NON-COMPETE AGREEMENT

 

                                                                   EXHIBIT 10.40

NON-COMPETE AGREEMENT

         THIS NON-COMPETE AGREEMENT (this "Agreement") is entered into as of
August 16, 1996, between Dr. Manfred George Krukemeyer (the "Shareholder") and
Paracelsus Healthcare Corp., a California corporation ("Paracelsus").

         WHEREAS, Paracelsus, Champion Healthcare Corporation, a Delaware
corporation ("Champion"), and PC Merger Sub, Inc., a Delaware corporation
("Merger Sub"), have entered into an Agreement and Plan of Merger dated as of
April 12, 1996, as amended and restated as of May 29, 1996 (as so amended and
restated, the "Merger Agreement"), providing for, among other things, the
merger (the "Merger") of Merger Sub with and into Champion pursuant to the
terms and conditions of the Merger Agreement, and setting forth certain
representations, warranties, covenants and agreements of the parties thereto in
connection with the Merger; and

         WHEREAS, upon consummation of the Merger, the Shareholder will
continue to Beneficially Own Voting Securities of Paracelsus constituting a
majority of the Total Voting Power of Paracelsus;

         NOW, THEREFORE, for good and valuable consideration, the receipt,
sufficiency and adequacy of which is hereby acknowledged, the parties hereto
agree as follows:

 1.  Certain Definitions.  (a)  For the purposes of this Agreement, capitalized
terms not otherwise defined herein shall have the meanings assigned to them in
the Shareholder Agreement (as defined in the Merger Agreement).

 2.  Representations of the Shareholder.  As of the date hereof, the
Shareholder represents and warrants to Paracelsus that:

         (a)     such Shareholder Beneficially Owns all of the outstanding
shares of common stock, no par value per share, of Paracelsus ("Paracelsus
Common Stock");

         (b)     such Shareholder does not Beneficially Own any shares of
common stock, par value $.01 per share, of Champion ("Champion Common Stock")
or any shares of Series C Preferred Stock or Series D Preferred Stock of
Champion (collectively, the "Champion Capital Stock");

         (c)     this Agreement has been duly executed and delivered by the
Shareholder and, assuming due execution by Paracelsus, this Agreement is a
legal, valid and binding obligation, enforceable against the Shareholder in
accordance with its terms; and

         (d)     The execution, delivery and performance by the Shareholder of
this Agreement do not and will not contravene or conflict with any provision of
any law, regulation, judgment, injunction, order or decree binding upon the
Shareholder or any agreement, contract or other instrument to which the
Shareholder is a party, other than any such contraventions or conflicts that
would not prevent or materially delay the performance of the Shareholder's
obligations hereunder.

 3.  Representations of Paracelsus.  As of the date hereof, Paracelsus
represents and warrants to the Shareholder that the execution, delivery and
performance of this Agreement by it has been

duly and validly authorized by all necessary corporate action on its part and,
assuming due execution by the Shareholder, that this Agreement is a legal,
valid and binding obligation, enforceable against Paracelsus in accordance with
its terms.

 4.  Non-Compete.

         (a)  Non-Competition.  In consideration of the benefits of this
Agreement, the Shareholder Agreement and the Merger Agreement to the
Shareholder and in order to induce Paracelsus to enter into this Agreement, the
Shareholder Agreement and the Merger Agreement and Champion to enter into the
Merger Agreement, the Shareholder hereby covenants and agrees that during the
period from the date of the Shareholder Agreement to the date of termination of
each and every provision of the Shareholder Agreement with respect to the
Shareholder and each and every Affiliate or Associate of the Shareholder or the
relinquishment of all rights relating to the nomination of, and resignation of,
all director nominees of the Shareholder and the Shareholder's Affiliates and
Associates (the "Term") neither the Shareholder nor any Affiliates of the
Shareholder shall, without the prior written consent of Paracelsus, directly or
indirectly, compete with Paracelsus or any of its Subsidiaries in the business
(which specifically does not include any ancillary hospital service businesses
related to such business, including, without limitation, dietary, maintenance,
security and other related service businesses) of owning, leasing or managing
hospitals and ambulatory care centers (the "Business") in the Restricted Area
(as defined below) or have any interest, directly or indirectly, in any entity
engaged in the Business in the Restricted Area. Nothing in this Section shall
prohibit the Shareholder from (i) owning, directly or indirectly, control of a
Person (the "Subject Company") if the Subject Company is not primarily engaged,
directly or indirectly, in the Business in the Restricted Area and, within
twelve months after such acquisition, the Shareholder causes the Subject
Company to divest any business or assets of the Subject Company that engage in
the Business in the Restricted Area or (ii) owning, directly or indirectly, not
more than 5% of any class of voting securities of a publicly traded Person that
is engaged, directly or indirectly, in the Business in the Restricted Area. The
Shareholder specifically agrees that this covenant is an integral part of the
inducement of Champion and Paracelsus to consummate the transactions
contemplated by the Merger Agreement and that it shall be specifically
enforceable by Paracelsus' successors and permitted assigns.

         (b)  Restricted Area.  The covenants contained in Section 4(a) shall
be construed as a series of separate covenants, one for each county or state of
the United States of America (together, the "Restricted Area").

         (c)  Blue Penciling.  If any provision contained in this Section shall
for any reason be held invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provision
hereof, but this Section shall be construed as if such invalid, illegal or
unenforceable provision had never been contained herein. Each of the
Shareholder and Paracelsus agrees that in the event that either the length of
time or geographical area set forth in this Section is deemed too restrictive
by any court of competent jurisdiction, the covenants and agreements in this
Section shall be enforceable for such time and within such geographical area as
such court may deem reasonable under the circumstances.

         (d)  Non-Solicitation.  The Shareholder hereby covenants and agrees
that following the Closing Date neither it nor any of its Affiliates shall,
without the prior written consent of Paracelsus, directly or indirectly,
solicit for employment any current key employee or officer of Paracelsus or any
of its Subsidiaries; provided, that the foregoing restriction shall not apply
to

employees no longer employed by Paracelsus or its Subsidiaries or to employees
who respond to general solicitations of employment not specifically directed
toward such key employees or officers of Paracelsus or its Subsidiaries.

 5.  Additional Agreements.  Neither the termination of this Agreement nor the
Transfer by the Shareholder of Beneficial Ownership of any Voting Securities of
Paracelsus shall relieve the Shareholder of any liabilities or obligations to
Paracelsus that arose or accrued under the terms of this Agreement prior to the
date of such termination or Transfer.

 6.  Specific Performance.  Each party hereto acknowledges that it will be
impossible to measure in money the damage to the other party if a party hereto
fails to comply with any of the obligations imposed by this Agreement, that
every such obligation is material and that, in the event of any such failure,
the other party will not have an adequate remedy at law or damages.
Accordingly, each party hereto agrees that injunctive relief or other equitable
remedy, in addition to remedies at law or damages, is the appropriate remedy
for any such failure and will not oppose the granting of such relief on the
basis that the other party has an adequate remedy at law. Each party hereto
agrees that it shall not seek, and agrees to waive any requirement for, the
securing or posting of a bond in connection with any other party's seeking or
obtaining such equitable relief.

 7.  Successors and Assigns.  This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns
and shall not be assignable (by operation of law or otherwise) without the
written consent of all other parties hereto; provided, that in the event of a
merger where Paracelsus is not the surviving corporation, (x) this Agreement
shall be assigned to and shall inure to the benefit of and be binding upon such
surviving corporation and (y) any reference herein to Paracelsus shall be
deemed to be a reference to such surviving corporation; provided, further, that
in the event of a merger where Paracelsus is the surviving corporation, this
Agreement shall continue in full force and effect.

 8.  Entire Agreement; Amendment; Waiver.  This Agreement supersedes all prior
agreements, written or oral, among the parties hereto with respect to the
subject matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be amended,
supplemented or modified, and no provisions hereof may be modified or waived,
or any consents granted hereunder, except, with respect to Paracelsus, by an
instrument in writing signed by Paracelsus and approved by the unanimous vote
of all of the Independent Directors and, with respect to the Shareholder, by
the Shareholder. No waiver of any provisions hereof by any party shall be
deemed a waiver of any other provisions hereof by any such party, nor shall any
such waiver be deemed a continuing waiver of any provision hereof by such
party.

 9.  Miscellaneous.

         (a)  Governing Law and Venue.  THIS AGREEMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HERETO SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH AND SUBJECT TO THE LAWS OF THE STATE OF TEXAS, WITHOUT
REFERENCE TO CONFLICTS OF LAWS PRINCIPLES. The parties hereby irrevocably
submit to the jurisdiction of the courts of the State of Texas and the Federal
courts of the United States of America located in the State of Texas solely in
respect of the interpretation and enforcement of the provisions of this
Agreement, and in respect of the transactions contemplated hereby, and hereby
waive, and agree not to assert, as a defense in any action, suit or proceeding
for the interpretation or enforcement hereof or of any such document, that it
is not subject thereto or that

such action, suit or proceeding may not be brought or is not maintainable in
said courts or that the venue thereof may not be appropriate or that this
Agreement or any such document may not be enforced in or by such courts, and
the parties hereto irrevocably agree that all claims with respect to such
action or proceeding shall be heard and determined in such a Texas State or
Federal court. The parties hereby consent to and grant any such court
jurisdiction over the person of such parties and over the subject matter of
such dispute and agree that mailing of process or other papers in connection
with any such action or proceeding in the manner provided in Section 9(b),
shall be valid and sufficient service thereof.

         (b)  Notices.  All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be deemed given (i) on
the first business day following the date received, if delivered personally or
by telecopy (with telephonic confirmation of receipt by the addressee), (ii) on
the business day following timely deposit with an overnight courier service, if
sent by overnight courier specifying next day delivery and (iii) on the first
business day that is at least five days following deposit in the mails, if sent
by first class mail, to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):

         If to the Shareholder, to:

                 Dr. Manfred George Krukemeyer
                 AM Natruper Holz 69
                 D-49076
                 Federal Republic of Germany
                 Facsimile: (011) 49-541-966-4006

         with copies to:

                 R.J. Messenger
                 155 North Lake Avenue, Suite 1100
                 Pasadena, California  91101
                 Facsimile: (818) 578-6387

         and to:

                 Dr. Meyer zu Losebeck
                 Sozietat Dr. H. Mertens
                 Hasemauer 9
                 49074 Osnabruck, Germany
                 Facsimile: (011) 49-541-331-1616

         If to Paracelsus, to:

                 Paracelsus Healthcare Corporation
                 515 West Greens Road, Suite 800
                 Houston, Texas  77067
                 Facsimile: (713) 873-6680
                 Attention:       Robert C. Joyner
                                  Vice President and General Counsel

         with a copy to:

                 Skadden, Arps, Slate, Meagher & Flom
                 300 South Grand Avenue
                 Suite 3400
                 Los Angeles, California 90071
                 Attention: Thomas C. Janson, Jr.
                 Facsimile: (213) 687-5600

         (c)  Severability.  The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any Person or any
circumstance, is invalid or unenforceable, (i) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (ii) the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.

         (d)  Counterparts.  For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, each of which shall be
deemed to be an original and all of which shall together constitute the same
agreement.

         (e)  Termination.  This Agreement shall terminate automatically
without any action by any party upon termination of each and every provision of
the Shareholder Agreement with respect to the Shareholder and each and every
Affiliate and Associate of the Shareholder or the relinquishment of all rights
relating to the nomination of, and the resignation of all director nominees of
the Shareholder and the Shareholder's Affiliates and Associates except as
otherwise agreed by the unanimous vote of all of the Independent Directors then
in office.

         (f)  Headings.  All Section headings and the recitals herein are for
convenience of reference only and are not part of this Agreement, and no
construction or reference shall be derived therefrom.

         (g)  Other Agreements.  The parties hereto agree that there is not and
has not been any other agreement, arrangement or understanding between the
parties hereto with respect to the matters set forth herein.

         (h)  THIRD PARTY BENEFICIARIES.  NOTHING IN THIS AGREEMENT, EXPRESS OR
IMPLIED, IS INTENDED TO CONFER UPON ANY THIRD PARTY (INCLUDING ANY HOLDER OF
VOTING SECURITIES OF PARACELSUS) ANY RIGHTS OR REMEDIES OF ANY NATURE
WHATSOEVER UNDER OR BY REASON OF THIS AGREEMENT; PROVIDED, THAT THE FOREGOING
SHALL NOT IN ANY WAY RESTRICT OR LIMIT ANY HOLDER OF VOTING SECURITIES OF
PARACELSUS FROM BRINGING A SHAREHOLDER DERIVATIVE ACTION TO SEEK OR COMPEL THE
DIRECTORS OF PARACELSUS TO CAUSE PARACELSUS TO ENFORCE ANY OBLIGATIONS OF THE
SHAREHOLDER HEREUNDER OR TO EXERCISE ANY RIGHTS OR REMEDIES OF PARACELSUS
HEREUNDER.

         (i)  No Waiver of Opportunities.  Nothing in this Agreement shall
waive or shall be construed to waive the right of Paracelsus or any of its
Subsidiaries to pursue a claim against any Person for loss of, or a failure to
present or provide to Paracelsus or any Subsidiary of Paracelsus, any present
or future corporate opportunities; provided, that the parties intend that the
foregoing provision shall not (A) affect in any manner the contractual
obligations under this Agreement or be deemed to impose any additional
obligations on any party except such obligations that may arise by operation of
law or (B) expand or limit the interpretation of any provisions hereof
including, without limitation, Section 4(a) and 4(d).

         IN WITNESS WHEREOF, Paracelsus and the Shareholder have executed and
delivered this Agreement, or a counterpart hereof, as of the date first written
above.

                                PARACELSUS HEALTHCARE                           
                                                                             
                                By:      \s\ Ronald J. Messenger             
                                                                             
                                         ------------------------------------
                                Name:    R. J. Messenger                     
                                Title:   President & Chief Executive Officer 
                                                                             
                                THE SHAREHOLDER                              
                                                                             
                                By:      \s\ Dr. Manfred G. Krukemeyer       
                                                                             
                                         ------------------------------------
                                Name:    Dr. Manfred George Krukemeyer 

Basic Info X:

Name: NON-COMPETE AGREEMENT
Type: Non-Compete Agreement
Date: Nov. 19, 1996
Company: PARACELSUS HEALTHCARE CORP
State: California

Other info:

Date:

  • August 16 , 1996
  • April 12 , 1996
  • May 29 , 1996

Organization:

  • Paracelsus Healthcare Corp.
  • Champion Healthcare Corporation
  • PC Merger Sub , Inc.
  • Plan of Merger
  • Beneficially Own Voting Securities of Paracelsus
  • Total Voting Power of Paracelsus
  • Paracelsus Healthcare Corporation
  • Meagher & Flom

Location:

  • Delaware
  • State of Texas
  • United States of America
  • Texas State
  • North Lake Avenue
  • Pasadena
  • Osnabruck
  • Germany
  • Houston
  • Skadden
  • Arps
  • Los Angeles
  • California

Money:

  • $ .01

Person:

  • Manfred George Krukemeyer AM Natruper Holz
  • R.J. Messenger
  • H. Mertens Hasemauer
  • Robert C. Joyner
  • Thomas C. Janson
  • Ronald J. Messenger
  • R. J. Messenger
  • Manfred G. Krukemeyer

Percent:

  • 5 %