Possessed
Type: Evil Enh. • Brigade: Pale Green • Ability: None • Class: None • Special Ability: Place one of your demons on a Lost Soul. While that demon remains, that Lost Soul cannot be rescued by a Hero. Discard that demon if holder loses two battle challenges. If the Lost Soul is taken out of play, discard that demon.
Panic Demon (Pale Green)
Type: Evil Char. • Brigade: Pale Green • Ability: 2 / 4 • Class: None • Special Ability: If rescue attempt fails, you may place this card on a Hero in a territory. Hero cannot enter battle while this Panic Demon remains. May band to Panic Demon.
I don't see any reason that the PD cannot be removed from the "possessed" Lost Soul. You could choose to place the PG PD on a Hero. It would also work to band him off the LS or even discard him with ACiB.