EXECUTION COPY
SETTLEMENT AGREEMENT
Settlement Agreement (the "Agreement"), dated as of
March 24, 1999, by and among the former shareholders of Champion
Healthcare Corporation ("Champion") listed on Exhibit
"A" hereto (the "Champion Shareholders"), Park-
Hospital GmbH ("Park"), Dr. Manfred ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ("▇▇.
▇▇▇▇▇▇▇▇▇▇"), and ▇▇▇▇▇▇▇▇▇▇ Healthcare Corporation
("PHC") (collectively, the "Parties").
As used in this Agreement, "old-▇▇▇▇▇▇▇▇▇▇" means PHC
prior to its merger with Champion; "Class Action" means IN
RE ▇▇▇▇▇▇▇▇▇▇ HEALTHCARE CORP. SEC. LITIG., Master File No. H-96-3464
(S.D. Tex.) (EW); "Derivative Actions" means ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ET AL., C.A. No. H-96-3464 (S.D. Texas) (EW), and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇, ET AL., C.A. No. H-97-2752 (S.D. Texas) (EW); "District
Court" means the United States District Court for the
Southern District of Texas; "State Court Actions" means all
of the actions filed in various state courts arising from the merger of
Champion and old-▇▇▇▇▇▇▇▇▇▇ and the related public offerings, including,
without limitation, GAONKAR V. ▇▇▇▇▇▇▇▇▇▇, ET AL., No. BC 158899
(Cal.Super.Ct., Los Angeles Cty.), PRESCOTT V. ▇▇▇▇▇▇▇▇▇▇, ET AL., No. BC
158979 (Cal.Super.Ct., Los Angeles Cty.), ▇▇▇▇▇▇▇▇ V. ▇▇▇▇▇▇▇▇▇▇, ET AL.,
No. SC38166, ESSEX IMPORTS V. ▇▇▇▇▇▇▇▇▇▇, ET AL., No. 96-51864 (▇▇▇▇▇▇
Cty. Dist. Ct.), and ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ET AL., C.A. No. 14945
(Del.Ch.Ct. New Castle Cty.); and "PHC Securities
Litigation" means the Class Action, Derivative Actions, and
State Court Actions combined.
I. CONTRIBUTION OF SHARES.
A. Subject to the terms set forth herein, Park shall contribute
nine million eight hundred sixty-five thousand (9,865,000)
shares of PHC common stock (the "Shares
Available") towards a global settlement of the
claims which could have been asserted and which are being
asserted in the PHC Securities Litigation. On the Effective
Date, as defined below in paragraph XIII., Park shall transfer
up to the maximum amount of Shares Available to the Champion
Shareholders; PROVIDED, HOWEVER, that each of the Champion
Shareholders receiving shares from Park continuously held his,
her, or its shares of PHC common stock from August 16, 1996
through October 10, 1996; and PROVIDED, FURTHER, that no shares
will be transferred on account of any PHC warrants, PHC
options, PHC convertible securities, subscription and
preemptive right to any PHC stock, or any other PHC securities
(other than shares of common stock) held by Champion
Shareholders. In the event that the aggregate number of shares
of PHC common stock held by the Champion Shareholders totals
less than sixteen million five hundred thousand (16,500,000)
(the "Share Threshold"), the number of shares of
PHC common stock to be transferred from Park to the Champion
Shareholders shall be an amount equal to the product of (i) the
amount of shares of PHC common stock held by the Champion
Shareholders times (ii) 9.865/16.5 (the "Share
Product"). No PHC warrants, PHC options, PHC
convertible securities, subscription and preemptive right to
any PHC stock, and any other PHC securities (other than shares
of common stock), or shares of PHC common stock held by
individuals that were members of the pre-merger management of
Champion shall be counted in determining whether the Share
Threshold has been met or exceeded.
B. In the event that the number of shares of PHC common stock
transferred by Park to the Champion Shareholders pursuant to
paragraph I.A. hereof is less than the Shares Available,
contemporaneously with the transfer of the appropriate amount
of shares to the Champion Shareholders, Park shall make
available for the settlement of the Class Action an amount of
shares of PHC common stock equal to the difference between the
Shares Available and the Share Product. In no event, however,
shall Park transfer more than nine million eight hundred sixty-
five thousand (9,865,000) shares of PHC common stock to resolve
the PHC Securities Litigation and all claims that could have
been asserted by the Champion Shareholders arising from or in
any way related to the facts and circumstances forming the
subject matter of the PHC Securities Litigation.
C. The transfer of shares in accordance with paragraphs I.A. and
I.B. hereof shall only occur if the District Court certifies a
class in the Class Action that is substantially similar to the
class as defined with the consent of Park and the Champion
Shareholders in Section B of that certain Class Action
Memorandum of Understanding.
D. PHC shall ensure that all shares transferred to the Champion
Shareholders, the class certified in the Class Action, and ▇▇.
▇▇▇▇▇▇▇▇▇▇ in accordance with this Agreement are registered or
exempt from registration under the federal securities laws for
purposes of that transfer. Park and ▇▇. ▇▇▇▇▇▇▇▇▇▇ shall
cooperate with PHC in this regard, but PHC shall be solely
responsible for all reasonable expenses, including reasonable
attorneys' fees. In the event that not all shares transferred
to the Champion Shareholders, the class certified in the Class
Action, and ▇▇. ▇▇▇▇▇▇▇▇▇▇ in accordance with this Agreement
are registered, outside counsel to PHC shall, prior to the
transfer of shares to the Champion Shareholders, ▇▇.
▇▇▇▇▇▇▇▇▇▇, and plaintiffs in the Class Action, provide Park,
▇▇. ▇▇▇▇▇▇▇▇▇▇ and the Champion Shareholders with a legal
opinion, substantially in the form attached as Exhibit
AB" hereto, that the unregistered shares being
transferred are exempt from registration under the federal
securities laws for purposes of that transfer and shall provide
standard assurances concerning the transfer of the securities
under state Blue Sky law.
E. The transfer of shares of PHC common stock by Park to the
Champion Shareholders pursuant to paragraph I.A. hereof shall
resolve all claims that could have been asserted by the
Champion Shareholders arising from or in any way related to the
facts and circumstances forming the subject matter of the PHC
Securities Litigation. To the extent possible, such
resolutions shall be effected in such a way as to not affect
claims and causes of action, to the extent not otherwise
released in the course of a global settlement of the PHC
Securities Litigation, against PHC's current or former officers
and directors, PHC's independent accountants, and the
underwriters associated with the merger of Champion and old-
▇▇▇▇▇▇▇▇▇▇. Other than the consideration provided in this
Agreement, no other consideration from Park, ▇▇. ▇▇▇▇▇▇▇▇▇▇,
PHC, or any other person, including cash or the issuance of PHC
shares by PHC, shall be provided to the Champion Shareholders
to compromise the claims they could have asserted arising from
or in any way related to the facts and circumstances forming
the subject matter of the PHC Securities Litigation.
Additionally, except as provided in this Agreement, Park and
▇▇. ▇▇▇▇▇▇▇▇▇▇ will provide no consideration to compromise
claims being asserted in the PHC Securities Litigation by
plaintiffs other than the Champion Shareholders.
F. Except for members of the management of old-▇▇▇▇▇▇▇▇▇▇ or
Champion who are included within the class certified by the
District Court, no shares of PHC common stock to be transferred
by Park shall be for the benefit of the pre-merger management
of old-▇▇▇▇▇▇▇▇▇▇ or Champion. Additionally, no shares of PHC
common stock to be transferred by Park shall be on account of
any PHC warrants, PHC options, PHC convertible securities,
subscription and preemptive right to any PHC stock, or any
other PHC securities (other than shares of common stock) held
by the Champion Shareholders.
II. SHAREHOLDER LOAN.
A. The $7.2 million subordinated note (the "Note")
issued by PHC to Park, dated August 30, 1996, shall, beginning
with the annual payment originally scheduled to be made in
August 2000, be discharged in accordance with its original
terms. PHC shall pay to Park the interest due under the Note
as scheduled on August 30, 1999. Subject to the approval of
PHC's senior and subordinated lenders, if PHC in its discretion
determines that such approval is required, in which case PHC
shall use its reasonable best efforts to seek such approval,
all amounts of the Note in arrears shall be paid in full on the
date of the annual payment due in August 30, 2000 or as soon
thereafter as is possible. Subject to the provisions of
subparagraphs II.B and II.C hereof, the Note shall be prepaid
upon the earliest to occur of (i) the express consent of PHC's
senior and subordinated lenders, (ii) a refinancing by payment
of PHC's senior and subordinated indebtedness, and (iii) where
such payment would not violate the terms of PHC's existing
senior and subordinated indebtedness; PROVIDED, HOWEVER, that
the Note shall not be prepaid in any event prior to August 30,
2000.
B. In the event that at any time within two (2) years following
the Effective Date (i) a voluntary petition in bankruptcy is
filed by PHC or (ii) an involuntary petition under Title 11 of
the United States Code is filed against PHC and (1) an order
for relief is entered or (2) such petition is not dismissed
within sixty (60) days of its filing, the outstanding principal
balance of the Note, together with accrued interest, shall be
converted into shares of PHC common stock and then immediately
issued by PHC to Park. The number of shares of PHC common
stock that Park shall receive in such a conversion shall be
calculated based on a share value of Four Dollars ($4.00) per
share. On Park's receipt of the shares, the Note shall
terminate and be canceled as fully discharged and performed.
C. If an agreement is reached to sell all or substantially all of
the outstanding voting securities or assets of PHC to a third-
party within two (2) years following the Effective Date for a
price of less than Four Dollars ($4.00) per share of PHC common
stock, the outstanding principal balance of the Note, together
with accrued interest, shall be converted into shares of PHC
common stock and then immediately issued by PHC to Park. The
number of shares of PHC common stock that Park shall receive in
such a conversion shall be calculated based on a share value of
Four Dollars ($4.00) per share. On Park's receipt of the
shares, the Note shall terminate and be canceled as fully
discharged and performed.
III. SERVICE AGREEMENT. - The senior and subordinated lenders of PHC
currently permit PHC to pay Two Hundred Fifty Thousand Dollars
($250,000) annually on the Service Agreement dated July 17, 1996
between PHC and ▇▇. ▇▇▇▇▇▇▇▇▇▇.
A. PHC shall buy out the obligation currently permitted by the
lenders to pay Two Hundred Fifty Thousand Dollars ($250,000)
annually to ▇▇. ▇▇▇▇▇▇▇▇▇▇ for the remaining period of the
Service Agreement by making a lump sum payment to ▇▇.
▇▇▇▇▇▇▇▇▇▇ of One Million Dollars ($1,000,000) on the Effective
Date.
B. PHC shall buy out its remaining obligations under the Service
Agreement by issuing one million (1,000,000) shares of PHC
common stock to ▇▇. ▇▇▇▇▇▇▇▇▇▇ on the Effective Date.
C. The Service Agreement shall terminate and have no further
effect on the Effective Date. Prior to the Effective Date, PHC
shall continue to make quarterly payments on the Service
Agreement at the current rate of Two Hundred Fifty Thousand
Dollars ($250,000) annually.
IV. CORPORATE GOVERNANCE.
A. On the Effective Date, the current Shareholder Agreement and
the Shareholder Protection Rights Agreement shall be
terminated. Between the date of this Agreement and the
Effective Date, PHC agrees not to assert or pursue any rights,
claims, or actions under the Shareholder Protection Rights
Agreement and Shareholder Agreement relating to the terms of
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇'▇ will providing for the appointment of
executors, the actual appointment or replacement of co-
executors under ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇'▇ will, and the disclosure
of such terms and circumstances, and the other transactions and
events disclosed in the 13-D filings made by Park and the co-
executors in December 1997, or as the result of any transaction
contemplated in this Agreement. In the event that PHC does
assert or pursue any such rights, claims, or actions under the
Shareholder Protection Rights Agreement and Shareholder
Agreement prior to the Effective Date or the termination of
this Agreement, Park may terminate this Agreement, which shall
render this entire Agreement null and void.
B. Simultaneous with the execution of this Agreement, PHC and Park
shall execute a new Shareholder Agreement, in the form attached
as Exhibit "C" hereto (the "New Shareholder
Agreement"), which shall become effective on the
Effective Date. The parties agree that, for a period of two
(2) years after the Effective Date, PHC and Park shall not
amend the Shareholder Agreement to grant Park any additional
material rights or to delete any material rights of PHC without
the approval of a majority of the Board taking into account only
the votes of the directors not nominated or designated by Park.
C. On or as soon as practical after the execution of this
Agreement, and for a period of two (2) years following the
Effective Date, the PHC Board of Directors shall include at
least: (i) three (3) designees of Park; (ii) three (3)
designees of the Champion Shareholders; (iii) one member of
management; and (iv) two (2) independent directors ("New
Board"). For purposes of the New Board, a
director is independent if (i) he or she does not have, and has
not had during the two (2) years preceding election as a
director, any business, employment, financial, familial, or
other relationship with PHC (other than being a director), an
affiliate of PHC, Park, a Champion Shareholder, a person owning
three percent (3%) or more of the voting securities of PHC,
director or officer of PHC, or significant supplier or payor of
PHC and (ii) so long as PHC is listed on the New York Stock
Exchange, he or she satisfies the requirements of such Exchange
for independent directors. Upon expiration of such two (2)
year period, the PHC Board of Directors shall be nominated and
elected in accordance with the then-existing Articles of
Incorporation, By-laws, and the New Shareholder Agreement of
PHC. During the period from the date hereof up to and
including the date that the PHC Board of Directors is
reconstituted pursuant to this paragraph, the Champion
Shareholders' and Park's designees to the PHC Board of
Directors shall use their independent business judgment and act
to further the consummation of the transactions contemplated
herein.
Park, the Champion Shareholders and PHC shall use their
reasonable best efforts to ensure that the PHC Board of
Directors is constituted in this manner. In furtherance of the
foregoing, PHC shall nominate and shall use its reasonable best
efforts to take and cause to be taken all necessary action
(corporate and other) to elect to its Board the individuals
required to be nominated for election as directors in
accordance with the terms hereof. In addition, for a period of
two (2) years after the Effective Date, PHC shall nominate for
shareholder vote only slates of classes of directors, and not
any director on an individual basis, and the slates comprising
each of Class I (with a term expiring in 2000) and Class II
(with a term expiring in 2001) shall include at least one Park
designee and one Champion designee.
D. During the period prior to the Effective Date, Park agrees to
cooperate, to the best of its ability, with PHC and the
Champion Shareholders to ensure that Park's representation on
the PHC Board of Directors shall not exceed one-third (1/3) of
the Board of Directors.
E. Simultaneous with, or prior to, the execution of this
Agreement, the Board of Directors of PHC shall adopt a
Resolution, in substantially the form attached as Exhibit
"D" hereto, (i) adopting new Amended and Restated
Bylaws for PHC, in the form attached as Exhibit
"E" hereto (the "New Bylaws"), which
shall become effective on the Effective Date and (ii) electing
new directors to the Board of Directors, with such directors
taking office upon the complete execution of this Agreement.
V. GLOBAL SETTLEMENT OF CLAIMS AND COURT APPROVAL.
A. PHC shall use its best efforts to obtain an agreement to
compromise the remaining claims and causes of action currently
being asserted against PHC and ▇▇. ▇▇▇▇▇▇▇▇▇▇, among others, in
the Class Action, against PHC, Park, and ▇▇. ▇▇▇▇▇▇▇▇▇▇, among
others, in the Derivative Actions and against PHC, Park, and/or
▇▇. ▇▇▇▇▇▇▇▇▇▇ in the State Court Actions and in any other
pending litigation relating, in any way, to the merger of
Champion and old-▇▇▇▇▇▇▇▇▇▇. Although PHC may issue shares of
PHC common stock to compromise these remaining claims, in no
event shall PHC issue more than one million five hundred fifty
thousand (1,550,000) shares of new PHC common stock to
compromise these remaining claims in the Class Action,
Derivative Actions, and State Court Actions, without the
express written consent of Park and the Champion Shareholders.
B. Upon PHC's obtaining an agreement to compromise the remaining
claims, PHC, Park, the Champion Shareholders, the Derivative
Action plaintiffs, and the Class Action plaintiffs shall
jointly seek final approval of the proposed settlements from
the District Court having jurisdiction over the PHC Securities
Litigation. If, after proper notice and hearing, the District
Court approves the proposed settlements, PHC, Park, the
Champion Shareholders, the Derivative Action plaintiffs, and
the Class Action plaintiffs shall seek entry of orders and
final judgments that provide, among other things:
(1) as to the Derivative Actions, entry of a court order,
after notice and hearing, approving the proposed
settlements and their terms pursuant to Federal Rule of
Civil Procedure 23.1, approving the transfer of any
unregistered shares to the Champion Shareholders or ▇▇.
▇▇▇▇▇▇▇▇▇▇ pursuant to this Agreement as exempt from
registration under Section 3(a)(10) of the Securities Act
of 1933, and directing the consummation of the settlements
pursuant to their terms;
(2) as to the Class Action, entry of a court order, after
notice and hearing, approving the proposed settlements and
their terms as being fair, reasonable and adequate
settlements as to plaintiffs pursuant to Federal Rule of
Civil Procedure 23 approving the transfer of any
unregistered shares to the members of the class pursuant
to this Agreement as exempt from registration under
Section 3(a)(10) of the Securities Act of 1933, and
directing the consummation of the settlements pursuant to
their terms;
(3) directing that the Class Action and Derivative Actions be
dismissed with prejudice as to the settling defendants,
including Park; and
(4) a bar order that prohibits, except as otherwise expressly
provided in this Agreement or in the settlements of the
Class Action and Derivative Actions, any further claims
against the settling defendants, including Park, arising
from the events that form the basis of the PHC Securities
Litigation.
C. PHC shall use its reasonable best efforts to obtain a release
of all claims being asserted in the State Court Actions against
the settling defendants, including Park.
D. Each of the Champion Shareholders covenants that he, she or it
is a current shareholder of PHC and that he, she or it will
remain a shareholder of PHC through the Effective Date. Each
of the Champion Shareholders further covenants that he, she or
it will not commence any litigation or bring any claims against
Park, ▇▇. ▇▇▇▇▇▇▇▇▇▇, PHC, or any other person, arising from or
in any way related to the facts and circumstances forming the
subject matter of the PHC Securities Litigation.
E. If the approvals, orders, judgments, and dismissals described
above are not obtained from the District Court, this Agreement
shall be null and void.
VI. INDEMNIFICATION. - As of the Effective Date, and upon
consummation of the transactions contemplated in paragraph I hereof,
PHC shall indemnify and hold harmless Park, ▇▇. ▇▇▇▇▇▇▇▇▇▇, the
Champion Shareholders, and each of their respective employees and
agents, from any and all claims and causes of action relating, in
any way, to the merger of Champion and old-▇▇▇▇▇▇▇▇▇▇ that may be
asserted by any present or former holder of PHC common stock or
other PHC securities who is neither a party to this Agreement nor a
member of the class certified by the District Court in the Class
Action. PHC shall not, however, indemnify and hold harmless Park or
the Champion Shareholders for any claims which may be asserted,
assessed or otherwise imposed against any such persons or entities
by any governmental agency or tribunal, including, without
limitation, the Securities and Exchange Commission; PROVIDED,
HOWEVER, that PHC shall indemnify Park and its agents and employees
for reasonable legal fees, not to exceed Two Hundred and Fifty
Thousand Dollars ($250,000), incurred in connection with any
investigation or claims relating, in any way, to the merger of
Champion and the old-▇▇▇▇▇▇▇▇▇▇ brought by any governmental agency
or tribunal, including, without limitation, the Securities and
Exchange Commission. Nothing in this Agreement in any way limits or
reduces the indemnity rights, if any, that ▇▇. ▇▇▇▇▇▇▇▇▇▇ may have
either contractually or as a former director of old-▇▇▇▇▇▇▇▇▇▇ and
PHC.
VII. MUTUAL RELEASE.
A. On the Effective Date, for good and valuable consideration
received, each of the Champion Shareholders, on behalf of
themselves and each of his, her or its current, former, or
future partners, directors, officers, employees, shareholders,
predecessors, successors, affiliates, subsidiaries, agents,
lawyers, representatives, and assigns (collectively, the
"Champion Shareholder Releasing Parties") hereby
fully and finally release and forever discharge ▇▇. ▇▇▇▇▇▇▇▇▇▇,
Park, and PHC and each of his or its current, former, or future
trustees, directors, officers, employees, shareholders,
predecessors, successors, affiliates, subsidiaries, family
members, agents, lawyers, representatives and assigns
(collectively, the "▇▇▇▇▇▇▇▇▇▇/Park/PHC Released
Parties"), from any and all claims, demands,
obligations, debts, actions, suits, causes of action, whether
class, derivative, individual, or otherwise in nature, damages
whenever incurred, liabilities of any nature whatsoever,
including costs, expenses, penalties and attorneys' fees, known
or unknown, suspected or unsuspected, in law, under statute, or
in equity, that the Champion Shareholder Releasing Parties,
whether directly, representatively, derivatively or in any
other capacity, ever had, now have or hereafter can, shall or
may have against the ▇▇▇▇▇▇▇▇▇▇/Park/PHC Released Parties
arising from or in any way related to the facts and
circumstances forming the subject matter of the PHC Securities
Litigation.
B. On the Effective Date, for good and valuable consideration
received, ▇▇. ▇▇▇▇▇▇▇▇▇▇, Park, and PHC and each of his or its
current, former, or future trustees, directors, officers,
employees, shareholders, predecessors, successors, affiliates,
subsidiaries, family members, agents, lawyers, representatives,
and assigns (collectively, the "▇▇▇▇▇▇▇▇▇▇/Park/PHC Releasing
Parties") hereby fully and finally release and
forever discharge each of the Champion Shareholders, and each
of his, her or its current, former, or future trustees,
partners, directors, officers, employees, shareholders,
predecessors, successors, affiliates, subsidiaries, family
members, agents, lawyers, representatives, and assigns
(collectively, the "Champion Shareholder Released
Parties") from any and all claims, demands,
obligations, debts, actions, suits, causes of action, whether
class, derivative, individual, or otherwise in nature, damages
whenever incurred, liabilities of any nature whatsoever,
including costs, expenses, penalties and attorneys' fees, known
or unknown, suspected or unsuspected, in law, under statute, or
in equity, that the ▇▇▇▇▇▇▇▇▇▇/Park/PHC Releasing Parties,
whether directly, representatively, derivatively or in any
other capacity, ever had, now have or hereafter can, shall or
may have against the Champion Shareholder Released Parties
arising from or in any way related to the facts and
circumstances forming the subject matter of the PHC Securities
Litigation.
VIII. ASSIGNMENT AND PURSUIT OF CERTAIN CLAIMS.
A. Prior to the Effective Date, PHC shall not settle, compromise,
or assign any claim or cause of action it has or might have
arising from or related to the facts and circumstances forming
the subject matter of the PHC Securities Litigation, including,
without limitation, a claim or cause of action against a
current or former officer or director holding $.01 options
(for, among other things, affirmative recoveries and
cancellation of the $.01 options) and its independent
accountants except as provided in this Agreement, the Class
Action Memorandum of Understanding, and the Derivative Action
Settlement Agreement or except in a document signed by the
Champion Shareholders and Park. This obligation shall
terminate on the Effective Date.
B. Effective upon the transfer of shares from Park to the
Champion Shareholders pursuant to paragraph I.A., PHC and the
Champion Shareholders hereby assign to Park any and all claims
or causes of action that PHC and the Champion Shareholders may
have against PHC's independent accountants arising from the
work that the independent accountants performed in connection
with the merger of Champion and old-▇▇▇▇▇▇▇▇▇▇ and in
connection with any and all services that the independent
accountants provided to old-▇▇▇▇▇▇▇▇▇▇. Notwithstanding
anything to the contrary in paragraph VI., PHC shall not
indemnify Park against any counterclaims or other actions
asserted against Park by the independent accountants. Park
shall hold PHC and all other parties who receive releases in
connection with this Agreement, the settlement of the Class
Action, and the Derivative Actions harmless from any liability,
costs, and expenses, including reasonable legal fees, they may
incur as a result of Park's pursuit of such assigned claims and
causes of action against PHC's independent accountants. In
addition, to the extent PHC or any of the other parties held
harmless by Park are required to pay amounts to the independent
accountants in connection with such assigned claims and causes
of action, PHC and such other parties may at their option
require that any recovery due Park from the independent
accountants be reduced by such amounts. Park also covenants
not to commence any litigation against the independent
accountants until such time as a written commitment has been
obtained from another "Big Five" or other
nationally recognized accounting firm, acceptable to PHC and
its Board of Directors in its sole and absolute discretion,
agreeing to serve as PHC's independent accountants. In
connection with this assignment, upon prior written request to
PHC, and provided that such requests are reasonable, PHC shall
make available to Park all documents that are relevant to such
claims; PROVIDED, HOWEVER, that Park shall reimburse PHC for
the costs associated with producing such documents. If for any
reason this assignment is not valid or enforceable, the other
agreements and obligations contained in this Agreement remain
valid and enforceable.
C. From and after the Effective Date, claims and causes of action
of PHC may be pursued or compromised and settled at the
discretion and as determined by the reconstituted PHC Board of
Directors or as provided in settlements reached with respect
to the PHC Securities Litigation.
IX. TERMINATION OF CERTAIN STOCK OPTIONS. - Except as provided in the
Derivative Action Settlement Agreement and Senior Executive
Memorandum of Understanding, PHC shall investigate the feasibility
of canceling certain $.01 PHC stock options that were issued in
connection with the merger of Champion and old-▇▇▇▇▇▇▇▇▇▇. PHC
shall also investigate the feasibility of reacquiring, at a price
not to exceed the strike price, any PHC shares that have been issued
pursuant to such options or, if the person who obtained shares
pursuant to such options has sold the shares, the proceeds realized
on the sale of those shares.
X. CLASS ACTION MEMORANDUM OF UNDERSTANDING AND DERIVATIVE ACTIONS
SETTLEMENT AGREEMENT. - The obligations set forth in this Agreement
shall be conditioned on the final execution by all parties,
including Park, of a Class Action Memorandum of Understanding and a
Derivative Actions Settlement Agreement. This Agreement and the
Class Action Memorandum of Understanding shall be executed at the
same time.
XI. COSTS. - Upon execution of this Agreement, the Class Action
Memorandum of Understanding, and the Derivative Actions Settlement
Agreement by the Champion Shareholders, PHC shall pay all reasonable
fees and out-of-pocket expenses of the Champion Shareholders,
including, without limitation, reasonable attorneys' fees, incurred
as of the date thereof; PROVIDED, HOWEVER, that in no event shall
such payment exceed Five Hundred Thousand Dollars ($500,000).
Additionally, during the period from the date hereof up to and
including the Effective Date, PHC shall pay, on a monthly basis,
such additional reasonable fees and out-of-pocket expenses of the
Champion Shareholders, including, without limitation, reasonable
attorneys' fees, incurred subsequent to the execution of this
Agreement; PROVIDED, HOWEVER, that in no event shall PHC's payment
of legal fees incurred by the Champion Shareholders, in the
aggregate, exceed Eight Hundred Thousand Dollars ($800,000). If the
reasonable legal fees incurred by the Champion Shareholders exceed
Eight Hundred Thousand Dollars ($800,000), the Champion Shareholders
may request that such additional fees and expenses be paid by PHC
and PHC's decision on payment of those additional fees and expenses
shall be at the discretion of the New Board of Directors of PHC. In
the event that the PHC Securities Litigation is not globally settled
as contemplated in this Agreement, any amounts paid to the Champion
Shareholders pursuant to this paragraph shall be subtracted from and
offset against any eventual judgment or recovery by the Champion
Shareholders in connection with a claim or demand related in any way
to the merger of old-▇▇▇▇▇▇▇▇▇▇ and Champion or to the events
forming the basis of the PHC Securities Litigation and the judgment
is against or the recovery is from any person with a right of
indemnification or contribution against PHC.
XII. PRESS RELEASE. - Upon the final execution of this Agreement and the
Class Action Memorandum of Understanding, the Parties shall jointly
prepare and the Board of Directors of PHC shall issue a press
release announcing generally the terms of the agreements. Except as
required by applicable law, under no circumstance shall any party to
this Agreement issue a press release, without the consent of all
other Parties to this Agreement, or disclose the salient provisions
contained in this Agreement.
XIII. EFFECTIVE DATE. - The "Effective Date" means the first
business day ten (10) days after the order(s) and judgment(s) of the
District Court approving the settlements of the Class Action and
Derivative Actions and dismissing the Class Action and Derivative
Actions with prejudice become final and no longer subject to appeal.
XIV. TERMINATION OF TOLLING AGREEMENT. - Upon the transfer of shares from
Park to the Champion Shareholders pursuant to paragraph I.A. hereof
and the payment by PHC to the Champion Shareholders of all fees and
out-of-pocket expenses due and owing on the Effective Date pursuant
to paragraph XI. hereof, the August 1997 Tolling Agreement among
PHC, Park, ▇▇. ▇▇▇▇▇▇▇▇▇▇, certain of the Champion Shareholders, and
others shall terminate as to PHC, Park, and ▇▇. ▇▇▇▇▇▇▇▇▇▇.
XV. DOCUMENTATION AND APPROVAL. - The Parties shall act in good faith
and use their best efforts to further document the transactions
contemplated herein and obtain approval of the respective judicial
and governmental authorities and third parties.
XVI. GENERAL PROVISIONS.
A. The agreements contained herein are in no way intended as an
admission of liability by PHC, Park or ▇▇. ▇▇▇▇▇▇▇▇▇▇ or that
any reallocation of PHC shares to the Champion Shareholders is
proper, fair, or warranted under the circumstances.
B. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Texas without regard
to Texas conflict of law rules.
C. Any modifications or amendments to this Agreement must be in
writing and signed by the Parties.
D. This Agreement may be executed in counterparts, and as so
executed shall constitute one agreement.
Date: ___________ PARK-HOSPITAL GmbH
_________________________________
By: ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ zu Lsebeck
Managing Director
Date: ___________ ▇▇▇▇▇▇▇▇▇▇ HEALTHCARE CORPORATION
_________________________________
By:
Title:
Date: ___________ DR. MANFRED ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
_________________________________
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
Date: ___________ _________________________________
Number of Shares of PHC Name of Champion Shareholder
Common Stock Continuously
Held from August 16, 1996
through October 10, 1996:
________________ ________________________________
By:
Title:
