EMPLOYMENT AGREEMENT
 
 
EMPLOYMENT AGREEMENT, dated the 1st day of October, 2004, and as amended on the
19 th day of March, 2007 between American International Industries, Inc., a
Nevada corporation, currently having its principal place of business at 601 Cien
Street, Suite 235, Kemah, Texas 77565 (the "Company"), and Daniel Dror (the
"Executive").
 
 
WHEREAS, the Company has benefited from the services of Executive for many years
and desires to formalize the terms of the employment of Executive pursuant to
this agreement ("Employment Agreement") and Executive desires to be employed by
the Company, as a Chief Executive Officer and President of the Company pursuant
to this Employment Agreement.
 
 
NOW, THEREFORE, in consideration of the premises and covenants herein contained,
the parties hereto agree as follows:
 
 
1. Term of Agreement . Subject to the terms and conditions hereof, the term of
employment of the Executive under this Employment Agreement shall be for the
period commencing on the date hereof (the "Commencement Date) and terminating on
March 30, 2012, subject to the provisions of this Employment Agreement. Such
term of employment is herein called the "Employment Term.")
 
 
2. Employment . As of the Commencement Date, the Company hereby agrees to employ
the Executive as Chief Executive Officer and President of the Company, and the
Executive hereby accepts such employment and agrees to perform his duties and
responsibilities hereunder in accordance with the terms and conditions
hereinafter set forth.
 
 
3. Duties and Responsibilities . Executive shall serve as Chief Executive
Officer and President during the Employment Term. Executive shall report to and
be subject to the direction of the board of directors of the Company, of which
the Executive has served and shall continue to serve as chairman and shall
perform duties which are consistent with his current title and position as Chief
Executive Officer and President of the Company and such other duties as may be
assigned to him from time to time by the board of directors which are consistent
with his position of management and leadership. During the Employment Term,
Executive shall devote his full time, skill, energy and attention to the
business of the Company and shall perform his duties in a diligent, trustworthy,
loyal and businesslike manner.
 
 
4. Compensation and Benefits During the Employment Term :
 
 
- The Executive’s base compensation shall be at the rate of $10,000 per month,
for the term of this Agreement, payable in regular semi-monthly installments in
accordance with the Company’s practice for its executives. At the election of
the Executive, his compensation may be payable in shares of the Company’s common
stock, registered on Form S-8 under the Securities Act of 1933 or such other
form as may be appropriate, or at the election of the Executive pursuant to an
exemption from registration under the Act. Cash compensation shall be less
applicable withholding for income and employment taxes as required by law and
other deductions as to which the Executive shall agree. Such base compensation
shall be subject to increases as and when determined by the Company’s board of
directors at its sole discretion. Any unpaid balance during the year shall be
adjusted and paid on or before each fiscal year end.
 
 
- In addition to the Executive’s base compensation, Executive will be entitled
to a bonus as determined by the Company’s board of directors from time to time.
In addition, in the event of a change in control of the Company, resulting in
Executive ceasing to serve as the Company’s Chief Executive Officer, President
and Chairman, Executive shall be entitled to receive and the Company shall pay
to Executive within ninety (90) days of the change in control a sum equal to
five (5) years of the base salary then payable to Executive under this
Employment Agreement, and issue to Executive the shares underlying the common
stock purchase warrants provided in 4(d) below, based upon and adjusted exercise
price equal to par value of the shares at the date of the change in control.
 
 
- The Executive shall be entitled to reimbursement of all reasonable, ordinary
and necessary business related expenses incurred by him in the course of his
duties and upon compliance with the Company’s procedures.
 
 
- The Executive shall be granted common stock purchase warrants, exercisable on
a cashless basis, for 144,000 shares per annum commencing on March 30, 2007 and
on each consecutive March 30 th for a period of five (5) years, based upon an
exercise price of $7.00 per share. The warrants will provide for an expiration
date two (2) years following each annual grant, as set forth in the warrant
agreement that will be attached to this employment agreement.
 
 
- The Company hereby ratifies the grant to Executive of common stock purchase
options to purchase 50,000 shares of common stock heretofore granted to
Executive, which are exercisable through September 30, 2005 at a price of $1.50
per share and are exercisable on a cashless basis.
 
 
5. Termination . The Company may terminate this Employment Agreement (1) for
death or disability under Section 5 (a) or 5 (b); (2) with "cause" as set forth
under Section 5 (c); or by the Executive for good reason as defined under
Section 5 (d). All other terminations which may occur shall constitute a breach
of this Employment Agreement.
 
 
(a) The Company shall have the right to terminate the employment of the
Executive under this Employment Agreement for disability in the event Executive
suffers an injury, illness or incapacity of such character as to substantially
disable him from performing his duties without reasonable accommodation by the
Company hereunder for a period of more than one hundred and twenty (120)
consecutive days upon the Company giving at least thirty (30) days written
notice of termination; provided, however, that if the Executive is eligible to
receive disability payments pursuant to a disability policy paid for by the
Company, the Executive shall assign such benefits to the Company for all periods
as to which he is receiving full payment under this Employment Agreement.
 
 
(b) This Employment Agreement shall terminate upon the death of Executive.
 
 
(c) The Company may terminate this Employment Agreement at any time because of
(i) Executive's material breach of any term of this Employment Agreement, (ii)
the willful engaging by the Executive in misconduct which is materially
injurious to the Company, monetarily or otherwise; provided, in each case,
however, that the Company shall not terminate this Employment Agreement pursuant
to this Section 5(c) unless the Company shall first have delivered to the
Executive, a notice which specifically identifies such breach or misconduct and
the Executive shall not have cured the same within thirty (30) days after
receipt of such notice, (iii) Executive’s gross negligence in the performance of
his duties or (iv) the failure of Executive to perform his essential duties or
comply with reasonable directions of the board of directors.
 
 
(d) The Executive may terminate his employment for "Good Reason" if:
 
 
(i) he is assigned, without his express written consent, any duties inconsistent
with his positions, duties, responsibilities, authority and status with the
Company as of the date hereof, or a change in his reporting responsibilities or
titles as in effect as of the date hereof;
 
 
(ii) his compensation is reduced;
 
 
(iii) (1) the Company shall file a petition for bankruptcy or re-organization
under the federal bankruptcy statues or an involuntary petition is filed against
the Company and not removed or withdrawn within thirty (30) days or (2) the
Company does not pay any material amount of compensation due hereunder and then
fails either to pay such amount within the ten (10) day notice period required
for termination hereunder or to contest in good faith said notice. Further, if
such contest is not resolved within thirty (30) days the Company shall submit
such dispute to arbitration, under Section 7.
 
 
6. Arbitration . If a dispute should arise regarding this Employment Agreement,
all claims, disputes, controversies, differences or other matters in question
arising out of this relationship shall be settled finally, completely and
conclusively by arbitration of a single arbitrator in Harris County, Texas, in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association (the "Rules"). Arbitration shall be initiated by written demand.
This Employment Agreement to arbitrate shall be specifically enforceable only in
the District Court of Harris County, Texas. A decision of the arbitrator shall
be final, conclusive and binding on the Company and the Executive, and judgement
may be entered in the District Court of Harris County, Texas, for enforcement
and other benefits. On appointment, the arbitrator shall then proceed to decide
the arbitration subjects in accordance with the Rules. Any arbitration held in
accordance with this paragraph shall be private and confidential and no person
shall be entitled to attend the hearings except the arbitrator, Executive,
Executive’s attorneys, and an designated representatives of the Company and
their respective attorneys. The matters submitted for arbitration, the hearings
and proceedings and the arbitration award shall be kept and maintained in
strictest confidence by Executive and the Company and shall not be discussed,
disclosed or communicated to any persons. On request of any party, the record of
the proceeding shall be sealed and may not be disclosed except insofar, and only
insofar, as may be necessary to enforce the award of the arbitrator and any
judgement enforcing an award. The prevailing party shall be entitled to recover
reasonable and necessary attorneys’ fees and costs from the non-prevailing
party.
 
 
7. Opportunities . During his employment with the Company, and for one year
thereafter, Executive shall not take any action which might divert from the
Company any opportunity learned about by him during his employment with the
Company (including without limitation during the Employment Term) which would be
within the scope of any of the businesses then engaged in or planned to be
engaged in by the Company.
 
 
8. Survival . In the event that this Employment Agreement shall be terminated,
then notwithstanding such termination, the obligations of Executive pursuant to
Sections 7 of this Employment Agreement shall survive such termination.
 
 
9. Contents of Employment Agreement, Parties in Interest, Assignment . This
Employment Agreement sets forth the entire understanding of the parties hereto
with respect to the subject matter hereof. All of the terms and provisions of
this Employment Agreement shall be binding upon and inure to the benefit of and
be enforceable by the respective heirs, representatives, successors and assigns
of the parties hereto, except that the duties and responsibilities of Executive
hereunder which are of a personal nature shall neither be assigned nor
transferred in whole or in part by Executive. This Employment Agreement shall
not be amended except by a written instrument duly executed by the parties.
 
 
10. Severability . If any term or provision of this Employment Agreement shall
be held to be invalid or unenforceable for any reason, such term or provision
shall be ineffective to the extent of such invalidity or unenforceability
without invalidating the remaining terms and provisions hereof, and this
Employment Agreement shall be construed as if such invalid or unenforceable term
or provision had not been contained herein.
 
 
11. Notices . Any notice, request, instruction or other document to be given
hereunder by any party to the other party shall be in writing and shall be
deemed to have been duly given when delivered personally or five (5) days after
dispatch by registered or certified mail, postage prepaid, return receipt
requested, to the party to whom the same is so given or made:
 
 
If to the Company, addressed to:
 
 
American International Industries, Inc.
 
 
601 Cien Street, Suite 235
 
 
Kemah, Texas 77565
 
 
 
 
 
If to Executive addressed to:
 
 
Daniel Dror
 
 
601 Hanson Road
 
 
Kemah, Texas 77565
 
 
or to such other address as the one party shall specify to the other party in
writing.
 
 
12. Counterparts and Headings . This Employment Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and all which
together shall constitute one and the same instrument. All headings are inserted
for convenience of reference only and shall not affect the meaning or
interpretation of this Employment Agreement.
 
 
IN WITNESS WHEREOF, the parties hereto have caused this Employment Agreement to
be duly executed and delivered as of the day and year first above written.
 
 
American International Industries, Inc.
 
 
By:_______________________________
 
 
Sherry L. Couturier, Vice President
 
 
Executive
 
 
By:________________________________
 
 
Daniel Dror