SEPARATION AGREEMENT
AND
GENERAL RELEASE
This
Separation Agreement and Release ("Agreement") is entered into
on
March 15, 2007 (the "Execution Date"), by and between Michael A.
Gales
("Executive") and Gales Industries Incorporated ("Company").
The
parties wish to set forth the terms and conditions of the
termination
of Executive's employment by the Company and to settle and resolve
amicably and
voluntarily any and all claims that may arise as a result of such
termination
pursuant to all agreements between Executive and the Company
including, without
limitation, the Employment Agreement between Company and Executive
dated as of
September 26, 2005 (the "Employment Agreement"). By way of
clarification, the
Execution Date is the date on which this Agreement has been
executed by the
parties and the Termination Date (which may be the same date as the
Execution
Date) is the date on which Executive's employment by the Company
shall terminate
as provided in Section 1.
NOW,
THEREFORE, in consideration of the mutual covenants and
agreements
set forth herein and for other good and valuable consideration, the
receipt and
adequacy of which are hereby acknowledged, the parties hereby agree
as follows:
1.
Termination of Employment. Effective March 16, 2007
("Termination
Date"), Executive's employment with the Company will terminate and,
except as
otherwise provided in this Agreement, all benefits, privileges and
obligations
arising pursuant to any agreement between the Company and Executive
including,
without limitation the Employment Agreement will end as of the
close of business
on that date.
2.
Complete Resignation. Executive hereby resigns from all offices
and
positions he may hold in the Company and its affiliates, effective
the close of
business on the Termination Date.
3.
Consideration. In consideration of Executive's release
contained
herein, the Company agrees to provide Executive with the following
compensation:
<PAGE>
a. From
the Termination Date to November 30, 2010, the Company
will pay to Executive one hundred thousand dollars ($100,000)
per annum (pro-rated for any partial year);
b. From
December 1, 2010 to May 31, 2011, the Company shall pay
Executive fifty thousand dollars ($50,000);
c. If in
any of the calendar years 2007, 2008, 2009 or 2010, the
Company has net pretax income in excess of three million
dollars ($3,000,000; the "Hurdle"), the Company shall pay to
Executive the sum of $25,000, provided that the Executive
shall be paid no more than $50,000 pursuant to this clause c;
and
d. All
amounts due Executive pursuant to clauses (a) and (b)
above shall be paid in equal increments on the regular payroll
dates of the Company, but in no event less frequently than
twice per month. The amounts, if any, due pursuant to clause
(c) in respect of each of the first two years in which the
Company has net pretax income in excess of the Hurdle shall be
paid no later than 95 days after the end of each of such
years. By way of example if the Hurdle is met in calendar year
2007, the $25,000 due pursuant to clause (c) shall be paid no
later than April 5, 2008. All amounts payable to Executive
hereunder shall be subject to such withholdings as are
required by law.
Other than
as provided in this Section 3, Executive shall receive no
benefit or compensation, direct or indirect, from Company,
including but not
limited to insurance coverage of any kind.
4. Stock
Options. All rights Executive may have concerning Stock
Options,
shares of Restricted Stock or Restricted Stock Units shall be
governed solely
and exclusively by the terms of the Stock Option Agreement between
Company and
Executive dated as of September 26, 2005 (the "Option Agreement"),
as modified
herein. For the avoidance of doubt:
a. The
parties acknowledge that prior to the Termination Date,
the right to purchase 500,000 shares vested pursuant to the
Option Agreement and that the purchase price of 250,000 shares
is $0.22 per share, and the purchase price for 250,000 shares
is $0.55 per share;
b.
Notwithstanding the terms of the Option Agreement, the right
to exercise 750,000 options shares shall vest upon the
Termination Date; further, the exercise price of such options
shall be the average of the closing sales price (or in the
absence of a closing sale, the average of the closing bid and
asked prices) on the thirty trading days ending March 9, 2006;
and
c.
Notwithstanding anything contained in the Option Agreement to
the contrary, Executive's right to exercise the 1,250,000
options referenced in clauses (a) and (b) shall terminate on
the first anniversary of the date hereof.
<PAGE>
5. Waiver
and General Release of Claims. In exchange for the
consideration
set forth herein, Executive hereby completely releases and waives
any and all
claims, complaints, causes of action, demands, suits, and damages
of any kind or
character, which he has or may have against Company and/or its
employees, agents
officers, directors, counsel, predecessors, successors,
subsidiaries,
affiliates, assigns, and insurers and each and all thereof
(collectively, the
"Released Parties"), arising out of any acts, omissions,
statements, conduct,
decisions, behavior or events occurring up through the Execution
Date.
Executive
understands and accepts that Executive's release of claims
includes but is not limited to claims based upon: Title VII of the
Federal Civil
Rights Act of 1964, as amended; the Americans with Disabilities
Act; the Age
Discrimination in Employment Act of 1967, as amended; Sections 1981
through 1988
of Title 42 of the United States Code, as amended; The Family and
Medical Leave
Act; the Equal Pay Act; the Fair Labor Standards Act; the Employee
Retirement
Income Security Act; the Worker Adjustment Retraining Notification
Act; the New
York Human Rights Act; any and all federal, state, or local
employment laws,
rules, regulations or public policies which apply to Executive in
the state of
Executive's legal residence and in any state where Executive has
been employed
by Company; and any other federal state or local statute, ordinance
or law.
Executive also understands that he is giving up all other claims,
including
those grounded in contract or tort theories or other common law,
including but
not limited to: wrongful discharge; breach of contract; tortious
interference
with contractual relations; promissory estoppel; breach of the
implied covenant
of good faith and fair dealing; breach of express or implied
promise; breach of
manuals or other policies; breach of fiduciary duty; invasion of
privacy;
intentional or negligent misrepresentation; defamation, including
libel,
slander, discharge defamation and publication defamation; discharge
in violation
of public policy; intentional or negligent infliction of emotional
distress; or
any other theory, whether legal or equitable.
6.
Covenant Not to Sue. Executive represents and warrants that he has
not
heretofore assigned or transferred any claim, cause of action or
matter or any
part or portion thereof released herein. Executive agrees that
Executive has not
and will not file any grievance, complaint, claim or charge with
any local,
state or federal agency or judicial body concerning any matter that
is the
subject of this Agreement. Executive further agrees and warrants
that he will
not initiate, participate in or in any way assist in any action or
proceeding,
whether administrative or in law, arising out of or related to any
matter or any
potion thereof released herein, except as Executive may be
compelled to
participate in any such action by subpoena, order or decree of any
court or
governmental agency of competent jurisdiction.
<PAGE>
7.
Restrictive Covenants. Notwithstanding anything contained
herein,
Executive shall remain bound by the provisions contained in
Sections 5.01
through 5.05 and 7.01 and 7.02 of the Employment Agreement.
8. Waiver
and General Release of Claims. Executive hereby represents and
warrants that except for such contracts and agreements as have been
executed by
him in accordance with a resolution of the Board of Directors of
the Company, he
has not entered into any agreement on behalf of or otherwise bound
the Company
to pay any amount or perform any services other than such amount as
may be due
Courtenay Smith. In exchange for the consideration set forth
herein, except for
such claims that may arise out of or be related to actions or
agreements
constituting breaches of the representation set forth in the first
sentence of
this section, the Company hereby completely releases and waives any
and all
claims, complaints, causes of action, demands, suits, and damages
of any kind or
character, which it has or may have against Executive and/or his
heirs,
successors and assigns and each and all thereof (collectively, the
"Released
Parties"), arising out of any acts, omissions, statements, conduct,
decisions,
behavior or events occurring from December 31, 2005, up through the
Execution
Date.
The
Company understands that it is giving up all other
