Document:

exhibit1015i.htm

    THE
WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SHARES ISSUABLE UPON EXERCISE
OF THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND
SUBSTANCE TO IT THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT OF 1933,
AS AMENDED

     

     

    THE
TRANSFER OF THIS WARRANT IS RESTRICTED AS DESCRIBED HEREIN.

     

     

    AMERICAN
INTERNATIONAL INDUSTRIES, INC.

     

     

    Warrant
for the Purchase of Shares of Common Stock,

     

     

    par value
$0.001per Share

     

     

    No.
W-720,000 Shares

     

     

    THIS
CERTIFIES that pursuant to this Warrant Agreement and the Employment Agreement
between American International Industries, Inc., a Nevada corporation with
executive offices at 601 Cien Street, Suite 235, Kemah, TX 77565 (the "Company")
and Daniel Dror, a resident of the State of Texas (the "Holder"), both of which
were initially effective as of October 1, 2004 and both of which are hereby
amended effective as of March 19, 2007, the Holder is entitled to subscribe for
and purchase from the Company, upon the terms and conditions set forth herein,
an aggregate of 720,000 shares of the Company’s Common Stock, par value $0.001
per share ("Common Stock"), at a price of $7.00 per share (the "Exercise
Price"), at a rate of 144,000 shares of Common Stock per year as set forth under
"Exercise Period below. As used herein the term "this Warrant" shall mean and
include this Warrant and any Common Stock or Warrants hereafter issued as a
consequence of the exercise or transfer of this Warrant in whole or in
part.

     

     

    The
number of shares of Common Stock issuable upon exercise of the Warrants (the
"Warrant Shares") and the Exercise Price may be adjusted from time to time as
hereinafter set forth.

     

     

    1. Exercise Period .
This Warrant provides for the grant of Warrants at the rate of 144,000 Warrants
per year commencing on March 30, 2007 and on March 30 th for
each year thereafter through March 30, 2012. Each Warrant grant shall expire on
the second anniversary of the date of the grant (the "Exercise
Period").

     

     

    2. Procedure for Exercise;
Effect of Exercise .

     

     

    (a) Cash Exercise . This
Warrant may be exercised at the rate of 144,000 Warrant Shares per year, in
whole or in part, by the Holder during normal business hours on any business day
during the Exercise Period by (i) the presentation and surrender of this Warrant
to the Company at its principal office along with a duly executed Notice of
Exercise (in the form attached to this Warrant) specifying the number of Warrant
Shares to be purchased, and (ii) delivery of payment to the Company of the
Exercise Price for the number of Warrant Shares specified in the Notice of
Exercise by cash, wire transfer of immediately available funds to a bank account
specified by the Company, or by certified or bank cashier’s check.

     

     

    (b) Cashless Exercise .
This Warrant may also be exercised by the Holder through a cashless exercise, as
described in this Section 2(b). In such case, this Warrant may be exercised, in
whole or in part, by the Holder during normal business hours on any business day
during the Exercise Period by the presentation and surrender of this Warrant to
the Company at its principal office along with a duly executed Notice of
Exercise specifying the number of Warrant Shares to be applied to such exercise.
The number of shares of Common Stock to be issued upon exercise of this Warrant
pursuant to this Section 2(b) shall equal the value of this Warrant (or the
portion thereof being canceled) computed as of the date of delivery of this
Warrant to the Company using the following formula:

     

    
      	
              X
      =

            	
              Y(A-B)
      A

            

    

     

    Where:

     

    
      	
              X =
      the number of shares of Common Stock to be issued to Holder under this
      Section 2(b);

            
	
              Y =
      the number of Warrant Shares identified in the Notice of Exercise as being
      applied to the subject exercise;

            
	
              A =
      the Current Market Price on such date; and

            
	
              B =
      the Exercise Price on such date

            

    

     

    For
purposes of this Section 2(b), Current Market Price shall have the definition
provided in Section 6(g).

     

     

    The
Company acknowledges and agrees that this Warrant was issued on the date set
forth at the end of this Warrant.

     

     

    Notwithstanding
the foregoing, the Holder may conduct a cashless exercise pursuant to this
Section 2(b) only after the first anniversary of the initial issuance date of
this Warrant.

     

     

    In the
event that the Holder shall not exercise the Warrant during any year pursuant to
this Warrant Agreement, this Warrant may be exercisable for accrued and
unexercised Warrant Shares during any subsequent year during the Exercise
Period.

     

     

    (c) Company’s Response; Effect
of Exercise . Upon receipt by the Company of a copy of a Notice of
Exercise (including a copy received via facsimile), the Company shall
immediately send to the Holder, via facsimile, a confirmation of receipt of such
Notice of Exercise. Upon receipt by the Company of this Warrant and the original
Notice of Exercise, together with proper payment of the Exercise Price, as
provided in this Section 2, the Company or its designated transfer agent (the
"Transfer Agent"), as applicable, shall, within three (3) business days
following the date of receipt by the Company of the original Notice of Exercise
(so long as this Warrant and the proper payment of the Exercise Price are
received by the Company on or before such third business day), issue and deliver
to the Holder the number of Warrant Shares subject to the Notice of Exercise,
registered in the name of the Holder or his designee. If this Warrant should be
exercised in part only, the Company shall, upon surrender of this Warrant for
cancellation, execute and deliver a new Warrant evidencing the right of the
Holder to purchase the balance of the Warrant Shares subject to purchase
hereunder. Upon receipt by the Company of this Warrant and a Notice of Exercise,
together with proper payment of the Exercise Price, as provided in this Section
2, the Company agrees that such Warrant Shares shall be deemed to be issued to
the Holder as the record holder of such Warrant Shares as of the close of
business on the date on which this Warrant has been surrendered and payment has
been made for such Warrant Shares in accordance with this Warrant and the Holder
shall be deemed to be the holder of record of the Warrant Shares,
notwithstanding that the stock transfer books of the Company shall then be
closed or that certificates representing such Warrant Shares shall not then be
actually delivered to the Holder.

     

     

    3. Registration of Warrants;
Transfer of Warrants . Any Warrants issued upon the transfer or exercise
in part of this Warrant shall be numbered and shall be registered in a Warrant
Register as they are issued. The Company shall be entitled to treat the
registered holder of any Warrant on the Warrant Register as the owner in fact
thereof for all purposes and shall not be bound to recognize any equitable or
other claim to or interest in such Warrant on the part of any other person, and
shall not be liable for any registration or transfer of Warrants which are
registered or to be registered in the name of a fiduciary or the nominee of a
fiduciary unless made with the actual knowledge that a fiduciary or nominee is
committing a breach of trust in requesting such registration or transfer, or
with the knowledge of such facts that its participation therein amounts to bad
faith. This Warrant shall be transferable only on the books of the Company upon
delivery thereof duly endorsed by the Holder or by its duly authorized attorney
or representative, or accompanied by proper evidence of succession, assignment,
or authority to transfer. In all cases of transfer by an attorney, executor,
administrator, guardian, or other legal representative, duly authenticated
evidence of his or its authority shall be produced. Upon any registration of
transfer, the Company shall deliver a new Warrant or Warrants to the person
entitled thereto. This Warrant may be exchanged, at the option of the Holder
thereof, for another Warrant, or other Warrants of different denominations, of
like tenor and representing in the aggregate the right to purchase a like number
of Warrant Shares, upon surrender to the Company or its duly authorized
agent.

     

     

    4. 
Restrictions on
Transfer .

     

     

    (a) The
Holder, as of the date of issuance hereof, represents to the Company that such
Holder is acquiring the Warrants for his own account for investment purposes and
not with a view to the distribution thereof or of the Warrant Shares.
Notwithstanding any provisions contained in this Warrant to the contrary, this
Warrant and the related Warrant Shares shall not be transferable except pursuant
to the proviso contained in the following sentence or upon the conditions
specified in this Section 4, which conditions are intended, among other things,
to insure compliance with the provisions of the Securities Act of 1933, as
amended (the "Securities Act") and applicable state law in respect of the
transfer of this Warrant or such Warrant Shares. The Holder by acceptance of
this Warrant agrees that the Holder will not transfer this Warrant or the
related Warrant Shares prior to delivery to the Company of an opinion of the
Holder’s counsel (as such opinion and such counsel are described in Section 4(b)
hereof) or until registration of such Warrant Shares under the Securities Act
has become effective or after a sale of such Warrant or Warrant Shares has been
consummated pursuant to Rule 144 under the Securities Act; provided, however , that the
Holder may freely transfer this Warrant or such Warrant Shares (without delivery
to the Company of an opinion of counsel) (i) one or members of Holder’s
immediate family, (ii) to a trust established by or for the benefit of Holder or
one or more members of his immediate family, or (iii) to an accredited investor
(as such term is defined in Regulation D under the Securities Act) giving
equivalent investment intent representations and agreements.

     

     

    (b) The
Holder, by his acceptance hereof, agrees that prior to any transfer of this
Warrant or of the related Warrant Shares (other than as permitted by Section
4(a) hereof or pursuant to a registration under the Securities Act), the Holder
will give written notice to the Company of his intention to effect such
transfer, together with an opinion of such counsel for the Holder as shall be
reasonably acceptable to the Company, to the effect that the proposed transfer
of this Warrant and/or such Warrant Shares may be effected without registration
under the Securities Act. Upon delivery of such notice and opinion to the
Company, the Holder shall be entitled to transfer this Warrant and/or such
Warrant Shares in accordance with the intended method of disposition specified
in the notice to the Company.

     

     

    (c) Each
stock certificate representing Warrant Shares issued upon exercise or exchange
of this Warrant shall bear the following legend unless the opinion of counsel
referred to in Section 4(b) states such legend is not required:

     

     

    "THE
SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE TRANSFERRED EXCEPT UPON
DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY IN FORM AND
SUBSTANCE TO IT THAT SUCH TRANSFER WILL NOT VIOLATE THE SECURITIES ACT OF 1933,
AS AMENDED."

     

     

    The
Holder understands that the Company may place, and may instruct any transfer
agent for the Warrant Shares to place, a stop transfer notation in the
securities records in respect of the Warrant Shares.

     

     

    5. 
Reservation of Shares
. The Company shall at all times during the Exercise Period reserve and
keep available out of its authorized and unissued Common Stock, solely for the
purpose of providing for the exercise of the rights to purchase all Warrant
Shares granted pursuant to the Warrants, such number of shares of Common Stock
as shall, from time to time, be sufficient therefor. The Company covenants that
all shares of Common Stock issuable upon exercise of this Warrant, upon receipt
by the Company of the Exercise Price therefor shall be validly issued, fully
paid, non-assessable, and free of preemptive rights, and free from all taxes,
claims, liens, charges and other encumbrances.

     

     

    6. 
Exercise Price
Adjustments . The Exercise Price shall be subject to adjustment from time
to time as follows:

     

     

    (a) (i)
In the event that the Company shall (A) pay a dividend or make a distribution to
all its stockholders, in shares of Common Stock, on any class of capital stock
of the Company or any subsidiary which is not directly or indirectly
wholly-owned by the Company, (B) split or subdivide its outstanding Common Stock
into a greater number of shares, or (C) combine its outstanding Common Stock
into a smaller number of shares, then in each such case the Exercise Price and
number of underlying shares of Common Stock in effect immediately prior thereto
shall be adjusted so that the Holder of a Warrant thereafter surrendered for
Exercise shall be entitled to receive the number of shares of Common Stock that
such Holder would have owned or have been entitled to receive after the
occurrence of any of the events described above had such Warrant been exercised
immediately prior to the occurrence of such event. An adjustment made pursuant
to this Section 6(a)(i) shall become effective immediately after the close of
business on the record date in the case of a dividend or distribution (except as
provided in Section 6(e) below) and shall become effective immediately after the
close of business on the effective date in the case of such subdivision, split
or combination, as the case may be. Any shares of Common Stock issuable in
payment of a dividend shall be deemed to have been issued immediately prior to
the close of business on the record date for such dividend for purposes of
calculating the number of outstanding shares of Common Stock under clause (ii)
below.

     

     

    (ii) No
adjustment in the Exercise Price shall be required unless the adjustment would
require an increase or decrease of at least 1% in the Exercise Price then in
effect; provided, however,
that any adjustments that by reason of this Section 6(a) are not required
to be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 6(a) shall be made to the
nearest cent or nearest 1/100th of a share.

     

     

    (iii) The
Company from time to time may reduce the Exercise Price by any amount for any
period of time in the discretion of the Board of Directors. A voluntary
reduction of the Exercise Price does not change or adjust the Exercise Price
otherwise in effect for purposes of this Section 6(a).

     

     

    (iv) In
the event that, at any time as a result of an adjustment made pursuant to
Sections 6(a)(i) through 6(a)(iii) above, the Holder of any Warrant thereafter
surrendered for exercise shall become entitled to receive any shares of the
Company other than shares of the Common Stock, thereafter the number of such
other shares so receivable upon exercise of any such Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock contained in
Sections 6(a)(i) through 6(a)(iii) above, and the other provisions of this
Section 6(a) with respect to the Common Stock shall apply on like terms to any
such other shares.

     

     

    (b) In
case of any reclassification of the Common Stock (other than in a transaction to
which Section 6(a)(i) applies), any consolidation of the Company with, or merger
of the Company into, any other entity, any merger of another entity into the
Company (other than a merger that does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), any sale or transfer of all or substantially all of the assets of
the Company or any compulsory share exchange, pursuant to which share exchange
the Common Stock is converted into other securities, cash or other property,
then lawful provision shall be made as part of the terms of such transaction
whereby the Holder of a Warrant then outstanding shall have the right
thereafter, during the period such Warrant shall be exercisable, to exercise
such Warrant only for the kind and amount of securities, cash and other property
receivable upon the reclassification, consolidation, merger, sale, transfer or
share exchange by a holder of the number of shares of Common Stock of the
Company into which a Warrant might have been able to exercise for immediately
prior to the reclassification, consolidation, merger, sale, transfer or share
exchange assuming that such holder of Common Stock failed to exercise rights of
election, if any, as to the kind or amount of securities, cash or other property
receivable upon consummation of such transaction subject to adjustment as
provided in Section 6(a) above following the date of consummation of such
transaction. The provisions of this Section 6(b) shall similarly apply to
successive reclassifications, consolidations, mergers, sales, transfers or share
exchanges.

     

     

    (c) If:

     

     

    (i) the
Company shall take any action which would require an adjustment in the Exercise
Price pursuant to Section 6(a); or

     

     

    (ii) the
Company shall authorize the granting to the holders of its Common Stock
generally of rights, warrants or options to subscribe for or purchase any shares
of any class or any other rights, warrants or options; or

     

     

    (iii) there
shall be any reclassification or change of the Common Stock (other than a
subdivision or combination of its outstanding Common Stock or a change in par
value) or any consolidation, merger or statutory share exchange to which the
Company is a party and for which approval of any stockholders of the Company is
required, or the sale or transfer of all or substantially all of the assets of
the Company; or

     

     

    (iv) there
shall be a voluntary or involuntary dissolution, liquidation or winding up of
the Company;

     

     

    then, in
each such case, the Company shall cause to be filed with the transfer agent for
the Warrants and shall cause to be mailed to the Holder at such Holder’s address
as shown on the books of the transfer agent for the Warrants, as promptly as
possible, but at least 30 days prior to the applicable date hereinafter
specified, a notice stating (A) the date on which a record is to be taken for
the purpose of such dividend, distribution or granting of rights, warrants or
options, or, if a record is not to be taken, the date as of which the holders of
Common Stock of record to be entitled to such dividend, distribution or rights,
warrants or options are to be determined, or (B) the date on which such
reclassification, change, consolidation, merger, statutory share exchange, sale,
transfer, dissolution, liquidation or winding-up is expected to become effective
or occur, and the date as of which it is expected that holders of Common Stock
of record shall be entitled to exchange their shares of Common Stock for
securities or other property deliverable upon such reclassification, change,
consolidation, merger, statutory share exchange, sale, transfer, dissolution,
liquidation or winding up. Failure to give such notice or any defect therein
shall not affect the legality or validity of the proceedings described in this
Section 6(c).

     

     

    (d) Whenever
the Exercise Price is adjusted as herein provided, the Company shall promptly
file with the transfer agent for the Warrants a certificate of an officer of the
Company setting forth the Exercise Price after the adjustment and setting forth
a brief statement of the facts requiring such adjustment and a computation
thereof. The Company shall promptly cause a notice of the adjusted Exercise
Price to be mailed to the Holder.

     

     

    (e) In
any case in which Section 6(a) provides that an adjustment shall become
effective immediately after a record date for an event and the date fixed for
such adjustment pursuant to Section 6(a) occurs after such record date but
before the occurrence of such event, the Company may defer until the actual
occurrence of such event (i) issuing to the Holder of any Warrants exercised
after such record date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the Common Stock issuable upon such
exercise before giving effect to such adjustment, and (ii) paying to the Holder
any amount in cash in lieu of any fraction pursuant to Section
6(i).

     

     

    (f) In
case the Company shall take any action affecting the Common Stock, other than
actions described in this Section 6, which in the opinion of the Board of
Directors would materially adversely affect the exercise right of the Holders,
the Exercise Price may be adjusted, to the extent permitted by law, in such
manner, if any, and at such time, as the Board of Directors may determine to be
equitable in the circumstances.

     

     

    (g) For
the purpose of any computation under this Warrant, the " Current Market Price
" means, when used with respect to a share of Common Stock as of any
date, the volume weighted average price of the Common Stock on the ten (10)
consecutive trading days immediately preceding (but not including) such date as
reported for consolidated transactions with respect to securities listed on the
principal national securities exchange on which the Common Stock is listed or
admitted to trading or, if the Common Stock is not listed or admitted to trading
on any national securities exchange, the volume weighted average price of the
Common Stock on the ten (10) consecutive trading days immediately preceding (but
not including) such date in the over-the-counter market, as reported by the
National Association of Securities Dealers, Inc. Automated Quotations System or
such other system then in use or, if the Common Stock is not quoted by any such
organization, the volume weighted average price of the Common Stock as of the
ten (10) consecutive trading days immediately preceding (but not including) such
date furnished by a New York Stock Exchange member firm selected by the Company,
or if the Common Stock is not quoted by any such organization and no such New
York Stock Exchange member firm is able to provide such prices, such price as is
determined by the Independent Directors in good faith. "Independent Directors"
means directors of the Company that (i) are not 5% or greater stockholders of
the Company or the designee of any such stockholder, (ii) are not officers or
employees of the Company, any of its subsidiaries or of a stockholder referred
to above in clause (i), (iii) are not Related Persons, and (iv) do not have
relationships that, in the opinion of the Board of Directors, would interfere
with their exercise of independent judgment in carrying out the responsibilities
of the directors, and " Related Person "
means an individual related to an officer, director or employee of the Company
or any of its affiliates which relation is by blood, marriage or adoption and
not more remote than first cousin.

     

     

    (h) Upon
each adjustment of the Exercise Price, this Warrant shall thereafter evidence
the right to purchase, at the adjusted Exercise Price, that number of shares
(calculated to the nearest hundredth) obtained by dividing (i) the product
obtained by multiplying the number of shares purchasable upon exercise of this
Warrant prior to adjustment of the number of shares by the Exercise Price in
effect prior to adjustment of the Exercise Price, by (ii) the Exercise Price in
effect after such adjustment of the Exercise Price.

     

     

    (i) The
Company shall not be required to issue fractions of shares of Common Stock or
other capital stock of the Company upon the exercise of this Warrant. If any
fraction of a share would be issuable on the exercise of this Warrant (or
specified portions thereof), the Company shall purchase such fraction for an
amount in cash equal to the same fraction of the Current Market Price of such
share of Common Stock on the date of exercise of this Warrant.

     

     

    7. 
Transfer Taxes
. The issuance of any shares or other securities upon the exercise of
this Warrant, and the delivery of certificates or other instruments representing
such shares or other securities, shall be made without charge to the Holder for
any tax or other charge in respect of such issuance. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of any certificate in a name other
than that of the Holder and the Company shall not be required to issue or
deliver any such certificate unless and until the person or persons requesting
the issue thereof shall have paid to the Company the amount of such tax or shall
have established to the satisfaction of the Company that such tax has been
paid.

     

     

    8. 
Loss or Mutilation of
Warrant . Upon receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction, or mutilation of any Warrant (and upon
surrender of any Warrant if mutilated), and upon reimbursement of the Company’s
reasonable incidental expenses and delivery of an undertaking to indemnify the
Company against losses, the Company shall execute and deliver to the Holder
thereof a new Warrant of like date, tenor, and denomination.

     

     

    9. 
No Rights as a
Stockholder . The Holder of any Warrant shall not have, solely on account
of such status, any rights of a stockholder of the Company, either at law or in
equity, or to any notice of meetings of stockholders or of any other proceedings
of the Company, except as provided in this Warrant.

     

     

    10. 
Governing Law .
This Warrant shall be construed in accordance with the laws of the State of
Texas applicable to contracts made and performed within such State, without
regard to principles of conflicts of law.

     

     

    Dated: March
19, 2007

     

     

    AMERICAN
INTERNATIONAL INDUSTRIES, INC.

     

     

    By:____________________________

     

     

    Sherry L.
Couturier, Chief Financial
Officer

     

     

    FORM OF
ASSIGNMENT

     

     

    (To be
executed by the registered holder if such holder desires to transfer the
attached Warrant.)

     

     

    FOR VALUE
RECEIVED,        hereby sells, assigns, and
transfers unto __________________ a Warrant to purchase __________ shares of
Common Stock, par value $0.001 per share, of American International Industries,
Inc. (the " Company
"), together with all right, title, and interest therein, and does hereby
irrevocably constitute and appoint       attorney to
transfer such Warrant on the books of the Company, with full power of
substitution.

     

     

    Dated: 

     

     

    By:_____________________

     

     

    Signature

     

     

    The
signature on the foregoing Assignment must correspond to the name as written
upon the face of this Warrant in every particular, without alteration or
enlargement or any change whatsoever.

     

     

    To:
American International Industries, Inc.

     

     

    601 Cien
Street, Suite 235

     

     

    Kemah,
Texas 77565

     

     

    Attention:
Chief Financial Officer

     

     

    NOTICE OF
EXERCISE

     

     

    The
undersigned hereby exercises his rights to purchase _______ Warrant Shares
covered by the within Warrant and tenders payment herewith in the amount of
$_________ by [tendering cash or delivering a certified check or bank cashier’s
check, payable to the order of the Company] [surrendering ______ shares of
Common Stock received upon exercise of the attached Warrant, which shares have a
Current Market Price equal to such payment] in accordance with the terms
thereof.

     

     

    _______________________________________

     

     

    _______________________________________

     

     

    _______________________________________

     

     

    (Print
Name, Address and Social Security

     

     

    or
Tax Identification Number)

     

     

    Holder requests delivery to
be made : (check one)

     

    
      	 
      	
              By
      delivery of physical certificates in the name above and delivered to the
      above address

            

    

     

    and, if
such number of Warrant Shares shall not be all the Warrant Shares covered by the
within Warrant, that a new Warrant for the balance of the Warrant Shares covered
by the within Warrant be registered in the name of, and delivered to, the
under-signed at the address stated below.

     

     

    Dated: 

     

     

    By: 

     

     

    Print
Name

     

     

    Signature

     

     

    Address:exhibit1015ii.htm

    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

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