Exhibit 99.4

THIS PROPOSED DISCLOSURE STATEMENT HAS NOT YET BEEN APPROVED UNDER SECTION 1125(b) OF THE BANKRUPTCY CODE BY THE BANKRUPTCY COURT AS CONTAINING ADEQUATE INFORMATION FOR USE IN CONNECTION WITH THE SOLICITATION OF ACCEPTANCES OR REJECTIONS OF THE PLAN OF REORGANIZATION DESCRIBED HEREIN.  ACCORDINGLY, THE FILING AND DISSEMINATION OF THIS PROPOSED DISCLOSURE STATEMENT ARE NOT INTENDED AND SHOULD NOT IN ANY WAY BE CONSTRUED AS A SOLICITATION OF VOTES ON THE PLAN, NOR SHOULD THE INFORMATION CONTAINED HEREIN BE RELIED UPON FOR ANY PURPOSE BEFORE A DETERMINATION HAS BEEN MADE BY THE BANKRUPTCY COURT THAT THE PROPOSED DISCLOSURE STATEMENT CONTAINS ADEQUATE INFORMATION.

IN THE UNITED STATES BANKRUPTCY COURT

FOR THE NORTHERN DISTRICT OF TEXAS

DALLAS DIVISION

DISCLOSURE STATEMENT FOR DEBTORS’ JOINT PLAN OF REORGANIZATION
UNDER CHAPTER 11 OF THE BANKRUPTCY CODE

Dated:  April 19, 2017

(1)  A list of the Debtors in these chapter 11 cases, along with the last four digits of each Debtor’s federal tax identification number, is attached hereto as Exhibit A.  The location of the Debtors’ headquarters and the Debtors’ service address is: 2941 Lake Vista Drive, Lewisville, Texas 75067.

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EXHIBITS

I.                                        Introduction

The Debtors prepared this disclosure statement (together with any annexed exhibits and schedules, including any amendments or modifications from time to time, the “Disclosure Statement”) in connection with solicitation of votes for acceptance of the Debtors’ Joint Plan of Reorganization Under Chapter 11 of the Bankruptcy Code, as amended or modified from time to time, annexed to the Disclosure Statement as Exhibit B (the “Plan”).  This Disclosure Statement is intended to provide adequate information of a kind, and in sufficient detail, to enable the Debtors’ creditors to make an informed judgment about the Plan, including whether to accept or reject the Plan.

Capitalized terms used but not defined herein have the meanings ascribed to them in the Plan.  In some instances, a term that is used only in a specific Section will be defined only in that Section.

The Disclosure Statement provides the following categories of information:

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To the extent that the information provided in this Disclosure Statement and the Plan (including any attached exhibits and Plan Supplements) are in conflict, the terms of the Plan (including any attached exhibits and Plan Supplements) will control.

Creditors should refer only to this Disclosure Statement and the Plan to determine whether to vote to accept or reject the Plan.

The Plan implements extensive negotiations among the Debtors, Deerfield, the Debtors’ prepetition Bank Lenders, the Debtors’ joint venture partners and MPT.  The Debtors believe that approval of the Plan is in the best interests of the Debtors’ creditors, employees, patients and the general public they serve.

Creditors may request additional copies of this Disclosure Statement from Epiq Bankruptcy Solutions, LLC (the “Voting Agent”) at the following address:

Pursuant to the Bankruptcy Code, only creditors who actually vote on the Plan will be counted for purposes of determining whether the required number of acceptances have been obtained.  Failure to deliver a properly completed ballot by the Voting Deadline will result in an abstention, consequently, the vote will neither be counted as an acceptance or rejection of the Plan.

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II.                                   Background Information

A.                                    Debtors’ Business and History.

The Debtors, together with their non-debtor affiliates (collectively, the “Adeptus Enterprise”),(2) constitute the oldest and largest network of freestanding emergency rooms in the United States (the “Business”).  The mission of the Adeptus Enterprise is to provide local communities with immediate and convenient access to quality emergency healthcare in a patient-friendly, cost-effective setting.  As of April 19, 2017 (the “Petition Date”), the Adeptus Enterprise provided such care through five (5) fully-operational hospitals and ninety-nine (99) freestanding emergency rooms (“FSERs”)(3) that are either wholly-owned by the Debtors or by the Debtors’ joint ventures with leading healthcare systems in Arizona, Colorado and Texas.

Since its founding in 2002, the Adeptus Enterprise has been a patient-centered healthcare organization dedicated to providing quality emergency care through its FSERs, which are open to the public 24 hours a day, 7 days a week.  The Adeptus Enterprise achieves its mission by utilizing an innovative facility design and infrastructure that are specifically tailored to delivering emergency care.  In particular, each FSER within the Adeptus Enterprise typically has 6 to 9 emergency exam rooms, including 2 high-acuity suites, 1 pediatric room and a specialized obstetrics/gynecology room.  Additionally, each facility is equipped with a full radiology suite, including a CT scanner, digital x-ray and ultrasound machines, as well as an on-site laboratory.

The FSERs within the Adeptus Enterprise generally employ a “1-1-1-1” model for staffing that provides for at least one licensed physician trained in emergency medicine, one emergency room trained nurse, one radiology technologist and one front office staff member on site at all times.  Each FSER is also staffed with a facility administrator who is responsible for all operating aspects of the facility and the coordination of care to patients.

In 2016, approximately 408,000 patients visited facilities within the Adeptus Enterprise.  To service those patients, the Adeptus Enterprise employs or engages as independent contractors approximately 3,824 physicians, nurses, radiology technicians, laboratory professionals and administrative staff.  The Adeptus Enterprise is headquartered in Lewisville, Texas and, as reflected in the organizational chart attached hereto as Exhibit C, consists of 203 entities organized under the laws of various states.

(2)  There are sixty-three (63) non-debtor affiliates in the Adeptus Enterprise.

(3)  There are two types of FSERS: (i) a hospital outpatient department (“HOPD”) that is affiliated with a hospital system; and (ii) an independent freestanding emergency department (“IFSED”).  Both HOPDs and IFSEDs are subject to, among other rules and regulations, the Emergency Medical Treatment and Labor Act (EMTALA).  As a result of their affiliation with a hospital system, HOPDs are subject to additional rules and regulations, including those promulgated by the Centers for Medicare and Medicaid Services (“CMS”).  HOPDs can bill and collect from government-funded health programs, including Medicare, Medicaid and TRICARE for facility fees in addition to seeking reimbursement for services rendered.  IFSEDs, on the other hand, are not recognized by CMS as emergency departments and, therefore, cannot bill government-funded health programs for facility fees.  Each state has adopted different rules related to the operation of IFSEDs.  The Adeptus Enterprise includes both HOPDs and IFSEDs.

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The physicians that provide care at the facilities within the Adeptus Enterprise are independent contractors of certain entities that are either wholly-owned by Adeptus Health LLC (“HoldCo”), one of the Debtors, or affiliated with the Adeptus Enterprise.  In particular, the Corporate Practice of Medicine doctrines in Texas, Colorado, and Louisiana prohibit business corporations from practicing medicine or employing physicians to provide medical services.  In those particular states, entities that employ physicians must be owned by a licensed medical doctor.  Thus, the physicians staffed at the various facilities within the Adeptus Enterprise located in Colorado, Texas, and Louisiana are contracted through the following affiliated limited liability companies:

a.              National Medical Professionals of Texas, PLLC (“NMP of Texas”), whose sole member is Jerry Allison, M.D.;

b.              National Medical Professionals of Houston, PLLC (“NMP of Houston”), whose sole member is Jerry Allison, M.D.;

c.               National Medical Professionals of Colorado, PLLC (“NMP of Colorado”), whose sole member is Lee Shockley, M.D.; and

d.              National Medical Professionals of Louisiana Professional LLC (“NMP of Louisiana”), whose sole member is Ricardo Martinez, M.D.

In Ohio and Arizona, on the other hand, business corporations are permitted to directly employ physicians. Therefore, the Debtors wholly-own National Medical Professionals of Arizona LLC (“NMP of Arizona”) and National Medical Professionals of Ohio LLC (“NMP of Ohio,” and together with NMP of Texas, NMP of Houston, NMP of Colorado, NMP of Louisiana, and NMP of Arizona, the “NMPs”).(4)

Through an Exclusive Management and Administrative Services Agreement between each of the NMPs and First Choice ER, LLC (“First Choice ER”), First Choice ER provides management services for the day-to-day, non-clinical aspects of the NMPs, including assistance with the coding process, collections, recruitment, and bookkeeping.  The Debtors also administer the NMPs’ payroll.  The physicians are paid on a monthly basis based upon the number of shifts they worked in the previous month.  On average, the NMPs’ physician payroll totals approximately $16.0 million per month.(5)

(4)   NMP of Ohio was formed for the purpose of staffing physicians at the hospital that was intended to be built by the Ohio Joint Venture (as hereinafter defined).  Because the hospital has yet to be constructed, NMP of Ohio does not currently contract with any physicians.

(5)   Certain of the physicians who serve as directors of various medical facilities in the Adeptus Enterprise are also employees of the Joint Ventures and are paid additional amounts for such services.

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As will be discussed in greater detail below, Adeptus Health Management LLC, one of the Debtors, provides management services for nearly all of hospitals and FSERs within the Adeptus Enterprise.

Due to the nature of the services they provide, the Debtors are subject to a wide array of statutes and regulations that govern nearly all aspects of their operations, including, among other things, the Debtors’ billing practices, contractual relationships with physicians and marketing activities.  The failure to comply with these statutes and regulations can result in civil and criminal penalties, such as fines, damages, overpayment recoupment, loss of enrollment status or exclusion from government healthcare programs.

The regulatory agencies providing oversight to the Debtors are, among others, CMS, the United States Department of Justice (“DOJ”),(6) the Arizona Board of Pharmacy, Arizona Department of Health Services, Arizona Health Care Cost Containment System, Arizona Radiation Regulatory Agency, Colorado Department of Health Care Policy and Financing, Colorado Department of Public Health and Environment, Colorado State Board of Pharmacy, Texas Health and Human Services Commission, Texas Department of State Health Services, Texas State Board of Pharmacy, and the Offices of the Attorney General of the States of Arizona, Colorado and Texas.

Additionally, because Adeptus Health, Inc. (“PubCo”), the ultimate parent within the Adeptus Enterprise, is a publicly held company, the Debtors are subject to rules and regulations promulgated by the United States Securities and Exchange Commission.

B.                                    Organizational Structure of the Debtors.

1.                                      Generally

The Adeptus Enterprise began in 2002 with the formation of First Choice ER.  In 2011, funds affiliated with Sterling Partners acquired a 75% share in First Choice ER and, in 2013, HoldCo was created as a holding company to own and operate the FSERs owned by First Choice ER.  On March 7, 2014, PubCo was incorporated as a Delaware corporation for the purpose of conducting its initial public offering, which was completed on June 30, 2014 and raised approximately $96.2 million.  On May 11, 2015, July 29, 2015 and June 2, 2016, PubCo completed additional public offerings of its Class A common stock and raised more than $460.0 million.

(6)  The Adeptus Enterprise is subject to oversight of various divisions within CMS and DOJ, including without limitation, the Office of Civil Rights, Clinical Laboratory Improvement Amendments program, Center for Medicare, Center for Medicaid and CHIP Services, Center for Program Integrity, Center for Clinical Standards and Quality, Consortium for Quality Improvement and Survey & Certification Operations, Drug Enforcement Administration, Federal Bureau of Investigation, and U.S. Attorney’s Office, and the private organizations with deemed authority, including the respective Medicare Administrative Contractors and the Commission on Office Laboratory Accreditation.  Various divisions within the Arizona Department of Health Services, Colorado Department of Public Health and Environment, and Texas Department of State Health Services may regulate hospital and facility licensing, Medicare certification surveys, laboratory certification and radiation registrations.

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In connection with the initial public offering, a reorganization was effected, which among other things, resulted in PubCo becoming a holding company with its sole material asset being its equity interests in HoldCo.  As the sole managing member of HoldCo, PubCo operates and controls all of the business and affairs of HoldCo and, through HoldCo and its subsidiaries, conducts the business of the Adeptus Enterprise.

In particular, as reflected in the organizational chart attached hereto as Exhibit C, HoldCo owns 100% of the interests in:

a.                                      First Choice ER;

b.                                      NMP of Arizona, which provides physician staffing for the Arizona JV (as hereinafter defined); and

c.                                       NMP of Ohio, an entity with no current operations that was intended to provide physician staffing to the Ohio JV (as hereinafter defined) in the future.

First Choice ER, in turn, owns 100% of the interests in:

a.                                      Adeptus Health Management, LLC (“Adeptus Health Management”), an entity that provides day-to-day management services to nearly all of the hospitals and FSERs within the Adeptus Enterprise;

b.                                      ADPT New Orleans Management LLC, an entity that provided management services to certain FSERs wholly-owned by Ochsner Clinic Foundation, as described more fully below;

c.                                       Adeptus Health Ventures LLC (“Adeptus Health Ventures”), the sole member of, among other entities, the Debtor-entities that hold membership interests in each of the joint ventures described below;

d.                                      FCER Management, LLC, a legacy entity that currently has no operations;

e.                                       ECC Management, LLC, an entity that is the limited partner of (i) OpFree Licensing LP, an entity that holds all the Debtors’ trademarks; and (ii) OpFree RE Investments, Ltd., an entity that owns two parcels of real property in Ohio and Texas;

f.                                        OpFree, LLC, a legacy entity that currently has no operations; and

g.                                       IFSEDs in Houston, San Antonio, and Austin (the “Adeptus Wholly-Owned IFSEDs”).

Adeptus Health Ventures, in turn, indirectly holds:

a.                                      A 49.9% ownership interest in an operating joint venture with Dignity Health in Arizona;

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b.                                      A 49.9% ownership interest in an operating joint venture with the University of Colorado Health in Colorado Springs and Denver, Colorado;

c.                                       A 49.0% ownership interest in an operating joint venture with Texas Health Resources in Dallas, Texas;

d.                                      A 50.1% ownership interest in a non-operating joint venture with Mount Carmel Health System in Ohio;(7) and

e.                                       First Texas Hospital Cy-Fair LLC and its wholly-owned HOPDs in Houston, Texas (collectively, the “Houston Market”).

The Joint Ventures and their wholly-owned HOPDs are not Debtors in these Chapter 11 Cases because, among other reasons, the Debtors do not have exclusive authority to commence Chapter 11 Cases for such entities.  Therefore, only the Debtors’ interests in such Joint Ventures are impacted under the Plan.  Although the Joint Ventures are not Debtors, they are critical components of the Adeptus Enterprise and are essential parts of the Debtors’ successful reorganization.

2.                                      Dignity Joint Venture.

a.                                      Generally.

On October 22, 2014, First Choice ER announced its expansion into Arizona through a joint venture with Dignity Health, one of the nation’s largest healthcare systems.  In particular, Adeptus Health Phoenix Holdings LLC, a wholly-owned subsidiary of Adeptus Health Ventures, and Dignity Health formed AGH Phoenix LLC (the “Arizona JV”), in which Adeptus Health Phoenix Holdings LLC owns a 49.9% membership interest and Dignity Health owns the remaining 50.1%.

In connection with the Arizona JV, Adeptus Health Phoenix Holdings LLC and Dignity Health are parties to that certain Amended and Restated Operating Agreement of AGH Phoenix LLC, dated October 21, 2014 (the “Arizona Operating Agreement”), which dictates, among other things, the circumstances under which members may make capital contributions and loans to the Arizona JV as well as when members are entitled to distributions.  The Arizona Operating Agreement also contemplates that Adeptus Health Management will manage the Arizona JV’s facilities, as further discussed below.

In addition to its membership interest in the Arizona JV, Adeptus Health Phoenix Holdings LLC owns 100% of the interests in ADPT-AZ MPT Holdings LLC, an entity formed to

(7)   Additionally, prior to the Petition Date, the Debtors held a 49.9% ownership interest in a non-operating joint venture with Ochsner Clinic Foundation, which as described further below, has terminated.  The joint ventures with Dignity Health, University of Colorado Health, Texas Health Resources, and Mount Carmel Health System are collectively referred to herein as the “Joint Ventures.”

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hold the real property leases for the Arizona properties with MPT, and 100% of the interests in ADPT-AZ RE Holdings LLC, an entity formed to hold the real property leases with non-MPT lessors.  Other than their respective interests in real property leases, ADPT-AZ MPT Holdings LLC and ADPT-AZ RE Holdings LLC have no other assets or liabilities.

The Arizona JV is the sole member of AGH Laveen LLC, which operates a full-service hospital facility located in Phoenix, Arizona doing business as “Dignity Health Arizona General Hospital.”  There are ten (10) HOPDs affiliated with Dignity Health Arizona General Hospital.

The Arizona JV is also the sole member of AGH Mesa LLC, which was formed to operate a hospital in Mesa, Arizona that will do business as “Dignity Health East Mesa Hospital.”  As of the Petition Date, Dignity Health East Mesa Hospital is being constructed and is or will soon be undergoing licensure processes.

b.                                      Certain Material Agreements.

In order to facilitate its operations and management, Adeptus Health Management and the Arizona JV are parties to that certain Management Services Agreement of AGH Phoenix LLC, dated as of October 21, 2014 (the “Arizona Management Agreement”), pursuant to which Adeptus Health Management provides day-to-day management services for the Arizona JV’s facilities, including, but not limited to, overseeing all aspects of the operations of the Arizona JV’s facilities, implementing and managing the development and expansion of the Arizona JV’s facilities, managing and providing all business functions and services (including negotiating, administering and executing agreements for professional services of physician and other non-physician personnel and ordering supplies), providing financial operation functions (including payroll), recommending fees and charges for all services provided by the Arizona JV’s facilities, preparing annual budgets and projections, and arranging for the employment of key personnel, in accordance with provider-based billing regulations, as applicable.  In exchange for such management services, Adeptus Health Management is entitled to a management fee in the amount of eight percent (8%) of Net Revenues (as such term is defined in the Arizona Management Agreement) of the Arizona JV as well as reimbursement of certain expenses.

Additionally, the Arizona JV and Dignity Health are parties to that certain Support Services Agreement, dated October 21, 2014 (the “Arizona Support Services Agreement”), pursuant to which Dignity Health provides certain administrative and support services, such as negotiating managed care agreements, to the Arizona JV’s facilities.  Dignity Health is paid certain fees for such services, as specified in the Arizona Support Services Agreement.

In order to provide for physician staffing at the Arizona JV’s facilities, Dignity Health Arizona General Hospital and NMP of Arizona have entered into that certain Services Agreement for Emergency Department Coverage, dated December 1, 2014 (the “Arizona ED Coverage Agreement”).  Pursuant to the Arizona ED Coverage Agreement, NMP of Arizona provides Dignity Health Arizona General Hospital and its affiliated HOPDs with fully-licensed and qualified physicians and a medical director, in accordance with provider-based billing regulations, as applicable.

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Finally, pursuant to a Trademark License Agreement, dated October 21, 2014, the Arizona JV contracts with Dignity Health for the use of certain of Dignity Health’s trademarks.

c.                                       Certain Prepetition Transactions.

In connection with the formation of the Arizona JV, Adeptus Health Phoenix Holdings, LLC made a loan to the Arizona JV in an amount equal to $3.0 million (the “2014 Arizona Loan”).  Additionally, prior to February 2017, Adeptus Health Phoenix Holdings, LLC made additional loans to the Arizona JV in an aggregate amount equal to $12.0 million (the “2017 Arizona Loan”).

In February 2017, Dignity Health made a loan to the Arizona JV in an amount equal to $6.0 million (the “2017 Dignity Arizona Loan”), the proceeds of which were used to repay a portion of the 2017 Arizona Loan.  In addition, each of Adeptus Health Phoenix Holdings, LLC and Dignity Health made a commitment, subject to certain conditions, to loan an additional $6.0 million to the Arizona JV.

Pursuant to that certain 2017 Intercreditor and Subordination Agreement dated February 10, 2017, between the Arizona JV, Adeptus Health Phoenix Holdings LLC, and Dignity Health, the parties agreed that all obligations of the Arizona JV to Adeptus Health Phoenix Holdings, LLC under the 2014 Arizona Loan and the 2017 Arizona Loan would be subordinated to the obligations of the Arizona JV to Dignity Health under the 2017 Dignity Arizona Loan.

As a result, the 2014 Arizona Loan in the outstanding principal amount equal to $3.0 million, the 2017 Arizona Loan in the outstanding principal amount equal to $6.0 million and the 2017 Dignity Arizona Loan in the outstanding principal amount equal to $6.0 million are outstanding.

Additionally, as of February 28, 2017, the Arizona JV owed a total aggregate amount of approximately $37.87 million to (i) Adeptus Health Management on account of accrued management fees and disbursements for expenses made on behalf of the Arizona JV, and (ii) NMP of Arizona on account of physician subsidies.

In 2016, the Arizona JV generated approximately $46.6 million in revenue.

3.                                      UCHealth Joint Venture.

a.                                      Generally.

On April 21, 2015, Adeptus announced a joint venture with University of Colorado Health to operate facilities in Colorado Springs and Denver, Colorado.  In particular, Adeptus Health Colorado Holdings LLC, a wholly-owned subsidiary of Adeptus Health Ventures, and University of Colorado Health formed UCHealth Partners LLC (the “Colorado JV”), in which Adeptus Health Colorado Holdings LLC owns a 49.9% membership interest and University of Colorado Health owns the remaining 50.1%.

In connection with the Colorado JV, Adeptus Health Colorado Holdings LLC and University of Colorado Health are parties to that certain Second Amended and Restated

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Operating Agreement of UCHealth Partners LLC, dated February 1, 2017 (the “Colorado Operating Agreement”), which dictates, among other things, the circumstances under which members may make capital contributions and loans to the Colorado JV as well as when members are entitled to distributions.  Pursuant to the Colorado Operating Agreement, Adeptus Health Colorado Holdings LLC is entitled to a preferred distribution in the amount of $9.2 million per year.

The Colorado Operating Agreement also contemplates that Adeptus Health Management will manage the Colorado JV’s HOPDs and that University of Colorado Health will manage the Colorado JV’s hospital facilities, as further discussed below.

In addition to its interests in the Colorado JV, Adeptus Health Colorado Holdings LLC owns 100% of the interests in ADPT-CO MPT Holdings LLC, an entity formed to hold real property leases for the Colorado properties with MPT, and 100% of the interests in ADPT-CO RE Holdings LLC, an entity formed to hold real property leases with non-MPT lessors.  Other than their respective interests in real property leases, ADPT-CO MPT Holdings LLC and ADPT-CO RE Holdings LLC have no other assets or liabilities.

The Colorado JV is the sole member of UCHealth Colorado Springs Hospital LLC, which operates a full service hospital facility located in Colorado Springs, Colorado doing business as “UCHealth Grandview Hospital.”  There are four (4) active HOPDs that are affiliated with UCHealth Grandview Hospital.

The Colorado JV is also the sole member of UCHealth Broomfield Hospital LLC, which operates a full service hospital facility located in Denver, Colorado doing business as “UCHealth Broomfield Hospital.”  There are thirteen (13) active HOPDs that are owned by and affiliated with UCHealth Broomfield Hospital.

b.                                      Certain Material Agreements.

In order to facilitate the operations and management of the HOPDs, Adeptus Health Management and the Colorado JV entered into that certain Amended and Restated ER Facilities Management Services Agreement, dated February 1, 2017 (the “Colorado ER Management Agreement”), pursuant to which Adeptus Health Management provides day-to-day management services for the Colorado JV’s HOPDs, including, but not limited to, overseeing all aspects of the operations of the Colorado JV’s HOPDs, implementing and managing the development and expansion of the Colorado JV’s HOPDs, managing and providing all business functions and services (including negotiating, administering and executing agreements for professional services of physician and other non-physician personnel and ordering supplies), providing financial operation functions (including payroll), recommending fees and charges for all services provided by the Colorado JV’s HOPDs, preparing annual budgets and projections, and arranging for the employment of key personnel, in accordance with provider-based billing regulations, as applicable.  In exchange for such management services, Adeptus Health Management is entitled to a management fee in the amount of eight percent (8%) of Net Revenues (as such term is defined in the Colorado ER Management Agreement) of the Colorado JV’s HOPDs, as well as reimbursement of certain expenses.

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In order to facilitate the operations and management of its hospital facilities, University of Colorado Health and the Colorado JV entered into the Hospital Facilities Management Services Agreement, dated February 1, 2017 (the “Colorado Hospital Management Agreement”), pursuant to which University of Colorado Health provides certain management services to the Colorado JV’s hospitals, in accordance with provider-based billing regulations, as applicable.  In exchange for such management services, University of Colorado Health is entitled to a management fee in the amount of eight percent (8%) of Net Revenues (as such term is defined in the Colorado Hospital Management Agreement) of the Colorado JV’s hospital facilities, as well as reimbursement of certain expenses.

Additionally, the Colorado JV and University of Colorado Health have entered into that certain Support Services Agreement, dated April 20, 2015, pursuant to which University of Colorado Health provides certain administrative and support services, such as negotiating managed care agreements and providing certain billing and collection services, to the Colorado JV’s facilities.  University of Colorado Health is paid certain fees for such services, as specified in the Support Services Agreement.

In addition, the Colorado JV, UCHealth Grandview Hospital and UCHealth Broomfield Hospital have each entered into that certain Services Agreement for Emergency Department Coverage, dated April 20, 2015, with NMP of Colorado.  Pursuant to these agreements, NMP of Colorado provides the Colorado JV with physicians and a medical director, in accordance with provider-based billing regulations, as applicable.

Finally, pursuant to a Trademark License Agreement, dated April 20, 2015, the Colorado JV contracts with University of Colorado Health for the use of certain of University of Colorado Health’s trademarks.

On March 7, 2017 and March 31, 2017, University of Colorado Health sent Adeptus Health Management letters alleging that Adeptus Health Management breached, among other agreements, the Colorado ER Management Agreement by failing to devote necessary time and talents to the management of the Colorado JV.  Adeptus Health Management disputes such allegations.

c.             Certain Prepetition Transactions.

Prior to December 2016, Adeptus Health Colorado Holdings LLC made a series of cash advances to the Colorado JV in an amount equal to $21,115,716.00, a portion of which equal to $12,624,700.00 was treated as a loan from Adeptus Health Colorado Holdings LLC to the Colorado JV (the “Adeptus CO Loan”), and the remaining portion of which equal to $8,491,016.00 was treated as a loan from Adeptus Health Colorado Holdings LLC to University of Colorado Health (the “Inter-Party Loan”) and a subsequent contribution of the Inter-Party Loan proceeds from University of Colorado Health to the Colorado JV. In addition, prior to January 2017, University of Colorado Health made a series of cash advances to the Colorado JV in an amount equal to $4,184,284.00 (the “University of CO Loan”).

In December 2016, the Adeptus CO Loan in the amount equal to $12,624,700.00 was converted from a loan to a capital contribution to the Colorado JV, the University of CO Loan in

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the amount equal to $4,184,284.00 was converted from a loan to a capital contribution to the Colorado JV, and the Inter-Party Loan in the amount equal to $8,491,016.00 was repaid by University of Colorado Health.

In February 2017, the Colorado JV made a capital call in the amount of $6,746,500.00.  In connection therewith, University of Colorado Health contributed $3,379,996.00 ($920,817 in cash and $2,459,179.00 by contributing the $2,459,179.00 account receivable that the Colorado JV owed to University of Colorado Health for services provided through December 31, 2016) to the Colorado JV as a capital contribution and Adeptus Health Colorado Holdings LLC contributed $3,366,504.00 in cash to the Colorado JV through an inter-company transfer as a capital contribution.

In December 2016 and February 2017, Adeptus Health Colorado Holdings LLC acknowledged that it is obligated to make an additional capital contribution in an amount equal to $11.0 million to the Colorado JV that it has not made as of the Petition Date.

Additionally, as of February 28, 2017, the Colorado JV owed a total aggregate amount of approximately $7.14 million to (i) Adeptus Health Management on account of accrued management fees, and (ii) NMP of Colorado on account of physician subsidies.

In 2016, the Colorado JV generated approximately $68.3 million in revenue.

4.             THR Joint Venture.

a.             Generally.

On or around May 10, 2016, First Choice ER announced a joint venture with Texas Health Resources to operate facilities in the Dallas-Ft. Worth area of Texas.  In particular, ADPT DFW Holdings LLC, a wholly-owned subsidiary of Adeptus Health Ventures, and Texas Health Resources formed FTH DFW Partners, LLC (the “Texas JV”), in which ADPT DFW Holdings LLC owns 49% of the membership interest and Texas Health Resources owns the remaining 51%.

In connection with the Texas JV, ADPT DFW Holdings LLC and Texas Health Resources are parties to that certain Amended and Restated Operating Agreement of FTH DFW Partners LLC, dated May 10, 2016 (the “Texas Operating Agreement”), which dictates, among other things, the circumstances under which members may make capital contributions and loans to the Texas JV as well as when members are entitled to distributions.  The Texas Operating Agreement also contemplates that Adeptus Health Management will manage the Texas JV’s facilities, as further discussed below.  Pursuant to the Texas Operating Agreement, ADPT DFW Holdings LLC is entitled to a preferred distribution in an amount equal to $10.25 million that is due and payable at the end of each calendar quarter.

In addition to its membership interest in the Texas JV, ADPT DFW Holdings LLC owns 100% of the interests in ADPT-DFW MPT Holdings LLC, an entity formed to hold real property leases for the Dallas-Ft. Worth properties with MPT, and 100% of the interests in ADPT-DFW RE Holdings LLC, an entity formed to hold real property leases with non-MPT lessors.  Other

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than their respective interests in real property leases, ADPT-DFW MPT Holdings LLC and ADPT-DFW RE Holdings LLC have no other assets or liabilities.

The Texas JV is the sole member of First Texas Hospital Carrollton LLC, which operates a full service hospital facility located in Carrollton, Texas doing business as “Texas Health Hospital.”  There are thirty (30) active HOPDs that are owned by and affiliated with Texas Health Hospital.

b.             Certain Material Agreements.

In order to facilitate its operations and management, Adeptus Health Management and the Texas JV are parties to that certain Management Services Agreement, dated May 10, 2016, pursuant to which Adeptus Health Management provides day-to-day management services for the Texas JV’s facilities, such as overseeing all aspects of the operations of the Texas JV’s facilities, implementing and managing the development and expansion of the Texas JV’s facilities, managing and providing all business functions and services (including negotiating, administering and executing agreements for professional services of physician and other non-physician personnel and ordering supplies), providing financial operation functions (including payroll), preparing annual budgets and projections, and arranging for the employment of the CEO and Chief Nursing Officer, among other personnel, in accordance with provider-based billing regulations, as applicable.  In exchange for such management services, for each fiscal year, in addition to reimbursement for certain expenses, Adeptus Health Management is paid (a) eight percent (8%) of net revenues not attributable to acute care hospitals up to $150.0 million, (b) six percent (6%) of any of net revenues not attributable to acute care hospitals that are in excess of $150.0 million, and (c) four percent (4%) of net revenues attributable to acute care hospitals.

Additionally, the Texas JV and Texas Health Resources have entered into that certain Support Services Agreement, dated May 10, 2016, pursuant to which Texas Health Resources provides certain administrative and support services, such as negotiating managed care agreements and providing fee schedules, to the Texas JV’s facilities.  Texas Health Resources is paid certain fees for such services, as specified in the Support Services Agreement.

In addition, Texas Health Hospital and NMP of Texas are parties to that certain Services Agreement for Emergency Department Coverage, dated May 10, 2016, pursuant to which NMP of Texas provides Texas Health Hospital with physicians and a medical director, in accordance with provider-based billing regulations, as applicable.

Finally, pursuant to a Trademark License Agreement dated May 10, 2016, the Texas JV contracts with Texas Health Resources for the use of certain of Texas Health Resources’ trademarks.

c.             Certain Prepetition Transactions.

Prior to February 2017, ADPT DFW Holdings LLC or one of its affiliates paid for signage on behalf of the Texas JV in an amount equal to $2,752,482.89, which was treated as a loan from ADPT DFW Holdings LLC to the Texas JV (the “Signage Loan”), and Texas Health Resources paid for an advertising campaign on behalf of the Texas JV in an amount equal to

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$931,723.12, which was treated as a loan from Texas Health Resources to the Texas JV (the “Advertising Loan”).

In February 2017, a portion of the Signage Loan in an amount equal to $1,805,260.94 was converted from a loan to a capital contribution to the Texas JV, and all of the Advertising Loan was converted from a loan to a capital contribution to the Texas JV.  Additionally, in February 2017, Texas Health Resources made an additional capital contribution to the Texas JV in an amount equal to $947,221.95, the proceeds of which were used by the Texas JV to repay the outstanding portion of the Signage Loan.

As of February 2017, an additional loan made by ADPT DFW Holdings LLC to the Texas JV in an amount equal to $10.0 million was outstanding (the “Adeptus TX Loan”). In February 2017, Texas Health Resources loaned $5.0 million to the Texas JV (the “THR Loan”), all of the proceeds of which were used to repay a portion of the Adeptus TX Loan.  As a result, the Adeptus TX Loan in the outstanding principal amount equal to $5.0 million and the THR Loan in the outstanding principal amount equal to $5.0 million are outstanding.

As of February 28, 2017, the Texas JV owed a total aggregate amount of approximately $49.97 million to (i) Adeptus Health Management on account of accrued management fees and disbursements for expenses made on behalf of the Texas JV and (ii) NMP of Texas on account of physician subsidies.

In 2016, the Texas JV generated approximately $83.3 million in revenue.

5.             Mount Carmel Joint Venture.

a.             Generally.

In February 2016, the Adeptus Enterprise announced its expansion into Ohio through a partnership with Mount Carmel Health System.  In particular, ADPT Columbus Holdings LLC, a wholly-owned owned subsidiary of Adeptus Health Ventures, and Mount Carmel Health System formed Mount Carmel EHN LLC (the “Ohio JV”), in which ADPT Columbus Holdings LLC owns 50.1% of the membership interest and Mount Carmel Health System owns the remaining 49.9%.  The Ohio JV was formed for the purpose of constructing a hospital and affiliated HOPDs.  As of the Petition Date, however, the Ohio JV has yet to break ground on the construction of either its hospital or HOPDs.

In connection with the Ohio JV, ADPT Columbus Holdings LLC and Mount Carmel Health System are parties to that certain Operating Agreement, dated February 3, 2016 (the “Ohio Operating Agreement”), which dictates, among other things, the circumstances under which members may make capital contributions and loans to the Ohio JV.  The Ohio Operating Agreement also contemplates that Adeptus Health Management will manage the Ohio JV’s facilities, as further discussed below.  Pursuant to the Ohio Operating Agreement, HoldCo unconditionally and irrevocably guaranteed to the Ohio JV and Mount Carmel Health System the performance of the obligations of ADPT Columbus Holdings LLC under the Ohio Operating Agreement and certain related transactions.

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In addition to its membership interest in the Ohio JV, ADPT Columbus Holdings LLC owns 100% of the interests in ADPT-Columbus MPT Holdings LLC, an entity formed to hold real property leases for the Ohio properties with MPT, and 100% of the interests in ADPT-Columbus RE Holdings LLC, an entity formed to hold real property leases with non-MPT lessors.  Other than their respective interests in real property leases, ADPT-Columbus MPT Holdings LLC and ADPT-Columbus Holdings LLC have no other assets or liabilities.

b.             Certain Material Agreements.

The Ohio JV does not currently operate any facilities.  However, in anticipation of future operations, Adeptus Health Management and the Ohio JV are parties to that certain Management Services Agreement of Mount Carmel EHN LLC, dated as of February 3, 2016 (the “Ohio Management Agreement”), pursuant to which Adeptus Health Management agreed to provide day-to-day management services for the Ohio JV’s facilities, such as implementing all aspects of the operations of the Ohio JV’s facilities, implementing and overseeing development and expansion of the Ohio JV’s facilities, managing and providing all business functions and services (including negotiating, administering and executing agreements for professional services of physician and other non-physician personnel and ordering supplies), providing financial operation functions (including payroll), preparing annual budgets and projections, and arranging for the employment of the CEO and Chief Nursing Officer, among other personnel, in accordance with provider-based billing regulations, as applicable.  In exchange for such management services, Adeptus Health Management is entitled to a management fee in the amount of eight percent (8%) of Net Revenues (as such term is defined in the Ohio Management Agreement) of the Ohio JV as well as reimbursement of certain expenses.

Additionally, the Ohio JV and Mount Carmel Health System have entered into that certain Support Services Agreement of Mount Carmel EHN, LLC, dated February 3, 2016 (the “Ohio Support Services Agreement”), pursuant to which Mount Carmel Health System agreed to provide certain administrative and support services, such as managed care contracting services, to the Ohio JV’s facilities.  The Ohio JV is entitled to certain fees for such anticipated services, as specified in the Ohio Support Services Agreement.

In addition, the Ohio JV and NMP of Ohio have entered into a Services Agreement for Emergency Department Coverage, dated February 3, 2016.  Pursuant to the Services Agreement for Emergency Department Coverage, NMP of Ohio will provide the Ohio JV with physicians and a medical director, in accordance with provider-based billing regulations, as applicable.

Finally, pursuant to a Trademark License Agreement, dated February 3, 2016, the Ohio JV contracts with Mount Carmel Health System for the use of certain of Mount Carmel Health System’s trademarks.

6.             Ochsner Joint Venture.

In September 2015, Adeptus announced the formation of a partnership with New Orleans-based Ochsner Health System to operate facilities in Louisiana.  In particular, ADPT New Orleans Holdings LLC, a wholly-owned subsidiary of Adeptus Health Ventures, and Ochsner Clinic Foundation formed Ochsner Health Partners LLC (the “Louisiana JV”), in which

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ADPT New Orleans Holdings LLC owned 49.9% and Ochsner Health System owned the remaining 50.1%.  As discussed further below, Ochsner Clinic Foundation currently owns 100% of Ochsner Health Partners LLC.

In addition to its interests in the Louisiana JV, ADPT New Orleans Holdings LLC owns 100% of the interests in ADPT-LA MPT Holdings LLC, an entity formed to hold leases for the Louisiana properties with MPT (the “Louisiana MPT Properties”), and 100% of the interests in ADPT-LA RE Holdings LLC, an entity formed to hold leases with non-MPT lessors.  Other than their respective interests in real property leases, ADPT-LA MPT Holdings LLC and ADPT-LA RE Holdings LLC have no other assets or liabilities.

The Louisiana JV does not currently own any operating facilities.  However, the Louisiana JV owns 100% of the interests in Ochsner Health Partners Hospital LLC, an entity that was originally formed to operate a hospital.

In connection with the formation of the Louisiana JV, ADPT New Orleans Holdings LLC and Ochsner Health System entered into an operating agreement governing their rights and obligations.  Pursuant to the Limited Liability Company Agreement of Ochsner Health Partners, LLC, dated September 1, 2016 (the “Ochsner Operating Agreement”), First Choice ER unconditionally and irrevocably guaranteed to the Louisiana JV and Ochsner Health System the performance of the obligations of ADPT New Orleans Holdings LLC under the Ochsner Operating Agreement and certain related transactions.

Additionally, prior to the Petition Date, First Choice ER, ADPT New Orleans Management LLC, Ochsner Clinic Foundation, and Ochsner Medical Center-Kenner, L.L.C. were parties to that certain Partner Services Agreement, dated October 11, 2016 (the “Partner Services Agreement”), pursuant to which ADPT New Orleans Management LLC provided certain management services to facilities that are wholly-owned by Ochsner Clinic Foundation.  In exchange for such services, ADPT New Orleans Management LLC was entitled to certain fees, as described in the Partner Services Agreement.  Additionally, NMP of Louisiana provided medical personnel to facilities that are wholly-owned by Ochsner Clinic Foundation.

Additionally, in contemplation of its operations, the Louisiana JV negotiated several agreements with entities within the Adeptus Enterprise (the “Louisiana JV Agreements”), but have terminated such agreements in connection with the termination of the joint venture relationship described below.

Finally, the real property for certain facilities that were wholly-owned by Ochsner Clinic Foundation were leased by ADPT-LA MPT Holdings LLC under the 2014 Master Lease (the “Louisiana MPT Properties”).

On March 30, 2017, Ochsner Clinic Foundation, Ochsner Medical Center — Kenner, L.L.C., ADPT New Orleans Management LLC, First Choice ER, LLC, ADPT New Orleans Holdings LLC, Adeptus Health Management, the Louisiana JV, ADPT-LA MPT Holdings LLC and NMP of Louisiana entered into that certain Termination Agreement (the “Termination Agreement”).  Pursuant to the Termination Agreement, ADPT New Orleans Holdings LLC agreed to transfer its interests in the Louisiana JV to Ochsner Clinic Foundation.  The parties

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further agreed to terminate the Partner Services Agreement and the Louisiana JV Agreements, provided that ADPT New Orleans Management LLC will use efforts and take certain other actions to provide for a transition.  The parties also agreed that Ochsner Medical Center — Kenner, L.L.C. would pay rents to MPT for the Louisiana MPT Properties (or reimburse ADPT-LA MPT Holdings for the rent) and use commercially reasonable efforts to enter into direct agreements directly with MPT for those properties.  Finally, the parties agreed that NMP of Louisiana would provide certain services to the Louisiana JV pursuant to a separate agreement to be entered into at a later date.  On March 31, 2017, MPT agreed to sever the Louisiana MPT Properties from the 2014 Master Lease (as hereinafter defined) and to lease the Louisiana MPT Properties directly to Ocshner Health System.

As of the Petition Date and pursuant to the Termination Agreement, the Debtors received $1.2 million from Ochsner Clinic Foundation representing the estimated amount owed to ADPT New Orleans Management LLC under the Partner Services Agreement as of February 28, 2017. The Termination Agreement provides that additional amounts owed under the Partner Services Agreement will be reconciled within 60 days following the date of the Termination Agreement.

7.             Houston Market.

In addition to the facilities owned and operated through the Joint Ventures, the Adeptus Enterprise includes a fully-licensed and operational hospital and affiliated HOPDs that are wholly-owned and operated by the Debtors.

In particular, Adeptus Health Ventures owns 100% of the interests in FTH Houston Partners LLC, which in turn owns 100% of the interests in First Texas Hospital Cy-Fair LLC, which operates as First Texas Hospital in Houston, Texas.  First Texas Hospital Cy-Fair LLC, in turn, owns 100% of the interests and is the hospital-affiliate of twenty-three (23) HOPDs.

In addition to its interests in First Texas Hospital Cy-Fair LLC, FTH Houston Partners LLC owns 100% of the interests in ADPT-Houston MPT Holdings LLC, an entity formed to hold leases for the Houston properties with MPT, and 100% of the interests in ADPT-Houston RE Holdings LLC, an entity formed to hold the leases with non-MPT lessors.

In 2016, the Houston Market generated approximately $107.4 million in revenue.

8.             Adeptus Wholly-Owned IFSEDs.

Finally, the Adeptus Enterprise also includes the following:

a.             6 IFSEDs in the Houston area that are owned and operated by wholly-owned subsidiaries of First Choice ER; and

b.             12 IFSEDs in the Austin and San Antonio areas that are owned and operated by wholly-owned subsidiaries of First Choice ER.

Each of the foregoing wholly-owned IFSEDs operate independently and are not affiliated with a hospital nor related to any of the Joint Ventures.

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In 2016, the Adeptus Wholly-Owned IFSEDs generated approximately $79.1 million in revenue.(8)

C.            Leasehold Obligations.

1.             Master Funding and Lease Agreements with MPT.

As described in greater detail below, entities within the Adeptus Enterprise are parties to certain funding and lease agreements with MPT (the “MPT Agreements”).  Pursuant to the MPT Agreements, MPT acquires parcels of land, funds the ground-up construction of new facilities and leases the facilities to entities in the Adeptus Enterprise upon completion of construction.  A brief description of each of the MPT Agreements is provided below.  On a monthly basis, the Adeptus Enterprise pays MPT approximately $3.4 million on account of its obligations under the MPT Agreements.  As will be discussed in greater detail herein, the Debtors intend to assume the MPT Agreements and to pay to MPT all Cure Amounts due and owing thereunder on the Effective Date.

a.             The 2013 Master Funding and Lease Agreements.

On June 11, 2013, MPT and First Choice ER entered into that certain Master Funding and Development Agreement (the “2013 Master Funding Agreement”), pursuant to which MPT agreed to, among other things, finance the acquisition and development of up to 25 facilities for First Choice ER with an aggregate funding obligation of $100.0 million.  Specifically, the 2013 Master Funding Agreement contemplates that, after acquiring certain properties, MPT will include those properties under the 2013 Master Lease (as hereinafter defined), fund the construction of FSERs thereon and lease the facilities to First Choice ER or its affiliates.

In connection with the 2013 Master Funding Agreement, MPT of Little Elm FCER, LLC, an affiliate of MPT, and Little ELM FM 423 Medical Center, LLC, an affiliate of First Choice ER, entered into that certain Master Lease Agreement, dated August 29, 2013 (the “2013 Master Lease”).  The 2013 Master Lease contemplates that as additional facilities are constructed under the 2013 Master Funding Agreement, those facilities will be subject to the provisions of the 2013 Master Lease.  As of the Petition Date, certain of the Debtors are parties to, and twelve (12) facilities in Texas are subject to, the 2013 Master Lease.

As a condition to the 2013 Master Funding Agreement and the 2013 Master Lease, First Choice ER guaranteed all obligations, duties and liabilities of its affiliates under the 2013 Master Lease as well as certain cost overruns in connection with the construction and development of certain facilities.

(8)  This estimate excludes revenues from facilities that were contributed to the Texas JV in mid-2016.

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b.             The 2014 Master Funding and Lease Agreements.

On July 29, 2014, MPT entered into that certain Master Funding and Development Agreement with HoldCo (the “2014 Master Funding Agreement”), pursuant to which MPT agreed to, among other things, finance the acquisition and development of facilities for HoldCo with an aggregate funding obligation of $150.0 million.

In connection with the 2014 Master Funding Agreement, MPT Summerwood FCER, LLC, an affiliate of MPT, and Summerwood Medical Center, LLC, an affiliate of HoldCo, entered into that certain Master Lease Agreement, dated September 26, 2014 (the “2014 Master Lease”).  As with the 2013 Master Lease, it was intended that additional facilities would be added to the 2014 Master Lease as they were completed.  As of the Petition Date, certain of the Debtors are parties to the 2014 Master Lease.  There are thirty-two (32) facilities subject to the 2014 Master Lease.

As a condition to the 2014 Master Funding Agreement and 2014 Master Lease, HoldCo guaranteed all obligations, duties and liabilities of its affiliates under the 2014 Master Lease as well as certain cost overruns in connection with the construction and development of certain facilities.

c.             The Colorado Master Lease and Sublease.

In 2015, MPT and certain of the Debtors agreed to remove the properties located in Colorado that were the subject of the 2013 Master Lease and 2014 Master Lease and make them the subject of a separate master lease agreement.  Accordingly, on April 20, 2015, certain affiliates of MPT, namely MPT Aurora FCER, LLC, MPT of Denver 48th FCER, LLC, MPT of Firestone FCER, LLC, MPT of Broomfield FCER, LLC, MPT of North Gate FCER, LLC, MPT of Thornton FCER, LLC, MPT of Fountain FCER, LLC and MPT of Commerce City FCER, LLC, entered into that certain Master Lease Agreement (the “Colorado Master Lease”) with ADPT-CO MPT Holdings LLC, an affiliate of First Choice ER, in connection with the Colorado JV.

In accordance with the provisions of the Colorado Master Lease, ADPT-CO MPT Holdings LLC subleased the properties subject to the Colorado Master Lease to the following entities that are wholly-owned by the Colorado JV:  Firestone Medical Center LLC, Broomfield Huron Medical Center LLC, Colorado Springs Meadowgrass Medical Center LLC, Fountain Medical Center LLC, Commerce City Medical Center LLC, Thornton 136th Medical Center LLC, Green Valley Medical Center LLC, North Aurora Medical Center LLC, Parker-Lincoln Medical Center LLC, Horizon Park Medical Center LLC, and UCHealth Broomfield Hospital LLC (collectively, the “Sublessees”) pursuant to that certain Master Sublease Agreement dated April 20, 2015 (the “Colorado Master Sublease”).  The Sublessees, in turn, have assigned their interest under the Colorado Master Sublease to UCHealth Colorado Springs LLC and UCHealth Broomfield LLC, respectively.  There are eleven (11) facilities subject to the Colorado Master Lease.

HoldCo is a guarantor under the Colorado Master Lease.

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2.                                      Lease Agreements with Non-MPT Lessors.

Certain of the Debtors are lessees under individual leases (the “Non-MPT Leases”) with other landlords (the “Non-MPT Lessors”).  The major Non-MPT Lessors include, among other entities, affiliates of Elmtree Fund, Leon Capital Group, Verdad Real Estate, and a joint venture between IRA Capital and PM Realty Group.  The Non-MPT Leases relate to 62 active facilities.

On a monthly basis, the Adeptus Enterprise pays the Non-MPT Lessors approximately $2.7 million on account of its obligations under the Non-MPT Leases.

D.                                    Tax Receivable Agreement.

On June 25, 2014, in connection with PubCo’s initial public offering,  PubCo entered into a tax receivable agreement (the “TRA”) with the previous members of HoldCo (the “TRA Counterparties”) that provides for the payment from time to time by PubCo to the TRA Counterparties of 85% of the amount of the benefits, if any, that PubCo is deemed to realize as a result of increases in tax basis and certain other tax benefits related to PubCo’s acquisition of HoldCo LLC units from HoldCo’s previous members, including tax benefits attributable to payments under the TRA.  These payment obligations are obligations of PubCo; however, payments to the TRA Counterparties were only required to be paid as these tax benefits were actually realized by PubCo.  For purposes of the TRA, the benefit deemed realized by PubCo in a taxable year of PubCo was computed by comparing its actual income tax liability for such year to the amount of such taxes that PubCo would have been required to pay for such year (calculated with certain assumptions) had there been no increase to the tax basis of HoldCo’s assets as a result of PubCo’s acquisition of HoldCo LLC units and had PubCo not entered into the TRA.  The step-up in basis depends on the fair market value of the HoldCo LLC units when the units were acquired (or deemed to be acquired) by PubCo.

As of December 31, 2016, PubCo has recorded an estimated payable of $237.9 million related to the TRA.  PubCo and each of the Debtors reserve all rights, objections, and defenses to any claims asserted, related to, or in connection with the TRA.

III.                              The Debtors’ Prepetition Capital Structure.

A.                                    Generally.

In order to obtain funding for, among other things, the development and working capital needs of the Adeptus Enterprise, First Choice ER entered into that certain Credit Agreement, dated October 6, 2015, (as amended, modified or supplemented from time to time, the “Prepetition Credit Agreement”) with Bank of America, N.A., as administrative agent and lender (“Bank of America” or “Administrative Agent”), Bank of Montreal, Suntrust Bank, Regions Bank, Fifth Third Bank, Raymond James Bank, N.A., Legacy Texas Bank and Goldman Sachs Bank USA (collectively with the Administrative Agent, the “Bank Lenders”).  As discussed below, Deerfield (as defined below) are now the lenders under the Prepetition Credit Agreement.

As security for the payment of First Choice ER’s obligations under the Prepetition Credit Agreement, HoldCo and certain of First Choice ER’s subsidiaries jointly and severally guaranteed the obligations thereunder (the “Guarantors” and together with First Choice ER and

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HoldCo, the “Loan Parties”).(9)  Additionally, the Loan Parties pledged first priority liens in (a) 100% of the equity interests First Choice ER’s and in its subsidiaries(10); and (b) all property (other than Excluded Property(11)) of the Loan Parties, subject to certain restrictions.  To the extent that certain Debtors were not obligors pursuant to the Prepetition Credit Agreement (“Non-Obligor Debtors”), those Non-Obligor Debtors are obligors under the DIP Facility Loan Agreement and their assets are collateral thereunder.

As of April 3, 2017, immediately prior to the debt purchase by Deerfield described below, the Loan Parties’ total secured debt obligations to the Bank Lenders under the Prepetition Credit Agreement and related documents totaled approximately $212.75 million of principal consisting of obligations under the Revolving Loans, the Term Loans, the Letters of Credit, the Swing Line Loans and the Bridge Loan (collectively, the “Senior Debt Obligations”).  The Senior Debt Obligations are described in greater detail below.

B.                                    The Bank Lenders’ Loans

1.                                      The Revolving Loans.

Subject to the terms and conditions set forth in the Prepetition Credit Agreement, each of the Bank Lenders severally agreed to make loans (each such loan, a “Revolving Loan”) to First Choice ER in an aggregate amount not to exceed $50.0 million (the “Aggregate Revolving Loan Commitment”).  The Revolving Loans have a maturity date of October 6, 2020 (the “Maturity Date”).

On August 12, 2016, the Loan Parties and Bank of America entered into that certain First Amendment to the Prepetition Credit Agreement, pursuant to which Bank of America agreed to increase the Aggregate Revolving Loan Commitment to $70.0 million.

Shortly thereafter, on November 1, 2016, the Loan Parties and the Bank Lenders entered into that certain Second Amendment to the Prepetition Credit Agreement, pursuant to which Legacy Texas Bank agreed to provide a further increase in the Aggregate Revolving Loan Commitment to $75.0 million.

(9)  The Prepetition Credit Agreement provides that, to the extent a wholly-owned subsidiary becomes a “Material Domestic Subsidiary”, First Choice ER shall cause such subsidiary to become a Guarantor under the Prepetition Credit Agreement.  A “Material Domestic Subsidiary” is defined as any subsidiary organized in the United States that contributes more than $250,000 of Consolidated EBITDA (as defined in the Prepetition Credit Agreement) and has more than $250,000 in assets within a certain time period.

(10)  The Joint Ventures are not subsidiaries of First Choice ER and, accordingly, are not required to become a Guarantor or pledge any of their assets to secure the Senior Debt Obligations.

(11)   “Excluded Property” is defined to include, among other things, (i) any fee-owned property that has a fair market value of less than $500,000; (ii) commercial tort claims as to which the amount claimed does not exceed $500,000; and (iii) cash, deposit accounts and securities accounts held solely for payroll, trust and employee benefits.  The Debtors do not believe that material Excluded Property existed as of the Petition Date.  To the extent such Excluded Property exists, it has been pledged as collateral for the DIP Facility.

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As of April 4, 2017, the total amount owed to Deerfield by the Loan Parties on account of the Revolving Loans (after the debt purchase by Deerfield described below) totaled not less than $61.9 million.

2.                                      The Term Loans.

In addition to the Revolving Loans, each of the Bank Lenders severally agreed to make its portion of a term loan to First Choice ER in an aggregate amount not to exceed $125.0 million (the “Initial Term Loan”).  Unless accelerated sooner pursuant to the Prepetition Credit Agreement, First Choice ER is obligated to repay the outstanding principal of the Initial Term Loan in quarterly installments that range from $1,562,500 to $3,125,000, with the outstanding principal balance of the Initial Term Loan payable on the Maturity Date.

The Prepetition Credit Agreement provides that, subject to certain limitations, First Choice ER may, from time to time, add one or more tranches of Term Loans and/or increase the amount of the Initial Term Loan.

On November 1, 2016, the Loan Parties and Goldman Sachs Lending Partners LLC (“GSLP”) entered into that certain Incremental Facility Amendment (the “Incremental Facility Amendment), pursuant to which GSLP agreed to provide a new tranche of term loans (the “Incremental Term A-2 Loans” and together with the Initial Term Loan, the “Term Loans”) in the aggregate principal amount of up to $25.0 million ($10.0 million of which was never funded).  Pursuant to the Incremental Facility Amendment, First Choice ER is required to repay the outstanding principal amount of the Incremental Term Loans in quarterly installments that range from $187,000 to $375,000 with any outstanding balance of the Incremental Term A-2 Loans due on the Maturity Date.  In exchange for the Incremental Term A-2 Loans, First Choice ER agreed to (a) enter into a customary account control agreement with the Administrative Agent and any bank or other financial institution with which First Choice ER or any of the Guarantors maintains a deposit account; (b) furnish a consolidated 13-week forecast of cash availability and utilization of First Choice ER on a weekly basis to the Administrative Agent; and (c) retain FTI as an independent liquidity consultant.

As of April 4, 2017, the total amount owed to Deerfield by the Loan Parties on account of the Term Loans (after the debt purchase by Deerfield described below) totaled not less than $132.0 million.

3.                                      The Letters of Credit.

Pursuant to the Prepetition Credit Agreement, Bank of America agreed to issue certain letters of credit (the “Letters of Credit”) for First Choice ER or any of its wholly-owned subsidiaries, provided that, among other things, the amount outstanding under the Letters of Credit does not exceed $15.0 million.  The Letters of Credit were issued in connection with the Debtors’ obligations under the MPT Agreements.

As of April 4, 2017, the total amount owed to Deerfield by the Loan Parties on account of the Letters of Credit (after the debt purchase by Deerfield described below) totaled not less than $13.09 million.

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4.                                      The Swing Line Loans.

In addition to the Revolving Loans, Term Loans and Letters of Credit, Bank of America agreed to make loans to First Choice ER in an aggregate amount not to exceed $5.0 million (the “Swing Line Loans”).  The Swing Line Loans have a maturity date of the earlier of (a) 10 business days after a Swing Line Loan is made and (b) the Maturity Date.

5.                                      The Bridge Loan.

On March 7, 2017 (the “Bridge Loan Closing Date”), the Loan Parties entered into that certain Third Amendment to the Prepetition Credit Agreement (the “Third Amendment”) with Bank of America, Bank of Montreal, Fifth Third Bank, Raymond James Bank, N.A., and Goldman Sachs Lending Partners LLC (collectively, the “Bridge Lenders”), pursuant to which the Bridge Lenders agreed to (a) waive certain Acknowledged Events of Default (as such term is defined in the Third Amendment) and (b) provide additional extensions of credit under the Prepetition Credit Agreement in the form of a separate, priming tranche of term loans in the aggregate principal amount of $7.5 million, the proceeds of which were to be used to finance the short-term working capital needs of First Choice ER (the “Bridge Loan”).  The Bridge Loan had a maturity date of March 31, 2017.

In exchange for the Bridge Loan, First Choice ER agreed to pay to the Administrative Agent, for the account of each Lender in accordance with their Applicable Percentage (as such term is defined in the Third Amendment) an upfront fee in an amount equal to 3.0% of the Bridge Loan (the “Bridge Loan Upfront Fee”).  In accordance with the Third Amendment, the Bridge Loan Upfront Fee was payable from the Bridge Loan on the Bridge Loan Closing Date.  Additionally, as a condition to the Bridge Loan, First Choice ER agreed to retain a chief restructuring officer reasonably acceptable to the Bank Lenders to perform, among other things, the day-to-day operational management of the Loan Parties, preserving the working capital of the Loan Parties and reporting directly to First Choice ER’s board of directors.(12)

In connection with the Third Amendment, certain of First Choice ER’s subsidiaries, the Loan Parties, the Administrative Agent and the Bank Lenders entered into that certain Joinder Agreement, dated March 7, 2017, pursuant to which additional subsidiaries of First Choice ER were deemed to be a party to the Prepetition Credit Agreement and a Guarantor thereunder.

As of April 4, 2017, the total amount owed to Deerfield by the Loan Parties on account of the Bridge Loan (after the debt purchase by Deerfield described below) totaled not less than $7.5 million

(12)  The Bridge Lenders consented to the appointment of Andrew Hinkelman of FTI as CRO for the Debtors in accordance with the Third Amendment.

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C.                                    Deerfield Purchase of Debt and Additional Bridge Loan.

On April 3, 2017, the Bank Lenders and the Bridge Lenders agreed to sell their claims and interests under the Senior Debt Obligations to Deerfield Private Design Fund IV, L.P., Deerfield Partners, L.P., and Deerfield International Master Fund, L.P (collectively, “Deerfield”), pursuant to that certain Loan and Assignment Agreement (the “Sale Agreement”), dated April 3, 2017.  Pursuant to the Sale Agreement, Deerfield Management Company, L.P. (“Deerfield Management”) was appointed as successor agent under the Prepetition Credit Agreement.  Immediately prior to the debt purchase, the total amount owed to the Bank Lenders and the Bridge Lenders on account of the Senior Debt Obligations was approximately $212.75 million of principal, $7.5 million of which was on account of the Bridge Loan.

On April 5, 2017, the Loan Parties entered into that certain Fourth Amendment to the Prepetition Credit Agreement (the “Fourth Amendment”) with Deerfield, pursuant to which Deerfield agreed to (a) forbear until April 17, 2017 certain Specified Events of Default (as such term is defined in the Fourth Amendment) and (b) provide additional extensions of credit under the Prepetition Credit Agreement in the aggregate principal amount of $13.5 million, the proceeds of which were to be used to finance the short-term working capital needs of First Choice ER (the “Second Bridge Loan,” and together with the Bridge Loan, the “Bridge Loans,” and together with the Senior Debt Obligations, the “Deerfield Senior Debt Obligations”).  The Fourth Amendment provided that the Bridge Loans matured on the earlier of April 17, 2017 or the Petition Date.

As of the Petition Date, Deerfield held claims of approximately $228.0 million on account of the Deerfield Senior Debt Obligations.  A complete list of the Guarantors under the Prepetition Credit Agreement is attached hereto as Exhibit D.

In connection with the Sale Agreement and the Fourth Amendment, Deerfield agreed to provide the Debtors with postpetition funding for the Debtors’ Chapter 11 Cases, as further described below.  The Debtors and Deerfield further agreed that, subject to Bankruptcy Court approval, the Deerfield Secured Claims and Deerfield’s claims on account of the postpetition financing facility would be exchanged for equity in the Reorganized Debtors pursuant to the Plan.

D.                                    Deerfield- MPT Agreement.

Pursuant to that certain agreement dated April 3, 2017 by and between MPT and Deerfield (the “Deerfield-MPT Agreement”), MPT and Deerfield agreed, among other provisions, that upon the Effective Date, the Reorganized Debtors shall assume the MPT Agreements and pay all Cure Amounts due and owing thereunder.  Following assumption of the MPT Agreements by the Reorganized Debtors, MPT and Deerfield agreed to sever and release certain facilities from the MPT Agreements within certain specified time periods (collectively, the “Deerfield Severed Properties”).  The Deerfield-MPT Agreement further provides that, during the Chapter 11 Cases, MPT shall commence the process of marketing the real estate and operations of the Deerfield Severed Properties for sale or reletting, provided, however, that any potential sale or reletting of one or more of the Deerfield Severed Properties prior to the

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Effective Date shall require entry of a Final Order of the Bankruptcy Court approving same upon proper notice and hearing.

IV.                               Significant Prepetition Litigation and Regulatory Issues.

A.                                    Litigation.

As of the Petition Date, PubCo and related third parties have been named in three (3) securities class actions (the “Securities Class Actions”) styled as follows:

·                  Oklahoma Law Enforcement Retirement System, individually and on behalf of all other similarly situated, vs. Adeptus Health, Inc., Thomas S. Hall, Timothy L. Fielding, Richard Covert, Daniel W. Rosenberg, Gregory W. Scott, Ronald L. Taylor, Jeffery S. Vender, Steven V. Napolitano, Stephen M. Mengert, Sterling Partners, Goldman, Sachs & Co., and Merrill Lynch, Pierce, Fenner & Smith Incorporated (Case No. 16-cv-01243-RWS), which commenced on October 27, 2016;

·                  Laborers’ Local 235 Benefit Funds, individually and on behalf of all other similarly situated, vs. Adeptus Health Inc., Thomas S. Hall, Timothy L. Fielding, Richard Covert, Daniel W. Rosenberg, Gregory W. Scott, Ronald L. Taylor, Jeffery S. Vender, Steven V. Napolitano, Daniel J. Hosler, Stephen M. Mengert, Sterling Partners, Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Evercore Group L.L.C., Morgan Stanley & Co. LLC, Piper Jaffray & Co., RBC Capital Markets, LLC, Dougherty & Company LLC, Deutsche Bank Securities Inc., and BMO Capital Markets Corp. (Case No. 16-cv-01391-RWS), which commenced on December 22, 2016; and

·                  Winston Kim v. Adeptus Health Inc., Gregory W. Scott, Thomas S. Hall, Frank F. Williams, Jr., and Timothy L. Fielding (Case No. 17-cv-00150-RWS-KNM), which commenced on March 10, 2017.

The Securities Class Actions are currently pending in the United States District Court for the Eastern District of Texas, Tyler Division.  Collectively, the complaints in the Securities Class Actions allege that PubCo, certain of its officers and directors, its sponsor and the underwriters of its public offerings publicly disseminated false and misleading offering information, including in connection with PubCo’s initial public offering of its common stock on or around June 25, 2014 and its secondary public offering on or around May 11, 2015, July 29, 2015 and June 2, 2016, in violation of the Securities Act of 1933 and Securities Exchange Act of 1934.  As of the Petition Date, the Securities Class Actions are in the preliminary stages of litigation.  The Debtors dispute the allegations that form the basis of the Securities Class Actions.

As of the Petition Date, certain of the Debtors are also named as defendants in that certain action styled David Adkinson, Brent Blonigan, Chatan Patel, Krissa and Michael Price, and Truman Blocker III,  individually and on behalf of all others similarly situated v. Adeptus Health Inc., Adeptus Health LLC, Adeptus Health Colorado Holdings LLC, and Adeptus Health Management LLC (Case No. 17-cv-00006-ALM) (the “Consumer Fraud Class Action”) pending

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in the United States District Court for the Eastern District of Texas, Sherman Division.  In the Consumer Fraud Class Action, PubCo, HoldCo and certain related affiliates have been accused of failing to disclosure certain fees to patients.  Based on these allegations, the plaintiffs, purporting to sue on behalf of classes consisting of all of the defendants’ customers in Texas and Colorado, purport to state various common law claims and claims for violations of the Texas Deceptive Trade Practices Act and the Colorado Consumer Protection Act.  The Debtors dispute the allegations that form the basis of the Consumer Fraud Class Action.

As of the Petition Date, PubCo was named as a defendant in those certain actions styled Cheri Russell v. Adeptus Health Inc. (Case No. 2017-0086-TMR) and Chaile Steinberg v. Adeptus Health Inc. (Case No. 2017-0174) pending in the Delaware Chancery Court (the “Section 220 Actions”).  The plaintiffs in the Section 220 Actions seek an inspection of the books and records of PubCo.

As of the Petition Date, First Choice ER has been named in a breach of contract action styled Nicka & Associates, Inc. v. First Choice ER, LLC pending in the 401st Judicial District Court, Collin County, Texas (the “Nicka Action”).  Nicka & Associates, Inc. (“Nicka”) was a party to an agreement with First Choice ER pursuant to which Nicka was to provide medical coding, compliance and consulting services to First Choice ER (the “Nicka Agreement”).  In the Nicka Action, Nicka alleges that First Choice ER wrongfully terminated the Nicka Agreement and that Nicka sustained actual damages in the amount of $170,491.40 in connection therewith.  Nicka further seeks punitive damages in the amount of $100,000.00.  First Choice ER believes it may have viable counterclaims and defenses against Nicka.

Certain of the Debtors have also been named in wrongful death and negligence actions pending in various districts.

B.                                    Houston CLIA Regulatory Issue.

On May 27, 2016, three Houston-area freestanding emergency rooms received notices of noncompliance, in which CMS affirmed the findings of the Debtors’ internal inquiry and voluntary disclosure of clinical laboratory proficiency tests that had been performed and reported improperly by a former employee.  CMS proposed intermediate sanctions and the Debtors reached a resolution with the federal government and reasonably expect to continue operations by engaging a third party to operate those three laboratories for a temporary period.  In the event the Debtors are unable to engage a third party, two of the facilities would be unable to operate for a period of two years and the third would be closed for a period of one year.

V.                                    Events Leading to Bankruptcy

A.                                    Significant Working Capital Needs of the Adeptus Enterprise.

Based upon their experience operating hospitals and FSERs, the Debtors estimate that it takes approximately three (3) months for a FSER, and more than year for a hospital, to become profitable.  Until they breakeven or become profitable, hospitals and FSERs must rely on alternative financing sources to meet their ordinary operating expenses, including, but not limited to, rent obligations, equipment lease obligations and payroll for physicians, nurses, laboratory

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professionals and administrative staff, that cannot otherwise be satisfied from the collection of receivables.

Over the last three (3) years, the Adeptus Enterprise has grown significantly to include five (5) hospitals and ninety-nine (99) FSERs due, in large part, to its membership interests in the Joint Ventures.  In fact, in the last year alone, the Debtors, either directly or indirectly through their membership interests in the Joint Ventures, opened hospitals in Colorado Springs and Denver, Colorado as well as in Houston, Texas.  Attendant to such expansion, however, has been the need to fund the working capital of the Joint Ventures and IFSEDs.

For example, with respect to the Arizona JV, for the period beginning at the time of the Arizona JV’s formation through February 28, 2017, the Debtors expended a net amount of approximately $20.1 million to fund the working capital and operating losses of the Arizona JV.  With respect to the Texas JV, for the period beginning at the time of the Texas JV’s formation through February 28, 2017, the Debtors expended a net amount of approximately $11.2 million to fund the working capital of the Texas JV.  Notwithstanding the Debtors’ substantial expenditures and contributions, all of the Joint Ventures, except for the Colorado JV, have operated at a loss.  These expenditures and contributions have negatively impacted the Debtors’ short term liquidity.

B.                                    Challenges with Revenue Cycle Management.

Substantially all of the Debtors’ revenue is generated from the collection of fees from commercial patients and government payors.  The process of collecting such fees, however, entails a complex process that can span a number of months.

Prior to October 1, 2015, the coding, billing and collections for the Adeptus Enterprise was handled internally by the Debtors’ employees.  On October 1, 2015, the U.S. Department of Health and Human Services mandated that entities covered by the Health Insurance Portability and Accountability Act begin using the International Classification of Diseases, Tenth Revision, Clinical Modification (ICD-10-CM).  As a result of the enactment of ICD-10-CM, the Debtors were required to comply with more detailed coding requirements.  To ensure its compliance with ICD-10-CM, and to improve the Debtors’ overall revenue cycle management, the Debtors retained PST Services, Inc. (“McKesson”), an affiliate of McKesson Corporation, to manage the billing and collection needs for nearly all of the Adeptus Enterprise pursuant to a Master Services Agreement dated July 29, 2015 (the “McKesson Agreement”).

After retaining McKesson in 2015, the Debtors’ management learned that key aspects of its revenue cycle management process were not being performed.  Consequently, the collection of accounts receivable within a 90-day period from the date of service fell from approximately 87% to 74% as of September 30, 2016.  To address these shortfalls, the Debtors retained other third party service providers to, among other things, resubmit denied claims and follow up with patients.  Notwithstanding the Debtors’ efforts to improve its revenue cycle management, the

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Debtors have sustained a significant loss of revenue and have written off uncollectible receivables in excess of $27.0 million related to accounts receivable from 2015 and 2016.(13)  The Debtors believe they may have significant litigation claims related to its revenue cycle issues.

C.                                    Reduced Utilization and Patient Volume.

In recent years, there has been a sharp increase in competition among operators of FSERs in certain of the Debtors’ markets.  The facilities within the Adeptus Enterprise compete with a wide array of emergency care providers, including hospital emergency rooms, other FSERs, urgent care clinics and doctors’ offices.

As a result of such competition, the Debtors have experienced a steady decline in patient volume in certain of their facilities which, in turn, has caused a drop in revenue.  Additionally, as a result of low patient utilization, the Debtors have closed six facilities in Texas and Colorado.  The Debtors, however, continue to have lease obligations with respect to certain of the closed facilities.

D.                                    Prepetition Financing Process.

In October 2016, when it became apparent that the Debtors were facing liquidity constraints, the Debtors engaged in discussions with potential interested parties regarding financing and other strategic alternatives.  To that end, on November 1, 2016, the Debtors retained Goldman Sachs & Co. to assist in obtaining financing or a capital infusion (the “Goldman Process”).  Although 44 meetings were held with investors and 20 parties entered into confidentiality agreements in connection with the Goldman Process, the Debtors did not close on a transaction as a result of the Goldman Process.

In conjunction with and following the Goldman Process, the Debtors contacted various other parties regarding strategic alternatives.  Certain of the Debtors’ discussions resulted in PubCo entering into a confidentiality agreement with Deerfield Management in November 2016.  In February 2017, PubCo and Deerfield Capital Management began negotiations regarding a potential transaction (the “February Transaction”) pursuant to which PubCo would issue to affiliates of Deerfield Capital Management and/or its affiliates and possibly one or more additional purchasers, subordinated debt along with a detachable warrant, among other terms discussed by the parties.  Despite lengthy discussions and negotiations, PubCo and Deerfield Capital Management did not reach any final agreement or understanding regarding a transaction or the terms thereof, enter into definitive documentation related to or close on the February Transaction.  Consequently, the Debtors had to obtain the Bridge Loan from the Bridge Lenders in order to pay their immediate operating expenses, such as physician payroll.

On March 1, 2017, it became apparent that the Debtors had no other source of financing, the Debtors retained Houlihan Lokey Capital, Inc. (“HL”), the largest and most active

(13)  In connection with such issues with revenue cycle management, the Joint Ventures have written off approximately $54.9 million in accounts receivable from 2015 and 2016.

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restructuring investment banking practice in the world, to, among other things, solicit offers for a sale of all or substantially all of the Debtors’ assets, an affiliation transaction or a restructuring of all or a portion of the Debtors’ indebtedness.

Immediately after its retention on March 3, 2017, HL initiated a marketing process.  In consultation with the Debtors, their management, the Debtors’ other advisors, and advisors to the Debtors’ Bank Lenders, HL compiled a comprehensive list of potential financial and strategic investors that HL would reach out to, which included parties that had previously expressed interest in entering into a sale or financing transaction with the Debtors.  On or around March 8, 2017, HL initiated dialogue with third parties regarding potential transactions with the Debtors.  As of the Petition Date, HL has extensively explored the market for parties that would have a serious interest in purchasing the Debtors’ assets.

Upon execution of confidentiality agreements, third parties received access to a Confidential Information Summary as well as access to a confidential on-line data room containing over 7,000 documents comprising a comprehensive suite of financial, operational and legal information on all of the Adeptus Enterprise’s operations.  The chart below provides a summary of HL’s prepetition efforts prior to Deerfield’s purchase of the Senior Debt Obligations.

In addition to providing third parties with such information, HL arranged, attended and/or led numerous diligence discussions (both in person and telephonic) with potential investors (including Deerfield) with a combination of key members of the Debtors’ management team, the Debtors’ legal and financial advisors, the Bank Lenders’ advisors, the Debtors’ joint venture partners, and the Debtors’ key landlords.  In addition, HL held weekly calls with the Bank Lenders and their advisors as well as the Administrative Agent and its advisors to update them on the details of the current status and steps taken since embarking on the sale process.  Despite the limited liquidity window provided by the Bridge Loan, multiple parties expressed an interest in pursuing an opportunity for some or all of the Debtors’ operations, however, only Deerfield was prepared to commit to a transaction in the timeframe required by purchasing the Senior Debt Obligations with the intention to acquire the Debtors’ assets as part of the Plan.

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VI.                               Events Occurring During Debtors’ Chapter 11 Cases

A.                                    Bankruptcy Filing and First Day Orders.

The Debtors commenced the Chapter 11 Cases on the Petition Date, by filing voluntary petitions under chapter 11 of the Bankruptcy Code.  The Debtors are considered debtors in possession pursuant to Bankruptcy Code section 1107(a) and 1108.  The Debtors remain in possession of their assets and continue to operate their Business without interruption.

Contemporaneously with the filing of their chapter 11 petitions, the Debtors filed certain “first day motions” seeking orders granting various forms of relief intended to, among other things, ensure the efficient administration of their Chapter 11 Cases, stabilize the Debtors’ operations, and ensure uninterrupted emergency patient care.

Shortly after the Petition Date, the Bankruptcy Court held an initial hearing to consider certain “first day” matters and entered orders (i) permitting the joint administration of the Debtors’ Chapter 11 Cases; (ii) approving the Debtors’ continued use of their existing cash management system and business forms; (iii) authorizing, but not directing, the Debtors to make certain payroll payments to employees and continue certain employee benefit plans and other practices; (iv) authorizing the Debtors to file a consolidated mailing matrix and a consolidated list of their 40 largest unsecured creditors; (v) extending their time for filing the Schedules and Statements of Financial Affairs for an additional 45 days (for a total of 60 days); (vi) determining that the Debtors’ utility providers have been provided with adequate assurance of payment within the meaning of section 366 of the Bankruptcy Code and prohibiting such utility providers from altering, refusing, or discontinuing services on account of prepetition amounts outstanding and on account of any perceived inadequacy of the Debtors’ proposed adequate assurance pending entry of a final order, (vii) approving certain payments to critical vendors, (viii) approving the maintenance of certain insurance policies and the payment of obligations thereunder; (ix) authorizing limited service in connection with filings in the Chapter 11 Cases; and (x) authorizing certain steps to protect confidential patient information in connection with filings in the Chapter 11 Cases.

B.                                    Postpetition DIP Financing.

Prepetition, the Debtors began negotiating in good faith at arms-length with the Bank Lenders and several other parties to obtain postpetition financing.  The Debtors reached a deal for the DIP Facility with Deerfield whereby Deerfield will provide postpetition financing to certain of the Debtors (identified in the DIP Facility as “Borrowers”) in the form of a credit facility in the principal amount of up to $45.0 million.  Shortly after the Petition Date, the Bankruptcy Court held a hearing on and entered an order approving the DIP Facility on an interim basis and allowing the Borrowers to use $22.0 million of the funding provided under the DIP Facility to fund operations on an interim basis.

C.                                    Retention and Employment of Professionals.

During the Chapter 11 Cases, the Court has approved the Debtors’ retention and employment of the following Professionals to assist in the administration of the Debtors’ Chapter 11 Cases:  (i) Norton Rose Fulbright US LLP, as bankruptcy counsel to the Debtors, (ii)

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DLA Piper LLP (US), as special counsel to the Debtors; (iii) FTI Consulting, Inc., to provide a chief restructuring officer and certain additional personnel to the Debtors; and (iv) Epiq Bankruptcy Solutions, LLC, as claims, noticing and balloting agent to the Debtors.  The Debtors may seek to retain additional advisors to assist them in these Chapter 11 Cases, including, without limitation, in connection with confirmation of the Plan.

VII.                          Overview of Restructuring Transactions Under the Plan

The Plan contemplates paying Administrative Expense Claims, Fee Claims, and Priority Tax Claims in full.

The Guarantors under the Prepetition Credit Facility and certain other Debtors (the “Other Material Entities”) and the Non-Obligor Debtors are obligors under the DIP Facility.  Holders of DIP Facility Claims will receive New Equity Interests in the Designated Debtors, which include the Other Material Entities, in satisfaction of the DIP Facility Claims.

Other Secured Claims will be Unimpaired under the Plan.  Holders of the Deerfield Secured Claims will receive New Equity Interests in certain of the Debtors on account of the Deerfield Secured Claims.  Deerfield will then recapitalize the Reorganized Debtors as their new owners.(14)

Pursuant to the Plan, the Debtors will establish a Litigation Trust to investigate and pursue Causes of Action transferred to the Litigation Trust and to distribute the proceeds of any recovery thereupon.  The Deerfield Parties will provide initial funding of $750,000 to the Litigation Trust (the “Litigation Trust Initial Funding”) and shall have the option to provide additional funding in its sole and absolute discretion.  The Deerfield Parties will be repaid the Litigation Trust Initial Funding in full plus interest thereon at 10% per annum from any proceeds of the Litigation Trust.

The Liquidating Trust Trustee shall investigate and purse Causes of Action.  Holders of Lease Rejection Claims, Medical Malpractice Claims, and General Unsecured Claims will be paid from the proceeds of the Litigation Trust after the Deerfield Trust Repayment Distributions are paid, as described above.  Additionally, the Debtors have in place insurance policies with $50 million dollars in total limits that cover certain actions against directors and officers (the “D&O Policies”).  The D&O Policies are “claims made” policies and include $40 million in ABC coverage and $10 million in Side A DIC coverage.  The D&O Policies also provide for $0 retention for claims made against individual directors and officers when the entity is in bankruptcy.

(14)  The Debtors believe that an equity transfer may be more efficient than an asset transfer because, by allowing each applicable entity to retain its original employer identification number, the regulatory approval processes may be more streamlined.

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Because the source of recoveries for the Lease Rejection Claims, Medical Malpractice Claims, and General Unsecured Claims depend on litigation or settlement of the Causes of Action, the Debtors cannot estimate the recoveries of such Classes with any degree of certainty.

VIII.                     Treatment of Claims and Interests Under the Plan

A.                                    Classification and Treatment of Claims and Interests.

1.                                      Classification in General.

A Claim or Interest is placed in a particular Class for all purposes, including voting, confirmation, and distribution under the Plan and under sections 1122 and 1123(a)(1) of the Bankruptcy Code; provided, that a Claim or Interest is placed in a particular Class for the purpose of receiving distributions pursuant to the Plan only to the extent that such Claim or Interest is an Allowed Claim or Allowed Interest in that Class and such Claim or Interest has not been satisfied, released, or otherwise settled prior to the Effective Date.

2.                                      Formation of Debtor Groups for Convenience Only.

The Plan groups the Debtors together solely for the purpose of describing treatment under the Plan, confirmation of the Plan, and making Plan Distributions in respect of Claims against and Interests in the Debtors under the Plan.  Such groupings shall not affect any Debtor’s status as a separate legal entity, change the organizational structure of the Debtors’ business enterprise, constitute a change of control of any Debtor for any purpose, cause a merger of consolidation of any legal entities, or cause the transfer of any Assets; and, except as otherwise provided by or permitted under the Plan, all Debtors shall continue to exist as separate legal entities.

3.                                      Summary of Classification of Claims and Interests.

The following table summarizes the treatment of each Class under the Plan.  The table also identifies which Classes are entitled to vote on the Plan and the estimated recovery for holders of Allowed Claims in each Class, pursuant to applicable provisions of the Bankruptcy Code.

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4.                                      Elimination of Vacant Classes.

Any Class that, as of the commencement of the Confirmation Hearing, does not have at least one holder of a Claim or Interest that is Allowed in an amount greater than zero for voting purposes shall be considered vacant, deemed eliminated from the Plan for purposes of voting to accept or reject the Plan, and disregarded for purposes of determining whether the Plan satisfies section 1129(a)(8) of the Bankruptcy Code with respect to such Class.

5.                                      Voting; Presumptions; Solicitation.

(a)                                 Acceptance by Certain Impaired Classes.  Only holders of Allowed Claims in Classes 3, 4, 5 and 6 are entitled to vote to accept or reject the Plan.  An Impaired Class of Claims shall have accepted the Plan if (i) the holders of at least two-thirds (2/3) in amount of the Allowed Claims actually voting in such Class have voted to accept the Plan and (ii) the holders of more than one-half (1/2) in number of the Allowed Claims actually

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voting in such Class have voted to accept the Plan.  Holders of Claims in Classes 3, 4, 5 and 6 will receive ballots containing detailed voting instructions.

(b)                                 Deemed Acceptance by Unimpaired Classes.  Holders of Claims and Interests in Classes 1 and 2 are Unimpaired are conclusively deemed to have accepted the Plan pursuant to section 1126(f) of the Bankruptcy Code.  Accordingly, such holders are not entitled to vote to accept or reject the Plan.

(c)                                  Deemed Rejection by Certain Impaired Classes.  Holders of Claims and Interests in Classes 7 and 8 are deemed to have rejected the Plan pursuant to section 1126(g) of the Bankruptcy Code.  Accordingly, such holders are not entitled to vote to accept or reject the Plan.

6.                                      Cramdown.

If any Class of Claims is deemed to reject the Plan or is entitled to vote on the Plan and does not vote to accept the Plan, the Debtors may (i) seek confirmation of the Plan under section 1129(b) of the Bankruptcy Code or (ii) amend or modify the Plan in accordance with the terms of the Plan and the Bankruptcy Code.  If a controversy arises as to whether any Claims or Interests, any class of Claims or Interests, are impaired, the Bankruptcy Court shall, after notice and a hearing, determine such controversy on or before the Confirmation Date.

7.                                      No Waiver.

Nothing contained in the Plan shall be construed to waive a Debtor’s or other Person’s right to object on any basis to any Claim.

B.                                    Treatment of Unclassified Claims under the Plan.

1.                                      Administrative Expense Claims.

Except to the extent that a holder of an Allowed Administrative Expense Claim other than a Fee Claim agrees to a different treatment, on the Effective Date or as soon thereafter as is reasonably practicable (but in no event later than thirty (30) days after the Effective Date), the holder of such Allowed Administrative Expense Claim shall receive, on account of such Allowed Claim, Cash in an amount equal to the Allowed amount of such Claim; provided, that Allowed Administrative Expense Claims representing liabilities incurred in the ordinary course of business by the Debtors, as Debtors in Possession, shall be paid by the Debtors or the Reorganized Debtors, as applicable, in the ordinary course of business, consistent with past practice and in accordance with the terms and subject to the conditions of any orders or agreements governing, instruments evidencing, or other documents establishing, such liabilities.

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2.                                      Fee Claims.

All Professional Persons seeking awards by the Bankruptcy Court of compensation for services rendered or reimbursement of expenses incurred through and including the Effective Date under sections 327, 328, 330, 331, 503(b)(2), 503(b)(3), 503(b)(4), 503(b)(5), or 1103 of the Bankruptcy Code shall (a) file, on or before the date that is forty-five (45) days after the Effective Date, their respective applications for final allowances of compensation for services rendered and reimbursement of expenses incurred and (b) be paid in Cash, and in such amounts as are Allowed by the Bankruptcy Court or authorized to be paid in accordance with the order(s) relating to or allowing any such Fee Claim, including, without limitation, the DIP Facility Order.  On the Effective Date, unless previously established pursuant to the terms of the DIP Facility Order, the Debtors shall establish and fund the Fee Escrow Account.  The Debtors shall fund the Fee Escrow Account with Cash equal to the Professional Persons’ good faith estimates of the Fee Claims not to exceed the amounts set forth in the budget attached to the final DIP Facility Order.  Funds held in the Fee Escrow Account shall not be considered property of the Debtors’ Estates or property of the Reorganized Debtors, but shall revert to the Reorganized Debtors only after all Fee Claims allowed by the Bankruptcy Court have been irrevocably paid in full.  The Fee Escrow Account shall be held in trust for Professional Persons retained by the Debtors and for no other parties until all Fee Claims Allowed by the Bankruptcy Court have been paid in full.  Fees owing to the applicable Professional Persons shall be paid in Cash to such Professional Persons from funds held in the Fee Escrow Account when such Claims are Allowed by an order of the Bankruptcy Court or authorized to be paid in accordance with an order of the Bankruptcy Court establishing procedures for interim compensation and reimbursement of expenses.  The Reorganized Debtors shall have no obligation to pay any Fee Claims or fund any amounts to the Fee Escrow Account.

Any objections to Fee Claims shall be served and filed (a) no later than twenty-one (21) days after the filing of the final applications for compensation or reimbursement or (b) such later date as ordered by the Bankruptcy Court upon a motion of the Reorganized Debtors.

3.                                      DIP Facility Claims.

In full and final satisfaction, settlement, release, and discharge of, and in exchange for, each Allowed DIP Facility Claim, holders of Allowed DIP Facility Claims shall receive New Equity Interests in the Designated Debtors.  Thereafter, all obligations under the DIP Facility Loan Agreement shall terminate.

4.                                      Priority Tax Claims.

Except to the extent that a holder of an Allowed Priority Tax Claim agrees to a different treatment, on the Effective Date or as soon thereafter as is reasonably practicable, the holder of such Allowed Priority Tax Claim shall receive, on account of such Allowed Priority Tax Claim, Cash in an amount equal to the Allowed amount of such Claim; provided, that Allowed Priority Tax Claims representing liabilities incurred in the ordinary course of business by the Debtors, as Debtors in Possession, shall be paid by the Debtors or the Reorganized Debtors, as applicable, in the ordinary course of business, consistent with past practice and in accordance with the terms

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and subject to the conditions of any orders or agreements governing, instruments evidencing, or other documents establishing, such liabilities.

C.                                    Treatment of Classified Claims under the Plan.

1.                                      Treatment of Claims and Interests.

a.                                      Class 1:  Priority Non-Tax Claims.

The legal, equitable, and contractual rights of the holders of Allowed Priority Non-Tax Claims are unaltered by the Plan.  Except to the extent that a holder of an Allowed Priority Non-Tax Claim agrees to different treatment, on the later of the Effective Date and the date that is ten (10) Business Days after the date such Priority Non-Tax Claim becomes an Allowed Claim, or as soon thereafter as is reasonably practicable, each holder of an Allowed Priority Non-Tax Claim shall receive, on account of such Allowed Claim, at the option of the Reorganized Debtors:  (i) Cash in an amount equal to the Allowed amount of such Claim or (ii) other treatment consistent with the provisions of section 1129(a)(9) of the Bankruptcy Code.

b.                                      Class 2:  Other Secured Claims.

The legal, equitable, and contractual rights of the holders of Allowed Other Secured Claims are unaltered by the Plan.  Except to the extent that a holder of an Allowed Other Secured Claim agrees to different treatment, on the later of the Effective Date and the date that is ten (10) Business Days after the date such Other Secured Claim becomes an Allowed Claim, or as soon thereafter as is reasonably practicable, each holder of an Allowed Other Secured Claim shall receive, on account of such Allowed Claim, at the option of the Reorganized Debtors:  (i) Cash in an amount equal to the Allowed amount of such Claim, (ii) reinstatement or such other treatment sufficient to render such holder’s Allowed Other Secured Claim Unimpaired pursuant to section 1124 of the Bankruptcy Code, or (iii) return of the applicable Collateral in satisfaction of the Allowed amount of such Other Secured Claim.

c.                                       Class 3:  Deerfield Secured Claims.

Each holder of an Allowed Deerfield Secured Claim shall receive, on account of its Allowed Deerfield Secured Claims its Pro Rata share of New Equity Interests in the applicable Designated Debtor on the Effective Date.

Class 3 Deerfield Secured Claims shall be allowed in the amount of $100.0 million.

d.                                      Class 4:  Lease Rejection Claims.

Each holder of an Allowed Lease Rejection Claim shall receive its Pro Rata share of the proceeds of the Litigation Trust to be paid after the Deerfield Trust Repayment Distributions.

e.                                       Class 5:  Medical Malpractice Claims.

Each holder of an Allowed Medical Malpractice Claim shall receive its Pro Rata share of the proceeds of the Litigation Trust to be paid after the Deerfield Trust Repayment Distributions,

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and only to the extent that insurance is unavailable to cover such Allowed Medical Malpractice Claims.  Holders of Allowed Medical Malpractice Claims shall be provided relief from the stay imposed by Bankruptcy Code section 362 to pursue their Medical Malpractice Claims solely to seek recovery from the applicable insured in order to recover from applicable insurance policies.

f.                                        Class 6:  General Unsecured Claims.

Each holder of an Allowed General Unsecured Claim shall receive its Pro Rata share of the proceeds of the Litigation Trust to be paid after the Deerfield Trust Repayment Distributions, except to the extent that a holder of an Allowed General Unsecured Claim has been paid prior to the Effective Date or agrees to a less favorable classification and treatment in the ordinary course of business as if the Chapter 11 Cases had never been commenced.

g.                                      Class 7:  Subordinated Claims.

Subordinated Claims are subordinated pursuant to the Plan and section 510 of the Bankruptcy Code.  The holders of Subordinated Claims shall not receive or retain any property under the Plan on account of such Claims, and the obligations of the Debtors and the Reorganized Debtors on account of Subordinated Claims shall be discharged.

h.                                      Class 8:  Existing Equity Interests.

On the Effective Date, the Existing Equity Interests shall be cancelled without further action by or order of the Bankruptcy Court, except to the extent that such Existing Equity Interests must survive to allow the Deerfield Parties to enjoy the full benefit of the Debtors’ assets or to operate their business.

2.                                      Debtors’ Rights in Respect of Unimpaired Claims.

Except as otherwise provided in the Plan, nothing under the Plan shall affect the rights of the Reorganized Debtors in respect of any Unimpaired Claim, including, without limitation, all rights in respect of legal and equitable defenses to, or setoffs or recoupments against, any such Unimpaired Claim.

3.                                      Treatment of Vacant Classes.

Any Claim or Interest in a Class that is considered vacant under section 3.4 of the Plan shall receive no Plan Distribution.

4.                                      Intercompany Claims.

All Intercompany Claims shall be either reinstated, cancelled, released or otherwise settled in the Debtors’ discretion with the consent of the DIP Facility Lenders.

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IX.                              Voting Procedures and Requirements

Please refer to information provided with the ballot in the Solicitation Package sent to you by the Voting Agent for further detailed voting instructions.  Only Impaired Classes of Claims, which are expected to receive recovery above zero percent (0%) or where the Class’ percentage of recovery is not yet designated, are entitled to vote.  Please refer to Articles III and IV of the Plan and Article VII herein for estimated percentages of recovery for each Impaired Class.  If the Claim or Claims you hold are not in one of those Classes, you are not entitled to vote and, thus you will not receive a ballot from the Voting Agent.  Holders of Claims that are entitled to vote should read the ballot provided by the Voting Agent and follow the accompanying instructions carefully.

ANY QUESTIONS CONCERNING THE BALLOT OR ANY OTHER CONTENTS OF THE SOLICITATION PACKAGE SHOULD BE DIRECTED TO THE VOTING AGENT AT 1-844-469-3932 (US AND CANADA), 1-503-597-5530 (OUTSIDE THE US AND CANADA) OR VIA EMAIL AT adeptus@epiqsystems.com.

A.                                    Vote Required for Acceptance by a Class.

A Class of Claims entitled to vote to accept or reject the Plan shall be deemed to accept the Plan if the holders of Claims in such voting Class that hold at least two-thirds (2/3) in amount and more than one-half (1/2) in number of the Claims that vote in such Class vote to accept the Plan.  A Class of Interests is deemed to accept the Plan if the Plan has been accepted by holders of at least two-thirds (2/3) of the amount of the allowed Interests held by holders of such Interests who vote in such Class.

B.                                    Classes Entitled to Vote.

Pursuant to section 1126 of the Bankruptcy Code, each Impaired Class of Claims or Interests that will receive a Distribution pursuant to the Plan may vote separately to accept or reject the Plan.  Each Holder of an Allowed Claim in such an Impaired Class as of the Voting Record Date, shall receive a ballot and may cast a vote to accept or reject the Plan.