EX-4.1






	



Exhibit 4.1




AMERICAN
INTERNATIONAL PETROLEUM CORPORATION
2002
LONG-TERM PERFORMANCE PLAN



1.  Objectives. 



The American International
Petroleum Corporation 2002 Long-Term Performance Plan (the “Plan”) is
designed to attract, motivate and retain selected employees of, and other
individuals providing services to, American International Petroleum Corporation
(the “Company”). These objectives are accomplished by making long-term
incentive and other awards under the Plan, thereby providing Participants with a
proprietary interest in the growth and performance of the Company. 



2.  Definitions. 



(a) “Awards”
— The grant of any form of stock option, stock appreciation right, stock or
cash award, whether granted singly, in combination or in tandem, to a
Participant pursuant to such terms, conditions, performance requirements,
limitations and restrictions as the Committee may establish in order to fulfill
the objectives of the Plan. 



(b) “Award
Agreement” — An agreement between the Company and a Participant that
sets forth the terms, conditions, performance requirements, limitations and
restrictions applicable to an Award. 



(c) “Board” — The
Board of Directors of American International Petroleum Corporation. 



(d) “Capital
Stock” or “stock” — Authorized and issued or unissued
Capital Stock of the Company, at such par value as may be established from time
to time. 



(e) “Code” —
The Internal Revenue Code of 1986, as amended from time to time. 



(f) “Committee” — The committee
designated by the Board to administer the Plan. 



(g) “Company” — American
International Petroleum Corporation and its subsidiaries. 



(h) “Fair Market
Value” — The average of the high and low prices of Capital Stock on
the Nasdaq SmallCap Market or other principal stock exchange or automated
quotation service (including the OTC Bulletin Board) on which the Capital Stock
is then listed or quoted for the date in question, provided that, if no sales of
Capital Stock were made on said exchange or automated quotation service on that
date, the average of the high and low prices of Capital Stock as reported for
the most recent preceding day on which sales of Capital Stock were made on said
exchange or quotation service. 

















	





(i) “Participant”
— An individual to whom an Award has been made under the Plan. Awards may
be made to any employee of, or any other individual or entity providing services
to, the Company. However, incentive stock options may be granted only to
individuals who are employed by the Company or by a subsidiary corporation
(within the meaning of section 424(f) of the Code) of the Company, including a
subsidiary that becomes such after the adoption of the Plan. 



(j) “Performance
Period” — A multi-year period of no more than five consecutive
calendar years over which one or more of the performance criteria listed in
Section 6 shall be measured pursuant to the grant of Long-Term Performance
Incentive Awards (whether such Awards take the form of stock, stock units or
equivalents or cash). Performance Periods may overlap one another, but no two
Performance Periods may consist solely of the same calendar years. 



3.  Capital Stock Available for
Awards. 



The number of shares that
may be issued under the Plan for Awards granted wholly or partly in stock during
the term of the Plan is 5,000,000. Shares of Capital Stock may be made available
from the authorized but unissued shares of the Company or from shares held in
the Company’s treasury and not reserved for some other purpose. For
purposes of determining the number of shares of Capital Stock issued under the
Plan, no shares shall be deemed issued until they are actually delivered to a
Participant, or such other person in accordance with Section 10. Shares covered
by Awards that either wholly or in part are not earned, or that expire or are
forfeited, terminated, canceled, settled in cash, payable solely in cash or
exchanged for other awards, shall be available for future issuance under Awards.
Further, shares tendered to or withheld by the Company in connection with the
exercise of stock options, or the payment of tax withholding on any Award, shall
also be available for future issuance under Awards. 



4.   Administration. 



The Plan shall be
administered by the Committee, which shall have full power to select
Participants, to interpret the Plan, to grant waivers of Award restrictions, to
continue, accelerate or suspend exercisability, vesting or payment of an Award
and to adopt such rules, regulations and guidelines for carrying out the Plan as
it may deem necessary or proper. These powers include, but are not limited to,
the adoption of modifications, amendments, procedures, subplans and the like as
necessary to comply with provisions of the laws and regulations of the countries
in which the Company operates in order to assure the viability of Awards granted
under the Plan and to enable Participants regardless of where employed to
receive advantages and benefits under the Plan and such laws and regulations. 



5.   Delegation of Authority. 



The Committee may delegate
to officers of the Company its duties, power and authority under the Plan
pursuant to such conditions or limitations as the Committee may establish,
except that only the Committee or the Board may select, and grant Awards to,
Participants who are subject to Section 16 of the Securities Exchange Act of
1934. 



6.   Awards. 



The Committee shall
determine the type or types of Award(s) to be made to each Participant and shall
set forth in the related Award Agreement the terms, conditions, performance
requirements, and limitations applicable to each Award. Awards may include but
are not limited to those listed in this Section 6. Awards may be granted singly,
in combination or in tandem. Awards may also be made in combination or in tandem
with, in replacement or payment of, or as alternatives to, grants, rights or
compensation earned under any other plan of the Company, including the plan of
any acquired entity. 





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(a) Stock Option — A
grant of a right to purchase a specified number of shares of Capital Stock the
exercise price of which shall be not less than 100% of Fair Market Value on the
date of grant of such right, as determined by the Committee, provided that, in
the case of a stock option granted retroactively in tandem with or as
substitution for another award granted under any plan of the Company, the
exercise price may be the same as the purchase or designated price of such other
award. A stock option may be in the form of an incentive stock option
(“ISO”) which, in addition to being subject to applicable terms,
conditions and limitations established by the Committee, complies with section
422 of the Code; provided this Plan is approved by the affirmative vote of the
holders of a majority of the outstanding shares of Capital Stock entitled to
vote thereon within one year before or after adoption of the Plan by the Board
of Directors. All of the shares that may be issued under the Plan are available
for issuance under ISOs granted under the Plan. 



(b) Stock Appreciation
Right — A right to receive a payment, in cash and/or Capital Stock, equal
in value to the excess of the Fair Market Value of a specified number of shares
of Capital Stock on the date the stock appreciation right (SAR) is exercised
over the grant price of the SAR, which shall not be less than 100% of the Fair
Market Value on the date of grant of such SAR, as determined by the Committee,
provided that, in the case of a SAR granted retroactively in tandem with or as
substitution for another award granted under any plan of the Company, the grant
price may be the same as the exercise or designated price of such other award. 



(c) Stock Award — An
Award made in stock and denominated in units of stock. All or part of any stock
award may be subject to conditions established by the Committee, and set forth
in the Award Agreement, which may include, but are not limited to, continuous
service with Company, achievement of specific business objectives, increases in
specified indices, attaining growth rates, and other comparable measurements of
Company performance. An Award made in stock or denominated in units of stock
that is subject to restrictions on transfer and/or forfeiture provisions may be
referred to as an Award of “Restricted Stock,” “Restricted Stock
Units” or “Long-Term Performance Incentive” units. 



(d) Cash Award — An
Award denominated in cash with the eventual payment amount subject to future
service and such other restrictions and conditions as may be established by the
Committee, and as set forth in the Award Agreement, including, but not limited
to, continuous service with the Company, achievement of specific business
objectives, increases in specified indices, attaining growth rates, and other
comparable measurements of Company performance. 



(e) Performance Criteria
under section 162(m) of the Code for Long-Term Performance Incentive Awards
— The performance criteria for Long-Term Performance Incentive Awards
(whether such Awards take the form of stock, stock units or equivalents or cash)
made to any “covered employee” (as defined by section 162(m) of the
Code) shall consist of objective tests based on one or more of the following:
earnings, cash flow, customer satisfaction, revenues, financial return ratios,
market performance, shareholder return and/or value, operating profits
(including EBITDA), net profits, earnings per share, profit returns and margins,
stock price and working capital. Performance criteria may be measured solely on
a corporate, subsidiary or business unit basis, or a combination thereof.
Further, performance criteria may reflect absolute entity performance or a
relative comparison of entity performance to the performance of a peer group of
entities or other external measure of the selected performance criteria. The
formula for any Award may include or exclude items to measure specific
objectives, such as losses from discontinued operations, extraordinary gains or
losses, the cumulative effect of accounting changes, acquisitions or
divestitures, foreign exchange impacts and any unusual, nonrecurring gain or
loss. Nothing herein shall preclude the Committee from making any payments or
granting any Awards whether or not such payments or Awards qualify for tax
deductibility under section 162(m) of the Code. 





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7.   Payment of Awards. 



Payment of Awards may be
made in the form of cash, stock or combinations thereof and may include such
restrictions, as the Committee shall determine. Further, with Committee
approval, payments may be deferred, either in the form of installments or as a
future lump-sum payment, in accordance with such procedures as may be
established from time to time by the Committee. Any deferred payment, whether
elected by the Participant or specified by the Award Agreement or the Committee,
may require the payment to be forfeited in accordance with the provisions of
Section 13. Dividends or dividend equivalent rights may be extended to and made
part of any Award denominated in stock or units of stock, subject to such terms,
conditions and restrictions as the Committee may establish. The Committee may
also establish rules and procedures for the crediting of interest on deferred
cash payments and dividend equivalents for deferred payments denominated in
stock or units of stock. At the discretion of the Committee, a Participant may
be offered an election to substitute an Award for another Award or Awards of the
same or different type. 



8.   Stock Option
Exercise. 



The price at which shares
of Capital Stock may be purchased under a stock option shall be paid in full in
cash at the time of the exercise or, if permitted by the Committee, by means of
tendering Capital Stock or surrendering another Award or any combination
thereof. The Committee shall determine acceptable methods of tendering Capital
Stock or other Awards and may impose such conditions on the use of Capital Stock
or other Awards to exercise a stock option as it deems appropriate. 



9.   Tax Withholding. 



Prior to the payment or
settlement of any Award, the Participant must pay, or make arrangements
acceptable to the Company for the payment of, any and all federal, state and
local tax withholding and employment taxes that in the opinion of the Company is
required by law. The Company shall have the right to deduct applicable taxes
from any Award payment and withhold, at the time of delivery or vesting of
shares under the Plan, an appropriate number of shares for payment of taxes
required by law or to take such other action as may be necessary in the opinion
of the Company to satisfy all obligations for withholding of such taxes or for
payment of employment taxes. 





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10.  Transferability. 



No Award shall be
transferable or assignable, or payable to or exercisable by, anyone other than
the Participant to whom it was granted, except (i) by law, will or the laws of
descent and distribution, (ii) as a result of the disability of a Participant or
(iii) that the Committee (in the form of an Award Agreement or otherwise) may
permit transfers of Awards by gift or otherwise to a member of a
Participant’s immediate family and/or trusts whose beneficiaries are
members of the Participant’s immediate family, or to such other persons or
entities as may be approved by the Committee. Notwithstanding the foregoing, in
no event shall ISOs be transferable or assignable other than by will or by the
laws of descent and distribution. 



11.   Amendment, Modification,
Suspension or Discontinuance of the Plan. 



The Board may amend,
modify, suspend or terminate the Plan for the purpose of meeting or addressing
any changes in legal requirements or for any other purpose permitted by law.
Subject to changes in law or other legal requirements that would permit
otherwise, the Plan may not be amended without the consent of the holders of a
majority of the shares of Capital Stock then outstanding, to (i) increase the
aggregate number of shares of Capital Stock that may be issued under the Plan
(except for adjustments pursuant to Section 14 of the Plan), or (ii) permit the
granting of stock options or SARs with exercise or grant prices lower than those
specified in Section 6. 



12.   Termination of Employment. 



If the employment of a
Participant terminates, other than as a result of the death or disability of a
Participant, all unexercised, deferred and unpaid Awards shall be canceled
immediately, unless the Award Agreement provides otherwise. In the event of the
death of a Participant or in the event a Participant is deemed by the Company to
be disabled and eligible for benefits under the terms of any long-term
disability plan or policy maintained by the Company, the Participant’s
estate, beneficiaries or representative, as the case may be, shall have the
rights and duties of the Participant under the applicable Award Agreement. 



13.   Cancellation and Rescission of
Awards. 



(a) Unless the Award
Agreement specifies otherwise, the Committee may cancel, rescind, suspend,
withhold or otherwise limit or restrict any unexpired, unpaid, or deferred
Awards at any time if the Participant is not in compliance with all applicable
provisions of the Award Agreement and the Plan, or if the Participant engages in
any “Detrimental Activity.” For purposes of this Section 13,
“Detrimental Activity” shall include: (i) the rendering of services
for any organization or engaging directly or indirectly in any business which is
or becomes competitive with the Company, or which organization or business, or
the rendering of services to such organization or business, is or becomes
otherwise prejudicial to or in conflict with the interests of the Company; (ii)
the disclosure to anyone outside the Company, or the use in other than the
Company’s business, without prior written authorization from the Company,
of any confidential information or material relating to the business of the
Company, acquired by the Participant either during or after employment with the
Company; (iii) the failure or refusal to disclose promptly and to assign to the
Company all right, title and interest in any invention or idea, patentable or
not, made or conceived by the Participant during employment by the Company,
relating in any manner to the actual or anticipated business, research or
development work of the Company or the failure or refusal to do anything
reasonably necessary to enable the Company to secure a patent where appropriate
in the United States and in other countries; (iv) activity that results in
termination of the Participant’s employment for cause; (v) a violation of
any rules, policies, procedures or guidelines of the Company; (vi) any attempt
directly or indirectly to induce any employee of the Company to be employed or
perform services elsewhere or any attempt directly or indirectly to solicit the
trade or business of any current or prospective customer, supplier or partner of
the Company; (vii) the Participant being convicted of, or entering a guilty plea
with respect to, a crime, whether or not connected with the Company; or (viii)
any other conduct or act determined to be injurious, detrimental or prejudicial
to any interest of the Company. 





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(b) Upon exercise, payment
or delivery pursuant to an Award, the Participant shall certify in a manner
acceptable to the Company that he or she is in compliance with the terms and
conditions of the Plan. In the event a Participant fails to comply with the
provisions of paragraphs (a)(i)-(viii) of this Section 13 prior to, or during
the six months after, any exercise, payment or delivery pursuant to an Award,
such exercise, payment or delivery may be rescinded within two years thereafter.
In the event of any such rescission, the Participant shall pay to the Company
the amount of any gain realized or payment received as a result of the rescinded
exercise, payment or delivery, in such manner and on such terms and conditions
as may be required, and the Company shall be entitled to set-off against the
amount of any such gain any amount owed to the Participant by the Company. 



14.   Adjustments. 



In the event of any change
in the outstanding Capital Stock of the Company by reason of a stock split,
stock dividend, combination or reclassification of shares, recapitalization,
merger, or similar event, the Committee may adjust proportionately: (a) the
number of shares of Capital Stock (i) available for issuance under the Plan,
(ii) available for issuance under ISOs, (iii) for which Awards may be granted to
an individual Participant set forth in Section 6, and (iv) covered by
outstanding Awards denominated in stock or units of stock; (b) the exercise and
grant prices related to outstanding Awards; and (c) the appropriate Fair Market
Value and other price determinations for such Awards. In the event of any other
change affecting the Capital Stock or any distribution (other than normal cash
dividends) to holders of Capital Stock, including a spin-off of the capital
stock of a subsidiary, such adjustments in the number and kind of shares and the
exercise, grant and conversion prices of the affected Awards as may be deemed
equitable by the Committee, including adjustments to avoid fractional shares,
shall be made to give proper effect to such event. In the event of a corporate
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation, the Company or its successor shall issue or
assume stock options, whether or not in a transaction to which section 424(a) of
the Code applies, by means of substitution of new stock options for previously
issued stock options or an assumption of previously issued stock options. In
such event, the aggregate number of shares of Capital Stock available for
issuance under Awards under Section 3, including the individual Participant
maximums set forth in Section 6 will be increased to reflect such substitution
or assumption. 





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15.   Miscellaneous. 



(a) Any notice to the
Company required by any of the provisions of the Plan shall be addressed to the
chief financial officer of the Company in writing, and shall become effective
when it is received. 



(b) The Plan shall be
unfunded and the Company shall not be required to establish any special account
or fund or to otherwise segregate or encumber assets to ensure payment of any
Award. 



(c) Nothing contained in
the Plan shall prevent the Company from adopting other or additional
compensation arrangements or plans, subject to shareholder approval if such
approval is required, and such arrangements or plans may be either generally
applicable or applicable only in specific cases. 



(d) No Participant shall
have any claim or right to be granted an Award under the Plan and nothing
contained in the Plan shall be deemed or be construed to give any Participant
the right to be retained in the employ of the Company or to interfere with the
right of the Company to discharge any Participant at any time without regard to
the effect such discharge may have upon the Participant under the Plan. Except
to the extent otherwise provided in any plan or in an Award Agreement, no Award
under the Plan shall be deemed compensation for purposes of computing benefits
or contributions under any other plan of the Company. 



(e) Except as may otherwise
be required by federal law, the Plan and each Award Agreement shall be governed
by the laws of the State of California, excluding any conflicts or choice of law
rule or principle that might otherwise refer construction or interpretation of
the Plan to the substantive law of another jurisdiction. Unless otherwise
provided in the Award Agreement, recipients of an Award under the Plan are
deemed to submit to the exclusive jurisdiction and venue of the federal or state
courts of Texas, County of Harris, to resolve any and all issues that may arise
out of or relate to the Plan or any related Award Agreement. 



(f) In the event that a
Participant or the Company brings an action to enforce the terms of the Plan or
any Award Agreement and the Company prevails, the Participant shall pay all
costs and expenses incurred by the Company in connection with that action,
including reasonable attorneys’ fees, and all further costs and fees,
including reasonable attorneys’ fees incurred by the Company in connection
with collection. 



(g) The Committee and any
officers to whom it may delegate authority under Section 5 shall have full power
and authority to interpret the Plan and to make any determinations thereunder,
including determinations under Section 13, and the Committee’s or such
officer’s determinations shall be binding and conclusive. Determinations
made by the Committee or any such officer under the Plan need not be uniform and
may be made selectively among individuals, whether or not such individuals are
similarly situated. 



(h) If any provision of the
Plan is or becomes or is deemed invalid, illegal or unenforceable in any
jurisdiction, or would disqualify the Plan or any Award under any law deemed
applicable by the Committee, such provision shall be construed or deemed amended
or limited in scope to conform to applicable laws or, in the discretion of the
Committee, it shall be stricken and the remainder of the Plan shall remain in
full force and effect. 





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(i) The Plan shall become
effective upon adoption by the Board of Directors of the Company. 



(j) The Plan is not a Contract of Employment or
for Services. 



     Nothing
contained in the Plan or in any option agreement executed pursuant hereto shall
be deemed to confer upon any individual to whom an Option is or may be granted
hereunder any right to remain in the employ of the Company or of a subsidiary or
parent of the Company or in any way limit the right of the Company, or of any
parent or subsidiary thereof, to terminate the employment of any employee. 









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