives, successors and permitted assigns, if any. This Agreement is for the benefit of Licensor and Licensee only, and no person or entity will be deemed a third-party beneficiary of this Agreement.

b. No Assignment by Licensor. This Agreement may not be assigned by Licensor without the prior written consent of Licensee, which consent may be withheld at Licensee’s sole discretion.

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c. Notices. All notices and other communications required or desired to be given pursuant to this Agreement will be given in writing and will be deemed duly given upon personal delivery, or on the third day after mailing if sent by registered or certified mail, postage prepaid, return receipt requested, or on the day after mailing if sent by a nationally recognized overnight delivery service which maintains records of the time, place and recipient of delivery:

If to Licensor, then to:	If to Licensee, then to:
AJG Solutions, Inc.	American Addiction Centers, Inc.
2601 East Oakland Park Blvd., Suite 404	115 East Park Drive, Suite 100
Ft. Lauderdale, FL 33306	Brentwood, TN 37027
Attn: James D. Bevell, Jr.	Attn: Michael Cartwright

or to such other person, entity, address or facsimile number as a party may respectively designate in like manner, from time to time.

d. Amendments. No modifications or amendments of this Agreement will be effective unless made in writing and signed by Licensor and Licensee.

e. Governing Law. This Agreement is delivered and is intended to be performed in the State of Tennessee and will be construed and enforced in accordance with the laws of the State of Tennessee.

f. Counterparts. This Agreement may be executed in multiple counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument.

g. Entire Agreement. This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes any and all prior and contemporaneous agreements and understandings between the parties hereto relating to the subject matter hereof, whether verbal or written. No statement, representation, warranty, covenant, indemnity or agreement of any kind not expressly set forth in this Agreement will affect, or be used to interpret, change or restrict, the express terms and provisions of this Agreement.

h. Waivers and Consents. The terms and provisions of this Agreement may be waived, or consent for the departure therefrom granted, only by the written agreement of the party entitled to the benefits of such terms or provisions intended to be waived. Each such waiver or consent will be effective only in the specific instance and for the specific purpose for which it was given, and will not constitute a continuing waiver or consent.

i. Headings and Captions. The headings and captions of the various Sections and subparagraphs of this Agreement are for convenience or reference only and will in no way modify or affect the meaning or construction of any of the terms or provisions hereof.

j. Recitals. The recitals set forth at the beginning of this Agreement are hereby incorporated into and made a part of this Agreement as if fully set forth herein.

[Signature page immediately follows]

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IN WITNESS WHEREOF, Licensor and Licensee have each duly executed this Agreement as of the date first set forth above.

LICENSOR:		LICENSEE:
AJG SOLUTIONS, INC.		AMERICAN ADDICTION CENTERS. INC.
By:	/s/ Jerrod N. Menz	By:	/s/ Jerrod N. Menz
Title:	CEO	Title:	CEO

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Exhibit A

Domain Names

TREATMENTSOLUTIONS411.COM

TSNEMAIL.COM

TREATMENTSOLUTIONSNETWORK.COM

TSNET1.COM

TREATMENTSOLUTIONS.COM

TSNETMAIL.COM

TREATMENTSOLUTIONNETWORK.COM

TREATMENTSOLUTIONSFLORIDA.COM

TREATMENTSOLUTIONSNEWJERSEY.COM

TSN1.NET

TREATMENTSOLUTIONSMASS.COM

TSNEMAIL.NET

TREATMENTSOLUTIONSMASS.NET

TREATMENTSOLUTIONSNETWORK.NET

TSNHELPDESK.COM

TREATMENTSOLUTIONS411.NET

TREATMENTSOLUTIONNETWORK.NET

TREATMENTSOLUTIONSAMERICA.COM

TREATMENTSOLUTIONSCALIFORNIA.COM

TREATMENTSOLUTIONSGEORGIA.COM

TREATMENTSOLUTIONSILLINOIS.COM

TREATMENTSOLUTIONSMASSACHUSETTS.COM

TREATMENTSOLUTIONSNEWYORK.COM

TREATMENTSOLUTIONSOFAMERICA.COM

TREATMENTSOLUTIONSPENNSYLVANIA.COM

TREATMENTSOLUTIONSRHODEISLAND.COM

TREATMENTSOLUTIONSOFTEXAS.COM

TSNETMAIL.NET

TREATMENTSOLUTIONS.BIZ

TREATMENTSOLUTIONS.CO

TREATMENTSOLUTIONS.ME

TREATMENTSOLUTIONS.MOBI

TREATMENTSOLUTIONS411.ORG

TREATMENTSOLUTIONSNETWORK.BIZ

TREATMENTSOLUTIONSNETWORK.CC

TREATMENTSOLUTIONSNETWORK.CO

TREATMENTSOLUTIONSNETWORK.INFO

TREATMENTSOLUTIONSNETWORK.ME

TREATMENTSOLUTIONSNETWORK.MOBI

TREATMENTSOLUTIONSNETWORK.ORG

TREATMENTSOLUTIONSNETWORK.TV

TREATMENTSOLUTIONSNETWORK.US

TREATMENTSOLUTIONSNETWORK.WS

TSN1.INFO

TSN1.ORG

6

Exhibit B

Telephone Numbers

Toll Free:

***

Land Line:

***

7

Mobile:

***

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EX-10

Exhibit 10.34

AMERICAN ADDICTION CENTERS, INC.

2014 CASH INCENTIVE PLAN

Section 1. Purpose and Administration.

The American Addiction Centers, Inc. 2014 Cash Incentive Plan (the “Plan”) is intended to motivate eligible employees of American Addiction Centers, Inc. and its subsidiaries (together, the “Company”) to achieve specified performance goals by means of cash-based awards. All designations, determinations, interpretations and other decisions under or with respect to the Plan or any award thereunder (i) shall be within the sole discretion of the Board of Directors (the “Board”) of AAC Holdings, Inc., as successor with respect to the Plan as described below, (ii) may be made at any time and (iii) shall be final, conclusive and binding upon all persons. Such decisions need not be uniform and may be made selectively among Plan participants, whether or not such participants are similarly situated. The material terms of this Plan were previously approved by the Board of Directors of the Company, and as a result of the private share exchange between AAC Holdings, Inc. and certain stockholders of the Company in April 2014, the Board has assumed the administration of this Plan.

Section 2. Eligibility.

The participants of the Plan shall include only those employees of the Company or its subsidiaries who are listed on Schedule A hereto (each, a “Participant”). Each of the Chairman and Chief Executive Officer; President and Chief Financial Officer is referred to herein as a “Senior Officer Participant.” Each of the Chief Operating Officer; General Counsel and Secretary; Senior Vice President, Business Development; Vice President, Marketing and Chief Accounting Officer is referred to herein as an “Officer Participant.”

Section 3. Bonus Award Calculation and Payment.

Senior Officer Participants. Bonus awards payable pursuant to this Plan (each, an “Award”) with respect to each Senior Officer Participant shall be calculated based on the Company’s achievement of adjusted EBITDA (“AEBITDA”) goals during each quarter of the 2014 fiscal year (each, a “Fiscal Quarter”) and the 2014 fiscal year as a whole (the “Fiscal Year”, and each of the foregoing, a “Performance Period”). In order for a Senior Officer Participant to qualify for an Award with respect to any Fiscal Quarter, the Company must meet the AEBITDA Target (each, a “Performance Goal”) for such Fiscal Quarter. If the Performance Goal for a Fiscal Quarter is met, the Senior Officer Participant will be entitled to an Award equal to 25% of the Target Bonus Amount set forth in Schedule B for such Senior Officer Participant. If the Performance Goal for a Fiscal Quarter is not met, the Senior Officer Participant will not be entitled to an Award for such Fiscal Quarter (except to the extent the Performance Goal for the Fiscal Year is subsequently met). Notwithstanding the foregoing, in the event the Company would have achieved the Performance Goal for a Performance Period but for the expense of bonus amounts payable pursuant to the Plan, the Target Bonus payable for such period shall be proportionately reduced to the level at which the AEBITDA for the Performance Period, including the reduced bonus amounts, equals the Performance Goal with respect to such period.

For purposes of this Plan, “AEBITDA” means Consolidated Net Income, plus, without duplication, to the extent reducing Consolidated Net Income, (i) interest expense, (ii) depreciation expense, (iii) amortization expense, (iv) tax expense, (v) non-cash stock compensation, (vi) one-time legal and restructuring costs incurred in 2014 connection with the AAC Equity Transactions, the BHR Preferred Equity Transactions, the Initial Reorganization Transactions and the Holdings IPO in an amount not to exceed $2,500,000, (vii) one-time legal, accounting and other transaction costs incurred in connection with a Permitted Acquisition in 2014 or in any subsequent fiscal year in an aggregate amount not to exceed

$200,000 in any fiscal year, (viii) one-time settlement costs paid on or about April 9, 2014, in connection with certain wage and settlement charges in California in an amount not to exceed $2,500,000 and (ix) to the extent approved by the Agent in writing , other one-time and non-recurring charges. Capitalized terms used in the preceding sentence but not defined herein have the meanings assigned to them in the Second Amended and Restated Credit Agreement by and among AAC Holdings, Inc., American Addiction Centers, Inc., the lenders party thereto from time to time (the “Lenders”) and Wells Fargo Bank, National Association, as administrative agent and collateral agent for the Lenders, dated as of April 15, 2014.

If the Company achieves the Performance Goal with respect to the 2014 Fiscal Year, a Senior Officer Participant shall be entitled to an Award with respect to such Fiscal Year according to the following formula: (a) the percentage of the AEBITDA Target that actual AEBITDA for the 2014 Fiscal Year represents, multiplied by (b) the Senior Officer Participant’s Target Bonus Amount set forth in Schedule B, with the product of (a) and (b) reduced (but not below zero) by (c) payments made during the Fiscal Year with respect to the achievement of the Performance Goal with respect to each Fiscal Quarter; provided, that the maximum Award with respect to the Fiscal Year that a Senior Officer Participant may receive shall be the “Maximum Bonus Amount” set forth for the Senior Officer Participant on Schedule B. The Performance Goal for each Performance Period of the Company shall be as set by the Board.

The amount payable under this Plan with respect to the Senior Officer Participants shall be determined by the Board in its sole discretion based on whether and to what extent the Performance Goals have been met. The Board in its sole discretion may also award the maximum bonus to any Senior Officer Participant as it determines appropriate, including as a result of the completion of an underwritten initial public offering of its stock during the Fiscal Year.

Officer Participants. Awards with respect to each Officer Participant shall be based on such Officer Participant’s achievement of individual goals during each Performance Period as established by the Chief Executive Officer in his sole discretion. In order for an Officer Participant to qualify for an Award with respect to any Fiscal Quarter, the Officer Participant must meet his or her individual goals as established by the Chief Executive Officer for such Fiscal Quarter. If the individual goals of such Officer Participant for a Fiscal Quarter are met, the Officer Participant will be entitled to an Award in an amount up to 25% of the target bonus amount as established by the Chief Executive Officer acting pursuant to delegated authority of the Board.

Payment of Participant Awards. Awards pursuant to the Plan will be paid solely in cash, and such amounts (if any) shall be paid as soon as practicable following the close of each Fiscal Quarter, and in all events by March 15, 2015. Except as the Board may otherwise determine in its sole and absolute discretion (i) termination of the Participant’s employment prior to January 1, 2015 will result in the forfeiture of any further amounts that would otherwise have been payable to a Participant following the termination (inclusive of any quarterly payment not yet distributed to a Participant as of the date of termination) and (ii) termination of the Participant’s employment on or after January 1, 2015 will not result in the forfeiture of any further amounts that would otherwise have been payable to a Participant following the termination pursuant to the Plan.

This Program is not a “qualified” plan for federal income tax purposes, and any payments are subject to applicable tax withholding requirements.

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Section 4. Adjustments for Unusual or Nonrecurring Events.

The Board may appropriately adjust any evaluation of performance under the Performance Goals to exclude any of the following events that occur during 2014: (i) asset write-downs, (ii) litigation or claim judgments or settlements, including expenses related thereto, (iii) the effect of changes in tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programs, (v) an event either not directly related to the operations of the Company or not within the reasonable control of the Company’s management and (vi) direct or indirect acquisitions and dispositions of facilities during the Fiscal Year.

Section 5. General Provisions.

No Rights to Awards. No person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment among Participants. The terms and conditions of Awards need not be the same with respect to each Participant. The Company reserves the right to terminate the Plan at any time in the Company’s sole discretion.

No Right to Employment. Participation in the plan and the grant of an Award shall not be construed as giving a Participant the right to be retained in the employ or service of the Company or any affiliate.

Compliance with Section 409A of the Code. Notwithstanding any other provisions of the Plan, it is intended that the provisions of the Plan be exempt from, or comply with, Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and that no Award shall be granted, deferred, accelerated, extended, paid out or modified under this Plan in a manner that would result in the imposition of an additional tax under Section 409A of the Code upon a Participant. Any provision of this Plan that would cause the grant of an award or the payment thereof to fail to satisfy Section 409A of the Code shall be amended to comply with Section 409A of the Code on a timely basis, which may be made on a retroactive basis, in accordance with regulations and other guidance issued under Section 409A of the Code. In the event that it is reasonably determined by the Board that, as a result of Section 409A of the Code, payments in respect of any award under the Plan may not be made at the time contemplated by the terms of the Plan, as the case may be, without causing the Participant to be subject to taxation under Section 409A of the Code, the Company will make such payment on the first day that would not result in the Participant incurring any tax liability under Section 409A of the Code; which, if the Participant is a “specified employee” within the meaning of Section 409A, shall be the first day following the six-month period beginning on the date of Participant’s termination of employment.

Interpretation and Governing Law. The validity, construction and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the laws of the State of Nevada without giving effect to conflicts of laws principles. In the event the terms of this Plan are inconsistent with the terms of any written employment agreement between a Participant and the Company or its subsidiary, the terms of such written employment agreement shall govern the Participant’s participation in the Plan

No Trust or Fund Created. Neither the Plan nor any award shall create or be construed to create a trust or separate fund of any kind or a fiduciary relationship between the Company or any affiliate and a Participant or any other person. To the extent that any Person acquires a right to receive payments from the Company or any affiliate pursuant to an award, such right shall be no greater than the right of any unsecured general creditor of the Company or any affiliate.

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SCHEDULE A

NAME	TITLE
Michael T. Cartwright	Chairman and Chief Executive Officer
Jerrod N. Menz	President
Kirk R. Manz	Chief Financial Officer
Candance A. Henderson-Grice	Chief Operating Officer
Kathryn Sevier Phillips	General Counsel and Secretary
Michael J. Blackburn	Senior Vice President, Business Development
Adam R. Mittelberg	Vice President, Marketing
Steven R. Brumfield	Chief Accounting Officer

SCHEDULE B

PARTICIPANT NAME	TARGET BONUS AMOUNT		MAXIMUM BONUS AMOUNT
Michael T. Cartright	$	635,000	$	1,270,000
Jerrod N. Menz	$	384,000	$	768,000
Kirk R. Manz	$	137,500	$	275,000

EX-10

Exhibit 10.35

June 13, 2014

VIA EMAIL (alan.prohaska@wellsfargo.com)

Wells Fargo Bank, National Association

5901 Priestly Drive, 1^st Floor, Suite 130

Carlsbad, California 92008

Attention: Alan Prohaska

Re: Second Amended and Restated Credit Agreement (“Credit Agreement”) dated April 15, 2014 by and among AAC Holdings, Inc., a Nevada corporation (“Holdings”), American Addiction Centers, Inc. (formerly known as Forterus, Inc.), a Nevada corporation (“Borrower”), the lenders party hereto from time to time (the “Lenders”), and Wells Fargo Bank, National Association, as administrative agent and collateral agent for the Lenders (together with its successors and assigns, the “Agent”)

Reference is hereby made to the Credit Agreement. Capitalized terms used, but not defined herein, will have the meaning set forth in the Credit Agreement.

Holdings and Borrower hereby inform Agent and Lenders that Borrower will prepay the Existing Term Loan B in full on the effective date of this letter. The outstanding principal amount of the Existing Term Loan B as of the date hereof is $1,500,000, and the accrued and unpaid interest thereon as of the date hereof is $2,576.11. In connection with such prepayment of the Existing Term Loan B, Holdings and Borrower request that Wells Fargo Bank, National Association, as Agent and the sole current Lender and Required Lender, consent to (i) remove Section 5.9(d) of the Credit Agreement in its entirety from the Credit Agreement and (ii) amend the definition of “Fixed Charge Coverage Ratio” in Section 5.9(b) of the Credit Agreement by inserting “and the Existing Term Loan B” at the end of clause (y) thereof immediately after “the Reliant Debt to the extent repaid with the proceeds of the Holdings IPO” (the changes described in clauses (i) and (ii) above, collectively, the “Modifications”).

Subject to the terms and conditions set forth herein, Wells Fargo Bank, National Association, as Agent and the sole current Lender and Required Lender, hereby consent to the Modifications.

This letter agreement shall become effective only upon the satisfaction of all of the following conditions precedent: (i) the prepayment in full of the Existing Term Loan B, together with all accrued and unpaid interest thereon, and (ii) the execution of this letter agreement by Holdings, Borrower and Wells Fargo Bank, National Association.

Without limiting the generality of the provisions of Section 9.6 of the Credit Agreement, the consent set forth in this letter agreement shall be limited precisely as written and relates solely to the Modifications in the manner and to the extent described above, and nothing in this letter agreement shall be deemed to (a) constitute a consent or waiver of compliance by Holdings or Borrower with respect to any other term, provision or condition of the Credit Agreement or any other Loan Documents or (b) prejudice any right or remedy that Agent or any Lender may now have or may have in the future under or in connection with the Credit Agreement or any other Loan Documents. Except as expressly set forth herein, the terms, provisions and conditions of the Credit Agreement and the other Loan Documents shall remain in full force and effect and in all other respects are hereby ratified and confirmed.

115 East Park Drive | Second Floor | Brentwood, Tennessee 37027 | www.AmericanAddictionCenters.com

866.53.SOBER (76237)

Page 2

This letter agreement shall be a “Loan Document” for all purposes of the Credit Agreement.

This letter agreement shall be governed by and construed in accordance with the laws of the State of New York.

This letter agreement may be executed in any number of counterparts, each of which when executed and delivered shall be deemed to be an original, and all of which when taken together shall constitute one and the same agreement.

If you have any questions, please contact Kathryn Sevier Phillips by direct dial at (615) 732-1366 or via e-mail at ksphillips@contactacc.com. Otherwise, please sign and return a copy of this letter to Borrower confirming Agent’s and Lenders’ consent to the above referenced restructure and its waiver of any provisions of the Credit Agreement which would otherwise prohibit or preclude the same, including but not limited to the applicable provisions of Section 5.9 thereof.

[Remainder of page intentionally left blank]

Sincerely, Holdings: AAC HOLDINGS, INC.
By:	/s/ Kirk R. Manz
	Name: Kirk R. Manz Title: Chief Financial Officer

Borrower: AMERICAN ADDICTION CENTERS, INC.
By:	/s/ Kirk R. Manz
	Name: Kirk R. Manz Title: Chief Financial Officer

(Agent and Lenders counterpart signature page to follow.)

ACKNOWLEDGED AND AGREED AS OF THE DATE FIRST WRITTEN ABOVE:

WELLS FARGO BANK, NATIONAL ASSOCIATION, as Agent and Lender

By:	/s/ Alan Prohaska
Name:	Alan Prohaska
Title:	Vice President

EX-10

Exhibit 10.36

TERM LOAN PROMISSORY NOTE

$1,731,164.45 Entered into May 2, 2014 Effective as of April 15, 2014 Nashville, Tennessee

FOR VALUE RECEIVED, the undersigned, AAC HOLDINGS, INC., a Nevada corporation (the “Maker”), promises to pay to the order of RELIANT BANK (“Payee”; Payee and any subsequent holders hereof are hereinafter referred to collectively as “Holder”) at the office of the Payee at 1736 Carothers Parkway, Suite 100, Brentwood, Tennessee 37027, or at such other place as Payee may designate to Maker in writing from time to time, the original principal sum of One Million Seven Hundred Thirty-one Thousand One Hundred Sixty-four and 45/100 Dollars ($1,731,164.45) (“Loan”), together with interest on the outstanding principal balance hereof at the rate set forth herein and all other amounts that shall be payable herein (the “Indebtedness”), in lawful money of the United States of America, which shall at the time of payment be legal tender in payment of all debts and dues, public and private.

Maker, Payee and Holder (if applicable) shall be collectively referred to herein as the “Parties.”

Interest shall accrue on the outstanding principal balance of this Note at the rate of five percent (5.0%) per annum (the “Interest Rate”) and shall be calculated on the basis of a 360-day year for actual days elapsed.

Principal and interest of the Loan shall be payable in twelve (12) equal and consecutive monthly installments of Thirty-five Thousand Eight Hundred Sixty-six and 79/100 Dollars ($35,855.34) (“Installment(s)”) based upon a fifty-four (54) month amortization of the outstanding principal balance and the Interest Rate. Installments shall be due and payable on the 15^th day of each month during the term of this Note, commencing on the 15^th day of May, 2014, and continuing monthly thereafter until the 15^th day of April, 2015 (the “Maturity Date”) when any remaining principal and interest shall be paid in full.

Beginning on the Maturity Date or from the date of the occurrence of any Event of Default (hereinafter defined), Holder shall be entitled to charge and Maker shall pay interest at the maximum rate of interest which may be charged on the date hereof or on the date of default or on the Maturity Date, whichever is greater (the “Default Rate”). The Default Rate shall be computed from the occurrence of Maturity Date, Default, or an Event of Default (with regard to any applicable notice or grace period) until the earlier of the date upon which the Event of Default is cured or the date upon which the Indebtedness is paid in full.

Notwithstanding anything to the contrary contained herein, the effective rate of interest on the Indebtedness evidenced by this Note shall not exceed the Default Rate. Without limiting the generality of the foregoing, in the event the interest accrued or collected hereunder results in an effective rate of interest higher than that lawfully permitted to be accrued or collected, then such Interest Rate shall be reduced to the lawful maximum interest rate permitted to be accrued or collected by applicable law, and any amount previously paid or paid in the future which would exceed the highest lawful rate shall be applied to a reduction of principal (without premium or penalty) and not to the payment of interest.

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In the event any Installment is paid more than ten (10) days after the day when the same is due, then the Holder shall be entitled to collect, to the extent permitted by applicable law, a “Late Charge” in an amount equal to five percent (5.0%) of the amount of any such Installment in order to defray part of the increased cost of collection occasioned by any such late payment as liquidated damages and not as a penalty.

The Indebtedness evidenced by this Note may be prepaid in whole or in part without penalty. Any such prepayment shall be first applied to all charges and expenses owing Holder in connection with this Note, then all accrued and unpaid interest, and then to unpaid principal. Partial principal prepayments shall be applied in the inverse order of maturity and shall not change the due dates of any payments under this Note.

As additional consideration for this Note, Michael T. Cartwright, Jerrod N. Menz, Kirk R. Manz and American Addiction Centers, Inc. (collectively, “Guarantor”), have each executed a Continuing Guaranty dated of even date herewith (collectively, the “Guaranty”), to which Guaranty reference is hereby made for a description of the rights of the Holder of this Note in the Event of Default.

This Note shall be in default upon the occurrence of any of the following events (each, an “Event of Default”):

(1) Failure to pay the Indebtedness, or any part thereof, or the payment of any other sum which may be due and owing under any Loan Document when and as the same shall become due and payable; or

(2) If any warranty, covenant, representation, agreement or statement made, furnished or contained in this Note or in any other Loan Document be false, untrue or misleading in any material respect either at the time made or furnished or becomes false, untrue or misleading at any time thereafter during the term of this Note; or

(3) The occurrence of an event of default or the nonperformance, nonobservance, default, breach or failure to timely comply, perform, observe or execute in every particular the covenants, agreements, promises, obligations, warranties and conditions set out in any Loan Document or any other instrument or agreement between Maker and Holder with respect to any other indebtedness of Maker owed to Holder and such default is not cured within any applicable cure period; or the occurrence of an event of default or the nonperformance, nonobservance, default, breach or failure to timely comply, perform, observe or execute in every particular the covenants, agreements, promises, obligations, warranties and conditions set out in any other agreement with any other creditor, person, or entity, whether or not related to the Indebtedness, to which Maker is a party or that may materially affect any of Maker’s assets or that may affect Maker’s ability to pay the Indebtedness or perform under the Loan Documents; or

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(4) The filing by or against Maker of a voluntary or involuntary petition in bankruptcy; or any such Maker’s adjudication as a bankrupt or insolvent; or the filing by Maker of any petition or answer seeking or acquiescing in any reorganization, arrangement, composition, readjustment, liquidation, dissolution, or similar relief for itself under any present or future federal, state or other law or regulation relating to bankruptcy, insolvency, receivership or other relief for debtors; or the making by Maker, of any general assignment for the benefit of creditors; or the admission in writing by Maker, of its inability to pay the Indebtedness as it becomes due; or the commission by Maker, of an act of bankruptcy, unless the obligation of performance under this Agreement and/or the Loan Documents is assigned to another party acceptable to Holder; or

(5) The occurrence of an event of default or the occurrence of an event which, with the passage of time or the giving of notice, or both, would constitute an event of default under this Note or any other Loan Document; or

(6) Should a Material Adverse Change occur in the financial condition of Maker; or

(7) The occurrence of an event of default or the nonperformance, nonobservance, default, breach or failure to timely comply, perform, observe or execute in every particular the covenants, agreements, promises, obligations, warranties and conditions set out in any instrument or agreement between Maker and/or Guarantor and Wells Fargo Bank and such default is not cured within any applicable cure period and/or waived by Holder; or

(8) Should any of the foregoing Events of Default occur with respect to any endorser or any Guarantor of any of the Indebtedness.

If default be made in the payment of an Installment due under this Note, or in the payment of any other sum which may be due and owing under any document or instrument securing this Note, then the entire principal sum outstanding, together with accrued interest thereon, fees, charges, and costs, if any, shall, at the option of the Holder, at once become due and payable without further notice to Maker. If default be made in the performance of any other provisions herein contained, or if default occurs (other than the payment of this Note) under any other document or instrument securing this Note, the entire principal sum outstanding, together with accrued interest thereon, fees, charges, and costs, if any, may, at the option of the Holder, after the expiration of any applicable grace period, become due and payable without further notice to Maker.

Upon the occurrence of an Event of Default and failure to cure within any applicable time period, Holder, in its sole discretion, may pursue any and all legal and equitable remedies available to it under this Note, any Loan Document and/or applicable law and said remedies shall be cumulative and shall include, but not be limited to, suit for judgment against any Maker, endorser or guarantor; obtaining possession, appointing a receiver, sale or other disposition of any part of or all of the property, assets and interests which are security for or collateral for the Indebtedness or which are held or owned by Holder; and the offset of any bank accounts and monies of Maker, any endorser or any guarantor on deposit with Holder.

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The validity, construction and enforceability of, and the rights and obligations of the Maker and the Holder under this Note shall be governed by, construed and enforced in accordance with, the laws of the State of Tennessee, except to the extent that federal law is applicable to determine the maximum rate of interest chargeable hereunder. This Note may be freely transferred by Holder. Furthermore, for the purpose of determining the rights and obligations of Maker and Holder regarding this Note, it shall be deemed a negotiable instrument under the Uniform Commercial Code, as incorporated into applicable state law.

Time is of the essence of each obligation of the Maker hereunder.

Capitalized terms used herein and not defined shall have the meaning ascribed to them in that certain Term Loan Agreement, dated and effective of even date herewith, between Maker, Payee and Guarantor.

In the event any provision of this Note (or any part of any provision hereof) is held by a court of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision (or remaining part of the affected provision) of this Note; but this Note shall be construed as if such invalid, illegal or unenforceable provision (or part thereof) had not been contained in this Note, but only to the extent it is invalid, illegal or unenforceable.

Except as otherwise set forth herein, the Maker, for itself and its successors and assigns, and any endorser or guarantor, jointly and severally, waives presentment, protest and demand, notice of protest, demand, dishonor and non payment of this Note, and expressly agrees that this Note, or any payment hereunder, may be extended from time to time without in any way affecting the liability of the Maker or any endorser or guarantor hereof.

No failure to accelerate the Indebtedness evidenced hereby by reason of an Event of Default hereunder, acceptance of a past due Installment or other indulgences granted from time to time, shall be construed as a novation of this Note or as a waiver of such right of acceleration or of the right of Holder thereafter to insist upon strict compliance with the terms of this Note or to prevent the exercise of such right of acceleration or any other right granted hereunder or by applicable laws. No extension of the time for payment of the Indebtedness evidenced hereby or any Installment due hereunder, made by agreement with any person now or hereafter liable for payment of the Indebtedness evidenced hereby, shall operate to release, discharge, modify, change or affect the original liability of Maker hereunder or that of any other person now or hereafter liable for payment of the Indebtedness evidenced hereby, either in whole or in part, unless Holder agrees otherwise in writing. This Note may not be changed orally, but only by an agreement in writing signed by the Parties. This Note may be executed in any number of counterparts, each of which will be deemed to be an original, but all of which together will constitute one and the same agreement. It will not be necessary, in proving this Agreement in any proceeding, to produce or account for more than one counterpart of this Agreement. Delivery of an executed counterpart of this Agreement by facsimile transmission (fax) or email shall be equally as effective as delivery of an original executed counterpart of this Agreement. Any Party delivering an executed counterpart of this Agreement by facsimile transmission or email also shall deliver an original executed counterpart of this Agreement but the failure to deliver an original executed counterpart shall not affect the validity, enforceability, and binding effect of this Agreement.

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Maker and any endorser or guarantor shall not be entitled to any notices of any nature whatsoever from Holder, except (i) with respect to matters to which this Note specifically and expressly provides for the giving of notice by Holder and (ii) with respect to matters which Holder is required by applicable law to give notice. Maker expressly waives the right to receive any notice from Holder with respect to any matter for which this Note does not specifically and expressly provide for the giving of notice by Holder to Maker.

Whenever pursuant to this Note (i) Holder exercises any right given it to approve or disapprove, (ii) any arrangement or term is to be satisfactory to Holder, or (iii) any other decision, consent or determination is to be made by Holder, all such decisions and determinations made by Holder shall be in the sole discretion of Holder, except as may be otherwise expressly and specifically provided herein.

The Parties hereto irrevocably consent to the jurisdiction and venue of any state or federal court located within, or having jurisdiction over, the County of Davidson, Tennessee, for any disputes pertaining to this Note and/or the Indebtedness evidenced hereby, and agree that any case or proceeding relating to Title XI of the United States Code and any actions relating to the Indebtedness evidenced hereby shall be litigated in such courts, and the Parties waive any objection which they may have based on improper venue or forum non conveniens to the conduct of any proceeding in any such court.

Maker, any co-maker, and any endorser irrevocably waives all right to trial by jury in any court in any action (a) Holder brings to collect amounts owed to Holder under this Note; (b) alleging that Holder has (i) breached this Note or any note modified or extended by this Note, (ii) has breached any agreement relating to an extension of credit to Maker, (iii) has breached any other agreement, express or implied, (iv) Holder or any of its officers, employees, representatives or agents have acted wrongfully, negligently, or otherwise tortiously, with respect to any maker, co-maker, endorser, or guarantor; or (c) between the parties. This waiver of trial by jury does not waive Maker or Holder’s right to bring a lawsuit that a judge, without a jury, would decide. To the extent that any court of competent jurisdiction determines that such a jury waiver is inapplicable or unenforceable with respect to any claim or dispute, such claim or dispute shall be submitted to and settled by final and binding arbitration under the Federal Arbitration Act or other applicable law, pursuant to the Commercial Arbitration Rules of the American Arbitration Association. Such arbitration proceedings shall be held before a single arbitrator who is an active attorney or a retired judge.

Maker, any co-maker, and any endorser agree to pay all reasonable attorneys’ fees, expenses, court costs and all other costs of whatever kind incurred or paid by Holder, whether or not any legal proceeding is commenced and whether or not the debt has matured or an Event of Default has occurred or is continuing or default has been declared, incident to the Indebtedness, including but not limited to, (i) the drafting, negotiation, and preparation of this Note and all other Loan Documents and the closing of this loan; (ii) any extension, renewal, modification, amendment, consolidation, restructure, or refinancing of the Indebtedness; (iii) the release or substitution of any collateral for the Indebtedness; (iv) obtaining consents, waivers, or approvals with respect to the Loan Documents and any collateral; (v) the review, advice and response to any correspondence, documents or documentation submitted by or for the benefit of any Maker,

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endorser, or guarantor; (vi) the perfection, validity, priority, collection, enforcement, protection and defense of any collateral and all Loan Documents executed in connection with the Indebtedness including any mortgage, security, assignments, pledges, security interests, or liens and all other rights and obligations therein; (vii) the collection, enforcement, protection and defense of any collateral for this Note; (viii) the perfection, validity, and priority of Holder’s interest in or collateral for this Note; (ix) representation of Holder in any bankruptcy, receivership, insolvency, administrative, judicial, or other legal proceeding irrespective of whether or not an Event of Default has incurred or default has been declared; and (xi) all attorneys fees, expenses, costs, recording fees, taxes, and other costs of whatever kind incident to and necessary to document, record, perfect, and continue the priority and perfection of Maker’s mortgage, security interest, assignment, pledge, or lien in any collateral.

[Signature page follows.]

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[Signature page to Term Loan Promissory Note]

IN WITNESS WHEREOF, Maker has caused this Note to be executed and delivered by as of the date and year first set forth above.

MAKER:
AAC HOLDINGS, INC., a Nevada corporation
By:	/s/ Kathryn Sevier Phillips
Name:	Kathryn Sevier Phillips
Title:	General Counsel and Secretary
HOLDER:
RELIANT BANK

By:	/s/ Stephen Fawehinmi
	Stephen Fawehinmi, Vice President

[Notary jurats follow]

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[Notary jurats page]

STATE OF TENNESSEE                )

COUNTY OF RUTHERFORD        )

Before me, the undersigned, a Notary Public of the State and County aforesaid, personally appeared Kathryn Sevier Phillips, with whom I am personally acquainted (or proved to me on the basis of satisfactory evidence), and who, upon oath acknowledged herself to be the General Counsel and Secretary of AAC Holdings, Inc., a Nevada corporation, the within named bargainor, and that she as General Counsel and Secretary, executed the foregoing instrument for the purpose therein contained by signing the name of the corporation by herself as General Counsel and Secretary.

Witness my hand and notary seal this 2^nd day May, 2014.

/s/ Jessica R. Carrell

Notary Public

My commission expires: August 22, 2016                             [Affix Notary Seal]

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