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                                                                   Exhibit 10.40


                              SEPARATION AGREEMENT


         This Separation Agreement hereinafter referred to as "The Agreement" is
made on this 12th day of July, 2001 by and between JOSEPH SPINELLA hereinafter
referred to as "Employee", and STANDARD AUTOMOTIVE CORPORATION, a Delaware
corporation, hereinafter referred to as "SAC."

         WHEREAS, the "Employee" was hired by "SAC" with a written Employment
Agreement dated August 1, 1999 attached hereto, hereinafter referred to as the
"CONTRACT." Said "Contract" being for a period of three (3) years at a variable
compensation and for employment as a Chief Financial Officer, and

         WHEREAS, the management of "SAC" have terminated the "Employee" prior
to the ending of the "Contract", and

         WHEREAS, the Board of Directors of "SAC" has acknowledged said
termination of the "Employee",

         and WHEREAS, in an effort to mutually agree upon a resolution of the
difference between the parties, it is hereby

         AGREED between the parties that for good and valuable consideration the
"Employee" and "SAC" agree to undertake the following terms and conditions.

         1. Salary. "SAC" agrees to pay the "Employee" his full salary and
benefits for the period he remains actively working at "SAC" and for the full
term of the "Contract."

                  The parties do hereby acknowledge that "SAC" has requested the
"Employee" to continue on in his employment to assist in the transition for his
replacement, at his full salary and benefits as enunciated in the "Contract."
Said payment of salary will be in the normal fashion,


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less standard deductions. The "Employee" agrees to continue in this role through
August 24, 2001, the "Employee" agrees to leave active employment at the
direction of "SAC."

         2. Post Active Employment/Severance Pay. Upon the last day of active
employment "Employee" shall be due, owed, and entitled to $180,000.00 as
compensation of payroll due under the "Contract" to be funded and payable as it
has been for the first two (2) years. In addition to compensation immediately
payable through July 31, 2002, "SAC" agrees to continue "Employee" on the
payroll and pay "Employee" at the rate of the "Employee's" salary of $180,000.00
per year, payable on normal payroll dates with the normal deductions for a
period to end July 31, 2002. "Employee" accepts this payment schedule as an
accommodation for the cash flow requirements of "SAC" and the subsidiaries
through which his payroll is funded.

         3. Vacation Pay. (1) Upon severance, the "Employee" will be reimbursed
at full salary for the unused seven (7) weeks' vacation which he has not taken
in order to fulfill the request of management. (2) Unused vacation is to be paid
on August 24, 2001 or the last day of employment, whichever is the earliest.
This payment is in addition to any other payments herein and does not affect any
other obligation of "SAC."

         4. Healthcare Benefits. At all times during the period while the
"Employee" is actually working, "SAC" shall maintain and pay for "Employee's"
family medical and dental insurance in the present plan or such other plan which
is substituted for all top management personnel, and "SAC" shall continue to
supply such coverage for at least twelve (12) months after the "Employee" leaves
the active role of employment with the company, at least through July 31, 2002.
It is further understood that if the "Employee" is unemployed on July 31, 2002,
then "SAC" shall provide and pay for COBRA for an additional twelve (12) months,
until July 31, 2003, after which COBRA shall be permitted in accordance with the
law.


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         5. Relocation Expenses. "SAC" shall pay the relocation expenses of the
"Employee" and his family from the apartment in Belle Mead, New Jersey to
Mahwah, New Jersey which shall not exceed $3,000.00.

         6. Stock Options. "SAC" acknowledges that "Employee" currently holds
34,000 options in shares of stock. These options shall vest immediately.

            "Employee" may exercise the option up to ten (10) years from the
date of this Agreement to convert these options into stock. Should the
"Employee" not survive for ten (10) years, his heirs shall have the right of
exercising these options in his place and stead. If the option plan is repriced,
then the "Employee" shall be given the same opportunity for the lower price
afforded other employees at the time of repricing.

         7. 401K. "SAC" shall, through July 31, 2002, provide "Employee" all
401K and pension benefits available to employees of "SAC."

         8. Entire Agreement. The parties do acknowledge that this is the entire
Agreement between the "Employee" and "SAC."

         9. Liquidation Merger. The parties do also agree and acknowledge that
if "SAC" is sold or otherwise liquidated or merged with any other organization
that as part of any negotiations, that "SAC" shall make known their obligation
to the "Employee" to ensure that the new venture continues to pay the obligation
contained herein.

        10. Publication. The parties do hereby agree that if asked about the
severance of the "Employee" from "SAC" that all parties will acknowledge that
there was a change in management who wanted to employ their own team in an
effort to assist the corporation in thriving and that the termination of the
"Employee" was not based on his performance or for any cause, but merely the
efforts of management to have their chosen team in place.


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            The parties do hereby further agree that they will not publish the
nature and extent of this Agreement except as may be required by a perspective
employer. The "Employee" may show the Agreement or disclose the contents to any
governmental agency, the "Employee's" family, and professionals retained by the
"Employee."

            It is further understood and agreed that all payments hereunder
shall be made on the date due. Severance salary is to be paid on normal payroll
days. If any obligations are not so paid, then that shall constitute a material
breach of the contract which will entitle the "Employee" to immediate
acceleration of all payments due hereunder. "Employee" shall be and is hereby
appointed as the Attorney in fact for the limited purpose of confessing judgment
against "SAC" in the full amount due to him. He may act on behalf of "SAC" in a
court of competent jurisdiction. It is the intent to reduce the matter to
judgment with the "Employee" becoming a judgment creditor of "SAC."

         11. Legal Expenses. "SAC" does hereby agree to reimburse the "Employee"
for any and all legal expenses associated with the preparation of this Agreement
and the settlement of these matters which shall not exceed $4,000.00.

         12. Enforcement. Should the "SAC" default on the payments herein or any
other material term of this Agreement such that the "Employee" is required to
obtain legal representation or go to a Court of Law to enforce this Agreement
then the "SAC" shall reimburse the "Employee" for all attorneys' fees, costs,
and expenses.

         13. Employment. Parties agree that "Employee" may seek employment
immediately and that no terms or obligations herein shall be waived, altered, or
in any way affected regardless of the terms or place of employment.


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         14. Indemnification. "SAC" shall indemnify, save harmless, and defend
employee from any actions of any type or kind arising out of his employment with
"SAC" even if said actions allege or prove fault of the "Employee."

         15. Choice of Laws. Parties do hereby agree that this Agreement shall
be bound by the terms and conditions of the Laws of the State of New Jersey and
that each party will submit to the jurisdiction of Courts of the State of New
Jersey in the County of Bergen for any disputes arising out of this Agreement.

         16. In case any provision of this Agreement is determined to be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.

         17. This Agreement sets forth the entire agreement between the parties
hereto. The terms of this Agreement are contractual and not a mere recital.

         18. This Agreement is binding upon the parties hereto, and their
respective successors, transferees, and assigns.

         19. Waiver of "Contract." "SAC" does hereby waive and release
"Employee" from any and all obligations under the "Contract." "SAC" does hereby
release "Employee" from any obligation which may affect his obligation to seek
employment, wherever and on whatever terms "Employee" chooses.

         20. Mutual Release. In consideration for the payments and mutual
covenants contained herein, the parties do hereby mutually release each other
for any claim or claims they may have had as of the date of the signing of this
Agreement.

         21. ADEA Waiver. The parties recognize and agree that "SAC" shall have
no obligation to provide the Separation Package called for herein and that his
Agreement shall not


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become effective until such time as "Employee" has had a period of twenty-one
(21) days to reflect on this Agreement before executing it and an additional
period of seven (7) days after executing the Agreement to revoke it. The parties
further recognize and agree that this position is intended to ensure an
effective waiver of any claims by "Employee" under the Federal Age
Discrimination Act, as amended by the Older Workers Benefit Protection Act of
1990. By his signature below, "Employee" warrants and represents he has been
given twenty-one (21) days prior to his execution of this Agreement to reflect
on this Agreement and all material changes thereto, that in the event he
executes this Agreement before the full twenty-one (21) days, he does so
knowingly and voluntarily and with the intention of waiving any remaining time
in that twenty-one (21) day reflection period, that he understands all of the
terms of this Agreement, that he has been encouraged to consult with an attorney
prior to executing this Agreement, and that he knowingly and voluntarily enters
into this Agreement in all respects. The parties further agree that "Employee"
is not entitled to any payment or compensation of any kind of nature whatsoever
in the event that he revokes this Agreement or elects not to enter into this
Agreement. "Employee" further acknowledges that any payment or compensation made
prior to revocation must be returned in full to "SAC." The parties further
intend and agree that this Agreement, if executed and not revoked within seven
(7) days after that execution, shall constitute an effective waiver of any claim
of any age discrimination claims and of any other claim of whatever kind or
nature by "Employee" against any of the Releases as defined in this Agreement.


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         22. The Board of Directors by resolution of May 3, 2001 have authorized
Paul Provost to negotiate and bind the corporation for this Separation Agreement
with Joseph Spinella.

WITNESS: STANDARD AUTOMOTIVE CORPORATION


/s/ illegible                            By: /s/ Paul Provost
---------------------------------            ---------------------------------
                                             PAUL PROVOST, DIRECTOR       L.S.

WITNESS:


/s/ illegible                                /s/ Joseph Spinella
---------------------------------            ---------------------------------
                                             JOSEPH SPINELLA              L.S.





                                                      [corporate seal]


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