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Exact, if name of subdirectory is the name of file where to launch command then this file will delete.
So, We can just repeat -type f after -o connector:
find $DIRECTORY -type f ! -name '*.gz' ...

Hi,
Here, we can use only one find command:
find $DIRECTORY -type f ! -name '*.gz' -mtime +10 -exec gzip {} \; -o -name '*.gz' -mtime +365 -exec rm {} \;
Regards.