EXHIBIT 10.10
EMPLOYMENT AGREEMENT
THIS
EMPLOYMENT AGREEMENT (this "Agreement") is entered into as of
the
26th day of September, 2005, by and among
Gales Industries Incorporated, a
Delaware corporation (the "Company"), Air
Industries Machining, Corp., a New
York corporation (the "Subsidiary"), and
Dario Peragallo, a resident of the
State of New York ("Executive"). The
Company and the Subsidiary are sometimes
referred to herein jointly as the
"Employer".
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 initial term of Executive's
employment hereunder shall be a period of
five (5) years commencing on the
effective date (the "Effective Date") of
the Company's acquisition of the shares
of the Subsidiary (the "Initial Term").
This Agreement shall be automatically
extended for successive three (3) one year
periods (each, a "Renewal Term", and
together with the Initial Term, the "Term")
unless (i) any party objects to such
extension by no less than ninety (90) days'
prior written notice to the other
parties at any time prior to the expiration
of the Initial Term or a Renewal
Term, as the case may be, or (ii) this
Agreement is terminated at an earlier
date in accordance with the provisions of
Section 6.
<PAGE>
3.
Position and Duties.
3.01 Service with the Employer. The Employer hereby employs
Executive in an executive capacity during
the Term with the title of Executive
Vice President of Manufacturing and
Production of the Subsidiary, and Executive
hereby accepts such employment and
undertakes and agrees to serve in such
capacities during the Term. In addition,
the Company agrees to use its best
efforts to cause Executive to be elected as
a member of the Boards of Directors
of both the Company and the Subsidiary. In
such capacities, Executive shall have
such powers, perform such duties and
fulfill such responsibilities typically
associated with such positions in other
publicly held 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
during the Term. 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 business 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 Executive
Chairman and the Board of Directors of the
Company and to the Board of Directors
of the Subsidiary, as the case may be.
3.03 Key-man Life Insurance. Should the Company determine to
obtain
key-man life insurance payable to the
Company in the event of the death of
Executive, Executive agrees to cooperate
with such effort.
2
<PAGE>
4.
Compensation.
4.01 Base Salary. As base compensation for all services to be
rendered by Executive under this Agreement,
the Company shall pay to Executive
an annual base salary, which annual base
salary shall be $230,000 per year for
the initial twelve-month period of the Term
(as adjusted pursuant to this
Section 4.01, the "Base Salary"), which
Base Salary shall be paid on a weekly
basis in accordance with the Company's
normal payroll procedures and policies,
subject to applicable deductions as
required by law. The amount of the
Executive's Base Salary (a) shall be
reviewed annually by the Board of Directors
of the Company, (b) shall be increased
annually from the amount of the Base
Salary paid to Executive during the prior
twelve-month period (each, a "Prior
Period") of the Term on the basis, inter
alia, of the profitability and
performance of the Company, on a
consolidated basis, during such Prior Period
(as compared to the profitability and
performance of the Company, on a
consolidated basis, during the twelve-month
period prior to such Prior Period),
which increase shall in no event be less
than five percent (5%) of the amount of
the Base Salary paid to Executive during
such Prior Period, provided that
Operating Profits during such Prior Period
are at least five percent (5%)
greater than the Operating Profits during
the twelve-month period prior to such
Prior Period and (c) shall under no
circumstance be reduced from the amount of
the Base Salary paid to Executive during
the applicable Prior Period. "Operating
Profits" means the consolidated net income
during the applicable period, as
reported on the Company's consolidated
financial statements, plus current
interest expense, noncash expenses related
to any employee stock ownership plan
established by the Company, provisions for
taxes based on income, any
extraordinary losses for such period, minus
any extraordinary gains for such
period, but without adjustment for any
noncash income or noncash charges which
are classified as such under generally
accepted accounting principles in the
United States (other than noncash expenses
related to any employee stock
ownership plan established by the
Company).
3
<PAGE>
4.02 Annual Bonus. In addition to Base Salary, the Company shall
pay
to Executive an annual bonus. The amount of
the annual bonus to be paid to
Executive with respect to any twelve-month
period during the Term shall be
determined at the discretion of the Board
of Directors of the Company, provided,
however, that the amount of such annual
bonus shall be reasonably predicated on
Executive's performance and the achievement
by the Company of its operating
targets as set forth in the applicable
budget adopted by the Board of Directors
of the Company in consultation with
Executive. In addition, Executive shall
participate in all other bonus programs
that Employer may adopt from time to
time in which senior employees are entitled
to participate.
4.03 Participation in Benefit Plans. (a) The Company will
either
pay, or reimburse Executive, for the amount
of the premiums due for a long-term
disability policy providing benefits of no
less than one-half of Executive's
salary until age 65 with respect to
Executive and a life insurance policy on the
life of Executive. Such life insurance
policy will pay Executive's designated
beneficiary or beneficiaries no less than
two times the amount of the Base
Salary that was being paid to Executive at
the time of his death. In addition,
Executive shall also 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
<PAGE>
(b) Employer intends to implement a plan relating to future
acquisitions of other businesses, pursuant
to which a portion of a corporate
overhead charge implemented in connection
with each acquisition will be
allocated in good faith by the Company's
Board of Directors to compensation for
executive-level employees of the Company.
Upon adoption of such plan, it shall
provide that Executive will be entitled to
no less than 15% of the portion of
the corporate overhead charged allocated to
executive-level compensation with
respect to each such acquisition
consummated at any time during the period from
the date of adoption of such plan until the
date on which the Employer's
obligations to pay Benefits has terminated
pursuant to Section 6.02.
4.04 Automobile and Other Expenses. The Company will pay to
Executive no less than $700 per month
(adjusted annually for inflation, as
determined by the Company's Board of
Directors) during the Term as reimbursement
for business-related operating expenses for
an automobile to be used by
Executive, including without limitation
automobile lease payments, insurance,
service and repairs in the ordinary course.
In addition, the Company shall pay
or reimburse Executive for all reasonable
out-of-pocket expenses incurred by him
in the performance of his 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 Company's
normal policies.
4.05 Vacation. Executive shall be entitled to no less paid
vacation
than other senior employees of the Company
receive pursuant to the Company's
standard vacation policies, provided,
however, that Executive shall be entitled
to no less than three (3) weeks of paid
vacation during each twelve (12) month
period during the Term.
5
<PAGE>
4.06 Stock Options and Other Incentive Compensation. To further
the
attainment of the Company's long-term
profit and growth objectives, the Company
hereby grants Executive, contemporaneously
with the execution of this Agreement,
options to purchase such number of shares
of common stock of the Company as will
convert into 1,200,000 shares of common
stock (the "Common Stock") of the public
entity with which the Company merges upon
acquisition of the Subsidiary. The
exercise price of 150,000 of such options
shall be twenty-two cents and the
exercise price of the remaining options
shall be determined in accordance with
the provisions of the Option Agreement
being delivered simultaneously herewith.
In addition, Executive shall be entitled to
participate in all other stock
option, revenue sharing, profit sharing,
long-term accumulation and/or stock
based plans or programs that the Company or
the Subsidiary may adopt from time
to time. 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.
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.
6
<PAGE>
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 Employer
with any customer of the Employer, 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 Employer or its affiliates to
discontinue or alter his or her relationship
with the Employer.
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 Company 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 Employer. Executive
acknowledges and agrees that the business
of the Employer is of a worldwide
nature and that any geographic limitation
on the foregoing covenant would be
ineffective to adequately protect the
interests of the Employer. 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 and the
Employer. 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
7
<PAGE>
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.
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 Employer'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
Company or one of its affiliates, (b)
was known by Executive prior to disclosure
by the Employer, (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.
8
<PAGE>
6.
Termination.
6.01 Grounds for Termination. This Agreement shall terminate
prior
to the expiration of the Initial Term or
any Renewal Term upon the occurrence of
any of the following events at any time
during such Initial Term or Renewal
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
Company;
(b) Executive's death;
(c) Executive's Disability (as hereinafter defined);
(d) Executive elects to terminate his employment 30 or more
days after Executive gives the Company
written notice of his intent to terminate
his employment ("Notice of Good Reason")
for any of the following reasons (each,
a "Good Reason"), provided that the Company
has not eliminated the circumstances
constituting Good Reason prior to the
effective date of such resignation: (1) a
material adverse alteration in the nature
or status of Executive's title, duties
or responsibilities; (2) a material adverse
reduction in Executive's Base Salary
and Benefits (excluding contingent salary
and bonuses); (3) a requirement that
Executive be based at a work location more
than 50 miles from the current site
of Employer (unless such new work location
is closer to Executive's residence
than the current site is); (4) the failure
by the Company to pay to Executive
any portion of Executive's compensation
then due and payable; or (5) any failure
by Employer to comply with the material
provisions of this Agreement. The Notice
of Good Reason shall indicate the specific
provision above that Executive is
relying upon and shall set forth in
reasonable detail the facts and
circumstances claimed to provide a basis
for Good Reason under the provision so
indicated;
(e) Executive's termination by Employer without Cause (as
hereinafter defined);
9
<PAGE>
(f) Executive's termination by Employer for Cause. For the
purposes of this Agreement,
