Hemisphere Energy Corporation: Exhibit 10.5 - Filed by newsfilecorp.com






Exhibit 10.5

EXECUTIVE EMPLOYMENT AGREEMENT 

MEMORANDUM OF AGREEMENT made effective as of the 5th day
of July 2012. 

BETWEEN: 

Hemisphere Energy Corporation, a
body corporate having its head office at Vancouver, British Colombia (the
"Corporation") 

- and - 

Andrew Arthur, an individual
resident in Vancouver, British Columbia, (the "Executive") 

WHEREAS the Executive is a senior executive of the
Corporation and is considered by the Board of Directors of the Corporation to be
a valued employee of the Corporation and has acquired skills and abilities
relating to and an extensive background in and knowledge of the Corporation's
business and the industry in which it is engaged; 

AND WHEREAS the Board of Directors recognizes that it is
in the best interests of the Corporation and its shareholders that the
Corporation retain the continuing dedication of the Executive to his office and
employment; 

AND WHEREAS the Corporation believes it is fair and
reasonable to the Corporation that the Executive receive fair treatment in the
event of a termination of employment or in the event of a Change of Control in
respect of the Corporation; 

NOW THEREFORE in consideration of the premises and the
mutual covenants herein contained and in consideration of the Executive
continuing in office and in the employment of the Corporation, the Corporation
and the Executive hereby covenant and agree as follows: 

	1. 	
      Definitions



For the purposes of this Agreement, the following terms shall
have the following meanings, respectively: 

	 	(a) 	
      "Affiliate" shall have the meaning ascribed
      thereto, in the Canada Business Corporations Act as at the date of
      this Agreement.

	 	 	 
	 	(b) 	
      "Agreement" means this agreement and all schedules
      attached hereto, and in each case as they may be amended or supplemented
      from time to time, and the expressions "hereof", "herein", "hereto",
      "hereunder", "hereby" and similar expressions refer to this agreement and,
      unless otherwise indicated, references to articles, sections and
      subsections are to articles, sections and subsections in this
      agreement;

	 	 	 
	 	(c) 	
      "Annual Base Salary" has the meaning ascribed
      thereto in Section 5(a) hereof.







- 2 - 

	 	(d) 	
      "Annual Compensation on Termination" means the
      Annual Base Salary of the Executive (before giving effect to any reduction
      thereof constituting a Good Reason under subsection 1(j) hereof) payable
      by the Corporation as at the end of the month immediately preceding the
      month in which the termination of employment hereunder takes effect,
      together with the Average Annual Bonus representing the lost value of all
      benefits enjoyed by the Executive, at the time of the termination of
      employment.

	 	 	 	 	 
	 	(e) 	
      "Associate" shall have the meaning ascribed
      thereto in the Canada Business Corporations Act, as at the date of
      this Agreement.

	 	 	 	 	 
	 	(f) 	
      "Average Annual Bonus" means an amount equal to
      either:

	 	 	 	 	 
	 		(i) 	
      the average of the annual bonus paid to the Executive
      over the two (2) years immediately prior to any termination of the
      Executive; or

	 	 	 	 	 
	 		(ii) 	
      if the Executive has not been continuously employed by
      the Corporation for a period of two years prior to termination, the last
      annual bonus paid to the Executive prior to the termination of the
      Executive.

	 	 	 	 	 
	 	(g) 	
      "Board of Directors" means the Board of Directors
      of the Corporation.

	 	 	 	 	 
	 	(h) 	
      "Change of Control" means the occurrence of a
      transaction or a series of transactions following the effective date of
      this Agreement, other than as agreed to in writing by the Executive, as a
      result of which:

	 	 	 	 	 
	 		(i) 	
      any Person acquires or becomes the beneficial owner of,
      or a combination of Persons acting jointly or in concert or pursuant to a
      voting trust acquire or become the beneficial owner of, directly or
      indirectly, such number of Voting Securities of the Corporation which,
      together with such Person's or Persons' then owned Voting Securities of
      the Corporation, if any, represent 50% or more of the Voting Securities of
      the Corporation, whether such 50% threshold percentage is achieved through
      the acquisition of previously issued and outstanding Voting Securities, or
      of Voting Securities that have not been previously issued, or any
      combination thereof, or any other transaction having a similar effect;
      PROVIDED, HOWEVER, that the provisions of this subsection (i) shall be
      deemed not to apply to:

	 	 	 	 	 
	 			(A) 	
      the acquisition of 40% or more of the Voting Securities
      of the Corporation by the Executive or any Associate(s) of the Executive
      or by any voting trust in which either the Executive or any Associate(s)
      of the Executive participate(s); and

	 	 	 	 	 
	 		(ii) 	
      a majority of the directors of the Corporation is removed
      from office at any annual or special meeting of shareholders or in any
      other manner whatsoever;







- 3 - 

	 	(iii) 	
      the Corporation merges or is consolidated with, completes
      a successful take-over of or is successfully taken over by or concludes an
      arrangement for the disposition of the Corporation to or for the
      acquisition of any other corporation(s) or legal entity(ies) (other than
      with, of, by or to a wholly- owned Subsidiary or Subsidiaries of the
      Corporation) and such transaction or series of transactions results in a
      Person (other than the shareholders of the Corporation, taken as a whole,
      immediately before the transaction in question) acquiring or becoming the
      beneficial owner of, or a combination of Persons (other than the
      shareholders of the Corporation, taken as a whole, immediately before the
      transaction in question) acting jointly or in concert or pursuant to a
      voting trust acquiring or becoming the beneficial owner of, directly or
      indirectly, such number of Voting Securities of the resulting
      Corporation(s) or legal entity(ies), so as to gain effective control of
      the resulting Corporation(s) or the legal entity(ies), PROVIDED, HOWEVER,
      that the provisions of this subsection (iii) shall be deemed not to apply
      to any transaction in which the majority of the directors of the
      Corporation (as it was constituted prior to the transaction) remain as a
      majority of the directors of the Corporation following such
      transaction(s); or

	 	 	 
	 	(iv) 	
      the Corporation sells all or substantially all of its
      assets, over the reasonable objection of the Executive, to any other
      corporation(s) or legal entity(ies) (other than to a wholly-owned
      Subsidiary or Subsidiaries of the Corporation), and for the purpose of
      this subsection (iv), "substantially all" shall mean 75% or more in value
      of the "proved reserves" of the Corporation from time to
  time;




	 	(i) 	
      "Corporation" means Hemisphere Energy Corporation
      and its Affiliates and Subsidiaries.

	 	 	 	 
	 	(j) 	
      "Effective Date" means, in the event of
      termination of employment by the Corporation or the Executive, the
      effective date of written notice provided to the Executive or the
      Corporation, respectively.

	 	 	 	 
	 	(k) 	
      "Good Reason", in each case except as agreed to in
      writing by the Executive, means:

	 	 	 	 
	 		(i) 	
      a Change of Control;

	 	 	 	 
	 		(ii) 	
      the Executive is assigned any responsibilities or duties
      materially inconsistent with his position, duties, responsibilities and
      status with the Corporation as VP Exploration as in effect at the date of
      this Agreement, or there is a material change in the Executive's position,
      duties, responsibilities (including reporting responsibilities), titles or
      offices as contemplated by this Agreement;







- 4 - 

	 	(iii) 	
      any failure by the Corporation to continue to provide the
      Executive any benefit, bonus, profit sharing, incentive, remuneration or
      compensation plan, stock ownership or purchase plan, stock option plan,
      life insurance, disability plan, pension plan or retirement plan in which
      the Executive was entitled to participate in as at the date of this
      Agreement (or as may be added to or amended to benefit the Executive, from
      time to time) or the taking by the Corporation of any action materially
      adversely affecting the Executive's participation in or materially
      reducing his rights or benefits under or pursuant to any such plan. The
      Executive shall also be entitled to participate in and to receive all
      rights and benefits under any plan or program adopted by the Corporation
      for its executive officers as a group. Nothing in this Agreement affects
      of fetters the discretion of the Corporation to grant or award or not any
      bonus, option.

	 	 	 
	 	(iv) 	
      the Corporation requires the Executive to relocate to any
      city or community other than the City of Vancouver, except for required
      travel on the Corporation's business to an extent substantially consistent
      with the Executive's business obligations under this Agreement;

	 	 	 
	 	(v) 	
      there is any material breach by the Corporation of any
      material provision of this Agreement; or

	 	 	 
	 	(vi) 	
      any adverse change by the Corporation or its successor in
      title, and without the agreement of the Executive, in any of the duties,
      powers, rights, discretions, salary, title, or lines of reporting, such
      that immediately after such change or series of changes, the
      responsibilities and status of the Executive, taken as a whole, are not at
      least substantially equivalent to those assigned to him immediately prior
      to such change, or any other reason which would be considered to amount to
      constructive dismissal by a court of competent
  jurisdiction.




	 	(l) 	
      "Just Cause" includes, without in any way limiting
      its definition under common law, any improper conduct by the Executive
      which is materially detrimental to the Corporation or the wilful failure
      of the Executive to properly carry out his duties.

	 	 	 
	 	(m) 	
      "Option" has the meaning ascribed to it in
      subsection 5(d) hereof.

	 	 	 
	 	(n) 	
      "Person" includes an individual, partnership,
      association, body corporate, trustee, executor, administrator, legal
      representative and any national, provincial, state or municipal
      government.

	 	 	 
	 	(o) 	
      "Stock Option Agreement" means the Stock Option
      Agreement of the Corporation with respect to Stock Options granted to the
      Executive under the terms and conditions of the Option Plan or Plans in
      existence within the Corporation at the time of such grant.

	 	 	 
	 	(p) 	
      "Subsidiary" has the meaning ascribed to it in the
      Securities Act (British Columbia) as at the date of this Agreement;
      and







- 5 - 

	 	(q) 	
      "Voting Securities" means any securities of the
      Corporation ordinarily carrying the right to vote for the election of
      directors and any securities immediately convertible into or exchangeable
      for such securities.




	2. 	
      Employment of the
  Executive



The Corporation shall continue to employ the Executive, and the
Executive shall serve the Corporation, as an officer of the Corporation in the
position held as of the date hereof, on the terms and conditions and for the
remuneration hereinafter set forth, or in such other position, or on such other
terms and conditions or for such other remuneration as the parties hereto may
subsequently agree. In such position, the Executive shall perform or fulfil such
duties and responsibilities as the Board of Directors may designate from time to
time and as are consistent with such position. 

	3. 	
      Performance of Duties/Responsibilities of the
      Executive



During the period of his employment, the Executive shall
faithfully, honestly and diligently serve the Corporation and shall carry out
such tasks as the Corporation may from time to time reasonably request. The
Corporation may change the Executive's responsibilities and status, provided
that such change or series of changes would not constitute Good Reason. The
Executive shall devote his full time and efforts to the business of the
Corporation and to fulfilling the Executive's responsibilities, and the
Executive shall use his best efforts to promote the interests of the
Corporation. Notwithstanding the foregoing, the parties to this Agreement
acknowledge and agree that the Executive has held and will continue to hold
interests and positions in outside business opportunities as are known to the
Corporation as of the effective date of this Agreement and as may change from
time to time with the consent of the Corporation, which opportunities the
Executive is entitled to continue to participate in during the term of this
Agreement provided such participation does not detract from the ability of the
Executive to fulfil his obligations to the Corporation. 

	4. 	
      Term



This Agreement shall continue in full force and effect from the
date hereof and for a period of indefinite term unless earlier terminated in
accordance with the provisions of Article 6. 

	5. 	
      Remuneration




	 	(a) 	
      The Corporation shall pay to the Executive a gross annual
      salary of $130,000, which may thereafter be increased as determined
      by the Board of Directors (as increased from time to time, the "Annual
      Base Salary"). This annual salary shall be payable in accordance with
      the Corporation's usual payroll practices, but, in any event, not less
      than monthly. The effective start date for remuneration is July 15, 2012
      and the first pay date is July 31, 2012.

	 	 	 
	 	(b) 	
      In addition to the annual salary payable to the
      Executive, the Executive shall be entitled to receive a performance bonus
      as and when determined by, and at the discretion of, the Board of
      Directors.







- 6 - 

	 	(c) 	
      The Executive shall be entitled to the following
      benefits:

	 	 	 	 
	 		(i) 	
      annual paid vacation of Five (5) weeks;

	 	 	 	 
	 		(ii) 	
      the Corporation shall pay or reimburse the Executive for
      all reasonable out of pocket business expenses including, without
      limitation, all travel and promotional expenses payable or incurred by the
      Executive in connection with the proper discharge of his duties under this
      Agreement. All payments or reimbursement shall be made upon submission by
      the Executive of vouchers, bills or receipts for all such reasonable
      expenses;

	 	 	 	 
	 		(iii) 	
      the Executive shall be entitled to participate and to
      receive all rights and benefits under any life insurance, disability,
      medical, dental, health and accident plans maintained by the Corporation
      for its employees generally and for its executive officers specifically,
      with eligibility and benefits determined in accordance with the terms of
      such policy; and

	 	 	 	 
	 		(iv) 	
      the Executive shall be entitled to participate in and to
      receive all rights and benefits under the Corporation's profit sharing and
      stock option plans as the same may be constituted from time to time,
      together with such other plan or plans as may be implemented by the
      Corporation during the term of this Agreement, provided that such
      participation shall be in accordance with and subject to all applicable
      terms and conditions of such plans.

	 	 	 	 
	 	(d) 	
      The Corporation has granted to the Executive options to
      purchase shares in the common stock of the Corporation, and the
      Corporation may hereafter continue to grant options to the Executive
      (collectively the "Options"), which Options are to be governed by
      the terms and conditions of the Corporation's Stock Option Agreement(s),
      as amended.




	6. 	
      Termination




	 	(a) 	
      Termination of Employment by the Corporation for
      Just Cause. The Corporation may terminate this Agreement and the
      Executive's employment with the Corporation at any time without notice or
      further obligations to the Executive for reasons of Just Cause.

	 	 	 	 
	 	(b) 	
      Termination of Employment without Just Cause. Subject to subsection 6(e) hereof, if the Executive's employment
      is terminated (a) by the Corporation other than for Just Cause, or (b) by
      the Executive in response to a Good Reason within ninety (90) days after
      the Good Reason has taken effect, the Executive shall be entitled to
      receive, and the Corporation shall pay to the Executive, immediately
      following termination, a cash amount equal to the Annual Compensation on
      Termination:

	 	 	 	 
	 		(i) 	
      Annual Base Salary (12 months); plus

	 	 	 	 
	 		(ii) 	
      Average Annual Bonus







- 7 - 

	 	(c) 	
      Executive Stock Options on Termination Without Just
      Cause In the event of a termination pursuant to Section 6(b)
      hereof, the Multiplier created by the calculation set out in 6(b) shall
      also represent the number of months following the Effective Date of the
      termination (the "Notice Period") for which the Executive shall be
      entitled to the accelerated and immediate vesting of those Options which
      would have otherwise vested during the Notice Period and which accelerated
      Options may be exercised by the Executive in accordance with the
      timeframes set out in the Stock Option Agreement, in such
      circumstances.

	 	 	 
	 	(d) 	
      Resignation or Retirement. The Executive
      may terminate this Agreement and the Executive's employment with the
      Corporation at any time by giving thirty (30) days written notice of
      termination to the Corporation, even if the Executive does not do so for
      Good Reason, and the Corporation shall have no further obligation to the
      Executive under this Agreement or pursuant to the Executive's employment,
      and no other compensation shall be payable to the Executive after the
      expiry of the said notice.

	 	 	 
	 	(e) 	
      Non-Applicability. Subsections 6(b) and
      6(c) do not apply in the event of termination of the employment of the
      Executive as a result of the death, disability or retirement of the
      Executive.




	7. 	
      Change of Control



Subject to the terms of this Agreement, the Executive agrees to
remain in the employ of the Corporation during the period commencing with any
act taken by any Person, or the announcement of an intention to take such act,
which may result in a Change of Control of the Corporation and ending with the
final conclusion of all matters associated with such act or announcement. 

	8. 	
      Resignations and
Release



If the employment of the Executive is terminated for any of the
reasons set forth in Article 6 hereof, the Executive shall immediately tender
his resignation from any position he may hold as an officer or director of the
Corporation. Upon the payment of the appropriate amounts described in this
Agreement, if any, the employee agrees to accept such payment as full and
complete satisfaction of any and all outstanding obligations, from the
Corporation to the Executive. The Executive further agrees to provide the
Corporation, prior to any payments hereunder, with an executed Release in a form
satisfactory to the Corporation, with respect to all matters arising out of this
Agreement, the termination of this Agreement and the termination of the
employment relationship. 

	9. 	
      No Obligation to
Mitigate



The Executive shall not be required to mitigate the amount of
any payment or benefit provided for in this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for in
this Agreement be reduced by any compensation earned by the Executive as a
result of employment by another employer after termination or otherwise. 




- 8 - 

	10. 	
      Confidentiality




	 	(a) 	
      In the event of the termination of the employment of the
      Executive, howsoever initiated, whether by the Corporation or the
      Executive, the Executive agrees to keep confidential all information of a
      confidential or proprietary nature concerning the Corporation, its
      subsidiaries and affiliates and their respective operations,
      opportunities, assets, finances, business and affairs and further agrees
      not to use such information for personal advantage, provided that nothing
      herein shall prevent disclosure of information which is publicly available
      or which is required to be disclosed under appropriate statutes, rules of
      law or legal process.

	 	 	 
	 	(b) 	
      The Executive recognizes and understands that in
      performing the duties and responsibilities of his employment as outlined
      in this Agreement, he has been and will be a key employee of the
      Corporation and will occupy a position of high fiduciary trust and
      confidence, pursuant to which he has developed and will develop and
      acquire wide experience and knowledge with respect to all aspect of the
      services and businesses carried on by the Corporation and its Affiliates
      and the manner in which such businesses are conducted. It is the expressed
      intent and agreement of the Executive and the Corporation that such
      knowledge and experience shall be used solely and exclusively in the
      furtherance of the business interest of the Corporation and its Affiliates
      and not in any manner detrimental to them. The Executive therefore agrees
      that so long as he is employed by the Corporation pursuant to this
      Agreement he shall not engage in any practice or business in competition
      with the business of the Corporation or any of its Affiliates, nor shall
      he take any act that would result in a conflict of interest with respect
      to the Executive's duties under this
Agreement.




	11. 	
      Legal
Proceedings




	 	(a) 	
      To the extent that it is lawfully able to do so, the
      Corporation shall indemnify the Executive and his heirs, and legal
      representatives against all costs, charges and expenses (including any
      amounts paid to settle any actions or satisfy any judgment) reasonably
      incurred by the Executive in respect of any civil, criminal or
      administrative action or proceeding to which he has been made a party by
      reason of being or having been an employee, director, or officer of the
      Corporation if:

	 	 	 	 
	 		(i) 	
      the Executive acted honestly and in good faith with a
      view to the best interests of the Corporation; and

	 	 	 	 
	 		(ii) 	
      in the case of a criminal or administrative action or
      proceeding that is enforced by a monetary penalty, the Executive had
      reasonable grounds for believing that his conduct was
  lawful.







- 9 - 

	 	(b) 	
      To the extent that it is lawfully able to do so, the
      Corporation shall indemnify the Executive and his heirs, and legal
      representatives against all costs, charges and expenses reasonably
      incurred by the Executive in respect of an action by or on behalf of the
      Corporation to procure a judgment in the Corporation's favour to which the
      Executive is made a party by reason of having been an employee, director,
      or officer of the Corporation, if:

	 	 	 	 
	 		(i) 	
      the Executive acted honestly and in good faith with a
      view to the best interests of the Corporation; and

	 	 	 	 
	 		(ii) 	
      in the case of a criminal or administrative action or
      proceeding that is enforced by a monetary penalty, the Executive had
      reasonable grounds for believing that his conduct was
  lawful.




	12. 	
      Enurement



This Agreement shall enure to the benefit of and be enforceable
by the Executive's successors or legal representatives but otherwise it is not
assignable. 

	13. 	
      Entire Agreement



Except as specifically excepted herein, this Agreement
constitutes the entire agreement between the parties hereto pertaining to the
subject matter hereof. No amendment or waiver of this Agreement shall be binding
unless executed in writing by the party to be bound thereby. 

	14. 	
      Provisions Which Operate Following
      Termination



Notwithstanding any termination of this Agreement for any
reason whatsoever and with or without cause, the provisions of Articles 8, 10,
11 and 16, and any of the provisions of this Agreement necessary to give
efficacy thereto, shall continue in full force and effect following such
termination. 

	15. 	
      Headings



The headings of the articles, sections and subsections herein
are inserted for convenience of cross reference only and shall not effect the
meaning or construction hereof. 

	16. 	
      Severability



If any provision contained herein is determined to be void or
unenforceable in whole or in part, it shall be and be deemed to be severed from
this Agreement without effecting or impairing the validity of any other
provision herein. 

	17. 	
      Choice of Law



This Agreement shall be governed and interpreted in accordance
with the laws of the Province of British Columbia and the courts of the Province
of British Columbia shall be the sole and proper forum with respect to any suits
brought with respect to this Agreement. 




- 10 - 

	18. 	
      Most Favoured – Nation
  Provision



If there is a conflict between the provisions of this Agreement
and the provisions of any incentive compensation plans, benefit plans, pension
plans, any other perquisites payable, or any basis of compensation or the
payment of benefits to the Executive generally, the parties acknowledge and
agree that it is the intent of this Agreement that the Executive shall receive
the maximum of the amounts owing to him hereunder or thereunder and in no event
shall the Executive be disadvantaged as a result of such a conflict. 

	19. 	
      Notices



Any notice or other communication required or permitted to be
given hereunder shall be in writing and shall be prepaid first-class mail, by
facsimile or other means of electronic communication or by hand-delivery as
hereinafter provided. Any such notice or other communication, if mailed by
prepaid first-class mail at any time other than during a general discontinuance
of postal service due to strike, lockout or otherwise, shall be deemed to have
been received on the fourth business day after the post-marked date thereof, or
if sent by facsimile or other means of electronic communication, shall be deemed
to have been received at the time it is delivered to the applicable address
noted below either to the individual designated below or to an individual at
such address having apparent authority to accept deliveries on behalf of the
addressee. Notice of change of address shall also be governed by this section.
In the event of a general discontinuance of postal service due to strike,
lock-out or otherwise, notices or other communications shall be delivered by
hand or sent by facsimile or other means of electronic communication and shall
be deemed to have been received in accordance with this section. Notices and
other communications shall be addressed as follows: 

	(a) 	
      if to the Executive:

	 	 
		
      Andrew Arthur

	 	1059 Walace Drive, 
		Delta, BC, V4M 2L9; 
	 	Phone: (604) 569-5699
		
      Email: caerleon.resources@gmail.com

	 	 
	(b) 	
      if to the Corporation:

	 	 
		
      Hemisphere Energy Corporation

	 	Suite 570 -789 West Pender St. 
		Vancouver, BC V6C 1H2
	 	Attention: Chairman, Board of Directors 
		Facsimile: (604) 685-9676






- 11 - 

	20. 	
      Copy of Agreement



The Executive hereby acknowledges receipt of a copy of this
Agreement duly signed by the Corporation. 

IN WITNESS WHEREOF, the parties hereto have duly
executed and delivered this Agreement, signed at Vancouver on July 5, 2012.


	/s/ Dorlyn Evancic	 	/s/ Andrew Arthur
	Witness 	 	Andrew Arthur 
	 	 	 
	 	 	 
	HEMISPHERE ENERGY CORPORATION 	 	  
	 	 	 
	By: /s/ Don
    Simmons                                                                                                                                                                           
     	 	  
	             Don Simmons