Exhibit 6
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MEMORANDUM OF UNDERSTANDING
APRIL 16, 2001
THIS MEMORANDUM OF UNDERSTANDING confirms the agreements among Anam
LLC, a Delaware limited liability company ("Parent"), TRIOD LLC, a Delaware
limited liability company ("TRIOD"), ODE, L.L.C., a Delaware limited liability
company ("ODE"), Xxxxxxx X. X'Xxxxxxx, Xx., in his individual capacity ("Xx.
X'Xxxxxxx"), and Xxxxxx X. Xxxx, in his individual capacity ("Xx. Xxxx"), in
connection with Parent's agreement to acquire NextHealth, Inc., a Delaware
corporation ("NextHealth"), pursuant to the Agreement and Plan of Merger (the
"Merger Agreement") dated as of the date hereof by and among Parent, NH
Acquisition Corp., a Delaware corporation which is a wholly-owned subsidiary of
Parent ("NHI"), and NextHealth. Capitalized terms used but not defined herein
shall have the respective meanings ascribed to such terms in the Merger
Agreement.
1. General Statement of Purpose. Parent, TRIOD and NHI were formed by
Xx. X'Xxxxxxx and Xx. Xxxx (collectively, the "Initial Investors") to acquire
all of the stock and assets of NextHealth and its subsidiaries through a series
of transactions, including the Merger, as contemplated in the Merger Agreement
and this Memorandum of Understanding (collectively, with the other transactions
discussed below, the "Acquisition/Merger Transactions"). The Initial Investors,
Parent, NHI and ODE have concluded that it would be desirable to effect the
Acquisition/Merger Transactions. To that end, the parties hereto have executed
this Memorandum of Understanding to confirm their binding agreements. The
Initial Investors, Parent, NHI and ODE agree that this Memorandum of
Understanding shall terminate and cease to be of effect upon the termination of
the Merger Agreement or upon the execution of definitive agreements with respect
to the matters set forth herein.
2. Capitalization of Parent; Voting and Contribution Agreement. Each of
the Initial Investors have acquired a membership interest in Parent (a "Parent
Interest") in exchange for an initial capital contribution. Concurrently with
the execution and delivery of this Memorandum of Understanding, Parent and the
Initial Investors are entering into a Voting and Contribution Agreement,
substantially in the form attached hereto as Exhibit A (the "Voting and
Contribution Agreement"). Pursuant to the Voting and Contribution Agreement,
each of the Initial Investors and the other stockholders who execute or are
joined to the Voting and Contribution Agreement (collectively, the
"Stockholders") will agree, subject to the terms and conditions set forth
therein, to (i) grant Parent an irrevocable proxy to vote such Stockholder's
Shares (as defined in the Voting and Contribution Agreement) in favor of the
Merger, the Merger Agreement and the transactions contemplated thereby, (ii)
contribute such Stockholder's Shares to Parent immediately prior to the
Effective Date of the Merger in exchange for a proportionate Parent Interest and
(iii) have such Stockholder's Options cancelled pursuant to Section 2.4 of the
Merger Agreement. The parties hereto anticipate that Parent's total
capitalization will consist of the initial capital contributions of the Initial
Investors and the Shares contributed to Parent pursuant to the Voting and
Contribution Agreement.
3. Capitalization of TRIOD. Each of the Initial Investors have directly
or indirectly acquired a membership interest in TRIOD (a "TRIOD Interest") in
exchange for an initial capital contribution. ODE and Xx. Xxxx agree to
contribute to TRIOD the following capital in exchange for a proportionate TRIOD
Interest (i) in the case of ODE, the interests currently held by it in the
buildings and improvements in which a portion of NextHealth's business is
operated, and (ii) in the case of Xx. Xxxx, $3,000,000 in cash. The parties
hereto anticipate that approximately $30,000,000 of additional capital will be
contributed to TRIOD by other individual and/or institutional investors
(collectively, the "Additional Equity Holders") which will receive, in exchange
for such contributions, proportionate TRIOD Interests which, together with the
initial capital contributed by the Initial Investors and the capital to be
contributed by ODE, Xx. Xxxx and the Surviving Corporation (in accordance with
clause (iv) of paragraph 5 below), will constitute the total capitalization of
TRIOD.
4. Acquisition Loan Facility. The parties hereto anticipate that a loan
facility in the amount of approximately $40,000,000 (the "Acquisition Loan
Facility") will be obtained from a lender or a group of lenders to finance a
portion of the Merger Consideration. Upon the completion of the
Acquisition/Merger Transactions, the Acquisition Loan Facility will be secured
by a Lien on substantially all of the assets of TRIOD, replacing the existing
loan facility which will be repaid on the Closing Date as contemplated in the
Merger Agreement. The funds available under the Acquisition Loan Facility,
together with the capital to be contributed to Parent and TRIOD, will be
sufficient to pay the Merger Consideration and consummate all of the
Acquisition/Merger Transactions.
5. Acquisition/Merger Transactions. As contemplated in the Merger
Agreement and this Memorandum of Understanding, the Acquisition/Merger
Transactions will consist of (i) the purchase by TRIOD of (a) AP NH, LLC's 2%
minority interest in Sierra Tucson, LLC (a subsidiary of NextHealth) and (b)
certain NextHealth assets with a purchase price of approximately $33,000,000
(such assets to be selected by TRIOD to achieve certain agreed upon tax
benefits), (ii) the Merger (with NextHealth as the surviving corporation (the
"Surviving Corporation")), (iii) the merger of Health-Styles Inc. (a subsidiary
of NextHealth) with and into a newly- formed limited liability company which is
a wholly-owned subsidiary of the Surviving Corporation (with such limited
liability company as the surviving entity), (iv) the contribution by the
Surviving Corporation of all of its assets (including its interests in its
subsidiaries) to TRIOD in exchange for a proportionate TRIOD Interest, (v) the
dissolution of Parent and the distribution of Parent's stock of the Surviving
Corporation to the holders of Parent Interests, and (vi) the election by the
Surviving Corporation (with the consent of such holders) to be treated as a
"small business corporation" for Federal income tax purposes under Section 1362
of the Code, effective for the taxable year beginning January 1, 2002. Each of
the transactions described in the preceding sentence shall occur on the Closing
Date (other than the transactions listed in clauses (v) and (vi) which may occur
after the Closing Date) in the order listed, with each transaction occurring
immediately before the transaction listed immediately after it.
6. Certain Governance Matters. Subject to an agreement by the parties
hereto to the contrary (such agreement shall be set forth in the applicable
definitive organizational documents and agreements), until the completion of all
of the Acquisition/Merger Transactions, each of Parent, the Surviving
Corporation and TRIOD will be governed by a board which, in each case,
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shall consist of only the Initial Investors. After the completion of all of the
Acquisition/Merger Transactions, such entities shall be governed as follows:
(a) Parent and Surviving Corporation. At the request of Xx.
X'Xxxxxxx, Xx. Xxxx shall resign from the board of the Surviving Corporation
prior to the dissolution of Parent (and in connection therewith, Xx. X'Xxxxxxx
shall be entitled to purchase Xx. Xxxx'x Parent Interest for the amount of Xx.
Xxxx'x initial capital contribution to Parent).
(b) TRIOD. Xx X'Xxxxxxx and Xx. Xxxx shall be the only managers
of TRIOD (the "TRIOD Managers"). Except as otherwise provided in the definitive
operating agreement for TRIOD (the "TRIOD LLC Agreement") or by Delaware law,
the management and control of TRIOD and its business shall be vested exclusively
in the TRIOD Managers, and the non-managing members will not have any right,
power or authority to take part in the management or conduct of TRIOD and its
business. Notwithstanding the foregoing, the approval of the members shall be
required for (i) consolidations, mergers or joint ventures; (ii) admitting new
members or substitute members (other than as expressly permitted in the TRIOD
LLC Agreement); (iii) any act in contravention of the TRIOD LLC Agreement; (iv)
changing TRIOD's purpose or business; or (v) amending the TRIOD LLC Agreement or
TRIOD's certificate of formation.
7. Compliance With Securities Laws. In connection with their execution
and delivery of this Memorandum of Understanding, the parties hereto acknowledge
and agree to comply with all applicable Federal and state securities laws.
8. Xxxxxxx Money Deposit. The parties hereto acknowledge that, in
accordance with Section 7.5(a) of the Merger Agreement, Xx. X'Xxxxxxx has
obtained and deposited into the Escrow Account an irrevocable letter of credit
(the "Letter of Credit") which names the escrow agent under the Escrow Agreement
as the beneficiary thereof. In the event that the escrow agent draws funds under
the Letter of Credit for the benefit of NextHealth pursuant to the terms and
conditions set forth in the Merger Agreement that are not subsequently refunded,
Xx. Xxxx shall promptly reimburse Xx. X'Xxxxxxx an amount, payable in
immediately available funds, equal to 12.5% of the amount so drawn.
9. Participation Fee. The parties hereto anticipate that the Additional
Equity Holders will pay a fee (a "Participation Fee") in connection with their
participation in the Acquisition/Merger Transactions. At Closing, TRIOD shall
pay, or cause to be paid, the Participation Fee, if any, received from the
Additional Equity Holders to the Initial Investors in the following order of
priority: (i) first, to Xxxx X. Xxxxxxx & Company, LLC ("Xxxxxxx"), an Affiliate
of Xx. Xxxx, an amount up to and including $500,000 as an investment advisory
fee in connection with the Acquisition/Merger Transactions, (ii) second, to Xx.
X'Xxxxxxx, the excess amount of such fee up to and including $500,000, and (iii)
third, in the event that such fee exceeds $1,000,000, 50% of such excess amount
to Xxxxxxx, and 50% of such excess amount to Xx. X'Xxxxxxx.
10. Termination Fee; Reimbursed Fees and Expenses. The parties hereto
agree that in the event that Parent is entitled to receive the Termination Fee
pursuant to Section 7.4 of the Merger Agreement, such fee shall be paid to the
Initial Investors as follows: (i) 66.67% of the
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Termination Fee shall be paid to Xx. X'Xxxxxxx and (ii) 33.33% of the
Termination Fee shall be paid to Xxxxxxx as an investment advisory fee in
connection with the Acquisition/Merger Transactions. In the event that the
Company is entitled to receive Fees and Expenses pursuant to Section 7.4 of the
Merger Agreement, Parent shall promptly use such monies to pay all fees and
expenses incurred by it, TRIOD, NHI and their Affiliates in connection with this
Agreement and the Merger Agreement and the transactions contemplated hereby and
thereby.
11. Fees and Expenses. Except as set forth in paragraph 10 hereof, in
the event that the Merger is not consummated, all fees and expenses incurred in
connection with the Merger Agreement and this Agreement and the transactions
contemplated thereby and hereby (which in the case of Xxxxxxx, shall consist
solely of Xxxxxxx'x out-of-pocket expenses) shall be paid by the Initial
Investors as follows: (i) 66.67% of such fees and expenses shall be paid by Xx.
X'Xxxxxxx and (ii) 33.33% of such fees and expenses shall be paid by Xx. Xxxx.
12. Binding Agreement; Standard of Conduct. The terms of the agreements
herein shall be more fully set forth in definitive documentation, which each of
the parties hereto agrees to negotiate in good faith. Subject to the negotiation
and execution of such definitive documentation and the reaching of agreement on
other matters contemplated but not specifically addressed herein, each of the
parties hereto acknowledges and agrees that this Memorandum of Understanding is
intended as a binding agreement among them with respect to the matters set forth
herein.
13. Parties in Interest. This Memorandum of Understanding shall be
binding upon and inure solely to the benefit of each party hereto, and nothing
in this Memorandum of Understanding, express or implied, is intended to confer
upon any other person any rights or remedies of any nature whatsoever under or
by reason of this Memorandum of Understanding. Neither this Memorandum of
Understanding nor any of the rights, interests or obligations hereunder shall be
assigned, in whole or in part, by operation of law or otherwise by any of the
parties without the prior written consent of the other parties. Subject to the
preceding sentence, this Memorandum of Understanding shall be binding upon,
inure to the benefit of, and be enforceable by, the parties and their respective
successors and assigns.
14. Governing Law. THIS MEMORANDUM OF UNDERSTANDING SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF ILLINOIS, WITHOUT
REGARD TO ANY APPLICABLE CONFLICTS OF LAW.
15. Counterparts. This Memorandum of Understanding may be executed in
one or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties.
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IN WITNESS WHEREOF, each of the parties hereto has executed this
Memorandum of Understanding as of the date first above written.
ANAM LLC,
a Delaware limited liability company
/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
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By: Xxxxxxx X. X'Xxxxxxx, Xx.
TRIOD LLC,
a Delaware limited liability company
/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
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By: Xxxxxxx X. X'Xxxxxxx, Xx.
ODE, L.L.C.,
a Delaware limited liability company
/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
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By: Xxxxxxx X. X'Xxxxxxx, Xx.
/s/ Xxxxxxx X. X'Xxxxxxx, Xx.
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Xxxxxxx X. X'Xxxxxxx, Xx.,
in his individual capacity
/s/ Xxxxxx X. Xxxx
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Xxxxxx X. Xxxx,
in his individual capacity
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