Hemisphere Energy Corporation: Exhibit 10.1 - Filed by newsfilecorp.com






Exhibit 10.1

HEMISPHERE ENERGY CORPORATION

AMENDED AND RESTATED STOCK OPTION
PLAN
JUNE 6, 2014 





TABLE OF CONTENTS 

	SECTION 1 DEFINITIONS AND
      INTERPRETATION 	1 
	     1.1 	Definitions 	1 
	   
       1.2 	Choice of Law 	6 
	     1.3 	Headings 	6 
	SECTION 2 GRANT OF
      OPTIONS 	6 
	     2.1 	Grant of Options 	6 
	   
       2.2 	Record of Option Grants 	6 
	     2.3 	Effect of Plan 	6 
	SECTION 3 PURPOSE AND
      PARTICIPATION 	7 
	     3.1 	Purpose of Plan 	7 
	   
       3.2 	Participation in Plan 	7 
	     3.3 	Limits on Option Grants 	7 
	   
       3.4 	Notification of Grant 	8 
	     3.5 	Limitation on Service 	8 
	   
       3.6 	No Obligation to Exercise 	8 
	     3.7 	Agreement 	8 
	   
       3.8 	Notice 	8 
	     3.9 	Representation to TSXV 	8 
	SECTION 4 NUMBER OF
      SHARES UNDER PLAN 	9 
	     4.1 	Board to Approve Issuance of Shares 	9 
	   
       4.2 	Number of Shares 	9 
	     4.3 	Fractional Shares 	9 
	SECTION 5 TERMS AND
      CONDITIONS OF OPTIONS 	9 
	     5.1 	Exercise Period of Option 	9 
	   
       5.2 	Number of Shares Under Option
    	9 
	     5.3 	Exercise Price of Option 	9 
	   
       5.4 	Termination of Option 	10 
	     5.5 	Vesting of Option and Acceleration 	11 
	   
       5.6 	Additional Terms 	11 
	SECTION 6 TRANSFERABILITY OF
      OPTIONS 	12 
	   
       6.1 	Non-transferable 	12







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	     6.2 	Death of Option Holder 	12 
	     6.3 	Disability of Option Holder 	12 
	     6.4 	Disability and Death of Option
      Holder 	12 
	     6.5 	Vesting 	12 
	     6.6 	Deemed Non-Interruption of
      Engagement 	13 
	SECTION 7 EXERCISE OF OPTION 	13 
	     7.1 	Exercise of Option 	13 
	     7.2 	Issue of Share Certificates 	13 
	     7.3 	No Rights as Shareholder 	13 
	     7.4 	Statutory Deductions 	14 
	SECTION 8 ADMINISTRATION
    	14 
	     8.1 	Board or Committee 	14 
	     8.2 	Powers of Committee 	14 
	     8.3 	Administration by Committee 	15 
	     8.4 	Interpretation 	15 
	SECTION 9 APPROVALS AND AMENDMENT 	15 
	     9.1 	Shareholder Approval of Plan
	15 
	     9.2 	Amendment of Option or Plan 	15 
	SECTION 10 CONDITIONS
      PRECEDENT TO ISSUANCE OF OPTIONS AND SHARES 	 16 
	     10.1 	     Compliance with Laws 	16 
	     10.2 	     Regulatory
      Approvals 	16 
	     10.3 	     Inability to Obtain
      Regulatory Approvals 	16 
	SECTION 11 ADJUSTMENTS AND
      TERMINATION 	16 
	     11.1 	     Termination of Plan 	16 
	     11.2 	     No Grant
      During Suspension of Plan 	17 
	     11.3 	     Alteration in Capital
      Structure 	17 
	     11.4 	     Triggering
      Events 	17 
	     11.5 	     Notice of Termination by
      Triggering Event 	18 
	     11.6 	   
       Determinations to be Made By Committee 	18







STOCK OPTION PLAN

SECTION 1 
DEFINITIONS AND INTERPRETATION



	1.1 	
      Definitions



As used herein, unless there is something in the subject matter
or context inconsistent therewith, the following terms shall have the meanings
set forth below: 

	 	(a) 	
      “Administrator” means such Executive or Employee of the
      Company as may be designated as Administrator by the Committee from time
      to time, or, if no such person is appointed, the Committee
  itself.

	 	 	 	 
	 	(b) 	
      “Black-Out” means a restriction imposed by the Company on
      all or any of its directors, officers, consultants, employees, insiders or
      persons in a special relationship whereby they are to refrain from trading
      in the Company’s securities until the restriction has been lifted by the
      Company. Should the Expiry Date for an Option fall within a Black-Out, or
      within seven (7) business days following the expiration of a Black-Out,
      such Expiry Date shall, subject to approval of the Regulatory Authorities,
      be automatically extended without any further act of formality to that
      date which is the tenth (10th) business day after the end of
      the Black-Out, such tenth (10th) business day to be considered
      the Expiry Date for such Option for all purposes under the Plan.

	 	 	 	 
	 	(c) 	
      “Board” means the board of directors of the
    Company.

	 	 	 	 
	 	(d) 	
      “Change of Control” means an occurrence when
    either:

	 	 	 	 
	 		(i) 	
      a Person or Entity, other than the current “control
      person” of the Company (as that term is defined in the Securities Act),
      becomes a “control person” of the Company; or

	 	 	 	 
	 		(ii) 	
      a majority of the directors elected at any annual or
      extraordinary general meeting of shareholders of the Company are not
      individuals nominated by the Company’s then-incumbent Board.

	 	 	 	 
	 	(e) 	
      “Committee” means a committee of the Board to which the
      responsibility of approving the grant of stock options has been delegated,
      or if no such committee is appointed, the Board itself.

	 	 	 	 
	 	(f) 	
      “Company” means Hemisphere Energy Corporation.

	 	 	 	 
	 	(g) 	
      “Consultant” means, in relation to the Company (other
      than an Employee or and Executive) or company that:

	 	 	 	 
	 		(i) 	
      is engaged to provide, on an ongoing bona fide basis,
      consulting, technical, management or other services to the Company or any 







- 2 - 

	 	 	
      Subsidiary other than services provided in relation to a “distribution”
      (as that term is described in the Securities Act);
	 	 	
       
	 	(ii) 	
      provides the services under a written contract between
      the Company or any Subsidiary and the individual or a Consultant Entity
      (as defined in clause (g)(v) below);

	 	 	 
	 	(iii) 	
      in the reasonable opinion of the Company, spends or will
      spend a significant amount of time and attention on the affairs and
      business of the Company or any Subsidiary; and

	 	 	 
	 	(iv) 	
      has a relationship with the Company or any Subsidiary
      that enables the individual to be knowledgeable about the business and
      affairs of the Company or is otherwise permitted by applicable Regulatory
      Rules to be granted Options as a Consultant or as an equivalent
      thereof,



and includes: 

	 	(v) 	
      a company of which the individual is an employee or
      shareholder or a partnership of which the individual is an employee or
      partner (a “Consultant Entity”); or

	 	 	 
	 	(vi) 	
      an RRSP, RRIF or TFSA established by or for the
      individual under which he or she is the
beneficiary.




	 	(h) 	
      “Disability” means a medically determinable physical or
      mental impairment expected to result in death or to last for a continuous
      period of not less than 12 months, and which causes an individual to be
      unable to engage in any substantial gainful activity, or any other
      condition of impairment that the Committee, acting reasonably, determines
      constitutes a disability.

	 	 	 	 
	 	(i) 	
      “Employee” means:

	 	 	 	 
	 		(i) 	
      an individual who is considered an employee of the
      Company or its Subsidiary under the Income Tax Act (Canada) (and
      for whom income tax, employment insurance and Canada Pension Plan
      deductions must be made at source);

	 	 	 	 
	 		(ii) 	
      an individual who works full-time or part-time for the
      Company or any Subsidiary providing services normally provided by an
      employee and who is subject to the same control and direction by the
      Company over the details and methods of work as an employee of the
      Company, but for whom income tax deductions are not made at source;
    or

	 	 	 	 
	 		(iii) 	
      an individual who works for the Company or any Subsidiary
      on a continuing and regular basis for a minimum amount of time per week
      providing services normally provided by an employee and who is subject to
      the same control and direction by the Company or any Subsidiary over 







- 3 - 

the details and methods of work as an
employee of the Company or any Subsidiary, but for whom income tax deductions
are not made at source,

and includes: 

	 		(iv) 	
      a corporation wholly-owned by such individual;
  and

	 	 	 	 
	 		(v) 	
      any RRSP, RRIF or TFSA established by or for such
      individual under which he or she is the beneficiary.

	 	 	 	 
	 	(j) 	
      “Executive” means an individual who is a director or
      officer of the Company or a Subsidiary, and includes:

	 	 	 	 
	 		(i) 	
      a corporation wholly-owned by such individual;
  and

	 	 	 	 
	 		(ii) 	
      any RRSP, RRIF or TFSA established by or for such
      individual under which he or she is the beneficiary.

	 	 	 	 
	 	(k) 	
      “Exercise Notice” means the written notice of the
      exercise of an Option, in the form set out as Schedule B hereto, duly
      executed by the Option Holder.

	 	 	 	 
	 	(l) 	
      “Exercise Period” means the period during which a
      particular Option may be exercised and is the period from and including
      the Grant Date through to and including the Expiry Time on the Expiry Date
      provided, however, that no Option can be exercised unless and until all
      necessary Regulatory Approvals have been obtained.

	 	 	 	 
	 	(m) 	
      “Exercise Price” means the price at which an Option is
      exercisable as determined in accordance with section 5.3.

	 	 	 	 
	 	(n) 	
      “Expiry Date” means the date the Option expires as set
      out in the Option Certificate or as otherwise determined in accordance
      with sections 5.4, 6.2, 6.3, 6.4 or 11.4, subject to any applicable
      Black-Out.

	 	 	 	 
	 	(o) 	
      “Expiry Time” means the time the Option expires on the
      Expiry Date, which is 4:00 p.m. local time in Vancouver, British Columbia
      on the Expiry Date.

	 	 	 	 
	 	(p) 	
      “Grant Date” means the date on which the Committee grants
      a particular Option, which is the date the Option comes into effect
      provided however that no Option can be exercised unless and until all
      necessary Regulatory Approvals have been obtained.

	 	 	 	 
	 	(q) 	
      “Insider” means an insider as that term is defined in the
      Securities Act.

	 	 	 	 
	 	(r) 	
      “Market Value” means the market value of the Shares as
      determined in accordance with section 5.3.

	 	 	 	 
	 	(s) 	
      “Option” means an incentive share purchase option granted
      pursuant to this Plan entitling the Option Holder to purchase Shares of
      the Company.







- 4 - 

	 	(t) 	
      “Option Certificate” means the certificate, in
      substantially the form set out as Schedule A hereto, evidencing the
      Option.

	 	 	 	 
	 	(u) 	
      “Option Holder” means a Person or Entity who holds an
      unexercised and unexpired Option or, where applicable, the Personal
      Representative of such person.

	 	 	 	 
	 	(v) 	
      “Outstanding Issue” means the number of Shares that are
      outstanding (on a non- diluted basis) immediately prior to the Share
      issuance or grant of Option in question.

	 	 	 	 
	 	(w) 	
      “Person or Entity” means an individual, natural person,
      corporation, government or political subdivision or agency of a
      government, and where two or more persons act as a partnership, limited
      partnership, syndicate or other group for the purpose of acquiring,
      holding or disposing of securities of an issuer, such partnership, limited
      partnership, syndicate or group shall be deemed to be a Person or
      Entity.

	 	 	 	 
	 	(x) 	
      “Personal Representative” means:

	 	 	 	 
	 		(i) 	
      in the case of a deceased Option Holder, the executor or
      administrator of the deceased duly appointed by a court or public
      authority having jurisdiction to do so; and

	 	 	 	 
	 		(ii) 	
      in the case of an Option Holder who for any reason is
      unable to manage his or her affairs, the person entitled by law to act on
      behalf of such Option Holder.

	 	 	 	 
	 	(y) 	
      “Plan” means this stock option plan as from time to time
      amended.

	 	 	 	 
	 	(z) 	
      “Regulatory Approvals” means any necessary approvals of
      the Regulatory Authorities as may be required from time to time for the
      implementation, operation or amendment of this Plan or for the Options
      granted from time to time hereunder.

	 	 	 	 
	 	(aa) 	
      “Regulatory Authorities” means all organized trading
      facilities on which the Shares are listed, and all securities commissions
      or similar securities regulatory bodies having jurisdiction over the
      Company, this Plan or the Options granted from time to time
    hereunder.

	 	 	 	 
	 	(bb) 	
      “Regulatory Rules” means all corporate and securities
      laws, regulations, rules, policies, notices, instruments and other orders
      of any kind whatsoever which may, from time to time, apply to the
      implementation, operation or amendment of this Plan or the Options granted
      from time to time hereunder including, without limitation, those of the
      applicable Regulatory Authorities.

	 	 	 	 
	 	(cc) 	
      “RRIF” means a registered retirement income fund as
      defined in the Income Tax Act (Canada);







- 5 - 

	 	(dd) 	
      “RRSP” means a registered retirement savings plan as
      defined in the Income Tax Act (Canada);

	 	 	 	 
	 	(ee) 	
      “Securities Act” means the Securities Act (British
      Columbia), RSBC 1996, c.418 as from time to time amended.

	 	 	 	 
	 	(ff) 	
      “Share” or “Shares” means, as the case may be, one or
      more common shares without par value in the capital stock of the
      Company.

	 	 	 	 
	 	(gg) 	
      “Subsidiary” means a wholly-owned or controlled
      subsidiary corporation of the Company which definition may be varied by
      the Committee to confirm with the changing interests of the
  Company.

	 	 	 	 
	 	(hh) 	
      “TFSA” means a tax-free savings account as described in
      the Income Tax Act (Canada).

	 	 	 	 
	 	(ii) 	
      “Triggering Event” means:

	 	 	 	 
	 		(i) 	
      the proposed dissolution, liquidation or wind-up of the
      Company;

	 	 	 	 
	 		(ii) 	
      a proposed merger, amalgamation, arrangement or
      reorganization of the Company with one or more corporations as a result of
      which, immediately following such event, the shareholders of the Company
      as a group, as they were immediately prior to such event, are expected to
      hold less than a majority of the outstanding capital stock of the
      surviving corporation;

	 	 	 	 
	 		(iii) 	
      the proposed acquisition of all or substantially all of
      the issued and outstanding shares of the Company by one or more Persons or
      Entities;

	 	 	 	 
	 		(iv) 	
      a proposed Change of Control of the Company;

	 	 	 	 
	 		(v) 	
      the proposed sale or other disposition of all or
      substantially all of the assets of the Company; or

	 	 	 	 
	 		(vi) 	
      a proposed material alteration of the capital structure
      of the Company which, in the opinion of the Committee, is of such a nature
      that it is not practical or feasible to make adjustments to this Plan or
      to the Options granted hereunder to permit the Plan and Options granted
      hereunder to stay in effect.

	 	 	 	 
	 	(jj) 	
      “TSXV” means the TSX Venture Exchange Inc.

	 	 	 	 
	 	(kk) 	
      “Vest” or “Vesting” means that a portion of the Option
      granted to the Option Holder which is available to be exercised by the
      Option Holder at any time and from time to
time.







- 6 - 

	1.2 	
      Choice of Law



The Plan is established under, and the provisions of the Plan
shall be subject to and interpreted and construed solely in accordance with, the
laws of the Province of British Columbia and the laws of Canada applicable
therein without giving effect to the conflicts of laws principles thereof and
without reference to the laws of any other jurisdiction. The Company and each
Option Holder hereby attorn to the jurisdiction of the Courts of British
Columbia. 

	1.3 	
      Headings



The headings used herein are for convenience only and are not
to affect the interpretation of the Plan. 

SECTION 2 
GRANT OF OPTIONS 


	2.1 	
      Grant of Options



The Committee shall, from time to time in its sole discretion,
grant Options to such Persons or Entities and on such terms and conditions as
are permitted under this Plan. 

	2.2 	
      Record of Option
Grants



The Committee or the Administrator, as applicable, shall be
responsible to maintain a record of all Options granted under this Plan and such
record shall contain, in respect of each Option: 

	 	(a) 	
      the name and address of the Option Holder;

	 	 	 
	 	(b) 	
      the category (Executive, Employee or Consultant) under
      which the Option was granted to him, her or it;

	 	 	 
	 	(c) 	
      the Grant Date and Expiry Date of the Option;

	 	 	 
	 	(d) 	
      the number of Shares which may be acquired on the
      exercise of the Option and the Exercise Price of the Option;

	 	 	 
	 	(e) 	
      the vesting and other additional terms, if any, attached
      to the Option; and

	 	 	 
	 	(f) 	
      the particulars of each and every time the Option is
      exercised.




	2.3 	
      Effect of Plan



All Options granted pursuant to the Plan shall be subject to
the terms and conditions of the Plan notwithstanding the fact that the Option
Certificates issued in respect thereof do not expressly contain such terms and
conditions but instead incorporate them by reference to the Plan. The Option
Certificates will be issued for convenience only and in the case of a dispute
with regard to any matter in respect thereof, the provisions of the Plan and the
records of the Company shall prevail over the terms and conditions in the Option
Certificate, save and except as noted below. Each Option will also be subject
to, in addition to the provisions of the Plan, the terms and 




- 7 - 

SECTION 3 
PURPOSE AND PARTICIPATION 

conditions contained in the schedules, if any, attached to the
Option Certificate for such Option. Should the terms and conditions contained in
such schedules be inconsistent with the provisions of the Plan, such terms and
conditions will supersede the provisions of the Plan. 


	3.1 	
      Purpose of Plan



The purpose of the Plan is to provide the Company with a
share-related mechanism to attract, retain and motivate qualified Executives,
Employees and Consultants to contribute toward the long term goals of the
Company, and to encourage such individuals to acquire Shares of the Company as
long term investments. 

	3.2 	
      Participation in
Plan



The Committee shall, from time to time and in its sole
discretion, determine those Executives, Employees and Consultants to whom
Options are to be granted. 

	3.3 	
      Limits on Option
Grants



If the Company is listed on the TSXV, the following limitations
shall apply to the Plan and all Options thereunder so long as such limitations
are required by the TSXV: 

	 	(a) 	
      the maximum number of Options which may be granted to any
      one Option Holder under the Plan within any 12 month period as at the
      Grant Date shall be 5% of the Outstanding Issue (unless the Company has
      obtained disinterested shareholder approval as required by the
    TSXV);

	 	 	 
	 	(b) 	
      disinterested shareholder approval (as defined in the
      TSXV corporate finance manual) is required to the grant to Insiders,
      within a 12 month period, of a number of Options which, when added to the
      number of outstanding incentive stock options granted to Insiders within
      the previous 12 months, exceed 10% of the issued Shares;

	 	 	 
	 	(c) 	
      with respect to section 5.1, the Expiry Date of an Option
      shall be no later than the tenth anniversary of the Grant Date of such
      Option, subject to any applicable Black-Out;

	 	 	 
	 	(d) 	
      the maximum number of Options which may be granted to any
      one Consultant within any 12 month period must not exceed 2% of the
      Outstanding Issue; and

	 	 	 
	 	(e) 	
      the maximum number of Options which may be granted within
      any 12 month period to all persons engaged in investor relations
      activities must not exceed 2% of the Outstanding Issue and such options
      must vest in stages over 12 months with no more than 25% of the Options
      vesting in any three month period, and such limitation will not be an
      amendment to this Plan requiring the Option Holders consent under section
      9.2 of this Plan.







- 8 - 

	3.4 	
      Notification of
Grant



Following the granting of an Option, the Administrator shall,
within a reasonable period of time, notify the Option Holder in writing of the
grant and shall enclose with such notice the Option Certificate representing the
Option so granted. In no case will the Company be required to deliver an Option
Certificate to an Option Holder until such time as the Company has obtained all
necessary Regulatory Approvals for the grant of the Option. 

	3.5 	
      Limitation on
Service



The Plan does not give any Option Holder that is an Executive
the right to serve or continue to serve as an Executive of the Company or any
Subsidiary, nor does it give any Option Holder that is an Employee or Consultant
the right to be or to continue to be employed or engaged by the Company or any
Subsidiary. 

	3.6 	
      No Obligation to
Exercise



Option Holders shall be under no obligation to exercise
Options. 

	3.7 	
      Agreement



The Company and every Option Holder granted an Option hereunder
shall be bound by and subject to the terms and conditions of this Plan. By
accepting an Option granted hereunder, the Option Holder has expressly agreed
with the Company to be bound by the terms and conditions of this Plan. In the
event that the Option Holder receives his, her or its Options pursuant to an
oral or written agreement with the Company or a Subsidiary, whether such
agreement is an employment agreement, consulting agreement or any other kind of
agreement of any kind whatsoever, the Option Holder acknowledges that in the
event of any inconsistency between the terms relating to the grant of such
Options in that agreement and the terms attaching to the Options as provided for
in this Plan, the terms provided for in this Plan shall prevail and the other
agreement shall be deemed to have been amended accordingly. 

	3.8 	
      Notice



Any notice, delivery or other correspondence of any kind
whatsoever to be provided by the Company to an Option Holder will be deemed to
have been provided if provided to the last home address, fax number or email
address of the Option Holder in the records of the Company and the Company shall
be under no obligation to confirm receipt or delivery. 

	3.9 	
      Representation to
TSXV



If the Company is listed on the TSXV, as a condition precedent
to the issuance of an Option, the Company and the Option Holder must be able to
represent to the TSXV as of the Grant Date that the Option Holder is a bona
fide Executive, Employee or Consultant of the Company or any Subsidiary.





- 9 - 

SECTION 4 
NUMBER OF SHARES UNDER PLAN 


	4.1 	
      Board to Approve Issuance of
  Shares



The Committee shall approve by resolution the issuance of all
Shares to be issued to Option Holders upon the exercise of Options, such
authorization to be deemed effective as of the Grant Date of such Options
regardless of when it is actually done. The Committee shall be entitled to
approve the issuance of Shares in advance of the Grant Date, retroactively after
the Grant Date, or by a general approval of this Plan. 

	4.2 	
      Number of Shares



Subject to adjustment as provided for herein, the number of
Shares which will be available for purchase pursuant to Options granted pursuant
to this Plan, plus any other outstanding incentive stock options of the Company
granted pursuant to a previous stock option plan or agreement, will not exceed
10% of the Outstanding Issue at the Grant Date. If any Option expires or
otherwise terminates for any reason without having been exercised in full, the
number of Shares in respect of such expired or terminated Option shall again be
available for the purposes of granting Options pursuant to this Plan. 

	4.3 	
      Fractional Shares



No fractional shares shall be issued upon the exercise of any
Option and, if as a result of any adjustment, an Option Holder would become
entitled to a fractional share, such Option Holder shall have the right to
purchase only the next lowest whole number of Shares and no payment or other
adjustment will be made for the fractional interest. 

SECTION 5 
TERMS AND CONDITIONS OF OPTIONS



	5.1 	
      Exercise Period of
Option



Subject to sections 5.4, 6.2, 6.3, 6.4 and 11.4, the Grant Date
and the Expiry Date of an Option shall be the dates fixed by the Committee at
the time the Option is granted and shall be set out in the Option Certificate
issued in respect of such Option.

	5.2 	
      Number of Shares Under
  Option



The number of Shares which may be purchased pursuant to an
Option shall be determined by the Committee and shall be set out in the Option
Certificate issued in respect of the Option. 

	5.3 	
      Exercise Price of
Option



The Exercise Price at which an Option Holder may purchase a
Share upon the exercise of an Option shall be determined by the Committee and
shall be set out in the Option Certificate issued in respect of the Option. The
Exercise Price shall not be less than the Market Value of the Shares as of the
Grant Date. The Market Value of the Shares for a particular Grant Date shall be
determined as follows: 




- 10 - 

	 	(a) 	
      for each organized trading facility on which the Shares
      are listed, Market Value will be the closing trading price of the Shares
      on the day immediately preceding the Grant Date, and may be less than this
      price if it is within the discounts permitted by the applicable Regulatory
      Authorities;

	 	 	 
	 	(b) 	
      if the Company’s Shares are listed on more than one
      organized trading facility, the Market Value shall be the Market Value as
      determined in accordance with subparagraph (a) above for the primary
      organized trading facility on which the Shares are listed, as determined
      by the Committee, subject to any adjustments as may be required to secure
      all necessary Regulatory Approvals;

	 	 	 
	 	(c) 	
      if the Company’s Shares are listed on one or more
      organized trading facilities but have not traded during the ten trading
      days immediately preceding the Grant Date, then the Market Value will be,
      subject to any adjustments as may be required to secure all necessary
      Regulatory Approvals, such value as is determined by the Committee;
    and

	 	 	 
	 	(d) 	
      if the Company’s Shares are not listed on any organized
      trading facility, then the Market Value will be, subject to any
      adjustments as may be required to secure all necessary Regulatory
      Approvals, such value as is determined by the Committee to be the fair
      value of the Shares, taking into consideration all factors that the
      Committee deems appropriate, including, without limitation, recent sale
      and offer prices of the Shares in private transactions negotiated at arms’
      length.



Notwithstanding anything else contained herein, in no case will
the Market Value be less than the minimum prescribed by each of the organized
trading facilities that would apply to the Company on the Grant Date in
question. 

	5.4 	
      Termination of
Option



Subject to such other terms or conditions that may be attached
to Options granted hereunder, an Option Holder may exercise an Option in whole
or in part at any time and from time to time during the Exercise Period. Any
Option or part thereof not exercised within the Exercise Period shall terminate
and become null, void and of no effect as of the Expiry Time on the Expiry Date.
The Expiry Date of an Option shall be the earlier of the date so fixed by the
Committee at the time the Option is granted as set out in the Option Certificate
and the date established, if applicable, in paragraphs (a) or (b) below or
sections 6.2, 6.3, 6.4, or 11.4 of this Plan: 

	 	(a) 	
      Ceasing to Hold Office - In the event that the Option
      Holder holds his or her Option as an Executive and such Option Holder
      ceases to hold such position other than by reason of death or Disability,
      the Expiry Date of the Option shall be, unless otherwise determined by the
      Committee and expressly provided for in the Option Certificate, the
      90th day following the date the Option Holder ceases to hold
      such position unless the Option Holder ceases to hold such position as a
      result of:

	 	 	 	 
	 		(i) 	
      ceasing to meet the qualifications set forth in the
      corporate legislation applicable to the
Company;







- 11 - 

	 	(ii) 	
      a special resolution having been passed by the
      shareholders of the Company removing the Option Holder as a director of
      the Company or any Subsidiary; or

	 	 	 
	 	(iii) 	
      an order made by any Regulatory Authority having
      jurisdiction to so order, in which case the Expiry Date shall be the date
      the Option Holder ceases to hold such position;
OR




	 	(b) 	
      Ceasing to be Employed or Engaged - In the event that the
      Option Holder holds his or her Option as an Employee or Consultant and
      such Option Holder ceases to hold such position other than by reason of
      death or Disability, the Expiry Date of the Option shall be, unless
      otherwise determined by the Committee and expressly provided for in the
      Option Certificate, the 90th day following the date the Option
      Holder ceases to hold such position, unless the Option Holder ceases to
      hold such position as a result of:

	 	 	 	 
	 		(i) 	
      termination for cause;

	 	 	 	 
	 		(ii) 	
      resigning his or her position; or

	 	 	 	 
	 		(iii) 	
      an order made by any Regulatory Authority having
      jurisdiction to so order, in which case the Expiry Date shall be the date
      the Option Holder ceases to hold such position.



In the event that the Option Holder ceases to hold the position
of Executive, Employee or Consultant for which the Option was originally
granted, but comes to hold a different position as an Executive, Employee or
Consultant prior to the expiry of the Option, the Committee may, in its sole
discretion, choose to permit the Option to stay in place for that Option Holder
with such Option then to be treated as being held by that Option Holder in his
or her new position and such will not be considered to be an amendment to the
Option in question requiring the consent of the Option Holder under section 9.2
of this Plan. Notwithstanding anything else contained herein, in no case will an
Option be exercisable later than the Expiry Date of the Option. 

	5.5 	
      Vesting of Option and
  Acceleration



The vesting schedule for an Option, if any, shall be determined
by the Committee and shall be set out in the Option Certificate issued in
respect of the Option. The Committee may elect, at any time, to accelerate the
vesting schedule of one or more Options including, without limitation, on a
Triggering Event, and such acceleration will not be considered an amendment to
the Option in question requiring the consent of the Option Holder under section
9.2 of this Plan. Notwithstanding the foregoing, the Committee’s election to
accelerate the vesting schedule applicable to Options held by all persons
engaged in investor relations activities shall be subject to receipt of the
Regulatory Authorities approval. 

	5.6 	
      Additional Terms



Subject to all applicable Regulatory Rules and all necessary
Regulatory Approvals, the Committee may attach additional terms and conditions
to the grant of a particular Option, such 




- 12 - 

terms and conditions to be set out in a schedule attached to
the Option Certificate. The Option Certificates will be issued for convenience
only, and in the case of a dispute with regard to any matter in respect thereof,
the provisions of this Plan and the records of the Company shall prevail over
the terms and conditions in the Option Certificate, save and except as noted
below. Each Option will also be subject to, in addition to the provisions of the
Plan, the terms and conditions contained in the schedules, if any, attached to
the Option Certificate for such Option. Should the terms and conditions
contained in such schedules be inconsistent with the provisions of the Plan,
such terms and conditions will supersede the provisions of the Plan. 

SECTION 6 
TRANSFERABILITY OF OPTIONS 


	6.1 	
      Non-transferable



Except as provided otherwise in this section 6, Options are
non-assignable and non-transferable. 

	6.2 	
      Death of Option
Holder



In the event of the Option Holder’s death, any Options held by
such Option Holder shall pass to the Personal Representative of the Option
Holder and shall be exercisable by the Personal Representative on or before the
date which is the earlier of one year following the date of death and the
applicable Expiry Date. 

	6.3 	
      Disability of Option
  Holder



If the employment or engagement of an Option Holder as an
Employee or Consultant or the position of an Option Holder as a director or
officer of the Company or a Subsidiary is terminated by the Company by reason of
such Option Holder’s Disability, any Options held by such Option Holder shall be
exercisable by such Option Holder or by the Personal Representative on or before
the date which is the earlier of one year following the termination of
employment, engagement or appointment as a director or officer and the
applicable Expiry Date. 

	6.4 	
      Disability and Death of Option
  Holder



If an Option Holder has ceased to be employed, engaged or
appointed as a director or officer of the Company or a Subsidiary by reason of
such Option Holder’s Disability and such Option Holder dies within one year
after the termination of such engagement, any Options held by such Option Holder
that could have been exercised immediately prior to his or her death shall pass
to the Personal Representative of such Option Holder and shall be exercisable by
the Personal Representative on or before the date which is the earlier of one
year following the death of such Option Holder and the applicable Expiry Date.


	6.5 	
      Vesting



Unless the Committee determines otherwise, Options held by or
exercisable by a Personal Representative shall, during the period prior to their
termination, continue to vest in accordance with any vesting schedule to which
such Options are subject except for Options which are 




- 13 - 

required to be subject to a vesting schedule pursuant to the
policies of the Regulatory Authorities. 

	6.6 	
      Deemed Non-Interruption of
  Engagement



Employment or engagement by the Company shall be deemed to
continue intact during any military or sick leave or other bona fide leave of
absence if the period of such leave does not exceed 90 days or, if longer, for
so long as the Option Holder’s right to re-employment or re-engagement by the
Company is guaranteed either by statute or by contract. If the period of such
leave exceeds 90 days and the Option Holder’s re-employment or re-engagement is
not so guaranteed, then his or her employment or engagement shall be deemed to
have terminated on the ninety-first day of such leave. 

SECTION 7 
EXERCISE OF OPTION 


	7.1 	
      Exercise of Option



An Option may be exercised only by the Option Holder or the
Personal Representative of any Option Holder. An Option Holder or the Personal
Representative of any Option Holder may exercise an Option in whole or in part
at any time and from time to time during the Exercise Period up to the Expiry
Time on the Expiry Date by delivering to the Administrator the required Exercise
Notice, the applicable Option Certificate and a certified cheque or bank draft
or wire transfer payable to the Company in an amount equal to the aggregate
Exercise Price of the Shares then being purchased pursuant to the exercise of
the Option. Notwithstanding anything else contained herein, Options may not be
exercised during a Black-Out unless the Committee determines otherwise. 

	7.2 	
      Issue of Share
  Certificates



As soon as reasonably practicable following the receipt of the
Exercise Notice, the Administrator shall cause to be delivered to the Option
Holder a certificate for the Shares so purchased. If the number of Shares so
purchased is less than the number of Shares subject to the Option Certificate
surrendered, the Administrator shall also provide a new Option Certificate for
the balance of Shares available under the Option to the Option Holder concurrent
with delivery of the Share Certificate. 

	7.3 	
      No Rights as
Shareholder



Until the date of the issuance of the certificate for the
Shares purchased pursuant to the exercise of an Option, no right to vote or
receive dividends or any other rights as a shareholder shall exist with respect
to such Shares, notwithstanding the exercise of the Option, unless the Committee
determines otherwise. In the event of any dispute over the date of the issuance
of the certificates, the decision of the Committee shall be final, conclusive
and binding. 




- 14 - 

	7.4 	
      Statutory
Deductions



At the time the Option is exercised, the Option Holder shall
deliver to the Company, by certified cheque, bank draft or wire transfer, funds
equal to the amount that the Company determines in good faith it is required to
remit to the appropriate government authority in respect of statutory deductions
applicable to the exercise of the Option (the “Remittance Amount”). For greater
certainty, the Company shall not be required to process the Exercise Notice
until the Option Holder has delivered the Remittance Amount as aforesaid, and
the Option Holder shall not be entitled to receive a certificate representing
the Shares acquired upon exercise of the Option until such delivery has been
made. 

SECTION 8 
ADMINISTRATION 


	8.1 	
      Board or Committee



The Plan shall be administered by the Administrator with
oversight by the Committee. 

	8.2 	
      Powers of Committee



The Committee shall have the authority to do the following:


	 	(a) 	
      oversee the administration of the Plan in accordance with
      its terms;

	 	 	 	 
	 	(b) 	
      appoint or replace the Administrator from time to
      time;

	 	 	 	 
	 	(c) 	
      determine all questions arising in connection with the
      administration, interpretation and application of the Plan, including all
      questions relating to the Market Value;

	 	 	 	 
	 	(d) 	
      correct any defect, supply any information or reconcile
      any inconsistency in the Plan in such manner and to such extent as shall
      be deemed necessary or advisable to carry out the purposes of the
    Plan;

	 	 	 	 
	 	(e) 	
      prescribe, amend, and rescind rules and regulations
      relating to the administration of the Plan;

	 	 	 	 
	 	(f) 	
      determine the duration and purposes of leaves of absence
      from employment or engagement by the Company which may be granted to
      Option Holders without constituting a termination of employment or
      engagement for purposes of the Plan;

	 	 	 	 
	 	(g) 	
      do the following with respect to the granting of
      Options:

	 	 	 	 
	 		(i) 	
      determine the Executives, Employees or Consultants to
      whom Options shall be granted, based on the eligibility criteria set out
      in this Plan;

	 	 	 	 
	 		(ii) 	
      determine the terms of the Option to be granted to an
      Option Holder including, without limitation, the Grant Date, Expiry Date,
      Exercise Price 







- 15 - 

	 	 	
      and
      vesting schedule (which need not be identical with the terms of any other
      Option);
	 	 	
       
	 	(iii) 	
      subject to any necessary Regulatory Approvals and section
      9.2, amend the terms of any Options;

	 	 	 
	 	(iv) 	
      determine when Options shall be granted; and

	 	 	 
	 	(v) 	
      determine the number of Shares subject to each
    Option;




	 	(h) 	
      accelerate the vesting schedule of any Option previously
      granted subject to Regulatory Authorities requirements; and

	 	 	 
	 	(i) 	
      make all other determinations necessary or advisable, in
      its sole discretion, for the administration of the
Plan.




	8.3 	
      Administration by
  Committee



All determinations made by the Committee in good faith shall be
final, conclusive and binding upon all persons. The Committee shall have all
powers necessary or appropriate to accomplish its duties under this Plan. 

	8.4 	
      Interpretation



The interpretation by the Committee of any of the provisions of
the Plan and any determination by it pursuant thereto shall be final, conclusive
and binding and shall not be subject to dispute by any Option Holder. No member
of the Committee or any person acting pursuant to authority delegated by it
hereunder shall be personally liable for any action or determination in
connection with the Plan made or taken in good faith and each member of the
Committee and each such person shall be entitled to indemnification with respect
to any such action or determination in the manner provided for by the Company.


SECTION 9 
APPROVALS AND AMENDMENT 


	9.1 	
      Shareholder Approval of
  Plan



Notwithstanding any provision contained in this Plan, the Plan
must be reconfirmed as prescribed by the Regulatory Authorities by a resolution
passed by a majority of the votes cast at a meeting of shareholders, and if this
Plan is not reconfirmed by the shareholders as required by this provision, no
further grants of Options may be made under this Plan. 

	9.2 	
      Amendment of Option or
  Plan



Subject to any required Regulatory Approvals, the Committee may
from time to time amend any existing Option or the Plan or the terms and
conditions of any Option thereafter to be granted provided that where such
amendment relates to an existing Option and it would: 

	 	(a) 	
      materially decrease the rights or benefits accruing to an
      Option Holder; or







- 16 - 

	 	(b) 	
      materially increase the obligations of an Option
      Holder;



then, unless otherwise excepted out by a provision of this
Plan, the Committee must also obtain the written consent of the Option Holder in
question to such amendment. If at the time the Exercise Price of an Option is
reduced and the Option Holder is an Insider of the Company, the Insider must not
exercise the option at the reduced Exercise Price until the reduction in
Exercise Price has been approved by the disinterested shareholders of the
Company, if required by the the Regulatory Authorities. 

SECTION 10 
CONDITIONS PRECEDENT TO ISSUANCE OF
OPTIONS AND SHARES 


	10.1 	
      Compliance with
Laws



An Option shall not be granted or exercised, and Shares shall
not be issued pursuant to the exercise of any Option, unless the grant and
exercise of such Option and the issuance and delivery of such Shares comply with
all applicable Regulatory Rules, and such Options and Shares will be subject to
all applicable trading restrictions in effect pursuant to such Regulatory Rules
and the Company shall be entitled to legend the Option Certificates and the
certificates representing such Shares accordingly. 

	10.2 	
      Regulatory
Approvals



In administering this Plan, the Committee will seek any
Regulatory Approvals which may be required. The Committee will not permit any
Options to be granted without first obtaining the necessary Regulatory Approvals
unless such Options are granted conditional upon such Regulatory Approvals being
obtained. The Committee will make all filings required with the Regulatory
Authorities in respect of the Plan and each grant of Options hereunder. No
Option granted will be exercisable or binding on the Company unless and until
all necessary Regulatory Approvals have been obtained. The Committee shall be
entitled to amend this Plan and the Options granted hereunder in order to secure
any necessary Regulatory Approvals and such amendments will not require the
consent of the Option Holders under section 9.2 of this Plan. 

	10.3 	
      Inability to Obtain Regulatory
    Approvals



The Company’s inability to obtain Regulatory Approval from any
applicable Regulatory Authority, which Regulatory Approval is deemed by the
Committee to be necessary to complete the grant of Options hereunder, the
exercise of those Options or the lawful issuance and sale of any Shares pursuant
to such Options, shall relieve the Company of any liability with respect to the
failure to complete such transaction. 

SECTION 11 
ADJUSTMENTS AND TERMINATION



	11.1 	
      Termination of Plan



Subject to any necessary Regulatory Approvals, the Committee
may terminate or suspend the Plan.




- 17 - 

	11.2 	
      No Grant During Suspension of
  Plan



No Option may be granted during any suspension, or after
termination, of the Plan. Suspension or termination of the Plan shall not,
without the consent of the Option Holder, alter or impair any rights or
obligations under any Option previously granted. 

	11.3 	
      Alteration in Capital
  Structure



If there is a material alteration in the capital structure of
the Company and the Shares are consolidated, subdivided, converted, exchanged,
reclassified or in any way substituted for, the Committee shall make such
adjustments to this Plan and to the Options then outstanding under this Plan as
the Committee determines to be appropriate and equitable under the
circumstances, so that the proportionate interest of each Option Holder shall,
to the extent practicable, be maintained as before the occurrence of such event.
Such adjustments may include, without limitation: 

	 	(a) 	
      a change in the number or kind of shares of the Company
      covered by such Options; and

	 	 	 
	 	(b) 	
      a change in the Exercise Price payable per Share
      provided, however, that the aggregate Exercise Price applicable to the
      unexercised portion of existing Options shall not be altered, it being
      intended that any adjustments made with respect to such Options shall
      apply only to the Exercise Price per Share and the number of Shares
      subject thereto.



For purposes of this section 11.3, and without limitation,
neither: 

	 	(c) 	
      the issuance of additional securities of the Company in
      exchange for adequate consideration (including services); nor

	 	 	 
	 	(d) 	
      the conversion of outstanding securities of the Company
      into Shares shall be deemed to be material alterations of the capital
      structure of the Company.



Any adjustment made to any Options pursuant to this section
11.3 shall not be considered an amendment requiring the Option Holder’s consent
for the purposes of section 9.2 of this Plan. 

	11.4 	
      Triggering Events



Subject to the Company complying with section 11.5 and any
necessary Regulatory Approvals and notwithstanding any other provisions of this
Plan or any Option Certificate, the Committee may, without the consent of the
Option Holder or Holders in question: 

	 	(a) 	
      cause all or a portion of any of the Options granted
      under the Plan to terminate upon the occurrence of a Triggering Event;
      or

	 	 	 
	 	(b) 	
      cause all or a portion of any of the Options granted
      under the Plan to be exchanged for incentive stock options of another
      corporation upon the occurrence of a Triggering Event in such ratio and at
      such exercise price as the Committee deems appropriate, acting
      reasonably.







- 18 - 

Such termination or exchange shall not be considered an
amendment requiring the Option Holder’s consent for the purpose of section 9.2
of the Plan. 

	11.5 	
      Notice of Termination by Triggering
      Event



In the event that the Committee wishes to cause all or a
portion of any of the Options granted under this Plan to terminate on the
occurrence of a Triggering Event, it must give written notice to the Option
Holders in question not less than 10 days prior to the consummation of a
Triggering Event so as to permit the Option Holder the opportunity to exercise
the vested portion of the Options prior to such termination. Upon the giving of
such notice and subject to any necessary Regulatory Approvals, all Options or
portions thereof granted under the Plan which the Company proposes to terminate
shall become immediately exercisable notwithstanding any contingent vesting
provision to which such Options may have otherwise been subject, provided that
Regulatory Authorities approval of the same must be received in respect of
Options held by Consultants engaged in investor relations activities.


	11.6 	
      Determinations to be Made By
    Committee



Adjustments and determinations under this section 11 shall be
made by the Committee, whose decisions as to what adjustments or determination
shall be made, and the extent thereof, shall be final, binding, and conclusive.





SCHEDULE A 

HEMISPHERE ENERGY CORPORATION 

STOCK OPTION PLAN - OPTION CERTIFICATE

This Option Certificate is issued pursuant to the provisions of
the Stock Option Plan (the “Plan”) of Hemisphere Energy Corporation (the
“Company”) and evidences that <@> [Name of Option Holder] is the
holder (the “Option Holder”) of an option (the “Option”) to
purchase up to <@> common shares (the “Shares”) in the capital
stock of the Company at a purchase price of Cdn.$<@> per Share (the
“Exercise Price”). This Option may be exercised at any time and from time
to time from and including the following Grant Date through to and including up
to 4:00 p.m. local time in Vancouver, British Columbia (the “Expiry
Time”) on the following Expiry Date: 

	 	(a) 	
      the Grant Date of this Option is <@>, 20<@>;
      and

	 	 	 
	 	(b) 	
      subject to sections 5.4, 6.2, 6.3, 6.4 and 11.4 of the
      Plan, the Expiry Date of this Option is
  <@>,20<@>.



To exercise this Option, the Option Holder must deliver to the
Administrator of the Plan, prior to the Expiry Time on the Expiry Date, an
Exercise Notice, in the form provided in the Plan, which is incorporated by
reference herein, together with the original of this Option Certificate and a
certified cheque or bank draft payable to the Company in an amount equal to the
aggregate of the Exercise Price of the Shares in respect of which this Option is
being exercised. 

This Option Certificate and the Option evidenced hereby is not
assignable, transferable or negotiable and is subject to the detailed terms and
conditions contained in the Plan. This Option Certificate is issued for
convenience only and in the case of any dispute with regard to any matter in
respect hereof, the provisions of the Plan and the records of the Company shall
prevail. This Option is also subject to the terms and conditions contained in
the schedules, if any, attached hereto. 

[Include the following TSXV hold period only if the exercise
price of the stock options is based on less than Market Price or if the option
is granted to a director or officer.]  

[Any share certificates, or witten notice
in the case of uncertificated shares, issued pursuant to an exercise of the
Option before <@>[date four months and one day after Grant
Date] will contain the following legend: 

“Without prior written approval of
the TSX Venture Exchange and compliance with all applicable securities
legislation, the securities represented by this certificate may not be sold,
transferred, hypothecated or otherwise traded on or through the facilities of
the TSX Venture Exchange or otherwise in Canada or to or for the benefit of a
Canadian resident until <@>[date four months and one day after
Grant Date].”] 




- 2 - 

	Dated as of
    ___________________________________________________________________________	 	 
	  	 	 
	HEMISPHERE ENERGY 	 	 
	CORPORATION 	 	 
	by its authorized signatory: 	 	 
	 	 	 
	 	 	 


The Company and the Optionee under the terms and conditions of
the Plan is a bona fide Executive, Employee of Consultant of the Company
or any Subsidiary, entitled to receive Options under the TSX Venture Exchange
Policies. 

The Option Holder agrees to execute, deliver, file and
otherwise assist the Company in filing any report, undertaking or document with
respect to the awarding of the Option and exercise of the Option, as may be
required by the Regulatory Authorities. The Option Holder further acknowledges
that if the Plan has not been approved by the shareholders of the Company on the
Grant Date, this Option is not exercisable until such approval has been
obtained. 

	Signature of Option Holder: 	 	 
		 	Date signed:
    ___________________________________________________________________________
	Signature 	 	 
	  	 	 
	  	 	 
	Print Name 	 	 
	  	 	 
	  	 	 
	Address 	 	 
	 	 	 
	 	 	 






OPTION CERTIFICATE – SCHEDULE

[Complete the following additional terms and any other
special terms, if applicable, or remove the inapplicable terms or this schedule
entirely.] 

The additional terms and conditions attached to the Option
represented by this Option Certificate are as follows: 

	1. 	
      The Options will not be exercisable unless and until they
      have vested and then only to the extent that they have vested. The Options
      will vest in accordance with the following:

	 	 	 
		(a) 	
      <@> Shares (<@>%) will vest and be
      exercisable on or after the Grant Date;

	 	 	 
		(b) 	
      <@> additional Shares (<@>%) will vest and be
      exercisable on or after <@> [date];

	 	 	 
		(c) 	
      <@> additional Shares (<@>%) will vest and be
      exercisable on or after <@> [date];

	 	 	 
		(d) 	
      <@> additional Shares (<@>%) will vest and be
      exercisable on or after <@> [date];

	 	 	 
	2. 	
      Upon the Option Holder ceasing to hold a position with
      the Company, other than as a result of the events set out in paragraphs
      5.4(a) or 5.4(b) of the Plan, the Expiry Date of the Option shall be
      <@> [Insert date desired that is longer or shorter than the
      standard 90 days as set out in the Plan] following the date the Option
      Holder ceases to hold such position.







SCHEDULE B 

Hemisphere Energy Corporation 
STOCK OPTION
PLAN


NOTICE OF EXERCISE OF OPTION

TO: The Administrator, Stock Option Plan

The undersigned hereby irrevocably gives notice, pursuant to
the Stock Option Plan (the “Plan”) of Hemisphere Energy Corporation (the
“Company”), of the exercise of the Option to acquire and hereby
subscribes for (cross out inapplicable item): 

	 	(a) 	
      all of the Shares; or

	 	 	 
	 	(b) 	
      ______________of the Shares;



which are the subject of the Option Certificate attached hereto
(attach your original Option Certificate). 

The undersigned tenders herewith a certified cheque or bank
draft (circle one) payable to the Company or in an amount equal to the
aggregate Exercise Price of the aforesaid Shares and directs the Company to
issue the certificate evidencing said Shares in the name of the undersigned to
be mailed to the undersigned at the following address (provide full complete
address): 

_________________________________________________

_________________________________________________

_________________________________________________

_________________________________________________

The undersigned acknowledges the Option is not validly
exercised unless this Notice is completed in strict compliance with this form
and delivered to the required address with the required payment prior to 4:00
p.m. local time in Vancouver, BC on the Expiry Date of the Option. 

DATED the _________day of __________________, 20 ____

	 	 
	 	Signature of Option Holder