EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
the
12th day of April, 2007, between Gales Industries Incorporated, a
Delaware
corporation (the "Company" or "Employer") and GEORGE ELKINS, a
resident of the
State of New York ("Executive").
WHEREAS,
the Employer wishes to employ Executive on the terms and
conditions set forth in this Agreement, and Executive wishes to be
retained and
employed by the Employer on such terms and conditions.
NOW,
THEREFORE, in consideration of the premises and the respective
undertakings of the Employer and Executive set forth below, the
Employer and
Executive hereby agree as follows:
1.
Employment. The Employer hereby employs Executive, and Executive
hereby
accepts such employment and agrees to perform services for the
Employer, for the
period and on the other terms and subject to the conditions set
forth in this
Agreement.
2. Term.
Unless terminated at an earlier date in accordance with the
provisions of Section 6 of this Agreement, the term of Executive's
employment
hereunder shall be a period of five (5) years commencing the date
(the
"Effective Date") on which the shares of Sigma Metals, Inc., a New
York
corporation ("Sigma") are acquired by the Company or a subsidiary
thereof and
ending on the fifth anniversary of such date (the "Term").
3.
Position and Duties.
3.01 Service with the Employer. During the term of this
Agreement
the Executive shall serve in an executive position with Sigma. The
Employer
hereby employs Executive in an executive capacity with the title of
Chief
Executive Officer of Sigma and Executive hereby accepts such
employment and
undertakes and agrees to serve in such capacity during the Term. In
such
capacity, Executive shall have such powers, perform such duties and
fulfill such
responsibilities as are typically associated with such position in
comparable
companies.
3.02 Performance of Duties. Executive agrees to serve Employer
to
the best of his ability and to devote his full time, attention and
efforts to
the business and affairs of the Employer and, upon request, to the
business and
affairs of Sigma and affiliates thereof. Notwithstanding the
foregoing,
Executive shall not be precluded from accepting service as a
director of other
businesses or community organizations or from the management of his
investments,
provided, however, that any such activities shall not be
competitive with the
Company and such service shall not detract from Executive's
performance or time
commitment hereunder. Executive shall report directly to the Board
of Directors
of the Employer.
3.03 Key-person Life Insurance. Should the Company determine to
obtain key-person life insurance payable to the Company in the
event of the
death of Executive, Executive agrees to cooperate with such
effort.
<PAGE>
4.
Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement, the Employer shall pay
to Executive
an annual base salary of $225,000 per year (the "Base Salary"). The
Base Salary
shall be paid on a weekly or bi-weekly basis in accordance with the
Employer's
normal payroll procedures and policies, subject to applicable
deductions as
required by law.
"Operating Profits" as used below means the net income before
taxes
of Sigma during the applicable period, as indicated in Sigma's
financial
statements, less noncash expenses related to any employee stock
ownership or
option plan established by the Company to the extent benefiting
employees of
Sigma, but without adjustment for any noncash income or noncash
charges which
are classified as such under generally accepted accounting
principles in the
United States.
4.02 Annual Bonus. In addition to the Base Salary, the Employer
shall pay to Executive an annual bonus ("Bonus") equal to fifteen
(15%) percent
of the Base Salary with respect to each fiscal year during the Term
in which
Sigma achieves an increase of at least five (5%) percent in the
Operating
Profits over the preceding fiscal year period (the "Threshold
Profits
Increase").The initial fiscal year in respect of which Executive
shall be
eligible for a bonus shall be the year ended December 31, 2007, and
the
operating Profits for such year shall be compared with the
Operating Profits for
the year ended December 31, 2006. Notwithstanding that this
agreement shall
begin after January 1, 2007, the operating Profits to be used for
purposes of
determining whether Executive receives the Bonus shall be the
operating Profits
for the entire 2007 year. The amount of the annual bonus to be paid
to Executive
with respect to any fiscal year and any other period of employment
which is not
a full fiscal year shall be a pro-rated amount of any Bonus which
would have
been due had the Executive been employed under this Agreement for
the full
fiscal year, based upon the number of days during which Executive
is employed
during such year. The Bonus shall be paid by Employer to the
Executive within
thirty (30) days after the computation of Sigma's Operating Profits
for each
fiscal year but in no event more than 90 days after the end of each
fiscal year
of the Term
4.03 Participation in Benefit Plans. (a) Executive shall be
entitled
to participate in all employee benefit plans or programs offered to
senior
employees of Employer (to the extent that Executive meets the
requirements for
each such plan or program), including without limitation
participation in any
health, disability, dental, eye care, 401(k), deferred compensation
and other
similar plans (together with the life insurance and disability
policies,
"Benefits"), as such plans and programs may be or have been adopted
from time to
time.
4.04 Automobile and Other Expenses. The Company will pay to
Executive $1,200 per month during the Term as reimbursement for
operating
expenses and for the payment of the Executive's automobile and
insurance in the
ordinary course. Employer will also pay the deductible and any
other repairs and
maintenance expenses. During the term, the Employer will provide a
cell phone,
laptop computer and other reasonable communication device for the
Executive and
reimburse the Employee for the monthly expenses relating to cell
phone service,
laptop and other reasonable communication device. In addition, the
Company shall
provide Employee with a corporate AMEX card and gas card and the
Employer will
pay directly for Executive or reimburse Executive for all
reasonable
out-of-pocket expenses incurred by her in the performance of her
duties under
this Agreement, subject to the presentment and approval of
appropriate itemized
expense statements, receipts, vouchers or other supporting
documentation in
accordance with the Employer's normal policies.
<PAGE>
4.05 Vacation. Executive shall be entitled to four (4) weeks of
paid
vacation during each twelve (12) month period of employment during
the Term.
4.06 Stock Options and Other Incentive Compensation. In addition
to
the cash bonus provided in Section 4.2, no later than 90 days after
the end of
each applicable fiscal year commencing with the year ended December
31, 2007,
the Employer shall cause the Company to grant to the Executive
stock options in
the form attached hereto as Exhibit A to purchase 100,000 shares of
Common Stock
of the Company ("Common Stock") for each fiscal year during the
Term in which
the Employer achieves the Threshold Profits Increase. The exercise
price of such
options will equal the average closing price of the Common Stock on
the OTC
Bulletin Board during the twenty (20) trading days immediately
preceding the
date as of which such options are issued. For purposes of any
Common Stock
options or other similar programs to be granted hereunder, such
Common Stock and
rights shall be defined to include the Common Stock of any
successor corporation
or other entity into which the Company is merged, or which
acquires
substantially all the assets of the Company. The number of options
to be granted
to Executive with respect to any other period of employment which
is not a full
fiscal year shall be pro-rated based upon the number of days
Executive is
employed during such year.
5.
Additional Covenants.
5.01 Acknowledgments and Stipulations. Executive acknowledges
that
he is agreeing to the covenants set forth in this Section 5: (a)
in
consideration of the substantial economic benefits derived by
Executive under
the terms of this Agreement, (b) in recognition that the services
rendered by
Executive to Employer will be unique, as are Executive's abilities,
skills and
experience, (c) in recognition that, as a result of his employment,
Executive
will acquire and participate in the creation of knowledge and
information of a
confidential and/or proprietary nature relating to the business of
the Company
and its affiliates, which is valuable to the Company because the
Company will
expend substantial time, effort and money to develop such knowledge
and
information, (d) to induce Employer to employ Executive and
disclose certain of
such information to Executive, and (e) to induce Employer to enter
into this
Agreement.
5.02 Nonsolicitation of Customers and Executives. At all times
during the term of Executive's employment with the Employer and for
a period of
twelve (12) months following the termination of such employment
pursuant to
Section 6.01(a) or Section 6.01(f) hereto, (a) Executive shall not,
directly or
indirectly, for himself or on behalf of or in conjunction with any
other person,
solicit or attempt to solicit the business or patronage of, or
interfere with
the business relationship of the Company and its subsidiaries
(collectively, the
"Corporation") with any customer of the Corporation, and (b)
Executive shall not
directly or indirectly cause any other person to employ, solicit,
disturb,
entice away, or in any other manner persuade any employee of the
Corporation to
discontinue or alter his or his relationship with the
Corporation.
<PAGE>
5.03 Noncompetition. At all times during the term of
Executive's
employment with the Employer and for a period of twelve (12) months
following
the termination of such employment for any reason other than a
termination of
this Agreement by the Employer without cause, Executive whether
individually, as
a director, manager, member, stockholder, partner, owner, employee,
consultant
or agent of any business, or in any other capacity, shall not
engage, directly
or indirectly through any other person, in any business, enterprise
or
employment which competes with the business of the Corporation.
Executive
acknowledges and agrees that the business of the Corporation is of
a worldwide
nature and that any geographic limitation on the foregoing covenant
would be
ineffective to adequately protect the interests of the Corporation.
Executive
further acknowledges and agrees that the foregoing covenant is an
integral part
of his agreement to be employed hereunder, is fair and reasonable
in light of
all of the facts and circumstances of the relationship between
Executive, the
Employer and the Corporation. In the event any court of competent
jurisdiction
determines that, notwithstanding the foregoing acknowledgments, the
scope of the
restricted activities of the foregoing covenant is excessive or not
enforceable,
or that the foregoing covenant is not enforceable unless it is
subject to a
geographic limitation, this Agreement shall be deemed amended to
reflect the
maximum restrictions on activities and geographic scope allowable
pursuant to
such court's determination. Nothing contained in this Section 5.03
shall be
construed as limiting the scope of this Section 5.
5.04 Limitation on Covenant not to Compete. Ownership by
Executive,
as a passive investment, of less than two percent (2.00%) of the
outstanding
shares of capital stock of any corporation, with a cost basis to
Executive of
less than $250,000, listed on a national securities exchange or
publicly traded
in the over-the-counter market shall not constitute a breach of
this Section 5.
A breach of this agreement by the Employer giving the Executive the
right to
terminate (as defined below) shall cancel the restrictive covenant
against the
Executive and the enforceability of Section 5 herein.
5.05 Confidential Information. Executive agrees that during and
after the period of his employment, he will not, without the
authorization of
the Company, divulge, disclose or otherwise communicate to any
person, other
than as necessary or desirable for the business of the Employer
pursuant to his
responsibilities to the Employer during the Term, any information
of a
confidential nature pertaining in any way to the Corporation's
business,
products, practices, techniques, customers, suppliers, functions or
operations
(the "Confidential Information"), except to the extent that such
Confidential
Information (a) was disclosed to Executive by a third party who did
not obtain
the same directly or indirectly from the Corporation, (b) was known
prior to
disclosure to Executive by the Corporation, (c) at or after the
time of
disclosure, is or becomes generally available to the public (other
than as a
result of its disclosure by Executive), (d) is required to be
disclosed by
Executive pursuant to applicable law or an order of a governing
authority
applicable to Executive.
6.
Termination.
6.01 Grounds for Termination. This Agreement shall terminate
prior
to the expiration of the Term upon the occurrence of any of the
following events
at any time during the Term:
(a) The effective date of Executive's voluntary resignation,
for which Executive agrees to give at least 30 days' prior written
notice to the
Employer;
(b) Executive's death;
(c) Executive's Disability (as hereinafter defined);
<PAGE>
(d) Executive elects to terminate his employment 30 or more
days after Executive gives the Employer written notice of his
intent to
terminate his employment ("Notice of Good Reason").
(e) Executive's termination by Employer without Cause (as
hereinafter defined);
(f) Executive's termination by Employer for Cause. For the
purposes of this Agreement, "Cause" means, as determined by the
Board (or its
designee), with respect to conduct during the Executive's
employment or service
relationship with the Employer, whether or not committed during the
Term, (i)
indictment of Executive for a felony that has a material adverse
effect on the
performance of their duties hereunder; (ii) acts of dishonesty by
Executive that
has a material adverse effect and causes damage to the Employer;
(iii) conduct
by Executive in connection with his duties hereunder that is
fraudulent,
unlawful or grossly negligent, including, but not limited to, acts
of
discrimination; (iv) engaging in personal conduct by Executive
(including but
not limited to employee harassment or discrimination, the use or
possession at
work of any illegal controlled substance) which seriously
discredits or damages
the Employer; and (v) breach of the Executive's covenants set forth
in Section 5
before termination of employment; provided, that, the Executive
shall have ten
(10) days after notice from the Employer to cure the deficiency
leading to the
Cause determination (except with respect to (i) above), if curable.
A
termination for "Cause" shall be effective immediately or on such
later date set
forth by the Employer in the notice of termination.
6.02 Severance. If Executive's employment is terminated:
(a) as a result
of Section 6.01(b) or (c), th
