8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: November 23, 2015

Date of earliest event reported: November 16, 2015

HYDROCARB ENERGY CORPORATION

(Exact name of registrant as specified in its charter)

Nevada	000-53313	30-0420930
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

800 Gessner, Suite 375, Houston, Texas	77024
(Address of principal executive offices)	(Zip Code)

(713) 970-1590

Registrant’s telephone number, including area code

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

Darling Capital, LLC Note

On November 17, 2015, Hydrocarb Energy Corporation (“we”, “us” and the “Company”) sold Darling Capital, LLC (“Darling”) an 8% Short Term Cash Redeemable Note (the “Darling Note”) in the principal amount of $200,000, pursuant to the terms of a Securities Purchase Agreement entered into between us and Darling dated October 21, 2015. The Darling Note, which was dated November 12, 2015, accrues interest at the rate of 8% per annum (22% upon the occurrence of an event of default) and is payable on September 12, 2016, provided that we have the option to extend the maturity date of the note for an additional nine months in the event we provide Darling at least 30 days’ notice of our intention to extend such maturity date. In the event we do not prepay the Darling note, together with accrued and unpaid interest, on or prior to the 180th day after the issuance date (the “Darling Pre-Payment Date”), together with the pre-payment penalties described below, Darling has the right to convert the principal and accrued interest owed under such note into our common stock.  The conversion price for such conversions is the greater of a 40% discount (subject to additional 10% discounts in the event we become subject to a DTC “chill” or there is not current available information regarding the Company on OTC Markets and further adjustments during the occurrence of certain major announcements), to the lowest closing bid price for our common stock during the 15 trading days immediately preceding a conversion request (the “Market Price”) and $0.001 per share. Notwithstanding the above, in the event the Market Price on the date (i) the conversion shares are transferred to and deposited into Darling’s brokerage account and (ii) Darling’s broker has confirmed that it can execute trades, is lower than the Market Price on the date of conversion, the conversion price is adjusted to such lower price and additional shares are required to be issued to the holder. Notwithstanding the foregoing, there is an initial soft floor of $0.30 per share on conversions, which means that in the event our common stock closes below $0.30 per share, then the holder may not convert its note for the 10 trading days immediately preceding the first time the price closes below $0.30 per share. However, in the event the price of our common stock closes above $0.30 per share in that 10 day period, the holder may convert, without waiting the balance of the 10 days. Additionally, following the 10 day period, the holder has a three day grace period to convert, even if the common stock closes below the next lower soft floor level (as described in the following sentence). This process is repeated with soft floors of $0.15 per share and $0.075 per share. At no time may the Darling Note be converted into shares of our common stock if such conversion would result in Darling and its affiliates owning an aggregate of in excess of 9.9% of the then outstanding shares of our common stock.

Along with any prepayment, we are required to pay the following pre-payment penalties in addition to the principal amount and interest then outstanding under the Darling Note: until the 60th day after the issuance date, a premium of 15% of the principal amount and interest owed on the note; from the 61st day to the 120th day after the issuance date, a premium of 35% of the principal amount and interest owed on the note; from the 121st day to the Darling Pre-Payment Date, a premium of 45% of the principal amount and interest owed on the note; and after the Darling Pre-Payment Date, no prepayment can be made of the Darling Note without the prior written approval of Darling. Darling agreed not to sell short any shares of our common stock so long as the Darling Note is outstanding.

We are subject to fees, penalties and in some cases liquidated damages for our failure to comply with the terms of the Darling Note. The Darling Note provides for customary events of default such as failing to timely make payments under the Darling Note when due, and including our failure to maintain a reserve of shares in connection with the conversion of the Darling Note as provided in the Darling Note, us becoming delinquent in our periodic filings with the SEC, and if OTC Markets changes our designation to ‘No Information’ (Stop Sign), or yield. Upon the occurrence of an event of default, Darling can declare the entire amount of the Darling Note immediately due and payable, together with additional penalties and liquidated damages as described in further detail in the Darling Note.

Pursuant to a side letter entered into with Darling, Darling agreed to grant us an option for three 30 day conversion moratorium periods, with the first period beginning on the Darling Pre-Payment Date, and the next two beginning 30 days and 60 days, respectively, after the end of such first period. We are able to exercise the options for conversion moratoriums by notifying Darling no later than 10 trading days prior to the Darling Pre-Payment Date (or thereafter, the end of the next applicable conversion moratorium period) and by paying Darling $20,000 prior to five trading days before the end of the then current period (with the first such payment due at least five trading days prior to the Pre-Payment Date).

Darling also entered into a Subordination Agreement in favor of our senior lender, Shadow Tree Capital Management, LLC, to subordinate the repayment of the Darling Note to amounts owed by us to Shadow Tree.

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The descriptions of the Securities Purchase Agreement, Darling Note and Darling side letter are not complete and are qualified in their entirety by the Securities Purchase Agreement, Darling Note and Darling side letter, filed herewith as Exhibits 10.1 through 10.3, the terms of which are incorporated herein by reference.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

The information regarding the Darling Note described in Item 1.01 above and Item 3.02 below, are incorporated in this Item 2.03 by reference.

Item 3.02 Unregistered Sales of Equity Securities.

As described in Item 1.01 above, in November 2015, we sold the Darling Note, which note is convertible into our common stock pursuant to the applicable terms of such note. We believe that the sale of the note was exempt from registration pursuant to (a) Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”); and/or (b) Rule 506 of the Securities Act, and the regulations promulgated thereunder. With respect to the transaction described above, no general solicitation was made either by us or by any person acting on our behalf. The transaction was privately negotiated, and did not involve any kind of public solicitation. The securities sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to an exemption therefrom. Darling represented to us that they were an “accredited investor”.

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Effective November 13, 2015, the Board of Directors of the Company increased the number of members of the Company’s Board of Directors from two to three and appointed Robert M. Harrell as a member of the Board of Directors to fill the newly created vacancy, each pursuant to the power provided to the Board of Directors by the Company’s Bylaws and the Nevada Revised Statutes.  Mr. Harrell formally accepted the appointment as a member of the Board of Directors on November 23, 2015.

Mr. Harrell’s biographical information is provided below:

Robert M. Harrell, Age 62

Mr. Harrell has served as the Director of Offshore Select, Americas, of INTECSEA, Inc., an offshore engineering company, since December 2014. From November 2011 to September 2014, Mr. Harrell served as President Europe Region (2013 to October 2014) and Vice President Sales & Commercial, Asia Pacific Region (2011 to 2012), of Wison Offshore & Marine Ltd., a marine contracting company. From June 2005 to October 2011, Mr. Harrell served in various positions with Williams Companies, Inc. (“Williams”), including General Manager – Western Gulf of Mexico (2011),General Manager – Eastern Gulf of Mexico (2010) and Director Technical Services – Deepwater (2005 to 2009). Prior to joining Williams, Mr. Harrell served in various management and other positions with J. Ray McDermott and its related entities from 1975 to 2005, at locations based in Houston, Texas; Jakarta, Indonesia; Dubai, UAE; Lynchburg, Virginia; and New Orleans, Louisiana. Mr. Harrell obtained a Bachelor of Civil Engineering Degree from the Georgia Institute of Technology in 1975 and a Master of Business Administration from Harvard University in 1982.

Item 8.01 Other Events

On or around August 25, 2015, Kent P. Watts, our Chief Executive Officer and Chairman, entered into a voting agreement in favor of S. Chris Herndon, a member of the Board of Directors of the Company. Pursuant to the voting agreement, Mr. Watts provided Mr. Herndon a voting proxy to vote all of the shares of common stock which Mr. Watts owned (approximately 4,946,955 shares as of his entry into the agreement) or which he may acquire in the future, to vote to elect or remove (as applicable) 66.6% of members of the Company’s Board of Directors on any stockholder vote (i.e., 2 out of 3 directors). The voting agreement was to become effective, only if Mr. Watts had sold $1 million in securities in private transactions before September 21, 2015 and was to remain effective from such date, if ever, until the earlier of: (a) August 19, 2017; and (b) the due date of a certain convertible note which a company affiliated with Mr. Herndon (Duma Holdings, LLC) may choose to purchase from the Company in the future as described in greater detail in the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on July 31, 2015 (as applicable, the “Termination Date”).

On or around the same date, Chris Watts, the nephew of Kent P. Watts, and the largest shareholder of the Company, entered into a voting agreement with Mr. Herndon on substantially similar terms as the voting agreement with Kent P. Watts described above.

As a result of Mr. Watts not selling $1 million in securities in private transactions on similar terms as described above before September 21, 2015, the voting agreements were never effective and expired; provided that on November 16, 2015, the parties entered into a First Amendment to Voting Agreements to remove the prior condition to effectiveness regarding the required sale of $1 million in securities before September 21, 2015, and as a result the voting agreements are currently in full force and effect and will remain in effect until the Termination Date. As a result of the voting agreements, Mr. Herndon has the right to appoint 66.6% of the members of the Company’s Board of Directors until the Termination Date.

Item 9.01 Financial Statements and Exhibits.

Exhibit No.	Description
10.1*	Securities Purchase Agreement dated October 21, 2015, between Hydrocarb Energy Corporation and Darling Capital, LLC
10.2*	8% Short Term Cash Redeemable Note ($200,000), Due September 12, 2016, dated November 12, 2015, issued by Hydrocarb Energy Corporation to Darling Capital, LLC
10.3*	Side Letter Agreement dated November 12, 2015 between Darling Capital, LLC and Hydrocarb Energy Corporation
10.4(1)	Voting Agreement (August 25, 2015) between Kent P. Watts and S. Chris Herndon
10.5(1)	Voting Agreement (August 28, 2015) between Christopher Watts and S. Chris Herndon
10.6*	First Amendment to Voting Agreements (November 16, 2015) by and between S. Chris Herndon, Kent P. Watts and Christopher Watts

* Filed herewith.

(1) Filed as exhibits to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 22, 2015 and incorporated herein by reference (File Number 000-53313). 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

Date: November 23, 2015	Hydrocarb Energy Corporation
	/s/ Kent P. Watts
	Kent P. Watts
	Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1*	Securities Purchase Agreement dated October 21, 2015, between Hydrocarb Energy Corporation and Darling Capital, LLC
10.2*	8% Short Term Cash Redeemable Note ($200,000), Due September 12, 2016, dated November 12, 2015, issued by Hydrocarb Energy Corporation to Darling Capital, LLC
10.3*	Side Letter Agreement dated November 12, 2015 between Darling Capital, LLC and Hydrocarb Energy Corporation
10.4(1)	Voting Agreement (August 25, 2015) between Kent P. Watts and S. Chris Herndon
10.5(1)	Voting Agreement (August 28, 2015) between Christopher Watts and S. Chris Herndon
10.6*	First Amendment to Voting Agreements (November 16, 2015) by and between S. Chris Herndon, Kent P. Watts and Christopher Watts

* Filed herewith.

(1) Filed as exhibits to our Current Report on Form 8-K filed with the Securities and Exchange Commission on September 22, 2015 and incorporated herein by reference (File Number 000-53313). 

EX-10.1

Exhibit 10.1

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT (the “Agreement”), dated as of October 21, 2015 by and between Hydrocarb Energy Corporation, a Nevada corporation, with headquarters located at 405 Lexington Avenue 25th Floor New York, NY 10174 (the “Company”), and DARLING CAPITAL, LLC., a New York Limited Liability Company, with its address at 767 Third Ave Suite # 25-1A New York, NY. 10017 (the “Buyer”).

WHEREAS:

A.           The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by the rules and regulations as promulgated by the United States Securities and Exchange Commission (the “SEC”) under the Securities Act of 1933, as amended (the “1933 Act”);

B.           Buyer desires to purchase and the Company desires to issue and sell, upon the terms and conditions set forth in this Agreement an 8% Short Term Cash Redeemable note of the Company, in the form attached hereto as Exhibit A, in the aggregate principal amount of $200,000.00 (together with any note(s) issued in replacement thereof or as a dividend thereon or otherwise with respect thereto in accordance with the terms thereof, the “Note”), convertible into shares of common stock, $0.001 par value per share, of the Company (the “Common Stock”), upon the terms and subject to the limitations and conditions set forth in such Note.

C.           The Buyer wishes to purchase, upon the terms and conditions stated in this Agreement, such principal amount of Note as is set forth immediately below its name on the signature pages hereto; and

NOW THEREFORE, the Company and the Buyer severally (and not jointly) hereby agree as follows:

1.           Purchase and Sale of Note.

a.           Purchase of Note.  On the Closing Date (as defined below), the Company shall issue and sell to the Buyer and the Buyer agrees to purchase from the Company such principal amount of Note as is set forth immediately below the Buyer’s name on the signature pages hereto.

b.           Form of Payment.  On the Closing Date (as defined below), (i) the Buyer shall pay the purchase price for the Note to be issued and sold to it at the Closing (as defined below) (the “Purchase Price”) by wire transfer of immediately available funds to the Company, in accordance with the Company’s written wiring instructions, against delivery of the Note in the principal amount equal to the Purchase Price as is set forth immediately below the Buyer’s name on the signature pages hereto, and (ii) the Company shall deliver such duly executed Note on behalf of the Company, to the Buyer, against delivery of such Purchase Price.

c.           Closing Date.  The date and time of the issuance and sale of the Note pursuant to this Agreement (the “Closing Date”) shall be on or about November 12, 2015 or such other mutually agreed upon time.  The closing of the transactions contemplated by this Agreement (the “Closing”) shall occur on the Closing Date at such location as may be agreed to by the parties.

2.           Buyer’s Representations and Warranties.  The Buyer represents and warrants to the Company that:

a.           Investment Purpose.  As of the date hereof, the Buyer is purchasing the Note and the shares of Common Stock issuable upon conversion of or otherwise pursuant to the Note, such shares of Common Stock being collectively referred to herein as the “Conversion Shares” and, collectively with the Note, the “Securities”) for its own account and not with a present view towards the public sale or distribution thereof, except pursuant to sales registered or exempted from registration under the 1933 Act; provided, however, that by making the representations herein, the Buyer does not agree to hold any of the Securities for any minimum or other specific term and reserves the right to dispose of the Securities at any time in accordance with or pursuant to a registration statement or an exemption under the 1933 Act.

b.           Accredited Investor Status.  The Buyer is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D (an “Accredited Investor”).

c.           Reliance on Exemptions.  The Buyer understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer’s compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities.

d.           Information.  The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, furnished with all materials relating to the business, finances and operations of the Company and materials relating to the offer and sale of the Securities which have been requested by the Buyer or its advisors.  The Buyer and its advisors, if any, have been, and for so long as the Note remain outstanding will continue to be, afforded the opportunity to ask questions of the Company.  Notwithstanding the foregoing, the Company has not disclosed to the Buyer any material nonpublic information and will not disclose such information unless such information is disclosed to the public prior to or promptly following such disclosure to the Buyer.  Neither such inquiries nor any other due diligence investigation conducted by Buyer or any of its advisors or representatives shall modify, amend or affect Buyer’s right to rely on the Company’s representations and warranties contained in Section 3 below.  The Buyer understands that its investment in the Securities involves a significant degree of risk. The Buyer is not aware of any facts that may constitute a breach of any of the Company's representations and warranties made herein.

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e.           Governmental Review.  The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed upon or made any recommendation or endorsement of the Securities.

f.           Transfer or Re-sale.  The Buyer understands that (i) the sale or re-sale of the Securities has not been and is not being registered under the 1933 Act or any applicable state securities laws, and the Securities may not be transferred unless (a) the Securities are sold pursuant to an effective registration statement under the 1933 Act, (b) the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in comparable transactions to the effect that the Securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration, which opinion shall be accepted by the Company, (c) the Securities are sold or transferred to an “affiliate” (as defined in Rule 144 promulgated under the 1933 Act (or a successor rule) (“Rule 144”)) of the Buyer who agrees to sell or otherwise transfer the Securities only in accordance with this Section 2(f) and who is an Accredited Investor, (d) the Securities are sold pursuant to Rule 144, or (e) the Securities are sold pursuant to Regulation S under the 1933 Act (or a successor rule) (“Regulation S”), and the Buyer shall have delivered to the Company, at the cost of the Buyer, an opinion of counsel that shall be in form, substance and scope customary for opinions of counsel in corporate transactions, which opinion shall be accepted by the Company; (ii) any sale of such Securities made in reliance on Rule 144 may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any re-sale of such Securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such Securities under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder (in each case).  Notwithstanding the foregoing or anything else contained herein to the contrary, the Securities may be pledged as collateral in connection with a bonafide margin account or other lending arrangement.

g.           Legends.  The Buyer understands that the Note and, until such time as the Conversion Shares have been registered under the 1933 Act may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, the Conversion Shares may bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of the certificates for such Securities):

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS.  THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT.  NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

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The legend set forth above shall be removed and the Company shall issue a certificate without such legend to the holder of any Security upon which it is stamped, if, unless otherwise required by applicable state securities laws, (a) such Security is registered for sale under an effective registration statement filed under the 1933 Act or otherwise may be sold pursuant to Rule 144 or Regulation S without any restriction as to the number of securities as of a particular date that can then be immediately sold, or (b) such holder provides the Company with an opinion of counsel, in form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Security may be made without registration under the 1933 Act, which opinion shall be accepted by the Company so that the sale or transfer is effected.  The Buyer agrees to sell all Securities, including those represented by a certificate(s) from which the legend has been removed, in compliance with applicable prospectus delivery requirements, if any. In the event that the Company does not accept the opinion of counsel provided by the Buyer with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, within 2 business days, it will be considered an Event of Default under the Note.

h.           Authorization; Enforcement. This Agreement has been duly and validly authorized.  This Agreement has been duly executed and delivered on behalf of the Buyer, and this Agreement constitutes a valid and binding agreement of the Buyer enforceable in accordance with its terms.

i.           Residency.  The Buyer is a resident of the jurisdiction set forth immediately below the Buyer’s name on the signature pages hereto.

3.           Representations and Warranties of the Company.  The Company represents and warrants to the Buyer that:

a.           Organization and Qualification.  The Company and each of its subsidiaries, if any, is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated, with full power and authority (corporate and other) to own, lease, use and operate its properties and to carry on its business as and where now owned, leased, used, operated and conducted.

b.           Authorization; Enforcement.  (i) The Company has all requisite corporate power and authority to enter into and perform this Agreement, the Note and to consummate the transactions contemplated hereby and thereby and to issue the Securities, in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement, the Note by the Company and the consummation by it of the transactions contemplated hereby and thereby (including without limitation, the issuance of the Note and the issuance and reservation for issuance of the Conversion Shares issuable upon conversion or exercise thereof) have been duly authorized by the Company’s Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its shareholders is required, (iii) this Agreement has been duly executed and delivered by the Company by its authorized representative, and such authorized representative is the true and official representative with authority to sign this Agreement and the other documents executed in connection herewith and bind the Company accordingly, and (iv) this Agreement constitutes, and upon execution and delivery by the Company of the Note, each of such instruments will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms.

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c.           Issuance of Shares.  The Conversion Shares are duly authorized and reserved for issuance and, upon conversion of the Note in accordance with its respective terms, will be validly issued, fully paid and non-assessable, and free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Company and will not impose personal liability upon the holder thereof.

d.           Acknowledgment of Dilution.  The Company understands and acknowledges the potentially dilutive effect to the Common Stock upon the issuance of the Conversion Shares upon conversion of the Note.  The Company further acknowledges that its obligation to issue Conversion Shares upon conversion of the Note in accordance with this Agreement, the Note is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

e.           No Conflicts.  The execution, delivery and performance of this Agreement, the Note by the Company and the consummation by the Company of the transactions contemplated hereby and thereby (including, without limitation, the issuance and reservation for issuance of the Conversion Shares) will not (i) conflict with or result in a violation of any provision of the Certificate of Incorporation or By-laws, or (ii) violate or conflict with, or result in a breach of any provision of, or constitute a default (or an event which with notice or lapse of time or both could become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, patent, patent license or instrument to which the Company or any of its subsidiaries is a party, or (iii)  result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations and regulations of any self-regulatory organizations to which the Company or its securities are subject) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a material adverse effect).  All consents, authorizations, orders, filings and registrations which the Company is required to obtain pursuant to the preceding sentence have been obtained or effected on or prior to the date hereof.  The Company is not in violation of the listing requirements of the Over-the-Counter Bulletin Board (the “OTCBB”) or applicable trading market and does not reasonably anticipate that the Common Stock will be delisted by the OTCBB or applicable trading market in the foreseeable future, nor are the Company’s securities “chilled” by FINRA.  The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

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f.           Absence of Litigation.  There is no action, suit, claim, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or body pending or, to the knowledge of the Company or any of its subsidiaries, threatened against or affecting the Company or any of its subsidiaries, or their officers or directors in their capacity as such, that could have a material adverse effect.  Schedule 3(f) contains a complete list and summary description of any pending or, to the knowledge of the Company, threatened proceeding against or affecting the Company or any of its subsidiaries, without regard to whether it would have a material adverse effect.  The Company and its subsidiaries are unaware of any facts or circumstances which might give rise to any of the foregoing.

g.           Acknowledgment Regarding Buyer’ Purchase of Securities.  The Company acknowledges and agrees that the Buyer is acting solely in the capacity of arm’s length purchasers with respect to this Agreement and the transactions contemplated hereby.  The Company further acknowledges that the Buyer is not acting as a financial advisor or fiduciary of the Company (or in any similar capacity) with respect to this Agreement and the transactions contemplated hereby and any statement made by the Buyer or any of its respective representatives or agents in connection with this Agreement and the transactions contemplated hereby is not advice or a recommendation and is merely incidental to the Buyer’ purchase of the Securities.  The Company further represents to the Buyer that the Company’s decision to enter into this Agreement has been based solely on the independent evaluation of the Company and its representatives.

h.           No Integrated Offering.  Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales in any security or solicited any offers to buy any security under circumstances that would require registration under the 1933 Act of the issuance of the Securities to the Buyer.  The issuance of the Securities to the Buyer will not be integrated with any other issuance of the Company’s securities (past, current or future) for purposes of any shareholder approval provisions applicable to the Company or its securities.

i.           Title to Property.  The Company and its subsidiaries have good and marketable title in fee simple to all real property and good and marketable title to all personal property owned by them which is material to the business of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances and defects except such as are described in Schedule 3(i) or such as would not have a material adverse effect.  Any real property and facilities held under lease by the Company and its subsidiaries are held by them under valid, subsisting and enforceable leases with such exceptions as would not have a material adverse effect.

j.           Breach of Representations and Warranties by the Company.  If the Company breaches any of the representations or warranties set forth in this Section 3, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an Event of default under the Note.

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4.           COVENANTS.

a.           Expenses.  At the Closing, the Company shall reimburse Buyer for expenses incurred by them in connection with the negotiation, preparation, execution, delivery and performance of this Agreement and the other agreements to be executed in connection herewith (“Documents”), including, without limitation, reasonable attorneys’ and consultants’ fees and expenses, transfer agent fees, fees for stock quotation services, fees relating to any amendments or modifications of the Documents or any consents or waivers of provisions in the Documents, fees for the preparation of opinions of counsel, escrow fees, and costs of restructuring the transactions contemplated by the Documents.  When possible, the Company must pay these fees directly, otherwise the Company must make immediate payment for reimbursement to the Buyer for all fees and expenses immediately upon written notice by the Buyer or the submission of an invoice by the Buyer.

b.           Listing.  The Company shall promptly secure the listing of the Conversion Shares upon each national securities exchange or automated quotation system, if any, upon which shares of Common Stock are then listed (subject to official notice of issuance) and, so long as the Buyer owns any of the Securities, shall maintain, so long as any other shares of Common Stock shall be so listed, such listing of all Conversion Shares from time to time issuable upon conversion of the Note.  The Company will obtain and, so long as the Buyer owns any of the Securities, maintain the listing and trading of its Common Stock on the OTCBB, OTC PINK or any equivalent replacement exchange, the Nasdaq National Market (“Nasdaq”), the Nasdaq SmallCap Market (“Nasdaq SmallCap”), the New York Stock Exchange (“NYSE”), or the American Stock Exchange (“AMEX”) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of the Financial Industry Regulatory Authority (“FINRA”) and such exchanges, as applicable.  The Company shall promptly provide to the Buyer copies of any notices it receives from the OTCBB, OTC PINK and any other exchanges or quotation systems on which the Common Stock is then listed regarding the continued eligibility of the Common Stock for listing on such exchanges and quotation systems.

c.           Corporate Existence.  So long as the Buyer beneficially owns any Note, the Company shall maintain its corporate existence and shall not sell all or substantially all of the Company’s assets, except in the event of a merger or consolidation or sale of all or substantially all of the Company’s assets, where the surviving or successor entity in such transaction (i) assumes the Company’s obligations hereunder and under the agreements and instruments entered into in connection herewith and (ii) is a publicly traded corporation whose Common Stock is listed for trading on the OTCBB, OTC PINK, Nasdaq, Nasdaq SmallCap, NYSE or AMEX.

d.           No Integration.  The Company shall not make any offers or sales of any security (other than the Securities) under circumstances that would require registration of the Securities being offered or sold hereunder under the 1933 Act or cause the offering of the Securities to be integrated with any other offering of securities by the Company for the purpose of any stockholder approval provision applicable to the Company or its securities.

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e.           Breach of Covenants.  If the Company breaches any of the covenants set forth in this Section 4, and in addition to any other remedies available to the Buyer pursuant to this Agreement, it will be considered an event of default under the Note.

5.           Governing Law; Miscellaneous.

a.           Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of New York without regard to principles of conflicts of laws.  Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of New York or in the federal courts located in the state and county of New York.  The parties to this Agreement hereby irrevocably waive any objection to jurisdiction and venue of any action instituted hereunder and shall not assert any defense based on lack of jurisdiction or venue or based upon forum non conveniens.  The Company and Buyer waive trial by jury.  The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs.  In the event that any provision of this Agreement or any other agreement delivered in connection herewith is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of any agreement.   Each party hereby irrevocably waives personal service of process and consents to process being served in any suit, action or proceeding in connection with this Agreement by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any other manner permitted by law.

b.           Counterparts; Signatures by Facsimile.  This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party.  This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

c.           Headings.  The headings of this Agreement are for convenience of reference only and shall not form part of, or affect the interpretation of, this Agreement.

d.           Severability.  In the event that any provision of this Agreement is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any provision hereof which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision hereof.

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e.           Entire Agreement; Amendments.  This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein and therein and, except as specifically set forth herein or therein, neither the Company nor the Buyer makes any representation, warranty, covenant or undertaking with respect to such matters.  No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the majority in interest of the Buyer.

f.           Notices.  All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice.  Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Company, to:

800 Gessner

Suite 375

Houston, TX 77024

Attn: Kent Patrick Watts, CEO

                   If to the Buyer:

DARLING CAPITAL, LLC

767 Third Ave Suite # 25-1A

New York, NY 10017

Attn: Yehuda Marrus

Each party shall provide notice to the other party of any change in address.

g.           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other.  Notwithstanding the foregoing, the Buyer may assign its rights hereunder to any person that purchases Securities in a private transaction from the Buyer or to any of its “affiliates,” as that term is defined under the 1934 Act, without the consent of the Company.

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h.           Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

i.           Survival.  The representations and warranties of the Company and the agreements and covenants set forth in this Agreement shall survive the closing hereunder notwithstanding any due diligence investigation conducted by or on behalf of the Buyer.  The Company agrees to indemnify and hold harmless the Buyer and all their officers, directors, employees and agents for loss or damage arising as a result of or related to any breach or alleged breach by the Company of any of its representations, warranties and covenants set forth in this Agreement or any of its covenants and obligations under this Agreement, including advancement of expenses as they are incurred.

j.           Further Assurances.  Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

k.           No Strict Construction.  The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

l.           Remedies.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Buyer by vitiating the intent and purpose of the transaction contemplated hereby.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Agreement will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Agreement, that the Buyer shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Agreement and to enforce specifically the terms and provisions hereof, without the necessity of showing economic loss and without any bond or other security being required.

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IN WITNESS WHEREOF, the undersigned Buyer and the Company have caused this Agreement to be duly executed as of the date first above written.

Hydrocarb Energy Corporation

By: /s/ Kent P. Watts                                          

Name:  Kent P. Watts

Title: Kent Patrick Watts, CEO

DARLING CAPITAL, LLC.

By: /s/ Yehuda Marrus                                          

Name: Yehuda Marrus

Title:   President

AGGREGATE SUBSCRIPTION AMOUNT:

Aggregate Principal Amount of Note:  $200,000.00

Aggregate Purchase Price:

$200,000.00

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EX-10.2

Exhibit 10.2

NEITHER THE ISSUANCE NOR SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE CONVERTIBLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

Principal Amount: $200,000 Purchase Price: $200,000 Issue Date: November 12, 2015

8%SHORT TERM CASH REDEEMABLE NOTE

FORVALUERECEIVED, HYDROCARBENERGYCORPORATION,a   Nevada corporation (hereinafter called the “Borrower”), hereby promises to pay to the order of DARLINGCAPITAL,LLCa New York limited  liability  company,  or  registered  assigns  (the  “Holder”) the sum of Two Hundred Thousand ($200,000.00) as set forth herein, on September 12, 2016 (the “Maturity Date”), and to pay interest on the unpaid principal balance hereof at the rate of eight percent (8%) (the “Interest Rate”) per annum from November 12, 2015 until the Note plus any and all accrued interest is paid in full. The Holder will have the option to extend the Maturity Date an additional nine (9) months. The Holder must inform the Borrower, in writing, within thirty (30) days from the original Maturity Date of its intent to extend the Maturity Date. Interest shall commence accruing on the date that the Note is fully paid and shall be computed on the basis of a 360-day year and the actual number of days elapsed. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum or the maximum rate permitted under applicable law from the due date thereof until the same is paid (“Default Interest”). All payments due hereunder (to the extent not converted into common stock, $0.001 par value per share (the “Common Stock”) in accordance with the terms hereof) shall be made in lawful money of the United States of America. All payments shall be made at such address as the Holder shall hereafter give to the Borrower by written notice made in accordance with the provisions of this Note. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a business day, the same shall instead be due on the next succeeding day which is a business day and, in the case of any interest payment date which is not the date on which this Note is paid in full, the extension of the due date thereof shall not be taken into account for purposes of determining the amount of interest due on such date. As used in this Note, the term “business day” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in the city of New York, New York are authorized or required by law or executive order to remain closed.

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This Note is free from all taxes, liens, claims and encumbrances with respect to the issue thereof and shall not be subject to preemptive rights or other similar rights of shareholders of the Borrower and will not impose personal liability upon the holder thereof.

The following terms shall apply to this Note:

ARTICLE I.

CONVERSION RIGHTS

1.1.                        ConversionRight. The Holder shall have the right upon the occurrence of a Pre-Payment Default, to convert all or any part of the outstanding and unpaid principal amount of this Note into fully paid and non- assessable shares of Common Stock, as such Common Stock exists on the Issue Date, or any shares of capital stock or other securities of the Borrower into which such Common Stock shall hereafter be changed or reclassified at the Conversion Price determined as provided herein (a “Conversion”); provided, however, that in no event shall the Holder be entitled to convert any portion of this Note in excess of that portion of this Note upon conversion of which the sum of (1) the number of shares of Common Stock beneficially owned by the Holder and its affiliates (other than shares of Common Stock which may be deemed beneficially owned through the ownership of the unconverted portion of the Notes or the unexercised or unconverted portion of any other security of the Borrower subject to a limitation on conversion or exercise analogous to the limitations contained herein) and (2) the number of shares of Common Stock issuable upon the conversion of the portion of this Note with respect to which the determination of this proviso is being made, would result in beneficial ownership by the Holder and its affiliates of more than 9.99% of the outstanding shares of Common Stock.  For  purposes  of  the  proviso  to the immediately preceding sentence, beneficial ownership shall be determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and Regulations 13D-G thereunder, except as otherwise provided in clause (1) of such proviso, provided, further, however, that the limitations on conversion may be waived by the Holder upon, at the election of the Holder, not less than 61 days’ prior written notice to the Borrower, and the provisions of the conversion limitation shall continue to apply until such 61st day (or such later date, as determined by the Holder, as may be specified in such notice of waiver). The number of shares of Common Stock to be issued upon each conversion of this Note shall be determined by  dividing the Conversion Amount (as defined below) by the applicable Conversion Price then in effect on the date specified in the notice of conversion, in the form attached hereto as Exhibit A (the “Notice of Conversion”), delivered to the Borrower by the Holder in accordance with Section 1.4 below; provided that the Notice of Conversion is submitted by facsimile or e-mail (or by other means resulting in, or reasonably expected to result in, notice) to the Borrower before 6:00 p.m., New York, New York time on such conversion date (the “Conversion Date”). The term “Conversion Amount” means, with respect to any conversion of this Note, the sum of (1) the principal amount of this Note to be converted in such conversion plus(2) at the Holder’s option, accrued and unpaid interest, if any, on such principal amount at the interest rates provided in this Note to the Conversion Date, plus(3) at the Holder’s option, Default Interest, if any, on the amounts referred to in the immediately preceding clauses (1) and/or (2) plus(4) at the Holder’s option, any amounts owed to the Holder pursuant to Section 1.4(g) hereof.

1.2.                        ConversionPrice.  CalculationofConversionPrice.Theconversionprice(the“ConversionPrice”)shallequaltheVariableConversionPrice(asdefinedherein)(subjecttoequitableadjustmentsforstocksplits,stockdividends or rights offerings by the Borrower relating to the Borrower’s securities or the securities of any subsidiary of the Borrower, combinations, recapitalization, reclassifications, extraordinary distributions and similar events). The "VariableConversionPrice"shallmeanthe greater of 60% multipliedbytheMarketPrice(asdefinedherein) and $.0001 per share.“MarketPrice”meansthelowest closing bid Price (as defined below) for the Common Stock during the Fifteen (15) Trading Day period immediately preceding the Conversion Date (the “Look Back Period”). “Trading Price” means, for any security as of any date, the closing stock price on the OTCQB Market, or applicable trading market (the “OTCPink”) as reported by a reliable reporting service (“Reporting Service”) designated by the Holder (i.e. Bloomberg); provided that if the closing bid price for thecommonstockontheClearingdate(definedbelow)islowerthantheclosingbidprice,thenthepurchasepriceshallbeadjustedsuchthatthediscount shallbetakenfromtheclosingbidpriceontheClearingDate,andtheBorrower shallissueadditionalsharestoHolder toreflectsuchadjustedConversion Price.ForpurposesofthisAgreement,theClearingDateshallbethelatestdateonwhich(i)theconversionsharesaretransferredtoanddepositedintotheHolder's brokerageaccountbytheBorrower’srepresentativesortransferagentand(ii)Holder'sbrokerhasconfirmedwithHolderthattheHoldermayexecutetrades of the conversion shares. If such events occur after 5:30 PM Eastern Standard Time, the events shall be deemed to have occurred on the next trading day. There shall be an initial floor at $0.30 per share. If the Borrower’s stock price closes below $0.30 per share, the Holder may not submit a notice of conversion for 10 trading days after the drop. However, if the stock price closes back above the floor price, then the Holder may submit a conversion notice and does not need to wait the balance of the 10 days. This process shall be repeated with lower floors of a)$0.15 per share and $0.075 per share. If the stock price closes below a lower priced floor during the 10 day period the Holder does not need to wait an additional 10 days to submit the notice of conversion Finally, after the 10 days blackout period, the Holder shall have a 3 day grace period to submit a conversion notice even if the price of the Borrower’s stock was to close below the next lower floor level. Upon the exercise of any conversion, the Holder shall duly notify the Borrower whether principal or interest is being converted. If the Borrower’s Common stock is chilled for deposit at DTC, becomes chilled at any point while this Agreement remains outstanding or deposit otherwise additional fees due to a Yield Sign, Stop Sign or other trading restrictions, an additional 10% discount will be attributed to the Conversion Price defined hereof. For purposes of this agreement, “Trading Day” shall mean any day on which the Common Stock is tradable for any period on the OTCPink, or on the principal securities exchange or other securities market on which the Common Stock is then being traded. The Borrower shall bear any and all miscellaneous expenses that may arise as a result of conversion of the note and the delivery of shares of common stock thereunder including but not limited to transfer agent fees, rule 144 legal opinion fees and deposit fees. All accrued conversion expenses paid by the holder shall be added to the amount being converted under the note. No fractional shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded up or down, as the case may be, to the nearest whole share.

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b)           The Borrower acknowledges that it will take all reasonable steps necessary or appropriate to issue and deliver the Common Stock upon conversion, including providing a board of directors’ resolution authorizing the issuance of Common Stock. Without in any way limiting the Holder’s right to pursue other remedies, including actual damages and/or equitable relief, the parties agree that if delivery of the Common Stock issuable upon conversion of this Note is not delivered by the Deadline (as defined below), due to the willful acts of the Borrower designed to hinder the delivery of the Common Stock to the Holder, the Borrower shall pay to the Holder $2000.00 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock.  Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interfere with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section are justified.

c)           ConversionPriceDuringMajorAnnouncements. Notwithstanding anything contained in Section 1.2(a) to the contrary, in the event the Borrower (i) makes a public announcement that it intends to consolidate or merge with any other corporation (other than a merger in which the Borrower is the surviving or continuing corporation and its capital stock is unchanged) or sell or transfer all or substantially all of the assets of the Borrower or (ii) any person, group or entity (including the Borrower) publicly announces a tender offer to purchase 50% or more of the Borrower’s Common Stock (or any other takeover scheme) (the date of the announcement referred to in clause (i) or (ii) is hereinafter referred to as the “Announcement Date”), then the Conversion Price shall, effective upon the Announcement Date and continuing through the Adjusted Conversion Price Termination Date (as defined below), be equal to the lower of (x) the Conversion Price which would have been applicable for a Conversion occurring on the Announcement Date and (y) the Conversion Price that would otherwise be in effect. From and after the Adjusted Conversion Price Termination Date, the Conversion Price shall be determined as set forth in Section 1.2(a). For purposes hereof, “Adjusted Conversion Price Termination Date” shall mean, with respect to any proposed transaction or tender offer (or takeover scheme) for which a public announcement as contemplated by this Section 1.2(c) has been made, the date upon which the Borrower (in the case of clause (i) above) or the person, group or entity (in the case of clause (ii) above) consummates or publicly announces the termination or abandonment of the proposed transaction or tender offer (or takeover scheme) which caused this Section 1.2(c) to become operative.

1.3.             AuthorizedShares. The Borrower covenants that during the period the conversion right exists, the Borrower will reserve from its authorized and unissued Common Stock a sufficient number of shares, free from preemptive rights, to provide for the issuance of Common Stock upon the full conversion of this Note issued. The Borrower is required at all times to have authorized and reserved one and one half times the number of shares that is actually issuable upon full conversion of the Note (based on the Conversion Price of the Notes in effect from time to time)(the “Reserved Amount”). The Reserved Amount shall be increased from time to time in accordance with the Borrower’s obligations. Initially, the Borrower shall reserve One Million Two Hundred Thousand (1,200,000) shares of common stock in the name of the Holder. The Borrower represents that upon issuance, such shares will be duly and validly issued, fully paid and non-assessable. In addition, if the Borrower shall issue any securities or make any change to its capital structure which would change the number of shares of Common Stock into which the Notes shall be convertible at the then current Conversion Price, the Borrower shall at the same time make proper provision so that thereafter there shall be a sufficient number of shares of Common Stock authorized and reserved, free from preemptive rights, for conversion of the outstanding Notes. The Borrower (i) acknowledges that it has irrevocably instructed its transfer agent to issue certificates for the Common Stock issuable upon conversion of this Note, and (ii) agrees that its issuance of this Note shall constitute full authority to  its officers and agents who are charged with the duty of executing stock certificates to execute and issue the necessary certificates for shares of Common Stock in accordance with the terms and conditions of this Note. If, at any time the Borrower does not maintain the Reserved Amount it will be considered an Event of Default under Section 3.15 of the Note, provided that the Borrower shall have 10 Business Days to begin to cure the default (during which time, if an authorized share increase is required, the Borrower will at the minimum file the necessary paperwork with the SEC to start the process to increase its authorized shares, and which if timely completed, will not constitute an Event of Default).

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Method ofConversion.

a)           MechanicsofConversion. Subject to Section 1.1, this Note may be converted by the Holder in whole or in part at any time from time to time after the occurrence of a Pre-Payment Default, by (A) submitting to the Borrower a Notice of Conversion (by facsimile, e-mail or other reasonable means of communication dispatched on the Conversion Date prior to 6:00 p.m., New York, New York time) and (B) subject to Section 1.4(b), surrendering this Note at the principal office of the Borrower.

b)           SurrenderofNoteUponConversion. Notwithstanding anything to the contrary set forth herein, upon conversion of this Note in accordance with the terms hereof, the Holder shall not be required to physically surrender this Note to the Borrower unless the entire unpaid principal amount of this Note is so converted. The Holder and the Borrower shall maintain records showing the principal amount so converted and the dates of such conversions or shall use such other method, reasonably satisfactory to the Holder and the Borrower, so as not to require physical surrender of this Note upon each such conversion. In the event of any dispute or discrepancy, such records of the Borrower shall, primafacie,be controlling and determinative in the absence of manifest error. Notwithstanding the foregoing, if any portion of this Note is converted as aforesaid, the Holder may not transfer this Note unless the Holder first physically surrenders this Note to the Borrower, whereupon the Borrower will forthwith issue and deliver upon the order of the Holder a new Note of like tenor, registered as the Holder (upon payment by the Holder of any applicable transfer taxes) may request, representing in the aggregate the remaining unpaid principal amount of this Note. The Holder and any assignee, by acceptance of this Note, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Note, the unpaid and unconverted principal amount of this Note represented by this Note may be less than the amount stated on the face hereof.

c)           PaymentofTaxes. The Borrower shall not be required to pay any tax which may be payable in respect of any transfer involved in the issue and delivery of shares of Common Stock or other securities or property on conversion of this Note in a name other than that of the Holder (or in street name), and the Borrower shall not be required to issue or deliver any such shares or other securities or property unless and until the person or persons (other than the Holder or the custodian in whose street name such shares are to be held for the Holder’s account) requesting the issuance thereof shall have paid to the Borrower the amount of any such tax or shall have established to the satisfaction of the Borrower that such tax has been paid.

d)           DeliveryofCommonStockUponConversion. Upon receipt by the Borrower from the Holder of a facsimile transmission or e-mail (or other reasonable means of communication) of a Notice of Conversion meeting the requirements for conversion as provided in this Section 1.4, the Borrower shall issue and deliver or cause to be issued and delivered to or upon the order of the Holder certificates for the Common Stock issuable upon such conversion within three (3) business days after such receipt (the “Deadline”) (and, solely in the case of conversion of the entire unpaid principal amount hereof, surrender of this Note) in accordance with the terms hereof.

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e)           ObligationofBorrowertoDeliverCommonStock. Upon receipt by the Borrower of a duly and properly executed Notice of Conversion, the Holder shall be deemed to be the holder of record of the Common Stock issuable upon such conversion, the outstanding principal amount and the amount of accrued and unpaid interest on this Note shall be reduced to reflect such conversion, and, unless the Borrower defaults on its obligations under this Article I, all rights with respect to the portion of this Note being so converted shall forthwith terminate except the right to receive the Common Stock or other securities, cash or other assets, as herein provided, on such conversion. If the Holder shall have given a Notice of Conversion as provided herein, the Borrower’s obligation to issue and deliver the certificates for Common Stock shall be absolute and unconditional, irrespective of the absence of any action by the Holder to enforce the same, any waiver or consent with respect to any provision thereof, the recovery of any judgment against any person or any action to enforce the same, any failure or delay in the enforcement of any other obligation of the Borrower to the holder of record, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder of any obligation to the Borrower, and irrespective of any other circumstance which might otherwise limit such obligation of the Borrower to the Holder in connection with such conversion. The Conversion Date specified in the Notice of Conversion shall be the Conversion Date so long as the Notice of Conversion is received by the Borrower before 6:00 p.m., New York, New York time, on such date.

f)           DeliveryofCommonStockbyElectronicTransfer. In lieu of delivering physical certificates representing the Common Stock issuable upon conversion, provided the Borrower is participating in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer (“FAST”) program, upon request of the Holder and its compliance with the provisions contained in Section 1.1 and in this Section 1.4, the Borrower shall use its best efforts to cause its transfer agent to electronically transmit the Common Stock issuable upon conversion to the Holder by crediting the account of Holder’s Prime Broker with DTC through its Deposit Withdrawal Agent Commission (“DWAC”) system.

g)           Failure to Deliver Common Stock Prior to Deadline. Without in any waylimitingtheHolder’srighttopursueotherremedies,includingactualdamagesand/or equitable relief,thepartiesagreethatifdeliveryoftheCommonStockissuableuponconversionofthisNoteis not deliveredbythe Deadline theBorrower shall payto the Holder $2000.00 per day in cash, for each day beyond the Deadline that the Borrower fails to deliver such Common Stock through willful acts designed to hinder the delivery of Common Stock to the Holder. Such cash amount shall be paid to Holder by the fifth day of the month following the month in which it has accrued or, at the option of the Holder (by written notice to the Borrower by the first day of the month following the month in which it has accrued), shall be added to the principal amount of this Note, in which event interest shall accrue thereon in accordance with the terms of this Note and such additional principal amount shall be convertible into Common Stock in accordance with the terms of this Note. The Borrower agrees that the right to convert is a valuable right to the Holder. The damages resulting from a failure, attempt to frustrate, interference with such conversion right are difficult if not impossible to qualify. Accordingly the parties acknowledge that the liquidated damages provision contained in this Section 1.4(g) are justified.

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1.4.             ConcerningtheShares. The shares of Common Stock issuable upon conversion of this Note may not be sold or transferred unless (i) such shares are sold pursuant to an effective registration statement under the Act or (ii) the Borrower or its transfer agent shall have been furnished with an opinion of counsel (which opinion shall be in form, substance and scope customary for opinions of counsel in comparable transactions) to the effect that the shares to be sold or transferred may be sold or transferred pursuant to an exemption from such registration or (iii) such shares are sold or transferred pursuant to Rule 144 under the Act (or a successor rule) (“Rule 144”) or (iv) such shares are transferred to an “affiliate” (as defined in Rule 144) of the Borrower who agrees to sell or otherwise transfer the shares only in accordance with this Section 1.5 and who is an Accredited Investor. (and subject to the removal provisions set forth below), until such time as the shares of Common Stock issuable upon conversion of this Note have been registered under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold, each certificate for shares of Common Stock issuable upon conversion of this Note that has not been so included in an effective registration statement or that has not been sold pursuant to an effective registration statement or an exemption that permits removal of the legend, shall bear a legend substantially in the following form, as appropriate:

“NEITHER THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE NOR THE SECURITIES INTO WHICH THESE SECURITIES ARE EXERCISABLE HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL (WHICH COUNSEL SHALL BE SELECTED BY THE HOLDER), IN A GENERALLY ACCEPTABLE FORM, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.”

legend set forth above shall be removed and the Borrower shall issue to the Holder a new certificate therefore free of any transfer legend if (i) the Borrower or its transfer agent shall have received an opinion of counsel form, substance and scope customary for opinions of counsel in comparable transactions, to the effect that a public sale or transfer of such Common Stock may be made without registration under the Act, which opinion shall be accepted by the Borrower so that the sale or transfer is or (ii) in the case of the Common Stock issuable upon conversion of this Note, such security is registered for sale by the Holder under an effective registration statement filed under the Act or otherwise may be sold pursuant to Rule 144 without any restriction as to the number of securities as of a particular date that can then be immediately sold. In the event that the Borrower does not reasonably accept the opinion of counsel provided by the Holder with respect to the transfer of Securities pursuant to an exemption from registration, such as Rule 144 or Regulation S, at the Deadline, it will be considered an Event of Default pursuant to Section 3.2 of this Note.

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1.5.             Effect ofCertainEvents.

a)           EffectofMerger,Consolidation,Etc. At the option of the Holder, the sale, conveyance or disposition of all or substantially all of the assets of the Borrower, the effectuation by the Borrower of a transaction or series of related transactions in which more than 50% of the voting power of the Borrower is disposed of, or the consolidation, merger or other business combination of the Borrower with or into any other Person (as defined below) or Persons when the Borrower is not the survivor shall either: (i) be deemed to be an Event of Default (as defined in Article III) pursuant to which the Borrower shall be required to pay to the Holder upon the consummation of and as a condition to such transaction an amount equal to the Default Amount (as defined in Article III) or (ii) be treated pursuant to Section 1.6(b) hereof. “Person” shall mean any individual, corporation, limited liability company, partnership, association, trust or other entity or organization.

b)           AdjustmentDuetoMerger,Consolidation,Etc. If, at any time when this Note is issued and outstanding and prior to conversion of all of the Notes, there shall be any merger, consolidation, exchange of shares, recapitalization, reorganization, or other similar event, as a result of which shares of Common Stock of the Borrower shall be changed into the same or a different number of shares of another class or classes of stock or securities of the Borrower or another entity, or in case of any sale or conveyance of all or substantially all of the assets of the Borrower other than in connection with a plan of complete liquidation of the Borrower, then the Holder of this Note shall thereafter have the right to receive upon conversion of this Note, upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore issuable upon conversion, such stock, securities or assets which the Holder would have been entitled to receive in such transaction had this Note been converted in full immediately prior to such transaction (without regard to any limitations on conversion set forth herein), and in any such case appropriate provisions shall be made with respect to the rights and interests of the Holder of this Note to the end that the provisions hereof (including, without limitation, provisions for adjustment of the Conversion Price and of the number of shares issuable upon conversion of the Note) shall thereafter be applicable, as nearly as may be practicable in relation to any securities or assets thereafter deliverable upon the conversion hereof. The Borrower shall not affect any transaction described in this Section 1.6(b) unless (a) it first gives, to the extent practicable, thirty (30) days prior written notice (but in any event at least fifteen (15) days prior written notice) of the record date of the special meeting of shareholders to approve, or if there is no such record date, the consummation of, such merger, consolidation, exchange of shares, recapitalization, reorganization or other similar event or sale of assets (during which time the Holder shall be entitled to convert this Note) and (b) the resulting successor or acquiring entity (if not the Borrower) assumes by written instrument the obligations of this Section 1.6(b). The above provisions shall similarly apply to successive consolidations, mergers, sales, transfers or share exchanges.

c)           AdjustmentDuetoDistribution. If the Borrower shall declare or make any distribution of its assets (or rights to acquire its assets) to holders of Common Stock as a dividend, stock repurchase, by way of return of capital or otherwise (including any dividend or distribution to the Borrower’s shareholders in cash or shares (or rights to acquire shares) of capital stock of a subsidiary (i.e., a spin-off)) (a “Distribution”), then the Holder of this Note shall be entitled, upon any conversion of this Note after the date of record for determining shareholders entitled to such Distribution, to receive the amount of such assets which would have been payable to the Holder with respect to the shares of Common Stock issuable upon such conversion had such Holder been the holder of such shares of Common Stock on the record date for the determination of shareholders entitled to such Distribution.

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d)           PurchaseRights. If, at any time when any Notes are issued and outstanding, the Borrower issues any convertible securities or rights to purchase stock, warrants, securities or other property (the “Purchase Rights”) pro rata to the record holders of any class of Common Stock, then the Holder of this Note will be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such Holder could have acquired if such Holder had held the number of shares of Common Stock acquirable upon complete conversion of this Note (without regard to any limitations on conversion contained herein) immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights.

e)           NoticeofAdjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price as a result of the events described in this Section 1.6, the Borrower, at its expense, shall promptly compute such adjustment or readjustment and prepare and furnish to the Holder a certificate setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Borrower shall, upon the written request at any time of the Holder, furnish to such Holder a like certificate setting forth (i) such adjustment or readjustment, (ii) the Conversion Price at the time in effect and (iii) the number of shares of Common Stock and the amount, if any, of other securities or property which at the time would be received upon conversion of the Note.

1.6.             Intentionallyleftblank.

1.7.             StatusasShareholder. Upon submission of a Notice of Conversion by a Holder, (i) the shares covered thereby (other than the shares, if any, which cannot be issued because their issuance would exceed such Holder’s allocated portion of the Reserved Amount or Maximum Share Amount) shall be deemed converted into shares of Common Stock and (ii) the Holder’s rights as a Holder of such converted portion of this Note shall cease and terminate, excepting only the right to receive certificates for such shares of Common Stock and to any remedies provided herein or otherwise available at law or in equity to such Holder because of a failure by the Borrower to comply with the terms of this Note. Notwithstanding the foregoing, if a Holder has not received certificates for all shares of Common Stock prior to the tenth (10th) business day after the expiration of the Deadline with respect to a conversion of any portion of this Note for any reason, then (unless the Holder otherwise elects to retain its status as a holder of Common Stock by so notifying the Borrower) the Holder shall regain the rights of a Holder of this Note with respect to such unconverted portions of this Note and the Borrower shall, as soon as practicable, return such unconverted Note to the Holder or, if the Note has not been surrendered, adjust its records to reflect that such portion of this Note has not been converted. In all cases, the Holder shall retain all of its rights and remedies for the Borrower’s failure to convert this Note.

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Prepayment. The Company shall pay this Note in full, together will any and all accrued and unpaid interest, subject to the terms of this Section 1.8, on the date which occurs 180 days after the issuance date hereof (the “Prepayment Date”). In the event the Note is not prepaid in full on or before the Prepayment Date, as such may be extended by any side letters or other agreements relating there-to, it shall be deemed a “Pre-Payment Default” hereunder. Notwithstandinganythingtothe contrary contained in this Note, at any time during the period beginning on the Issue Date, the Borrower shall have the right, exercisable on not less than three (3) Trading Days prior written notice to the Holder of the Note to prepay the outstanding Note (principal and accrued interest), in full, in accordance with this Section 1.8.Any notice of prepayment hereunder (an “Optional Prepayment Notice”) shall be delivered to the Holder of the Note at its registered addresses and shall state: (1) that the Borrower is exercising its right to prepay the Note, and (2) the date of prepayment which shall be not more than three (3) Trading Days from the date of the Optional Prepayment Notice. On the date fixed for prepayment (the “Optional Prepayment Date”), the Borrower shall make payment of the Optional Prepayment Amount (as defined below) to or upon the order of the Holder as specified by the Holder in writing to the Borrower at least one (1) business day prior to the Optional Prepayment Date. If the Borrower exercises its right to prepay the Note, the Borrower shall make payment to the Holder an amount as follows: (i) if the redemption is within the first 60 days this note is in effect of either an amount in cash (the “Optional Prepayment Amount”) equal to 115%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus (y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus(z) any amounts owed to the Holder pursuant to Section 1.4(g) hereof, or the current total value of the shares had this note been completely converted with all the discounts and terms included herein and the shares sold on the market, whichever is greater. (ii) if the redemption is after the 61st day this note is in effect, but less than the 120th day this note is in effect, then either an amount in cash (the “Optional Prepayment Amount”) equal to 135%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus(y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus(z) any amounts owed to the Holder pursuant to Section 1.4(g) hereof, or the current total value of the shares had this note been completely converted with all the discounts and terms included herein and the shares sold on the market, whichever is greater. (iii) if the redemption is after the 121st day this note is in effect, but before the Prepayment Date, then either an amount in cash (the “Optional Prepayment Amount”) equal to 145%, multiplied by the sum of: (w) the then outstanding principal amount of this Note plus(x) accrued and unpaid interest on the unpaid principal amount of this Note to the Optional Prepayment Date plus(y) Default Interest, if any, on the amounts referred to in clauses (w) and (x) plus(z) any amounts owed to the Holder pursuant to Section 1.4(g) hereof, or the current total value of the shares had this note been completely converted with all the discounts and terms included herein and the shares sold on the market, whichever is greater. If the Borrower delivers an Optional Prepayment Notice and fails to pay the Optional Prepayment Amount due to the Holder of the Note within two (2) business days following the Optional Prepayment Date, the Borrower shall forever forfeit its right to prepay the Note pursuant to this Section 1.8

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After the Prepayment Date, the Borrower shall have no right of prepayment, except as otherwise agreed.

ARTICLE II.

CERTAIN COVENANTS

2.1.             DistributionsonCapitalStock. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent (a) pay, declare or set apart for such payment, any dividend or other distribution (whether in cash, property or other securities) on shares of capital stock other than dividends on shares of Common Stock solely in the form of additional shares of Common Stock or (b) directly or indirectly or through any subsidiary make any other payment or distribution in respect of its capital stock except for distributions pursuant to any shareholders’ rights plan which is approved by a majority of the Borrower’s disinterested directors.

2.2.             RestrictiononStockRepurchases. So long as the Borrower shall have any obligation under this Note, the Borrower shall not without the Holder’s written consent redeem, repurchase or otherwise acquire (whether for cash or in exchange for property or other securities or otherwise) in any one transaction or series of related transactions any shares of capital stock of the Borrower or any warrants, rights or options to purchase or acquire any such shares.

2.3.             SaleofAssets. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, sell, lease or otherwise dispose of any significant portion of its assets outside the ordinary course of business. Any consent to the disposition of any assets may be conditioned on a specified use of the proceeds of disposition.

2.4.             AdvancesandLoans. So long as the Borrower shall have any obligation under this Note, the Borrower shall not, without the Holder’s written consent, lend money, give credit or make advances to any person, firm, joint venture or corporation, including, without limitation, officers, directors, employees, subsidiaries and affiliates of the Borrower, except loans, credits or advances (a) in existence or committed on the date hereof and which the Borrower has informed Holder in writing prior to the date hereof, (b) made in the ordinary course of business or (c) not in excess of $25,000.

2.5.             TimelyreportingobligationSo long as the Borrower shall have any obligation under this Note the borrower shall remain current in its fillings with the SEC, as required under the Exchange Act.

ARTICLE III.

EVENTS OF DEFAULT

If any of the following events of default (each, an “Event of Default”) shall occur:

3.1.             FailuretoPayPrincipalorInterest. The Borrower fails to pay the principal hereof or interest thereon when due on this Note, whether at maturity, upon acceleration or otherwise.

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3.2.             ConversionandtheShares. The Borrower fails to issue shares of Common Stock to the Holder (or announces or threatens in writing that it will not honor its obligation to do so) upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Note, fails to transfer or cause its transfer agent to transfer (issue) (electronically or in certificated form) any certificate for shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, the Borrower directs its transfer agent not to transfer or delays, impairs, and/or hinders its transfer agent in transferring (or issuing) (electronically or in certificated form) any certificate for shares of Common Stock to be issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note, or fails to remove (or directs its transfer agent not to remove or impairs, delays, and/or hinders its transfer agent from removing) any restrictive legend (or to withdraw any stop transfer instructions in respect thereof) on any certificate for any shares of Common Stock issued to the Holder upon conversion of or otherwise pursuant to this Note as and when required by this Note (or makes any written announcement, statement or threat that it does not intend to honor the obligations described in this paragraph) and any such failure shall continue uncured (or any written announcement, statement or threat not to honor its obligations shall not be rescinded in writing) for three (3) business days after the Holder shall have delivered a Notice of Conversion. It is an obligation of the Borrower to remain current in its obligations to its transfer agent. It shall be an event of default of this Note, if a conversion of this Note is delayed, hindered or frustrated due to a balance owed by the Borrower to its transfer agent. If at the option of the Holder, the Holder advances any funds to the Borrower’s transfer agent in order to process a conversion, such advanced funds shall be paid by the Borrower to the Holder within forty eight (48) hours of a demand from the Holder.

3.3.             BreachofCovenants. The Borrower breaches any material covenant or other material term or condition contained in this Note and any collateral documents and such breach continues for a period of ten (10) days after  written notice thereof to the Borrower from the Holder.

3.4.             BreachofRepresentationsandWarranties. Any representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith, shall be false or misleading in any material respect when made and the breach of which has (or with the passage of time will have) a material adverse effect on the rights of the Holder with respect to this  Note.

3.5.             ReceiverorTrustee. The Borrower or any subsidiary of the Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for it or for a substantial part of its property or business, or such a receiver or trustee shall otherwise be appointed.

3.6.             Judgments. Any money judgment, writ or similar process shall be entered or filed against the Borrower or any subsidiary of the Borrower or any of its property or other assets for more than $250,000, and shall remain unvacated, unbonded or unstayed for a period of twenty (20) days unless otherwise consented to by the Holder, which consent will not be unreasonably withheld.

3.7.             Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings, voluntary or involuntary, for relief under any bankruptcy law or any law for the relief of debtors shall be instituted by or against the Borrower or any subsidiary of the Borrower

3.8.             Delisting ofCommonStock. The Borrower shall either fail to maintain the listing of the Common Stock on at least one of the OTCPink or an equivalent replacement exchange, the Nasdaq National Market, the Nasdaq SmallCap Market, or the New York Stock Exchange, or if the OTC or equivalent market shall display any type of caution indicator on the listing, such as a “Yield sign”, “Stop sign”, “Skull and bones” or other.

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3.9.             FailuretoComply withtheExchangeAct. The Borrower shall fail to comply in any material respect with the periodic reporting requirements or obligations of the Exchange Act; and/or the Borrower shall cease to be subject to the reporting requirements or obligations of the Exchange Act.

3.10.             Liquidation. Any dissolution, liquidation, or winding up of Borrower or any substantial portion of its business.

3.11.             CessationofOperations.  Any cessation of operations by Borrower or Borrower admits it is otherwise generally unable to pay its debts as such debts become due, provided, however, that any disclosure of the Borrower’s ability to continue as a “going concern” shall not be an admission that the Borrower cannot pay its debts as they become due.

3.12.             MaintenanceofAssets. The failure by Borrower to maintain any material intellectual property rights, personal, real property or other assets which are necessary to conduct its business (whether now or in the future).

3.13.             FinancialStatementRestatement.  The restatement of any financial statements filed by the Borrower with the SEC for any date or period from two years prior to the Issue Date of this Note and until this Note is no longer outstanding, if the result of such restatement would, by comparison to the unrestated financial statement, have constituted a material adverse effect on the rights of the Holder with respect to this Note.

3.14.             ReverseSplits. The Borrower effectuates a reverse split of its Common Stock without twenty (20) days prior written notice to the Holder.

3.15.             ReserveIncreaseandReplacementofTransferAgent. In the event that the Borrower proposes to replace its transfer agent, the Borrower fails to provide, prior to the effective date of such replacement, a fully executed Irrevocable Transfer Agent Instructions (including but not limited to the provision to irrevocably reserve shares of Common Stock in the Reserved Amount) signed by the successor transfer agent to Borrower and the Borrower. Additionally, In the event that the Reserved Amount has been depleted and Borrower Fails to cause the increase of the number of shares within 3 business days of written request of the reserve being depleted.

3.16.             Cross-Default. Notwithstanding anything to the contrary contained in this Note or the other related or companion documents, a breach or default by the Borrower of any covenant or other term or condition contained in any of the Other Agreements, after the passage of all applicable notice and cure or grace periods, shall, at the option of the Holder, be considered a default under this Note and the Other Agreements, in which event the Holder shall be entitled (but in no event required) to apply all rights and remedies of the Holder under the terms of this Note and the Other Agreements by reason of a default under said Other Agreement or hereunder. “Other Agreements” means, collectively, all agreements and instruments between, among or by: (1) the Borrower, and, or for the benefit of, (2) the Holder and any affiliate of the Holder, including, without limitation, promissory notes; provided, however, the term “Other Agreements” shall not include the related or companion documents to this Note. Each of the loan transactions will be cross-defaulted with each other loan transaction and with all other existing and future debt of Borrower to the Holder.

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Upon the occurrence and during the continuation of any Event of Default specified in Section 3.1 (solely with respect to failure to pay the principal hereof or interest thereon when due at the Maturity Date),theNoteshallbecomeimmediatelydueand payableand theBorrowershall payto theHolder,infullsatisfactionofitsobligationshereunder,anamountequaltotheDefaultSum(asdefinedherein).UPONTHEOCCURRENCEANDDURINGTHECONTINUATIONOFANYEVENTOFDEFAULTSPECIFIEDINSECTION3.2,THENOTESHALLBECOMEIMMEDIATELYDUEANDPAYABLEANDTHEBORROWERSHALLPAYTOTHEHOLDER,INFULLSATISFACTIONOFITSOBLIGATIONSHEREUNDER,ANAMOUNTEQUALTO :(Y)THEDEFAULTSUM(ASDEFINEDHEREIN);MULTIPLIEDBY (Z)TWO (2).Upon the occurrence andduringthecontinuationofanyEventofDefaultspecifiedinSections3.1(solely withrespecttofailuretopaytheprincipalhereoforinterestthereonwhendueonthisNoteuponaTradingMarketPrepaymentEventpursuanttoSection1.7oruponacceleration),3.3,3.4,3.6,3.8,3.9,3.11,3.12,3.13,3.14,and/or3.15exercisablethroughthedeliveryofwrittennoticetotheBorrowerbysuch Holders(the“DefaultNotice”),andupontheoccurrenceofanEventofDefaultspecifiedtheremainingsectionsofArticlesIII(otherthanfailuretopaytheprincipalhereoforinterestthereonattheMaturityDatespecifiedinSection3,1hereof),theNoteshallbecomeimmediatelydueandpayableandtheBorrowershallpaytotheHolder,infullsatisfactionofitsobligationshereunder,anamountequaltothegreaterof(i)150%timesthesumof(w)thethenoutstandingprincipalamountofthisNoteplus(x)accruedandunpaidinterestontheunpaidprincipalamountofthisNotetothedateofpayment(the “MandatoryPrepaymentDate”)plus (y)DefaultInterest, ifany, on theamountsreferredtoinclauses(w)and/or(x)plus(z)anyamountsowedtotheHolderpursuanttoSections1.3and1.4(g)hereof(thethenoutstandingprincipalamountofthisNotetothedateofpaymentplustheamountsreferredtoinclauses(x),(y)and(z)shallcollectivelybeknownasthe“DefaultSum”)or the “parity value” of the Default Sum to be prepaid, where parity value means (a) the highest number of shares of Common Stock issuable upon conversion of or otherwise pursuant to such Default Sum in accordance with Article I, treating the Trading Day immediately preceding the Mandatory Prepayment Date as the “Conversion Date” for purposes of determining the lowest applicable Conversion Price, unless the Default Event arises as a result of a breach in respect of a specific Conversion Date in which case such Conversion Date shall be the Conversion Date), multipliedby(b) the highest Closing Price for the Common Stock during the period beginning on the date of first occurrence of the Event of Default and ending one day prior to the Mandatory Prepayment Date (the “Default Amount”) and all other amounts payable hereunder shall immediately become due and payable, all without demand, presentment or notice, all of which hereby are expressly waived, together with all costs, including, without limitation, legal fees and expenses, of collection, and the Holder shall be entitled to exercise all other rights and remedies available at law or in equity If the Borrower fails to pay the Default Amount within five (5) business days of written notice that such amount is due and payable, then the default amount shall be added to the principal balance of the note and the Holder shall have the right at any time, so long as the Borrower remains in default (and so long and to the extent that there are sufficient authorized shares), to require the Borrower, upon written notice, to immediately issue, in lieu of the Default Amount, the number of shares of Common Stock of the Borrower equal to the Default Amount divided by the Conversion Price then in effect. Upon an Event of Default, interest shall be accrue at a default interest rate of 24% per annum or, if such rate is usurious or not permitted by current law, then at the highest rate of interest permitted by law.

ARTICLE IV.

REPRESENTATIONS OF HOLDER

4.1           Representations of Holder. Holder hereby represents and warrants to the Company that:

a.           Holder is an “accredited investor,” as such term is defined in Regulation D of the Securities Act of 1933, as amended (the “1933 Act”), and will acquire this Note and the shares of Common Stock issuable upon conversion hereof (collectively, the “Securities”) for its own account and not with a view to a sale or distribution thereof as that term is used in Section 2(a)(11) of the 1933 Act, in a manner which would require registration under the 1933 Act or any state securities laws. Holder has such knowledge and experience in financial and business matters that such Holder is capable of evaluating the merits and risks of the Securities. Holder can bear the economic risk of the Securities, has knowledge and experience in financial business matters and is capable of bearing and managing the risk of investment in the Securities. Holder recognizes that the Securities have not been registered under the 1933 Act, nor under the securities laws of any state and, therefore, cannot be resold unless the resale of the Securities is registered under the 1933 Act or unless an exemption from registration is available. Holder has carefully considered and has, to the extent Holder believes such discussion necessary, discussed with its professional, legal, tax and financial advisors, the suitability of an investment in the Securities for its particular tax and financial situation and its advisers, if such advisors were deemed necessary, and has determined that the Securities are a suitable investment for it.  Holder has not been offered the Securities by any form of general solicitation or advertising, including, but not limited to, advertisements, articles, notices or other communications published in any newspaper, magazine, or other similar media or television or radio broadcast or any seminar or meeting where, to Holders' knowledge, those individuals that have attended have been invited by any such or similar means of general solicitation or advertising. Holder has had an opportunity to ask questions of and receive satisfactory answers from the Company, or any person or persons acting on behalf of the Company, concerning the terms and conditions of the Securities and the Company, and all such questions have been answered to the full satisfaction of Holder. The Company has not supplied Holder any information regarding the Securities or an investment in the Securities other than as contained in this Note, and Holder is relying on its own investigation and evaluation of the Company and the Securities and not on any other information.

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b.           The Holder is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation and has all requisite corporate power and authority to carry on its business as now conducted. The Holder is duly qualified to transact business and is in good standing in each jurisdiction in which the failure to so qualify would have a material adverse effect on its business or properties.

c.           All corporate action has been taken on the part of the Holder, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Note. The Holder has taken all corporate action required to make all of the obligations of the Holder reflected in the provisions of this Agreement, valid and enforceable obligations.

d.           Each certificate or instrument representing Securities will be endorsed with the following legend (or a substantially similar legend), unless or until registered under the 1933 Act:

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES WHICH IS REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

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e.           Holder its successors and assigns acknowledge and agree that they are aware of the Typenex Note and Securities Purchase Agreement entered into with the Company on or around October 16, 2015.  In the event that this Note constitutes Variable Securities as defined in the Securities Purchase Agreement with Typenex, that will not constitute a default with Holder.

f.           Holder, its successors and assigns, agree that so long as the Note remains outstanding, the Holder shall not enter into or effect “short sales” of the Common Stock or hedging transaction which establishes a short position with respect to the Common Stock of the Company. The Company acknowledges and agrees that upon delivery of a Conversion Notice by the Holder, the Holder immediately owns the shares of Common Stock described in the Conversion Notice and any sale of those shares issuable under such Conversion Notice would not be considered short sales.

ARTICLE V.

MISCELLANEOUS

5.1.             Failureor IndulgenceNotWaiver. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privileges. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available.

5.2.             Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addressesforsuchcommunicationsshall be:If totheBorrower,to: HYDROCARB ENERGYCORPORATION,800GessnerSuite375Houston,TX77024 Email:If to the Holder:DarlingCapital,LLC,7673rdAvenue,Suite25-1A,NewYork,NY10017.Email:Yehuda@darlingcapital.net

5.3.             Amendments. This Note and any provision hereof may only be amended by an instrument in writing signed by the Borrower and the Holder. The term “Note” and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented,  then as so amended or supplemented.

5.4.             Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to be the benefit of the Holder and its successors and assigns. Each transferee of this Note must be an “accredited investor” (as defined in Rule 501(a) of the 1933 Act). Notwithstanding anything in this Note to the contrary, this Note may be pledged as collateral in connection with a bona fide margin account or other lending arrangement.

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5.5.             CostofCollection. If default is made in the payment of this Note, the Borrower shall pay the Holder hereof costs of collection, including reasonable attorneys’ fees.

5.6.             GoverningLaw. This Note shall be governed by and construed in accordance with the laws of the State of New York without regard to conflicts of laws principles that would result in the application of the substantive laws of another jurisdiction. Any action brought by either party against the other concerning the transactions contemplated by this Agreement must be brought only in the civil or state courts of New York or in the federal courts located in the State and county of New York. Both parties and the individual signing this Agreement on behalf of the Borrower agree to submit to the jurisdiction of such courts. The prevailing party shall be entitled to recover from the other party its reasonable attorney’s fees and costs. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower’s obligations to Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other decision in favor of the Holder. ThisNoteshallbedeemedanunconditionalobligationofBorrowerforthepaymentofmoneyand,withoutlimitationtoanyotherremediesofHolder,maybeenforcedagainstBorrowerbysummaryproceedingpursuanttoNewYorkCivilProcedureLawandRulesSection3213oranysimilarruleorstatuteinthejurisdictionwhereenforcementissought.Forpurposesofsuchruleorstatute,anyotherdocumentoragreementtowhichHolderandBorrowerarepartiesorwhichBorrowerdeliveredtoHolder,whichmaybeconvenientornecessarytodetermineHolder’srightshereunderorBorrower’sobligationstoHolderaredeemedapartofthisNote,whetherornotsuchotherdocumentoragreementwasdeliveredtogetherherewithorwasexecutedapartfromthisNote.

5.7.             CertainAmounts. Whenever pursuant to this Note the Borrower is required to pay an amount in excess of the outstanding principal amount (or the portion thereof required to be paid at that time) plus accrued and unpaid interest plus Default Interest on such interest, the Borrower and the Holder agree that the actual damages to the Holder from the receipt of cash payment on this Note may be difficult to determine and the amount to be so paid by the Borrower represents stipulated damages and not a penalty and is intended to compensate the Holder in part for loss of the opportunity to convert this Note and to earn a return from the sale of shares of Common Stock acquired upon conversion of this Note at a price in excess of the price paid for such shares pursuant to this Note. The Borrower and the Holder hereby agree that such amount of stipulated damages is not plainly disproportionate to the possible loss to the Holder from the receipt of a cash payment without the opportunity to convert this Note into shares of Common Stock.

5.8.             Disclosure. Upon receipt or delivery by the Borrower of any notice in accordance with the terms of this Note, unless the Borrower has in good faith determined that the matters relating to such notice do not constitute material, non-public information relating to the Borrower or any of its Subsidiaries, the Borrower shall within one (1) Trading Day after any such receipt or delivery, publicly disclose such material, non-public information on a Current Report on Form 8-K or otherwise. In the event that the Borrower believes that a notice contains material, non- public information relating to the Borrower or any of its Subsidiaries, the Borrower so shall indicate to such Holder contemporaneously with delivery of such notice, and in the absence of any such indication, the Holder shall be allowed to presume that all matters relating to such notice do not constitute material, non-public information relating to the Borrower or its Subsidiaries.

5.9.             NoticeofCorporateEvents. Except as otherwise provided below, the Holder of this Note shall have no rights as a Holder of Common Stock unless and only to the extent that it converts this Note into Common Stock. The Borrower shall provide the Holder with prior notification of any meeting of the Borrower’s shareholders (and copies of proxy materials and other information sent to shareholders). In the event of any taking by the Borrower of a record of its shareholders for the purpose of determining shareholders who are entitled to receive payment of any dividend or other distribution, any right to subscribe for, purchase or otherwise acquire (including by way of merger, consolidation, reclassification or recapitalization) any share of any class or any other securities or property, or to receive any other right, or for the purpose of determining shareholders who are entitled to vote in connection with any proposed sale, lease or conveyance of all or substantially all of the assets of the Borrower or any proposed liquidation, dissolution or winding up of the Borrower, the Borrower shall mail a notice to the Holder, at least twenty (20) days prior to the record date specified therein (or thirty (30) days prior to the consummation of the transaction or event, whichever is earlier), of the date on which any such record is to be taken for the purpose of such dividend, distribution, right or other event, and a brief statement regarding the amount and character of such dividend, distribution, right or other event to the extent known at such time. The Borrower shall make a public announcement of any event requiring notification to the Holder hereunder substantially simultaneously with the notification to the Holder in accordance with the terms of this Section 5.9.

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5.10.             Remedies. The Borrower acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder, by vitiating the intent and purpose of the transaction contemplated hereby. Accordingly, the Borrower acknowledges that the remedy at law for a breach of its obligations under this Note will be inadequate and agrees, in the event of a breach or threatened breach by the Borrower of the provisions of this Note, that the Holder shall be entitled, in addition to all other available remedies at law or in equity, and in addition to the penalties assessable herein, to an injunction or injunctions restraining, preventing or curing any breach of this Note and to enforce specifically the terms and provisions thereof, without the necessity of showing economic loss and without any bond or other security being required.

5.11.             Other Noteholders. The note herein is pursuant to the agreement in which JMJ Financial shall have their convertible note(s) from Hydrocarb Energy Corporation paid off in full in a cash payment and retired, and shall be unable to convert any portion of their note(s). In the event that these terms are not met, this note shall bear interest of twenty two percent (22%) per annum beginning on the date of commencement of this note.

IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by its duly authorized officer this day of November 12, 2015.

HYDROCARB ENERGY CORPORATION

By: /s/ Kent P. Watts                

Name: Kent Patrick Watts

Title: CEO

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EXHIBIT A

NOTICE OF CONVERSION

TO:  HYDROCARB ENERGY CORPORATION,

VIA EMAIL Attn: CFO or President

The undersigned hereby irrevocably elects to exercise the right, represented by the PROMISSORY NOTE dated as of November 12, 2015 issued by HYDROCARB ENERGY CORPORATION, (the "Note") to convert $105 principal plus accrued interest equal to $ into ______________ shares ("ConversionShares") of the Common Stock, $0.001 par lue ("CommonStock").

Dated:

Holder's Signature:

_______________________

By: Yehuda Marrus, Director

Holder's Address:

Darling Capital, LLC

767 3rdAvenue, 25thFloor

New York, NY 10017

Please send shares to:

TBD

DISBURSEMENT AUTHORIZATION

(MEMORANDUM)

TO: DARLING CAPITAL, LLC

FROM: HYDROCARB ENERGY CORP. DATE: November 12, 2015

RE: Disbursement of Funds

In connection with the funding of an aggregate of $200,000.00 pursuant to that certain 8% SHORT TERM CASH REDEEMABLE NOTE dated as of November 12, 2015 (the “Agreement”), you are hereby directed to disburse such funds as follows:

1. $14,000.00 to Anubis Capital Partners for 3rd party due diligence fees in accordance with the wire transfer instructions attached as Schedule A, hereto; and

2. $186,000.00 to Hydrocarb Energy Corp. in accordance with the wire transfer instructions attached as Schedule B, hereto;

____________________________________

Name: Kent Patrick Watts

Title: CEO

EXHIBIT A

ANUBIS CAPITAL PARTNERS WIRING INFO

Independent Bank

654 North Denton Tap Rd.

Coppell, TX 75019

Routing No:	#########
Acct No.:	##########
Beneficiary:	Anubis Capital Partners
	2550 Midway Road Suite 198
	Carrolton, TX 75006

__________

Borrower Initials

EX-10.3

Exhibit 10.3

November 12, 2015

This Letter Agreement is between Darling Capital, LLC (the “Investor”) and HydroCarb Energy Corporation (the “Company”).

NOW THEREFORE the parties agree as follows:

1. The Investor hereby grants the Company the first of three (3) 30 day conversion moratorium option for the 30 days beginning on the 6 month anniversary of the $200,000 note purchased on even date herewith.  If the Company decides to exercise the first conversion moratorium option, it must notify the Investor of its intent to do so no later than 10 trading days prior to the 6 month anniversary of the note and wire the sum of $20,000 to the Investor no later than 5 trading days prior to the 6 month anniversary of the Note.

2. Upon timely receipt of the option exercise notice and the timely receipt of the $20,000, the Investor agrees it shall not convert the $200,000 note for a period of 30 days commencing on the 6 month anniversary of the $200,000 note.

3. The Investor hereby grants the Company the second of three (3) 30 day conversion moratorium option for the 30 days beginning on the 7 month anniversary of the $200,000 note purchased on even date herewith.  If the Company decides to exercise the second conversion moratorium option, it must notify the Investor of its intent to do so no later than 10 trading days prior to the 7 month anniversary of the note and wire the sum of $20,000 to the Investor no later than 5 trading days prior to the 7 month anniversary of the Note.

4. Upon timely receipt of the 2nd option exercise notice and the timely receipt of the $20,000, the Investor agrees it shall not convert the $200,000 note for a period of 30 days commencing on the 7 month anniversary of the $200,000 note.

5. The Investor hereby grants the Company the third of three (3) 30 day conversion moratorium option for the 30 days beginning on the 8 month anniversary of the $200,000 note purchased on even date herewith.  If the Company decides to exercise the third conversion moratorium option, it must notify the Investor of its intent to do so no later than 10 trading days prior to the 8 month anniversary of the note and wire the sum of $20,000 to the Investor no later than 5 trading days prior to the 8 month anniversary of the Note.

6. Upon timely receipt of the 3rd option exercise notice and the timely receipt of the $20,000, the Investor agrees it shall not convert the $200,000 note for a period of 30 days commencing on the 8 month anniversary of the $200,000 note.

7. This letter agreement shall be governed by the laws of the State of New York.  Venue shall be had in the federal and state courts of New York.

Darling Capital, LLC	HydroCarb Energy Corporation
	/s/ Kent P. Watts
Yehuda Marrus, Director	Kent Patrick Watts, CEO

EX-10.6

Exhibit 10.6

FIRST AMENDMENT TO VOTING AGREEMENTS

This First Amendment to Voting Agreements (this “Agreement”) dated November 16, 2015 (the “Execution Date”), is by and between, S. Chris Herndon, an individual (“Herndon”), Kent P. Watts, an individual (“Kent P. Watts”) and Christopher Watts, an individual (“Christopher Watts” and together with Kent P. Watts, the “Stockholders”), each a “Party” and collectively the “Parties”.

W I T N E S S E T H:

WHEREAS, Herndon and Kent P. Watts previously entered into a Voting Agreement on or around August 25, 2015 (the “Kent P. Watts Voting Agreement”);

WHEREAS, Herndon and Christopher Watts previously entered into a Voting Agreement on or around August 28, 2015 (the “Christopher Watts Voting Agreement” and together with the Kent P. Watts Voting Agreement, the “Voting Agreements”);

WHEREAS, certain capitalized terms used herein have the meanings given to such terms in the Voting Agreements;

WHEREAS, pursuant to the Voting Agreements each of the Stockholders provided Herndon a voting proxy, which provided Herndon the right to vote shares of common stock of Hydrocarb Energy Corporation (the “Company”) which they heldin connection with the election or removal of the Board Percentage of the directors of the Company (the “Voting Rights”);

WHEREAS, the Voting Agreements provided that the Voting Rights would become effective at such time as Kent P. Watts had sold an aggregate of $1 million shares of restricted common stock held by him to various purchasers in private transactions, and further provided that if an aggregate in $1 million in sales was not completed by September 21, 2015 (the “Minimum Purchase Requirement”), the Voting Agreements would not go into effect and all rights thereunder would expire;

WHEREAS, the Minimum Purchase Requirement was not met by September 21, 2015 and as such the Voting Agreements did not go into effect and in fact expired;

WHEREAS, the Parties now desire to amend the Voting Agreements to remove the Minimum Purchase Requirement and provide for the Voting Agreements to be immediately effective for their stated terms as set forth in the Voting Agreements; and

First Amendment To Voting Agreements

Page 1 of 5

WHEREAS, the Parties now desire to amend the Voting Agreements pursuant to the terms and conditions of this Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants, agreements, and considerations herein contained, and other good and valuable consideration, including $10 provided by Herndon to each of the Stockholders, which consideration the Parties hereby acknowledge and confirm the sufficiency thereof, the Parties hereto agree as follows:

1.           Amendment to Voting Agreements. Effective for all purposes as of the Effective Date, Section 5(c) of each of the Voting Agreements is hereby amended, superseded and replaced in its entirety, by the following Section 5(c):

“Term. For the purposes of this Agreement, “Term” means the period from November 16, 2015, until the earlier of (a) August 19, 2017; (b) the due date of a convertible promissory note that Mr. Herndon (or any entity which Mr. Herndon is deemed to beneficially own), directly or indirectly, purchases from Herndon in Herndon’s ongoing private placement of convertible promissory notes, which convertible promissory notes are convertible into Herndon’s common stock at a conversion price of $0.75 per share; and (c) the date that the Voting Proxy provides the Stockholder at least ten (10) days written notice of his intent to terminate this Agreement.”

2.           Amendment to Voting Proxies. Effective for all purposes as of the Effective Date, Exhibit A, the Voting Proxy, of each of the Voting Agreements is hereby amended, superseded and replaced in its entirety by the form of Voting Proxy attached hereto as Exhibit A. Concurrently with their execution of this Agreement, each of the Stockholders shall execute a new replacement form of Exhibit A, which shall replace the Exhibit A which forms a part of each of the Voting Agreements, as applicable, for all purposes.

3.           Confirmation of Effectiveness of Voting Agreements. For the sake of clarity and in an abundance of caution, the Parties agree and confirm that although the Voting Agreements never went into effect and expired and terminated pursuant to their original terms on September 21, 2015, the Parties now desire to amend and revise such Voting Agreements to be in effect as of the date of the Effective Date for all purposes and such Voting Agreements shall hence force be treated as though they never expired or were terminated and instead that they became effective for all purposes as of the Effective Date.

4.           Effective Date. The “Effective Date” of this Agreement shall be November 16, 2015 for all purposes.

5.           Consideration. Each of the Parties agrees and confirms by signing below that they have received valid consideration in connection with this Agreement and the transactions contemplated herein.

First Amendment To Voting Agreements

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6.           Mutual Representations, Covenants and Warranties. Each of the Parties, for themselves and for the benefit of each of the other Parties hereto, represents, covenants and warranties that:

(a)           Such Party has all requisite power and authority, corporate or otherwise, to execute and deliver this Agreement and to consummate the transactions contemplated hereby and thereby. This Agreement constitutes the legal, valid and binding obligation of such Party enforceable against such Party in accordance with its terms, except as such enforcement may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’ rights generally and general equitable principles; and

(b)           The execution and delivery by such Party and the consummation of the transactions contemplated hereby and thereby do not and shall not, by the lapse of time, the giving of notice or otherwise: (i) constitute a violation of any law; or (ii) constitute a breach of any provision contained in, or a default under, any governmental approval, any writ, injunction, order, judgment or decree of any governmental authority or any contract to which such Party is bound or affected.

7.           Further Assurances. The Parties agree that, from time to time, each of them will take such other action and to execute, acknowledge and deliver such contracts, deeds, or other documents as may be reasonably requested and necessary or appropriate to carry out the purposes and intent of this Agreement and the transactions contemplated herein.

8.           Reconfirmation of Representations. Except to the extent amended or modified hereby, each of the Parties hereby reaffirm all terms, conditions, covenants, representations and warranties made in the Voting Agreements; provided further that the Parties also confirm and acknowledge all terms, conditions, covenants, representations and warranties made in the Voting Agreements to the extent amended or modified hereby.

9.           Effect of Agreement. Upon the effectiveness of this Agreement, each reference in each of the Voting Agreements to “Agreement,” “hereunder,” “hereof,” “herein” or words of like import shall mean and be a reference to such Voting Agreements as modified or amended hereby.

10.           Benefit and Burden. This Agreement shall inure to the benefit of, and shall be binding upon, the Parties hereto and their successors and permitted assigns.

11.           Entire Agreement. This Agreement sets forth all of the promises, agreements, conditions, understandings, warranties and representations among the Parties with respect to the transactions contemplated hereby and thereby, and supersedes all prior agreements, arrangements and understandings between the Parties, whether written, oral or otherwise.

First Amendment To Voting Agreements

Page 3 of 5

12.           Construction. In this Agreement words importing the singular number include the plural and vice versa; words importing the masculine gender include the feminine and neuter genders.

13.           Review and Construction of Documents. The Stockholders represent to Herndon and Herndon represents to the Stockholders, that (a) before executing this Agreement, said Party has fully informed itself of the terms, contents, conditions and effects of this Agreement; (b) said Party has relied solely and completely upon its own judgment in executing this Agreement; (c) said Party has had the opportunity to seek and has obtained the advice of its own legal, tax and business advisors before executing this Agreement; (d) said Party has acted voluntarily and of its own free will in executing this Agreement; and (e) this Agreement is the result of arm’s length negotiations conducted by and among the Parties and their respective counsel.

14.           Counterparts and Signatures. This Agreement and any signed agreement or instrument entered into in connection with this Agreement, and any amendments hereto or thereto, may be executed in one or more counterparts, all of which shall constitute one and the same instrument. Any such counterpart, to the extent delivered by means of a facsimile machine or by .pdf, .tif, .gif, .peg or similar attachment to electronic mail (any such delivery, an “Electronic Delivery”) shall be treated in all manner and respects as an original executed counterpart and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. No party shall raise the use of Electronic Delivery to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of Electronic Delivery as a defense to the formation of a contract, and each such party forever waives any such defense, except to the extent such defense relates to lack of authenticity.

[Remainder of page left intentionally blank. Signature page follows.]

First Amendment To Voting Agreements

Page 4 of 5

IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the Execution Date to be effective as of the Effective Date.

"Herndon"

/s/ S. Chris Herndon                                  

S. Chris Herndon

"Kent P. Watts"

/s/ Kent P. Watts                                       

Kent P. Watts

"Christopher Watts"

/s/ Christopher Watts                               

Christopher Watts

First Amendment To Voting Agreements

Page 5 of 5

EXHIBIT A

VOTING PROXY

The undersigned stockholder (the “Stockholder”) of common stock of Hydrocarb Energy Corp., a Nevada corporation (the “Company”), who beneficially owns that number of shares of the common stock (the “Shares”) of the Company as set forth below, on the date hereof, hereby appoints S. Chris Herndon, as proxy (the “Proxy”), with full power of substitution, for and in the name of the undersigned, to vote the Shares (and such other shares as he may come to own or have voting control over, as described in greater detail in the Voting Agreement, which this Voting Proxy is attached to as Exhibit A), as his proxy in all proceedings in which the vote or written consent of Stockholder may be required or authorized by law (including, but not limited to actual meetings of the Stockholders of the Company and written consents to action), as if the undersigned were present and voting such Shares, in connection with the election or removal of the Board Percentage of the directors of the Company, in his sole discretion as the Stockholder’s true and lawful attorney and irrevocable proxy, for and in Stockholder’s name, place and stead, to vote the Shares owned or held by Stockholder as Stockholder’s proxy regardless of whether such Stockholder actually attends any applicable meeting or signs any applicable consent, or not in connection with the Board Percentage. The “Board Percentage” equals a number of members of the board of directors of the Company equal to the then total members (or positions open for nomination at the applicable meeting or as of the applicable consent) of the Company’s Board of Directors multiplied by 0.6666 and rounded up to the nearest whole number. For example, if the Company has three (3) directors, the Voting Proxy will have the right to vote the Shares to appoint (or remove) two (2) of the three (3) directors (three (3) directors multiplied by 0.6666 = two (2)). All action to be taken on any question shall be determined by Proxy, in his sole discretion. For the sake of clarity, and in an abundance of caution, the Stockholder shall have the right, in his sole discretion to vote the Shares for any remaining directors not covered by the Board Percentage or for any other proposals voted upon by the stockholders of the Company or for which the vote of stockholders is requested at any meeting or in connection with any action(s) taken via written consent.

The undersigned hereby affirms that this Proxy is coupled with an interest and ratifies and confirms all that the Proxy may lawfully do or cause to be done by virtue hereof. This Voting Proxy shall be in effect during the Term. “Term” means the period from November 16, 2015 until the earlier of (a) August 19, 2017; (b) the due date of a convertible promissory note that Mr. Herndon (or any entity which Mr. Herndon is deemed to beneficially own), directly or indirectly, purchases from the Company in the Company’s ongoing private placement of convertible promissory notes, which convertible promissory notes are convertible into Company common stock at a conversion price of $0.75 per share; and (c) the date that the Proxy provides the Stockholder at least ten (10) days written notice of his intent to terminate this Voting Proxy.

Executed this 16th day of November 2015.

By:_______________________

Printed Name:_________________

_________________ shares of Common Stock 1

 

1 If held indirectly, please spell out name of holder of Shares and Shares held by each indirect party.