SEPARATION AGREEMENT

AND

GENERAL RELEASE

 

 

TO:

Wayne Schellhammer

This Separation Agreement and General Release (the “Agreement”) is executed on
the dates given on the signature pages by and between American CareSource
Holdings, Inc. (“ACSHI” or the “Company”) and Wayne Schellhammer (“Executive,”
“you” or “I”).

RECITALS

WHEREAS, ACSHI and Executive entered into an Employment Agreement dated October
11, 2004 (“Employment Agreement”); and

 

WHEREAS, effective June 30, 2007, Executive shall resign as an officer,
director, and employee of ACSHI and all of its affiliates; and

 

WHEREAS, the parties agree that Executive’s separation from employment is the
result of a mutual agreement between Executive and ACSHI; and

 

WHEREAS, Executive agrees to provide ACSHI with a general release of claims as
contained herein.

 

NOW, THEREFORE, in consideration of the foregoing premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:

 

I.

Separation of Employment

 

A.          Except as otherwise provided herein, ACSHI and Executive hereby
agree that Executive’s employment shall be separated as of June 30, 2007
(“Separation Date”) and that neither shall thereafter have any liabilities,
rights, duties or obligations to the other party under or in connection with
Executive’s employment with the Company, except as provided in this Agreement.

 

B.          ACSHI and Executive hereby waive any rights to prior notification of
termination of Executive’s employment.

 

C.          Executive hereby resigns, effective on the Separation Date, as a
director, officer and employee of ACSHI, and as an officer, manager, employee or
similar functionary of all entities related to ACSHI.

 

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D.          Executive represents, acknowledges and agrees that Exhibit A
includes a complete and correct list of all equity or option agreements and
awards under which Executive claims a right to vested equity or option benefits
in ACSHI or any of its affiliates and to which he is not waiving his vested
rights pursuant to this Agreement (the “Stock Options”). Executive acknowledges
and agrees that, except as provided in Section II.C below, any and all rights he
possesses pursuant to the instruments listed on Exhibit A that remain unvested
as of the Separation Date shall in each case lapse and be forfeited as of the
Separation Date. Executive and ACSHI agree that Executive holds 539,007 vested
stock options and no shares of restricted stock. These and all other terms of
Executive’s stock and stock options shall be governed by the terms and
conditions of the applicable stock and option agreements and plan, as modified
by Section II.C below.

 

II.

Special Compensation, Benefits and Consideration

 

In consideration for Executive’s release of claims, as well as his other
promises contained herein, ACSHI agrees to provide Executive with the following
benefits:

 

 

A.

ACSHI agrees to pay to Executive the gross amount of $250,000.00, payable in
twelve (12) equal installments of $20,833.33 (“Installment Severance Payments”).
All payments made pursuant to this Paragraph shall be subject to taxes and
lawful deductions and shall be made in accordance with the Company’s normal
payroll practices. ACSHI and Executive agree that amounts payable during the six
month period following the Separation Date shall be classified as “short term
deferrals” for purposes of Treasury Regulation Section 1.409A-1(b)(4). The first
Installment Severance Payment shall be made on the first regular payday after
the Effective Date of this Agreement (as defined below in Section IV(O); and

 

 

B.

ACSHI agrees to continue Executive’s health and dental insurance coverage at its
expense for a period ending on the earlier of (i) June 30, 2008 or (ii) the date
on which Executive obtains health insurance from a subsequent employer (each the
“Benefit Termination Date”). This coverage shall be provided by Executive
enrolling in COBRA under ACSHI’s group health plan. ASCHI shall reimburse
Executive for the amount by which the COBRA premium payments exceed the premium
rates offered by the Company to active employees at the then effective rates
during the coverage period; provided, however, that ASCHI may, with the consent
of the insurance company, elect to pay such amount directly to the insurance
company. ACSHI and Executive agree that these payments shall be classified as a
reimbursement of medical expenses for purposes of Treasury Regulation Section
1.409A-1(b)(9)(v)(B). Executive further agrees that he will be required to
timely complete and submit the necessary paperwork to obtain such continuation
benefits. Executive understands and agrees that as of the Benefit Termination

 

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Date, any continuation of dental and health insurance benefits will be at
Executive's own expense.

 

 

C.

ACSHI and Executive agree that (i) any portion of the Stock Options that were
not vested on or before the Separation Date shall be forfeited on the Separation
Date, and (ii) the expiration date for the vested portion of Executive’s Stock
Options shall, as permitted by the Treasury Regulation Section
1.409A-1(b)(5)(v), be extended from ninety days following the Separation Date
until June 30, 2008 (“Option Exercise Period). ACSHI and Executive hereby agree
that this portion of the Agreement constitutes an amendment to each applicable
stock option agreement. As required in Sections 8(d) and 8(g) of the Company’s
2005 Amended and Restated Stock Option Plan, Executive shall be required to
deliver to the Company the applicable exercise price, any amounts required to be
withheld for State and/or Federal income taxes, and the Executive’s share of any
applicable employment taxes which arise from the exercise of the Stock Options.
Executive further acknowledges that the extension of the Stock Options will
cause such options to be classified as nonqualified stock options under Section
83 of the Internal Revenue Code.

 

In connection with and as a portion of the consideration for this extension,
Executive agrees that he will limit the number of shares of the Company’s common
stock with respect to which he effects any sale, transfer, pledge or other
transaction that affects his beneficial or economic interest therein to no more
than 140,000 shares for each rolling three-month during the Option Exercise
Period; provided, however, that the delivery by the Company of shares of common
stock to Executive upon the exercise of the Stock Options for cash shall not
reduce this amount). In addition, Executive shall given notice to the Company
not less than one business day prior to the date he makes any sale, transfer,
pledge or other transaction that affects his beneficial or economic interest
therein. This notice may, at Executive’s election, cover any proposed sales that
will occur during the following five (5) business days.

 

 

D.

The Company shall pay Executive $5,000 for relocation expenses (“Relocation
Payment”). The Company shall pay the Relocation Payment on the first regular
payday after the Effective Date of this Agreement (as defined below in Section
IV(O).

 

Executive understands and agrees that the compensation recited in this Section
II constitutes the full compensation from ACSHI to Executive, and no other
payments are due to Executive. The parties agree that Sections 5 (Termination),
5.1 (Termination Events) and 5.2(a) and (b) (Effects of Termination) of the
Employment Agreement shall not apply to Executive’s separation and shall have no
effect and be unenforceable as of the Effective Date of this Agreement.

 

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III.

General Release

 

A.         In return for the consideration referenced in this Agreement, I,
Wayne Schellhammer, agree to the following:

 

I agree, on behalf of myself and all of my heirs or personal representatives, to
release ACSHI, its parent companies (including without limitation Patient
Infosystems, Inc.), subsidiaries, all affiliates of each, predecessors and
successors, and all of its present or former officers, managers, directors,
managers, representatives, employees, agents, attorneys, employee benefit
programs, and the trustees, administrators, fiduciaries and insurers of such
programs (collectively the “Company Released Parties”), from any and all claims
for relief of any kind, whether known to me or unknown, which in any way arise
out of or relate to my employment at ACSHI or any of the Company Released
Parties, the separation of my employment at ACSHI or any of the Company Released
Parties, any agreements between ACSHI or any of the Company Released Parties and
me, including but not limited to the Employment Agreement, and concerning any
set of facts or events occurring at any time up to the Effective Date of this
Agreement, including, but not limited to, any and all claims of discrimination
of any kind, and any contractual, tort or other common law claims. This
settlement and waiver includes all such claims, whether for breach of contract,
quasi-contract, implied contract, quantum meruit, unjust enrichment,
compensation, deferred compensation, equity interest, any tort claims, any and
all claims under any applicable federal laws, including, but not limited to, the
Age Discrimination in Employment Act, as amended, Title VII of the Civil Rights
Act of 1964, as amended, the Civil Rights Act of 1991, 42 U.S.C. § 1981, the
Americans with Disabilities Act, as amended, the Equal Pay Act, as amended, the
Worker Adjustment and Retraining Notification Act, the Employee Retirement
Income Security Act of 1974, as amended, the Family and Medical Leave Act, as
amended, the Fair Labor Standards Act, as amended, the Sarbanes-Oxley Act, or
under any applicable state or local laws or ordinances or any other legal
restrictions on ACSHI’s rights, including the Texas Commission on Human Rights
Act.

 

B.        I further agree not to file a suit of any kind against ACSHI or any of
the Company Released Parties relating to my employment at ACSHI or any of the
Company Released Parties, the separation thereof, any agreements between ACSHI
or any of the Company Released Parties and me, including but not limited to the
Employment Agreement, any set of facts or events occurring up to the Effective
Date of this Agreement, or to participate voluntarily in any employment-related
claim brought by any other party against ACSHI or any of the Company Released
Parties. Even if a court rules that I may file a lawsuit against ACSHI or any of
the Company Released Parties arising from my employment at ACSHI or any of the
Company Released Parties, or the separation thereof, or based on any other set
of facts or events occurring prior to the Effective Date of this Agreement, I
agree not to accept any money damages or any other relief in connection with any
such lawsuit. I understand that this Agreement and General Release effectively
waives any right I might have to sue ACSHI or any of the Company Released
Parties for any claim arising out of my employment at ACSHI or any

 

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of the Company Released Parties, the separation of my employment, any agreements
between ACSHI or the Company Released Parties and me, including but not limited
to the Employment Agreement, or based on any other set of facts or events
occurring prior to the Effective Date of this Agreement. However, this release
does not prohibit me from filing (i) an administrative charge of discrimination
with any state or federal agency, or (ii) an unfair labor practice charge with
the National Labor Relations Board.

 

Further, this release does not waive my rights to enforce this Agreement. In
addition, this release does not give up my rights, if any, to COBRA benefits
under the Company's standard benefit programs applicable to me. In addition,
this release does not waive my rights to vested 401(k) or pension monies, vested
stock or stock options (which are addressed as described in Section III(C)
above), my final paycheck, reimbursement of any outstanding business expense
amounts (in accordance with ACSHI’s existing reimbursement policies) or my
rights to indemnification, if any, as expressed in Section IV(N) below.

 

IV.

Restrictive Covenants and Miscellaneous Provisions

A.         While Executive understands that he has had such an obligation since
he began his employment with ACSHI or any of the Released Parties, he confirms
that he shall not disclose any of the trade secrets or other confidential or
proprietary information of ACSHI or any of the Released Parties and shall not
make use of such trade secrets or confidential or proprietary information in any
fashion at any time, including in any future employment, task, work or business.

B.          Executive agrees to comply at all times after the Effective Date of
this Agreement with all provisions of Sections 5.2(c) and (d) of the Employment
Agreement, regardless of the nature of his separation, which provisions include
a non-competition covenant, a prohibition on the solicitation of employees of
the Company, a prohibition on the interference with the relationship between
ACSHI and its providers, agents, customers, suppliers, distributors, licensees
or other business relations, and a non-disparagement covenant. Executive
acknowledges and agrees that Sections 5.2(c) and (d) of the Employment Agreement
shall survive the separation of his employment, regardless of the separation
reason and shall survive the execution of this Agreement.

C.          Executive understands and agrees that ACSHI shall have the right to
and will terminate the Installment Severance Payments and/or payment for the
continued insurance benefits provided in Section II (B) above, and/or sue him
for breach of this Agreement if he violates the provisions of Section IV (B),
(E), (H) or (J), or otherwise fails to comply with this Agreement. In addition,
Executive’s right to exercise any of the Stock Options will terminate on the day
he violates the provisions of Section IV (B), (E), (H) or (J), or otherwise
fails to comply with this Agreement. Executive further acknowledges that but for
his agreements to comply with his obligations described in this Section and this
Agreement, ACSHI would not provide him with the compensation, benefits and other
consideration set forth in Section II and elsewhere in the Agreement.

 

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D.         The parties agree that Sections 5 (Termination), 5.1 (Termination
Events) and 5.2(a) and (b) (Effects of Termination) of the Employment Agreement
shall not apply to Executive’s separation and shall have no effect and be
unenforceable as of the Effective Date of this Agreement.

E.          Except as provided herein, Executive warrants that he has returned
to ACSHI all company property in his possession, including, but not limited to,
originals and all copies of company files, work product, confidential
information, proprietary information, trade secrets or documents containing
trade secrets, computer equipment, computer software, cell phones, pagers,
corporate credit cards, identification cards, manuals, company documents,
building access cards and company keys. The parties agree that Executive shall
be entitled to keep the laptop computer he was using as of the Separation Date
(“Executive Laptop”). Executive agrees that on or before the Effective Date of
this Agreement, he will present the Executive Laptop to Mark Reimer so that the
Company may review the Executive Laptop and scrub it of any Company information,
whether or not such information is confidential or trade secret. Executive
represents and warrants that he has not copied or downloaded any Company
information from the Executive Laptop and he agrees that he will not copy or
download any Company information from the Executive Laptop. Executive further
agrees to cooperate and work with the Chief Financial Officer to ensure his
compliance with this Section IV (E).

F.          Executive understands that the short-term disability, long-term
disability and life insurance coverage provided by ACSHI, if any, will end on
June 30, 2007. Executive also understands that ACSHI will not pay for any
business-related or other charges incurred by him after June 30, 2007, unless
such expenses are expressly approved in advance by the Ed Berger or the Board of
Directors of ACSHI. Executive further understands that he will cease to accrue
vacation time as of June 30, 2007. Executive shall be paid for any accrued,
unused vacation within fourteen (14) days after the Effective Date of this
Agreement.

G.         Executive acknowledges and agrees that this Agreement does not
constitute an admission of any kind by ACSHI, but is simply an accommodation
that offers certain extra benefits to which he would not otherwise be entitled
in return for his agreeing to and signing this document.

H.          Executive agrees not to voluntarily make the terms and conditions or
the circumstances surrounding this Agreement known to anyone other than an
attorney and/or tax consultant from whom he receives counseling, or, if he is
married, to his spouse, or except as otherwise required by law. Executive
acknowledges that any such person must agree not to further disclose the terms
of this Agreement.

I.           ACSHI agrees not to voluntarily make the terms and conditions or
the circumstances surrounding this Agreement known to anyone other than its
Board of Directors, attorneys and/or tax consultants from whom it receives
counseling, or except as otherwise required by law or the rules of the New York
Stock Exchange.

 

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J.          The parties agree to comply with their non-disparagement obligations
as set out in Section 5.2(d) of the Employment Agreement. Executive further
agrees not to take any action to interfere with or damage the Company’s
relationship with its vendors, lenders, brokers and/or clients. Executive agrees
that any breach or violation of this non-disparagement and non-interference
provision shall entitle ACSHI to terminate the Installment Severance Payments
and/or the paid insurance benefits and/or sue him on this Agreement for the
immediate recovery of any damages caused by such breach.

K.         The venue for the litigation of any dispute arising out of this
Agreement shall be a court of competent jurisdiction in Dallas County, Texas. If
either party files a lawsuit in state court arising out of this Agreement, the
other party may remove the lawsuit to federal court to the extent jurisdiction
exists. Texas law shall govern the interpretation and enforcement of this
Agreement.

L.          The Installment Severance Payments and Relocation Payment identified
in Section II above are gross amounts and will be subject to taxes and lawful
deductions, if any.

M.         Executive acknowledges that in the course of his employment with the
Company, he has gained knowledge and experience and/or was a witness to events
and circumstances that may arise in the Company's defense or prosecution of
subsequent proceedings. Executive agrees to cooperate fully with the Company,
including without limitation providing truthful testimony, and to appear upon
the Company's reasonable request as a witness and/or consultant in defending or
prosecuting claims of all kinds, including but not limited to any litigation,
administrative actions or arbitrations, at the Company's expense.

 

N.          Executive shall be entitled to indemnification as provided for in
ACSHI's articles of incorporation or bylaws and/or under the laws of Texas.
Nothing herein shall affect Executive's coverage under the terms and conditions
of any applicable Directors' and Officers' Liability Policy held by ACSHI, if
any.

 

O.         Executive acknowledges and agrees that he is entering into this
Agreement freely and voluntarily. Executive has carefully read and understands
all of the provisions of this Agreement. Executive understands that this
Agreement sets forth the entire agreement between him and the Company and he
represents that no other statements, promises, or commitments of any kind,
written or oral, have been made to him by the Company, or any of its agents, to
cause him to accept it. Executive acknowledges that he has been advised to
consult legal counsel concerning this Agreement prior to signing the Agreement,
and that he has had sufficient opportunity to do so. Executive understands that
he may have up to twenty-one (21) days from the date of his receipt of this
Agreement to consider this Agreement. Executive understands that if he signs
this Agreement, he will then have seven (7) days to cancel it if he so chooses.
Executive may cancel this Agreement by delivering a written notice of
cancellation to the Board of Directors, American CareSource Holdings, Inc., 5429
Lyndon B. Johnson Freeway, Suite 700, Dallas, Texas 75240. However, if Executive
elects to cancel this Agreement, he understands that he will not be entitled to
any of the

 

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benefits, compensation, or other consideration referenced in this Agreement.
Executive understands and agrees that this Agreement is not effective or
enforceable until the seven-day period expires without revocation. Executive
understands that this Agreement will not become effective until the eighth day
after he signs the Agreement without revocation (the “Effective Date”).
Executive understands and agrees that ACSHI will have no duty to pay him or
provide him with the compensation and benefits listed in Section II until the
Effective Date of this Agreement. Executive has read and acknowledged the press
release attached as Exhibit B that is not subject to revision or edit by the
executive.

 

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I acknowledge acceptance of this Agreement by my signature below:

/s/ Wayne Schellhammer

July 8, 2007

Wayne Schellhammer

Date

 

Agreed to and accepted on behalf of American CareSource Holdings, Inc.:

 

By: /s/ Edward B. Berger

 

 

Name: Edward Berger

 

Title: Executive Chairman

 

Date: July 12, 2007

 

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EXHIBIT A

 

Wayne Schellhammer

Option Grant Summary

 

 

 

 

 

 

 

 

Date

Split Adjusted*

Granted Options Exercise Price

Vested  

Options (1)

Forfeited Options

Grant 1

May 15, 2005

618,565

$0.31

435,288

183,277

Grant 2

May 15, 2005

112,466

$0.31

72,478

39,988

Grant 3

October 3, 2005

56,233

$0.49

31,241

24,993

 

 

787,265

 

539,007

248,258

* Adjusted for 1.124664 split

 

 

 

 

(1) As of June 20, 2007

 

 

 

 

 

Grant Terms:

 

Grant 1 – Original grant of 550,000 shares grant vest 1/3 on October 11, 2005
and remainder equally over 36 months beginning monthly following initial
vesting. Split adjusted (618,565 shares) 206,188 vested in October 2005 and
11,455 monthly thereafter.

 

Grant 2 – Original grant of 100,000 shares vest 20% on October 11, 2005 and
remainder equally over 48 months (“consistent same terms as other employees”).
Agreement was verbally modified to allow for 36 month vesting. Split adjusted
22,493 vested in October 2005 and 2,499 monthly thereafter.

 

Grant 3 – 50,000 shares grant vest monthly over 36 months. Split adjusted 56,233
vest 1,562 per month.

 

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EXHIBIT B

Copy of Press Release

 

Contact:

Edward Berger

Executive Chairman of the Board

American CareSource Holdings, Inc.

Tel. 972.308.6830

 

FOR IMMEDIATE RELEASE

 

AMERICAN CARESOURCE HOLDINGS

ANNOUNCES THE RESIGNATION OF WAYNE SCHELLHAMMER, CEO

 

Dallas, TX, July 6, 2007 – American CareSource Holdings, Inc. (XSI) announced
today that Wayne A. Schellhammer, President and Chief Executive Officer, has
resigned his management and board positions to focus on personal issues and will
be relocating to Des Moines, Iowa.

 

Edward Berger, Executive Chairman of American CareSource’s Board of Directors
stated, “The Board wishes Wayne all the best in his future endeavors and wants
to thank him for his contributions to American CareSource. Wayne was
instrumental in American CareSource becoming an independent public company and
in the development of the company’s strategy.”

 

David S. Boone, the company’s Chief Operating Officer and Chief Financial
Officer, will manage the day-to-day operations of the company, reporting to Mr.
Berger.

“The Board has commenced a search to replace Mr. Schellhammer and is confident
in the depth of the senior leadership team at American CareSource and their
ability to continue to develop and build the business.” stated Berger.

 

About American CareSource Holdings, Inc. (ACS)

American CareSource Holdings, Inc., the first national, publicly traded
ancillary care network services company, is a comprehensive ancillary care
service company offering a national network of more than 24,000 ancillary
providers. The ACS ancillary network and management provides a complete
outsourced solution for a wide variety of healthcare payors and plan sponsors
including self-insured employers, indemnity insurers, PPOs, HMOs, third party
administrators and both the Federal and local governments. Through its product
offerings, American CareSource Holdings, Inc. helps its clients reduce the cost
of ancillary services rendered through its network of ancillary care providers
in more than 30 service categories.

 

Any statements that are not historical facts contained in this release are
forward-looking statements. It is possible that the assumptions made by American
CareSource Holdings, Inc. for purposes of such statements may not materialize.
Actual results may differ materially from those projected or implied in any
forward-looking statements. Such statements may involve further risks and
uncertainties, including but not limited to those relating to product demand,
pricing, market acceptance, the effect of economic conditions, and intellectual
property rights, and the outcome of competitive products, risks in product
development, the results of financing effort, the ability to complete
transactions, and other risks identified in this release, and the Securities and
Exchange Commission filings of American CareSource Holdings, Inc.

 

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