Current Report Filing (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: July 31, 2015

Date of earliest event reported: June 12, 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.

Christine P. Spencer Employment Agreement

Effective June 12, 2015, Hydrocarb Energy Corporation (“we”, “us” and the “Company”) entered into an employment agreement with Christine P. Spencer, pursuant to which Ms. Spencer agreed to serve as the Chief Accounting Officer of the Company at a salary of $160,000 per year. The agreement has a term of one year, provided that the agreement automatically extends for additional one year periods unless either party provides the other written notice of their intent not to renew the agreement at least 60 days prior to the date of any applicable automatic extension. In the event the Company terminates the agreement without cause or Ms. Spencer terminates the agreement for good reason, Ms. Spencer is due salary and insurance benefits for a period of 12 months from the termination date. “Cause” includes a conviction for a felony or a crime involving moral turpitude or a plea of guilty or an entry of no lo contender in connection with a charge of such crime; the theft or embezzlement, or attempted theft or embezzlement of money or property of the Company; the perpetration or attempted perpetration of fraud, or the participation in connection therewith, on the Company; the unauthorized appropriation of any tangible or intangible material asset or property of the Company; dishonesty with respect to any matter concerning the Company; or the substantial and repeated failure to perform under the employment agreement. “Good reason” means our material breach of the agreement; any action by us which results in the material diminishment of Ms. Spencer’s job functions or responsibilities; any attempt by us to cause Ms. Spencer to relocate as a requirement of continued employment; or any reduction in salary or benefits (unless such reduction in benefits is applicable generally to all employees).

SMDRE Note

On December 4, 2013, Hydrocarb Corporation, a Nevada corporation (“HCN”) sold 619,960 shares of restricted common stock of the Company in consideration for a $1,859,879 non-interest bearing note from SMDRE LLC (“SMDRE”), of which Michael Watts, the brother of our Chief Executive Officer, Kent P. Watts, holds a 49% interest. We acquired this note upon our acquisition of HCN on December 9, 2013. The 619,960 shares of our common stock were previously issued by us to HCN to settle liabilities related to a consulting services agreement which was in place between us and HCN. The note was due upon the occurrence of any of the following conditions: (1) upon the sale of all or part of the shares by the owner of the shares to a third party; (2) within sixty days of the six month anniversary of the December 4, 2013 stock sale or within sixty days from the date that the shares become unrestricted (whichever occurred first); or (3) within 90 days of the date our common stock is listed on a major stock exchange and trades at a share price above $6.00 per share.

This note receivable was extended on August 4, 2014, for an extension fee of $50,000, payable in the future, with $750,000 due to be repaid by December 31, 2014, with the remaining balance to be repaid by March 31, 2015.

On April 27, 2015, the Board of Directors agreed to offer SMDRE the option, for 90 days, for the SMDRE note to be paid in full for a 67% discount (i.e., the offer to be paid $619,898 immediately) (the “Pre-Payment Option”). Between April 27, 2015 and July 9, 2015 the Company received payments on the SMDRE LLC note in the amount of $531,000. The balance of the discounted note of $88,898 has been extended for another 60 days.

Duma Holdings Note

On July 16, 2015, pursuant to a Note Subscription Agreement, we sold a $350,000 Convertible Secured Promissory Note (with a $7,000 original issuance discount) to Duma Holdings, LLC (“Duma Holding” and the “Duma Holdings Note”), of which Chris Herndon, a member of our Board of Directors, owns a 20% interest. The Duma Holdings Note (along with any unpaid interest thereon) is convertible at any time, provided the note is converted in full, into (a) 1.75 units (“Units”), each consisting of 25,000 shares of common stock of the Company and $100,000 in face amount of Convertible Subordinated Promissory Notes in the form currently offered by the Company in its ongoing private offering of Units as previously disclosed in the Current Report on Form 8-K filed by the Company with the Securities and Exchange Commission on June 19, 2015 (which allow the holder thereof the right to convert such notes into common stock at a conversion price of $4 per share, and convert into shares of our to-be designated and approved Series B Convertible Preferred Stock upon designation thereof by the Company, subject to approval of such Series B Convertible Preferred Stock by stockholders at the annual meeting); and (b) 350,000 shares of common stock (393,750 shares of common stock in aggregate when combined with the shares which form part of the Units). The Duma Holdings Note is due and payable by us on November 30, 2015. The Duma Holdings Note accrues interest at the rate of 15% per annum, payable beginning on October 31, 2015, and quarterly thereafter through maturity. The Duma Holdings Note can only be repaid with the prior written approval of Duma Holdings. The Duma Holdings Note contains usual and customary events of default, representations and warranties. The payment of the principal and accrued interest due under the Duma Holdings Note is personally guaranteed by Kent P. Watts, our Chief Executive Officer and Michael Watts, his brother, pursuant to separate guaranty agreements (the “Guarantee Agreements”), and secured by a first priority security interest on certain real estate owned by Kent P. Watts pursuant to a Deed of Trust, Assignment of Rents and Security Agreement.

* * * *

The summary of Ms. Spencer’s employment agreement, the Note Subscription Agreement, the Duma Holdings Note and the Guaranty Agreements above is qualified in all respects by the actual terms, conditions and provisions of Ms. Spencer’s employment agreement, the Note Subscription Agreement, the Duma Holdings Note and the Guaranty Agreements, copies of which are filed herewith as Exhibits 10.1, 10.2, 10.3, 10.4 and, 10.6, respectively, and the terms of which are incorporated by reference in this Item 1.01.

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 Duma Holdings Note described above in Item 1.01 is incorporated in this Item 2.03 by reference.

Item 3.02 Unregistered Sales of Equity Securities.

As described above in Item 1.01, on July 16, 2015, we sold the Duma Holdings Note to Duma Holdings, which as described above, is convertible into (a) 1.75 units (“Units”); and (b) 350,000 shares of common stock.

We believe that the issuance of the securities described above 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 transactions 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. No underwriters or agents were involved in the foregoing issuance and the Company paid no underwriting discounts or commissions. 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. All recipients (a) were “accredited investors” and/or (b) either received adequate information about us or had access, through employment or other relationships, to such information, to make an informed investment decision regarding the securities.

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

The disclosures regarding the Company’s entry into the employment agreement with Christine P. Spencer described above in Item 1.01 is incorporated in this Item 5.02 by reference.

Item 9.01 Financial Statements and Exhibits.

Exhibit No.		Description

10.1*		Employment Agreement with Christine P. Spencer effective June 12, 2015
10.2*		Note Subscription Agreement dated July 16, 2015 with Duma Holdings, LLC
10.3*		$350,000 Convertible Secured Promissory Note dated July 16, 2015 issued by Hydrocarb Energy Corporation to Duma Holdings, LLC
10.4*		Guaranty of Kent P. Watts (July 16, 2015)
10.5*		Guaranty of Michael Watts (July 16, 2015)

* Filed herewith

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: July 31, 2015	Hydrocarb Energy Corporation

	/s/ Kent P. Watts
	Kent P. Watts

EXHIBIT INDEX

Exhibit No.		Description

10.1*		Employment Agreement with Christine P. Spencer effective June 12, 2015
10.2*		Note Subscription Agreement dated July 16, 2015 with Duma Holdings, LLC
10.3*		$350,000 Convertible Secured Promissory Note dated July 16, 2015 issued by Hydrocarb Energy Corporation to Duma Holdings, LLC
10.4*		Guaranty of Kent P. Watts (July 16, 2015)
10.5*		Guaranty of Michael Watts (July 16, 2015)

* Filed herewith.

Exhibit 10.1

Employment Agreement

THIS AGREEMENT (the “Agreement”) is made effective as of 12th day of June 2014, by and between Hydrocarb Energy Corporation (HECC), a Nevada corporation with corporate office located at 800 Gessner, Suite 375, Houston, Texas 77024 (the “Company”), and Christine P. Spencer, a Texas resident (the “Employee”), together referred to hereafter as the “Parties”.

In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

1. Employment

When effective, this agreement replaces any other prior agreements. The Company shall employ Employee, and Employee hereby accepts employment with the Company, upon the terms and conditions set forth in the Agreement for the period beginning on the effective date and ending on the Termination Date, as defined in Section 4 hereof (the "Employment Period").

2. Position and Duties

During the Employment Period, Employee shall serve as the Company’s (and its subsidiaries, where appropriate) Chief Accounting Officer and shall be responsible for such duties normally performed by persons serving in such position in companies similarly situated with Company, as well as any other duties as may be reasonably prescribed by the CEO, management, and the Board of Directors of the Company (the “Board”).

3. Base Salary, Bonus and Benefits

(a)

Employee’s initial base salary for the term of the Agreement shall be $160,000 per year (the “Base Salary”). Base Salary shall be payable in approximately equal installments in accordance with the Company’s general payroll practices (but at least monthly) and shall be subject to withholding.

(b)

The Company shall reimburse Employee for all reasonable expenses incurred by her in the course of performing her duties under the Agreement which are consistent with the Company's policies in effect from time to time for its employees with respect to travel, entertainment and other business expenses, subject to the Company's requirements for its employees with respect to reporting and documentation of such expenses.

(c)

Employee shall be entitled to three (3) weeks of vacation per year, and up to two (2) weeks of sick leave, during which times her compensation shall be paid in full. Any un-used vacation time shall be forfeited and not carried over to future period.

(d)

Employee shall be eligible to participate, to the extent Employee meets all eligibility requirements of general application, in each of the employee benefit plans maintained by Employer from time to time in which employees of Employer generally are eligible to participate, including by way of illustration, any 401K Plan, and group medical, dental, life and AD&D plans. Employee shall also be entitled to participate in the award of any stock options, warrants, or other forms of non-cash compensation that may be offered to qualified employees by the Board in its discretion.

4. Term and Termination

(a) The Agreement shall be effective on the date first above written and continue for one (1) year, ending on the first anniversary date of execution unless extended as provided below. This Agreement may be terminated at any time: (i) by Employees resignation with or without Good Reason (as defined below), (ii) Employee's death or Disability (as defined below), or (iii) by the Company with or without Cause (as defined below). The effective term of this Agreement shall be automatically extended for consecutive one (1) year periods unless written notice not to extend is given by either party to the other party not less than sixty (60) days prior to the date any extension period is to commence. The date on which Employee’s employment with the Company ends is referred to herein as the “Termination Date”, with sixty (60) days advance written notice required.

(b) (i) If Employee's employment with the Company is terminated by the Company for Cause, or by Employee without Good Reason, Employee shall not be entitled to a severance payment and will not receive his Base Salary beyond the Termination Date.

(ii) If Employee's employment with the Company is terminated by the Company for any reason other than for Cause ("without Cause"), or if Employee terminates his employment for Good Reason, Employee shall be entitled to receive as a severance payment, his then current Base Salary and insurance benefits for a period of twelve (12) months following the Termination Date.

"Cause" shall mean (i) the conviction of Employee for a felony, a crime involving moral turpitude, or a plea of guilty or no lo contendre by Employee to a charge of any such crime, (ii) Employee's theft or embezzlement, or attempted theft or embezzlement, of money or property of the Company, (iii) Employee's perpetration or attempted perpetration of fraud, or Employee's participation in a fraud or an attempted fraud on the Company, or Employee's unauthorized appropriation or attempted appropriation of any tangible or intangible material asset or property of the Company, (iv) Employee's dishonesty with respect to any matter concerning the Company, or (v) Employee's substantial and repeated failure to perform his duties hereunder in accordance with the reasonable directions of the President, CEO or the Board.

"Change of Control" shall mean (i) the acquisition by any individual, entity or group of beneficial ownership of 50% or more of the then issued and outstanding stock of the Company; or (ii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "business combination"), unless, following such business combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of the common stock immediately prior to such business combination beneficially own, directly or indirectly, 50% or more of the common stock or membership interests, as the case may be, of the entity resulting from such business combination; or (iii) approval by the shareholders of the Company of a complete liquidation or dissolution of the Company.

"Disability" shall mean any illness, disability or incapacity of such a character as to render Employee unable to perform Employee's primary duties hereunder for a period of ninety (90) consecutive days, as determined in the discretion of the Board.

"Good Reason" shall mean (i) material breach by the Company of its obligations under the Agreement, including the failure of the Company to pay Employee the Base Salary or any othe payment or benefit due Employee hereunder; (ii) any action of the Company that results in a material diminishment in Employee's functions or responsibilities, or any attempt by the Company to cause Employee to relocate as a requirement of his continued employment; (iii) any reduction in Employee's Base Salary; or (iv) any material reduction of benefits unless the same reduction is applicable generally to all employees of the Company.

(e) A termination of the Agreement pursuant to its terms on the Expiration Date or any subsequent anniversary date, shall not in and of itself constitute a termination of Employee's employment with the Company. At such time, unless the Company or the Employee terminates Employee's employment with the Company, Employee shall become an employee at-will of the Company.

5. Severability

Whenever possible, each provision of the Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of the Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but the Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

6. Complete Agreement

The Agreement embodies with respect to the subject matter hereof the complete agreement and understanding among the parties and supersedes and preempts with respect to the subject matter hereof any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way.

7. Successors and Assigns

The Agreement is intended to bind and inure to the benefit of and be enforceable by Employee, the Company and their respective heirs, successors and assigns, except that Employee may not assign his rights or delegate his obligations hereunder without the prior written consent of the Company.

8. Choice of Law

All issues and questions concerning the construction, validity, enforcement and interpretation of the Agreement shall be governed by, and construed in accordance with, the laws of the State of Texas, without giving effect to any choice of law or conflict of law rules or provisions (whether is of the State of Texas or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Texas.

9. Arbitration

In the event of a dispute, the parties agree that such dispute shall be submitted to binding arbitration in Texas, U.S.A., pursuant to the rules of arbitration of the American Arbitration Association (the "Rules"). Except as set forth in the Section, the arbitration shall proceed pursuant to the Rules in effect on the date such arbitration is commenced. In the event of arbitration, the parties shall attempt to reach agreement on the selection of a single impartial arbitrator. If the parties are unable to agree on a single impartial arbitrator, each party shall select one impartial arbitrator and those arbitrators shall select a single impartial arbitrator who shall thereafter conduct the arbitration as the sole arbitrator. The arbitrator so selected shall be competent in the legal and technical aspects of the subject matter of the Agreement. The arbitrator shall not limit, expand or modify the terms of the Agreement nor award damages in excess of compensatory damages. Any party to the arbitration may seek conservatory or interim measures in accordance with the Rules. The prevailing party in the arbitration shall be awarded all attorney fees and costs incurred in the arbitration. The final award shall specify the factual and legal bases for the award, if any. Any final award or decision issued as a result of such arbitration shall be final, binding and conclusive between the parties, and shall be enforceable by any court having jurisdiction over the party against whom enforcement is sought. Each party to the Agreement hereby consents to non-exclusive jurisdiction and venue of the State of Texas, for any court proceedings to enforce any such final award or decision. Except where clearly prevented by the subject matter of the dispute, each party to the Agreement shall continue performing its respective obligations under the Agreement while the dispute is being resolved.

10. Amendment and Waiver

The provisions of the Agreement may be amended or waived only with the prior written consent of the Company and Employee, and no course of conduct or failure or delay in enforcing the provisions of the Agreement shall affect the validity, binding effect or enforceability of the Agreement.

IN WITNESS WHISEOF, the parties hereto have executed the Employment Agreement as of the date first written above.

	EMPLOYEE:

	/s/ Christine P. Spencer
	Christine P. Spencer

	COMPANY:

	Hydrocarb Energy Corporation

	By:	/s/ Charles F. Dommer
	Charles F. Dommer
	President and Chief Operating Officer

Exhibit 10.2

NOTE SUBSCRIPTION AGREEMENT

HYDROCARB ENERGY CORPORATION

A. Subscription. This Agreement has been executed by Duma Holdings, LLC, a/an ________LLC______, (Individual/Corporation/LLC/Trust/Partnership) residing and/or having a principal place of business in Houston, Texas (Country/State and City) (“Purchaser”, or “Subscriber”) in connection with the subscription to purchase a $350,000 Convertible Secured Promissory Note, which carries a $7,000 original issuance discount (the “Note”), which Note is convertible, pursuant to the terms of such Note, into (i) 1.75 units of Hydrocarb Energy Corporation, a Nevada corporation (the “Company”), with each unit consisting of (a) 25,000 shares of the common stock of the Company (the “Unit Shares”); and (b) $100,000 in face amount of Convertible Subordinated Promissory Notes (each a “Convertible Note”, a form of which has previously been provided to the Purchaser); and (ii) 350,000 shares of common stock of the Company (the “Common Shares” and together with the Note, the Unit Shares, the Convertible Note, and the shares of common stock issuable upon conversion of the Convertible Note, the “Securities”). This Note Subscription Agreement is referred to herein as the “Agreement”. The “Offering” shall be defined as the purchase by the Purchaser of the Note.

When the context in which words are used in this Agreement indicates that such is the intent, singular words shall include the plural, and vice versa, and masculine words shall include the feminine and neuter genders, and vice versa. Any reference to a person shall include an individual, trust, estate, or any incorporated or unincorporated organization, including general or limited partnerships, limited liability companies, corporations, joint ventures and cooperatives, and all heirs, executors, administrators, legal representatives, successors and assigns of such person where permitted or required by the context. Captions are inserted for convenience only, are not a part of this Agreement, and shall not be used in the interpretation of this Agreement.

It is understood and agreed that the Company shall have the right to accept or reject this subscription (the “Subscription”), in whole or in part, and that the same shall be deemed to be accepted by the Company only when it is signed by the Company.

B. Representations and Warranties of Subscriber. Subscriber hereby represents and warrants to the Company as follows:

i) Subscriber is an “Accredited Investor” as such time is defined in Rule 501 of the Securities Act of 1933, as amended (the “Securities Act”, the “Act” or the “1933 Act”), and has completed the Certification of Accredited Investor Status attached hereto as Exhibit A;

ii) The Subscriber is acquiring the Securities for its own account for long-term investment and not with a view toward resale, fractionalization or division, or distribution thereof, and it does not presently have any reason to anticipate any change in its circumstances, financial or otherwise, or particular occasion or event which would necessitate or require its sale or distribution of the Securities. No one other than the Subscriber has any beneficial interest in said securities. The Subscriber is purchasing the Securities for its account for the purpose of investment and not with a view to, or for sale in connection with, any distribution thereof. Subscriber 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 this investment, the Securities and the Offering, and all such questions have been answered to the full satisfaction of Subscriber. The Company has not supplied Subscriber any information other than as contained in this Agreement, and Subscriber is relying on its own investigation and evaluation of the Company and the Securities in making an investment hereunder and not on any other information;

iii) Subscriber is able to bear the economic risk of the investment in the Securities and Subscriber has sufficient net worth to sustain a loss of Subscriber’s entire investment in the Company without economic hardship if such a loss should occur. No person has made to the Subscriber any written or oral representations: (x) that any person will resell or repurchase any of the Securities; (y) that any person will refund the purchase price of any of the Securities, or (z) as to the future price or value of any of the Securities;

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Note Subscription Agreement

Hydrocarb Energy Corporation

iv) The undersigned recognizes that the investment herein is a speculative venture and that the total amount of funds tendered to purchase Securities is placed at the risk of the business and may be completely lost. The Subscriber: (i) if a natural person, represents that the Subscriber has reached the age of 21 and has full authority, legal capacity and competence to enter into, execute and deliver this Agreement and all other related agreements or certificates and to take all actions required pursuant hereto and thereto and to carry out the provisions hereof and thereof, or (ii) if a corporation, partnership, or limited liability company or partnership, or association, joint stock company, trust, unincorporated organization or other entity, represents that such entity was not formed for the specific purpose of acquiring the Securities and such entity is duly organized, validly existing and in good standing under the laws of the state of its organization. Subscriber is a bona fide resident and domiciliary of the state set forth herein. Any individual executing this Agreement on behalf of an entity has authority to act on behalf of such entity and has been duly and properly authorized to sign this Agreement on behalf of such entity, provided further that such entity has validly authorized and approved such entity’s entry into this Agreement and the transactions contemplated herein. The purchase of Securities as an investment involves special risks;

v) Subscriber acknowledges and is aware of the following:

(1) There are substantial restrictions on the transferability of the Securities; the Securities will not be, and investors in the Company have no right to require that the Securities be registered under the 1933 Act; there may not be any public market for the Securities; Subscriber may not be able to use the provisions of Rule 144 of the 1933 Act with respect to the resale of the Securities; and accordingly, Subscriber may have to hold the Securities indefinitely and it may not be possible for Subscriber to liquidate Subscriber’s investment in the Company. Subscriber agrees that the Securities shall not be sold, transferred, pledged or hypothecated unless such sale is exempt from registration under the 1933 Act. Subscriber also acknowledges that Subscriber shall be responsible for compliance with all conditions on transfer imposed by any blue sky or securities law administrator and for any expenses incurred by the Company for legal or accounting services in connection with reviewing a proposed transfer; and

(2) No federal or state agency has made any finding or determination as to the fairness of the Offering of the Securities for investment or any recommendation or endorsement of the Securities; and

(3) The Securities have not been approved or registered under any Blue Sky law or with any State Securities Division, and as such, there may be restrictions on the sale or transfer of such Securities under State law.

vi) The Subscriber has carefully considered and has, to the extent it believes such discussion is 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 that the Subscriber and its advisers, if such advisors were deemed necessary, have determined that the Securities are a suitable investment for it;

vii) The Subscriber has not become aware of this Offering and has not been offered 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 the Subscriber's knowledge, those individuals that have attended have been invited by any such or similar means of general solicitation or advertising;

viii) The Subscriber realizes that the Securities cannot readily be sold and will be restricted securities and therefore the Securities must not be purchased unless the Subscriber has liquid assets sufficient to assure that such purchase will cause no undue financial difficulties and the Subscriber can provide for current needs and possible personal contingencies;

ix) The Subscriber (i) has at least five years’ investment experience in investments similar to the Securities, including investments in securities listed on the OTC Pink Sheet market, (ii) has adequate means of providing for its current financial needs and possible personal contingencies and does not have a need for liquidity of this investment in the Securities for the foreseeable future; (iii) can afford (a) to hold the Securities for an indefinite period of time; and (b) to sustain a complete loss of the entire amount of the purchase price for the Securities; (iii) has not made an overall commitment to investments which are not readily marketable which is disproportionate so as to cause such overall commitment to become excessive, and (iv) is fully aware that the purchase of the Securities is a high risk investment;

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Note Subscription Agreement

Hydrocarb Energy Corporation

x) The Subscriber understands that the Securities are being offered and sold to he, she, or it in reliance on specific exemptions from or non-application of the registration requirements of federal and state securities laws and that the Company is relying upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Subscriber set forth herein in order to determine the applicability of such exemptions and the suitability of the Subscriber to acquire the Securities. All information which the Subscriber has provided to the Company concerning the undersigned's financial position and knowledge of financial and business matters is correct and complete as of the date hereof, and if there should be any material change in such information prior to acceptance of this Agreement by the Company, the undersigned will immediately provide the Company with such information;

xi) The Subscriber has the requisite power and authority to enter into and perform the transactions contemplated by this Agreement and the purchase of the Securities. The execution, delivery and performance of this Agreement by the Subscriber and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate, partnership or other entity action, and no further consent or authorization of the Subscriber or its Board of Directors, managers, stockholders, members, trustees, holders or partners, as the case may be, as required. When executed and delivered by the Subscriber, this Agreement shall constitute a valid and binding obligation of the Subscriber enforceable against the Subscriber in accordance with its terms;

xii) The Subscriber has not agreed to act with any of the other investors for the purpose of acquiring, holding, voting or disposing of the Securities purchased hereunder for purposes of Section 13(d) under the Securities Exchange Act of 1934, as amended, and the Subscriber is acting independently with respect to its investment in the Securities;

xiii) The Subscriber confirms and certifies that:

(a)

The Subscription hereunder is irrevocable by Subscriber, except as required by law, Subscriber is not entitled to cancel, terminate or revoke this Agreement or any agreements of Subscriber hereunder.

(b)

No federal or state agency has made any findings or determination as to the fairness of the terms of this Offering for investment purposes; or any recommendations or endorsements of the Securities. The Offering is intended to be exempt from registration under the Securities Act by virtue of Section 4(2) of the Securities Act and the provisions of Rule 506 of Regulation D and/or Regulation S thereunder, which is in part dependent upon the truth, completeness and accuracy of the statements made by the Subscriber herein.

(c)

Subscriber is in receipt of and has carefully read and reviewed and understands the Convertible Secured Promissory Note attached hereto as Exhibit B and the Information For Residents of Certain States, attached hereto as Exhibit C.

(d)

It is understood that in order not to jeopardize the Offering’s exempt status under Section 4(2) of the Securities Act and Regulation D or Regulation S, any transferee may, at a minimum, be required to fulfill the investor suitability requirements thereunder.

(e)

No person or entity acting on behalf, or under the authority, of Subscriber is or will be entitled to any broker’s, finder’s or similar fee or commission in connection with this subscription.

(f)

Subscriber, as required by the Internal Revenue Code, certifies under penalty of perjury that 1) the Social Security Number or Federal Identification Number provided below is correct and 2) Subscriber is not subject to backup withholding either because Subscriber has not been notified that Subscriber is subject to backup withholding as a result of a failure to report interest or dividends, or because the Internal Revenue Service has notified Subscriber that Subscriber is no longer subject to backup withholding.

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Note Subscription Agreement

Hydrocarb Energy Corporation

(g)

IN MAKING AN INVESTMENT DECISION, SUBSCRIBER MUST RELY ON ITS OWN EXAMINATION OF THE COMPANY AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SECURITIES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

(h)

THIS SUBSCRIPTION DOES NOT CONSTITUTE AN OFFER OR SOLICITATION IN ANY STATE OR JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT PERMITTED UNDER APPLICABLE LAW OR TO ANY FIRM OR INDIVIDUAL THAT DOES NOT POSSESS THE QUALIFICATIONS PRESCRIBED IN THIS SUBSCRIPTION.

xiv) The Subscriber confirms and acknowledges that this is a “best efforts, no minimum” Offering; that the Company need not raise any certain level of funding; that regardless of the amount of funding raised in the Offering, the Company will not return any of the undersigned’s investment herein assuming the Subscription is accepted by the Company; and the Company is not required to use the funds raised in this Offering for any particular purpose or towards any specific use of proceeds. The Subscriber further confirms that the Company may undertake additional offerings in the future and/or may issue shares to consultants or employees at offering prices below that of the Offering, which may cause dilution to the Subscriber.

C. Indemnification. Subscriber acknowledges that Subscriber understands the meaning and legal consequences of the representations and warranties in paragraph B hereof, and Subscriber hereby agrees to indemnify and hold harmless the Company and its affiliates, partners, officers, directors, agents, attorneys, and employees from and against any and all loss, damage or liability due to or arising out of a breach of any such representations or warranties and the breach of any representations and warranties whatsoever made herein. Notwithstanding the foregoing, however, no representation, warranty, acknowledgment or agreement made herein by Subscriber shall in any manner be deemed to constitute a waiver of any rights granted to Subscriber under federal or state securities laws. The representations and warranties set forth herein shall survive the date upon which the Subscriber becomes a shareholder of the Company and/or the date of this Agreement in the event the Company does not accept the Subscriber’s subscription. No representation, warranty or covenant in this Agreement contains any untrue statement of a material fact, or omits to state a material fact necessary to make the statements contained therein, in the light of the circumstances under which they were or are to be made, not misleading.

D. Compliance with Securities Laws. Subscriber understands and agrees that a legend has been or will be placed on any certificate(s) or other document(s) evidencing the Securities in substantially the following form:

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR ANY STATE SECURITIES ACT. THE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS (I) THEY SHALL HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES ACT, OR (II) THE CORPORATION SHALL HAVE BEEN FURNISHED WITH AN OPINION OF COUNSEL, SATISFACTORY TO COUNSEL FOR THE CORPORATION, THAT REGISTRATION IS NOT REQUIRED UNDER ANY SUCH ACTS.”

E. Confidentiality. Subscriber agrees to maintain in confidence all information furnished by the Company or its agents that may be deemed to be material nonpublic information, including, but not limited to the fact that the Offering is being made and the terms and conditions of this Offering and the Securities.

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Note Subscription Agreement

Hydrocarb Energy Corporation

F. Governing Law. This Agreement shall be interpreted in accordance with the laws of the State of Texas. In the event of a dispute concerning this Agreement, the parties agree that venue lies in a court of competent jurisdiction in any Texas court.

G. U.S.A. Patriot Act and Anti-Money Laundering Representations. Subscriber represents and warrants that Subscriber is not and is not acting as an agent, representative, intermediary or nominee for, a person identified on the list of blocked persons maintained by the Office of Foreign Assets Control, U.S. Department of Treasury. In addition, Subscriber is in full compliance with all applicable U.S. laws, regulations, directives, and executive orders imposing economic sanctions, embargoes, export controls or anti-money laundering requirements, including but not limited to the following laws: (1) the International Emergency Economic Powers Act, 50 U.S.C. 1701-1706; (2) the National Emergencies Act, 50 U.S.C. 1601-1651; (3) section 5 of the United Nations Participation Act of 1945, 22 U.S.C. 287c; (4) Section 321 of the Antiterrorism Act, 18 U.S.C. 2332d; (5) the Export Administration Act of 1979, as amended, 50 U.S.C. app. 2401-2420; (6) the Trading with the Enemy Act, 50 U.S.C. app. 1 et seq.; (7) the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56; and (8) Executive Order 13224 (Blocking Property and Prohibiting Transactions with Persons Who Commit, Threaten to Commit, or Support Terrorism) of September 23, 2001. The Subscriber represents that the amounts invested by it in the Company in the Offering were not and are not directly or indirectly derived from activities that contravene federal, state or international laws and regulations, including anti-money laundering laws and regulations. To the best of the Subscriber’s knowledge, none of: (1) the Subscriber; (2) any person controlling or controlled by the Subscriber; (3) if the Subscriber is a privately-held entity, any person having a beneficial interest in the Subscriber; or (4) any person for whom the Subscriber is acting as agent or nominee in connection with this investment is a country, territory, individual or entity named on an Office of Foreign Assets Control (“OFAC”) list, or a person or entity prohibited under the OFAC Programs.

H. Entire Agreement. This Subscription is the entire and fully integrated agreement of the parties regarding the subject matter hereof, and there are no oral representations, warranties, agreements, or promises pertaining to this Subscription or the Securities.

I. Construction. The parties acknowledge that each of them has had the benefit of legal counsel of its own choice and has been afforded an opportunity to review this Agreement with its legal counsel and that this Agreement shall be construed as if jointly drafted by the parties hereto. All references in this Agreement as to gender shall be interpreted in the applicable gender of the parties.

J. Purchase Payment. The purchase price for the Note shall be paid to the Company in cash, check or via wire transfer simultaneously with the undersigned’s entry into this Agreement.

K. Construction of Terms. As used in this Agreement, the terms “herein,” “herewith,” “hereof” and “hereunder” are references to this Agreement, taken as a whole; the term “includes” or “including” shall mean “including, without limitation;” the word “or” is not exclusive; and references to a “Section,” “subsection,” “clause,” “Exhibit,” “Appendix,” “Schedule,” “Annex” or “Attachment” shall mean a Section, subsection, clause, Exhibit, Appendix, Schedule, Annex or Attachment of this Agreement, as the case may be, unless in any such case the context requires otherwise. Exhibits, Appendices, Schedules, Annexes or Attachments to any document shall be deemed incorporated by reference in such document. All references to or definitions of any agreement, instrument or other document (a) shall include all documents, instruments or agreements issued or executed in replacement thereof, and (b) except as otherwise expressly provided, shall mean such agreement, instrument or document, or replacement or predecessor thereto, as modified, amended, supplemented and restated through the date as of which such reference is made.

L. Effect of Facsimile and Photocopied Signatures. This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. A copy of this Agreement signed by one party and (a) faxed to another party or (b) scanned and emailed to another party, shall be deemed to have been executed and delivered by the signing party as though an original. A photocopy or PDF of this Agreement shall be effective as an original for all purposes.

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Note Subscription Agreement

Hydrocarb Energy Corporation

M. Severability. The holding of any provision of this Note Subscription Agreement to be invalid or unenforceable by a court of competent jurisdiction shall not affect any other provision of this Note Subscription Agreement, which shall remain in full force and effect.

N. Further Assurances. The parties agree to execute and deliver all such further documents, agreements and instruments and take such other and further action as may be necessary or appropriate to carry out the purposes and intent of this Note Subscription Agreement.

O. Collection of Personal Information. The undersigned (on its own behalf and, if applicable, on behalf of any person for whose benefit the undersigned is subscribing) acknowledges and consents to the fact the Company is collecting the undersigned’s (and any beneficial purchaser’s) personal information pursuant to this Agreement. The undersigned (on its own behalf and, if applicable, on behalf of any person for whose benefit the undersigned is subscribing) acknowledges and consents to the Company retaining the personal information for as long as permitted or required by applicable law or business practices. The undersigned (on its own behalf and, if applicable, on behalf of any person for whose benefit the undersigned is subscribing) further acknowledges and consents to the fact the Company may be required by applicable securities laws and stock exchange rules to provide regulatory authorities any personal information provided by the undersigned respecting itself (and any beneficial purchaser). By executing this Agreement, the undersigned is deemed to be consenting to the foregoing collection, use and disclosure of the undersigned’s (and any beneficial purchaser’s) personal information. The undersigned also consents to the filing of copies or originals of any of the undersigned’s documents described herein as may be required to be filed with any stock exchange or securities regulatory authority in connection with the transactions contemplated hereby. The undersigned represents and warrants that it has the authority to provide the consents and acknowledgments set out in this paragraph on behalf of all beneficial purchasers.

“PURCHASER”

Subscribed For a Convertible Secured Promissory Note in the principal amount of $350,000.

Business Address (including zip code): 3602 Aspenwood Dr., Richmond, Texas 77406

All communications to be sent to Business Address

Name Securities should be registered in: Duma Holdings, LLC

The undersigned hereby represents, warrants and covenants that the undersigned has been duly authorized by all requisite action on the part of the Limited Liability Company listed below (“Company”) to acquire the Securities and, further, that the Company has all requisite authority to acquire such Securities.

The officer signing below represents and warrants that each of the above representations or agreements or understandings set forth herein applies to that Company and that he has authority under the articles of organization, operating agreement, and resolutions of the managers and/or members of such Company to execute this Note Subscription Agreement. Such officer encloses a true copy of the articles of organization, operating agreement and, as necessary, the resolutions of the managers and/or members authorizing a purchase of the investment herein, in each case as amended to date.

DUMA HOLDINGS, LLC

/s/ S. Chris Herndon

Name: S. CHRIS HERNDON

Title: MANAGER

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Note Subscription Agreement

Hydrocarb Energy Corporation

ACCEPTED BY THE COMPANY this the __16th____ day of July 2015.

Hydrocarb Energy Corporation

/s/ Kent P. Watts

Name: Kent P. Watts

Title: Chief Executive Officer

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Note Subscription Agreement

Hydrocarb Energy Corporation

Exhibit 10.3

THIS NOTE, AND THE UNITS AND SHARES OF COMMON STOCK ISSUABLE UPON CONVERSION OF THIS NOTE (COLLECTIVELY, THE “SECURITIES”) HAVE BEEN ACQUIRED FOR INVESTMENT PURPOSES ONLY AND MAY NOT BE TRANSFERRED UNTIL (i) A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT” OR THE “SECURITIES ACT”) SHALL HAVE BECOME EFFECTIVE WITH RESPECT THERETO OR (ii) RECEIPT BY THE COMPANY OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT REGISTRATION UNDER THE ACT IS NOT REQUIRED IN CONNECTION WITH SUCH PROPOSED TRANSFER NOR IS IN VIOLATION OF ANY APPLICABLE STATE SECURITIES LAWS. THIS LEGEND SHALL BE ENDORSED UPON ANY NOTE ISSUED IN EXCHANGE FOR THIS NOTE AND ANY SECURITIES ISSUABLE UPON CONVERSION OF THIS NOTE (EXCEPT AS OTHERWISE PROVIDED BELOW).

CONVERTIBLE SECURED PROMISSORY NOTE

Effective July 16, 2015

FOR VALUE RECEIVED, Hydrocarb Energy Corporation, a Nevada corporation (the “Corporation”), hereby promises to pay to the order of Duma Holdings, LLC, a Texas limited liability company and/or permitted assigns (the “Holder”), the aggregate principal amount of $350,000 (the “Principal”), together with interest on the unpaid Principal amount hereof, upon the terms and conditions hereinafter set forth. This Convertible Secured Promissory Note is defined herein as the “Note”, or the “Promissory Note”. The “Effective Date” of this Note shall be July 16, 2015. The Holder acquired the Note pursuant to the terms of that certain Note Subscription Agreement entered into between the Corporation and the Holder dated on or around July 16, 2015. The Holder, any purchasers, assignees and transferees of this Note should thoroughly read and review Section 4 hereof, which sets forth the terms and conditions upon which this Note (and the amount owed hereunder) can be converted into Units and Common Shares (each as defined below). This Note was issued with an original issue discount equal to 2% of the original Principal amount of the Note.

1. Payment Terms. The Corporation promises to pay to the Holder the balance of Principal, together with any accrued and unpaid interest due hereunder on November 30, 2015 (the “Maturity Date”), unless this Note is earlier (a) prepaid as herein provided; or (b) converted into Units and Common Shares pursuant to Section 4 below. All payments hereunder shall be made in lawful money of the United States of America. Payment shall be credited first to the accrued Interest then due and payable and the remainder to Principal.

2. Interest. The Principal amount of this Note shall accrue interest at the Interest Rate (“Interest” and such interest which is accrued and unpaid as of the applicable determination date, “Accrued Interest”). Accrued Interest shall be added to the Principal Amount of this Note until the earlier to occur of (i) the Conversion Date, at which time all Accrued Interest shall be subject to Section 4 below, and (ii) October 31, 2015 (the “Interest Payable Date”). Beginning on the Interest Payable Date, interest accruing on this Note after such date shall be payable by the Corporation in cash at the end of each Quarter until the earlier of (a) the Maturity Date; (b) the date this Note is repaid in full; and (c) the Conversion Date. All past-due Principal and Interest shall bear Interest at the rate of 18% per annum until paid in full (the “Default Rate”). The Interest Rate shall be computed on the basis of the actual number of days elapsed and a year of 365 days. The “Interest Rate” means 15% per annum. “Quarter” means any of the following during any calendar year: the three (3) month period ending January 31, April 30, July 31 or October 31.

(a) Notwithstanding any provision in this Note, the total liability for payments of Interest and payments in the nature of interest, including all charges, fees, exactions, or other sums which may at any time be deemed to be interest, shall not exceed the limit imposed by the usury laws of the State of Nevada or the applicable laws of the United States of America, whichever shall be higher (the “Maximum Rate”).

(b) In the event the total liability for payments of Interest and payments in the nature of interest, including, without limitation, all charges, fees, exactions or other sums which may at any time be deemed to be interest, which for any month or other interest payment period exceeds the Maximum Rate, all sums in excess of those lawfully collectible as interest for the period in question (and without further agreement or notice by, among or to the Holder the undersigned) shall be applied to the reduction of the Principal balance, with the same force and effect as though the undersigned had specifically designated such excess sums to be so applied to the reduction of the Principal balance and the Holder had agreed to accept such sums as a premium-free prepayment of Principal; provided, however, that the Holder may, at any time and from time to time, elect, by notice in writing to the undersigned, to waive, reduce or limit the collection of any sums in excess of those lawfully collectible as interest rather than accept such sums as a prepayment of the Principal balance. The undersigned does not intend or expect to pay nor does the Holder intend or expect to charge, accept or collect any interest under this Note greater than the Maximum Rate.

(c) If any payment of Principal or interest on this Note shall become due on a Saturday, Sunday or any other day on which national banks are not open for business, such payment shall be made on the next succeeding Business Day. “Business Day” means a day other than (i) a Saturday, (ii) a Sunday or (iii) a day on which commercial banks in Houston, Texas, are authorized or required to be closed for business.

3. Prepayment. This Note may be prepaid by the Corporation in whole or part at any time (each a “Prepayment”), only with the prior written approval of the Holder. Any partial Prepayment shall be applied first to any Accrued Interest and then to any Principal outstanding.

4. Holder’s Option to Convert This Note.

(a) At any time prior to the earlier of the payment in full by the Corporation of this Note, the Holder shall have the option to convert the then outstanding Principal balance and all Accrued Interest under the Note, into (i) 1.75 units of the Corporation, with each unit consisting of (a) 25,000 shares of the common stock, $0.001 par value per share (the “Common Stock”) of the Corporation (the “Unit Shares”); and (b) $100,000 in face amount of Convertible Subordinated Promissory Notes (each a “Convertible Note” and together with the Unit Shares, the “Units”, which shall be in the form of Units offered by the Corporation to investors beginning in June 2015); and (ii) 350,000 shares of Common Stock (the “Common Shares”, the “Conversion Option” and the “Conversion”). Upon any Conversion, all Principal and Accrued Interest shall be deemed paid in full by the Corporation upon issuance of the Units and Common Shares.

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Convertible Secured Promissory Note

(b) In order to exercise this Conversion Option, the Holder shall provide the Corporation a written notice of its intentions to exercise this Conversion Option, which shall be in the form of Exhibit A, attached hereto (“Notice of Conversion”). Within ten (10) Business Days of the Corporation’s receipt of the Notice of Conversion and an original copy of this Note, the Corporation shall deliver or cause to be delivered to the Holder, written confirmation that the Units and Common Shares have been issued in the name of the Holder;

(c) In the event of the exercise of the Conversion Option, the Holder shall cooperate with the Corporation to promptly take any and all additional actions required or requested to make Holder a unitholder/stockholder of the Corporation including, without limitation, in connection with the issuance of the Units and Common Shares and providing the Corporation or its legal counsel or Transfer Agent, representations as to financial condition, investment intent and sophisticated investor status as are reasonably requested or required;

(d) If the Corporation at any time or from time to time on or after the Effective Date of this Note (the “Original Issuance Date”) effects a subdivision of its outstanding Common Stock, the Common Shares due immediately before that subdivision shall be proportionately decreased, and conversely, if the Corporation at any time or from time to time on or after the Original Issuance Date combines its outstanding shares of Common Stock into a smaller number of shares, the Common Shares then due before the combination shall be proportionately increased; and

(e) On the date of any Conversion, all rights of any Holder with respect to the amount of this Note converted, will terminate, except only for the rights of any such Holder to receive certificates (if applicable) for the number of Units and Common Shares which this Note has been Converted.

5. Representations and Warranties of the Corporation. The Corporation represents and warrants to Holder as follows:

(a) The execution and delivery by the Corporation of this Note (i) are within the Corporation’s corporate power and authority, and (ii) have been duly authorized by all necessary corporate action. Further, the undersigned is a duly authorized representative of the Corporation who has been authorized by a resolution of the Board of Directors to exercise any and all documents necessary to effectuate the transaction contemplated hereby.

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Convertible Secured Promissory Note

(b) This Note is a legally binding obligation of the Corporation, enforceable against the Corporation in accordance with the terms hereof, except to the extent that (i) such enforceability is limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or affecting generally the enforcement of creditors’ rights, and (ii) the availability of the remedy of specific performance or injunctive or other equitable relief is subject to the discretion of the court before which any proceeding therefore may be brought.

6. Events of Default. If an Event of Default (as defined herein or below) occurs (unless all Events of Default have been cured or waived by Holder), Holder may, by written notice to the Corporation, declare the Principal amount then outstanding of, and the Accrued Interest and all other amounts payable on, this Note to be immediately due and payable, or exercise any other rights and remedies provided by law or equity. The following events shall constitute events of default (“Events of Default”) under this Note, and/or any other Events of Default defined elsewhere in this Note shall occur:

(a) the Corporation shall fail to pay, when and as due, the Principal or Interest payable hereunder on the due date of such payment, and such payment is not made within ten (10) days following the receipt of written notice of such failure by the Holder to the Corporation; or

(b) the Corporation shall have breached in any respect any material covenant in this Note, and, with respect to breaches capable of being cured, such breach shall not have been cured within ten (10) days following the receipt of written notice of such breach by the Holder to the Corporation; or

(c) the Corporation shall: (i) make an assignment for the benefit of creditors, file a petition in bankruptcy, petition or apply to any tribunal for the appointment of a custodian, receiver or a trustee for it or a substantial portion of its assets; (ii) commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation or statute of any jurisdiction, whether now or hereafter in effect; (iii) have filed against it any such petition or application in which an order for relief is entered or which remains undismissed for a period of ninety (90) days or more; (iv) indicate its consent to, approval of or acquiescence in any such petition, application, proceeding or order for relief or the appointment of a custodian, receiver or trustee for it or a substantial portion of its assets; or (v) suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of ninety (90) days or more; or

(d) the Corporation shall take any action authorizing, or in furtherance of, any of the foregoing.

In case any one or more Events of Default shall occur and be continuing and Holder has provided the Corporation written notice of such Event of Default, Holder may proceed to protect and enforce its rights by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or for an injunction against a violation of any of the terms hereof, or in aid of the exercise of any power granted hereby or thereby or by law or otherwise. In case of a default in the payment of any Principal of or premium, if any, or Interest on this Note, the Corporation will pay to Holder such further amount as shall be sufficient to cover the reasonable cost and expenses of collection, including, without limitation, reasonable attorneys’ fees, expenses and disbursements. No course of dealing and no delay on the part of Holder in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice Holder’s rights, powers or remedies. No right, power or remedy conferred by this Note upon Holder shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise.

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Convertible Secured Promissory Note

7. Security. The Principal and Accrued Interest due pursuant to the terms of this Note are (a) personally guaranteed by Kent Watts, the Corporation’s Chief Executive Officer and Michael Watts, his brother, pursuant to separate guarantee agreements entered into between such individuals and the Holder; and (b) secured by a first priority security interest on certain real estate owned by Kent Watts pursuant to a Deed of Trust, Assignment of Rents and Security Agreement (the “Security Agreement”) entered into separately herewith.

The Security Agreement shall be released upon receipt of payment of entire balance of Principal, together with any accrued and unpaid interest due hereunder or the completion of the Conversion pursuant to Section 4 above.

8. Certain Waivers by the Corporation. Except as expressly provided otherwise in this Note, the Corporation and every endorser or guarantor, if any, of this Note waive presentment, demand, notice, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note, and assent to any extension or postponement of the time of payment or any other indulgence, to any substitution, exchange or release of collateral available to Holder, if any, and to the addition or release of any other party or person primarily or secondarily liable.

9. Assignment and Transfer by Holder. If and whenever this Note shall be assigned and transferred, or negotiated, including transfers to substitute or successor trustees, in each case subject to applicable law and an exemption from registration for such transfer, which shall be approved by the Corporation subject to the Holder providing the Corporation a legal opinion for such transfer, which opinion shall be reasonably accepted by the Corporation, the holder hereof shall be deemed the “Holder” for all purposes under this Note.

10. Amendment. This Note may not be changed orally, but only by an agreement in writing, signed by the party against whom enforcement of any waiver, change, modification or discharge is sought.

11. Costs and Fees. Anything else in this Note to the contrary notwithstanding, in any action arising out of this Note, the prevailing party shall be entitled to collect from the non-prevailing party all of its attorneys’ fees. For the purposes of this Note, the party who receives or is awarded a substantial portion of the damages or claims sought in any proceeding shall be deemed the “prevailing” party and attorneys’ fees shall mean the reasonable fees charged by an attorney or a law firm for legal services and the services of any legal assistants, and costs of litigation, including, but not limited to, fees and costs at trial and appellate levels.

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Convertible Secured Promissory Note

12. Governing Law. It is the intention of the parties hereto that the terms and provisions of this Note are to be construed in accordance with and governed by the laws of the State of Texas, except as such laws may be preempted by any federal law controlling the rate of Interest which may be charged on account of this Note.

13. Construction. When used in this Note, unless a contrary intention appears: (i) a term has the meaning assigned to it; (ii) “or” is not exclusive; (iii) “including” means including without limitation; (iv) words in the singular include the plural and words in the plural include the singular, and words importing the masculine gender include the feminine and neuter genders; (v) any agreement, instrument or statute defined or referred to herein or in any instrument or certificate delivered in connection herewith means such agreement, instrument or statute as from time to time amended, modified or supplemented and includes (in the case of agreements or instruments) references to all attachments thereto and instruments incorporated therein; (vi) the words “hereof”, “herein” and “hereunder” and words of similar import when used in this Note shall refer to this Note as a whole and not to any particular provision hereof; (vii) references contained herein to Article, Section, Schedule and Exhibit, as applicable, are references to Articles, Sections, Schedules and Exhibits in this Note unless otherwise specified; (viii) references to “writing” include printing, typing, lithography and other means of reproducing words in a visible form, including, but not limited to email; (ix) references to “dollars”, “Dollars” or “$” in this Note shall mean United States dollars; (x) reference to a particular statute, regulation or Law means such statute, regulation or Law as amended or otherwise modified from time to time; (xi) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein); (xii) unless otherwise stated in this Note, in the computation of a period of time from a specified date to a later specified date, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”; (xiii) references to “days” shall mean calendar days; and (xiv) the paragraph headings contained in this Note are for convenience only, and shall in no manner be construed as part of this Note.

14. No Third Party Benefit. The provisions and covenants set forth in this Note are made solely for the benefit of the parties to this Note and are not for the benefit of any other person, and no other person shall have any right to enforce these provisions and covenants against any party to this Note.

15. Jurisdiction, Venue and Jury Trial Waiver. In any actions predicated upon this Note, venue is properly laid in Texas and the Circuit Court in and for Harris County, Texas, shall have exclusive full subject matter and personal jurisdiction over the parties to determine all issues arising out of or in connection with the execution and enforcement of this Note.

16. Interpretation. The term “Corporation” as used herein in every instance shall include the Corporation’s successors, legal representatives and assigns, including all subsequent grantees, either voluntarily by act of the Corporation or involuntarily by operation of law and shall denote the singular and/or plural and the masculine and/or feminine and natural and/or artificial persons, whenever and wherever the contexts so requires or properly applies. The term “Holder” as used herein in every instance shall include the Holder’s successors, legal representatives and assigns (as permitted pursuant to the terms of this Note), as well as all subsequent assignees, endorsees and holders of this Note (subject to the provisions of this Note providing for transfers and assignments by Holder), either voluntarily by act of the parties or involuntarily by operation of law.

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Convertible Secured Promissory Note

17. WAIVER OF JURY TRIAL. THE COMPANY AND HOLDER HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE THE RIGHT EITHER MAY HAVE TO TRIAL BY JURY IN RESPECT TO ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS NOTE AND ANY AGREEMENT CONTEMPLATED TO BE EXECUTED IN CONJUNCTION HEREWITH, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS, (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF EITHER PARTY. THE COMPANY ACKNOWLEDGES THAT THIS WAIVER OF JURY TRIAL IS A MATERIAL INDUCEMENT TO THE HOLDER IN EXTENDING CREDIT TO THE COMPANY, THAT THE HOLDER WOULD NOT HAVE EXTENDED SUCH CREDIT WITHOUT THIS JURY TRIAL WAIVER, AND THAT THE COMPANY HAS BEEN REPRESENTED BY AN ATTORNEY OR HAS HAD AN OPPORTUNITY TO CONSULT WITH AN ATTORNEY IN CONNECTION WITH THIS JURY TRIAL WAIVER AND UNDERSTANDS THE LEGAL EFFECT OF THIS WAIVER.

18. Cumulative Rights. No delay on the part of Holder or any other holder of this Note in the exercise of any power or right under this Note, shall operate as a waiver thereof, nor shall a single or partial exercise of any power or right preclude other or further exercise thereof or exercise of any other power or right.

19. Notices. Any and all notices, requests or other communications hereunder shall be given in writing and delivered by: (a) regular, overnight or registered or certified mail (return receipt requested), with first class postage prepaid; (b) hand delivery; (c) facsimile transmission; or (d) overnight courier service, to the parties at the following addresses or facsimile numbers:

If to the Corporation:

Hydrocarb Energy Corporation

Attn: Kent P. Watts

800 Gessner Road, Suite 375

Houston, Texas 77024

With a copy to:

The Loev Law Firm, PC

Attn: David M. Loev, Esq.

6300 West Loop South, Suite 280

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Convertible Secured Promissory Note

Bellaire, Texas 77401

Phone: (713) 524-4110

Fax: (713) 524-4122

If to the Holder:

Duma Holdings, LLC

Attn: S. Chris Herndon

2602 Aspenwood Dr.

Richmond, Texas 77406

With a copy to:

Christian, Smith & Jewell, LLP

Attn: James W. Christian

2302 Fannin, Suite 500

Houston, Texas 77002

or at such other address or number as shall be designated by either of the parties in a notice to the other party given in accordance with this Section 19, provided that at least ten (10) days prior written notice shall be given for any change. Except as otherwise provided in this Note, all such communications shall be deemed to have been duly given: (A) in the case of a notice sent by regular or registered or certified mail, three business days after it is duly deposited in the mails; (B) in the case of a notice delivered by hand, when personally delivered; (C) in the case of a notice sent by facsimile, upon transmission subject to telephone confirmation of receipt; and (D) in the case of a notice sent by overnight mail or overnight courier service, the next business day after such notice is mailed or delivered to such courier, in each case given or addressed as aforesaid.

20. Severability. If any term or other provision of this Note is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Note shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Note so as to affect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the extent possible.

21. Entire Agreement. This Note constitutes the sole and only agreement of the parties hereto and supersedes any prior understanding or written or oral agreements between the parties respecting the subject matter hereof.

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Convertible Secured Promissory Note

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Convertible Secured Promissory Note

IN WITNESS WHEREOF, the undersigned has caused this Convertible Secured Promissory Note to be executed and delivered as of the date first above written, to be effective as of the Effective Date set forth above.

	“Corporation”

	HYDROCARB ENERGY CORPORATION


	By:	/s/ Kent P. Watts

Its:

CEO

Printed Name:

Kent P.Watts

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Convertible Secured Promissory Note

EXHIBIT A

Conversion Election Form

____________, 20__

Hydrocarb Energy Corporation

Attn: Kent P. Watts

800 Gessner Road, Suite 375

Houston, Texas 77024

Re:	Conversion of Convertible Secured Promissory Note

Ladies and Gentlemen:

You are hereby notified that, pursuant to, and upon the terms and conditions of that certain Convertible Secured Promissory Note of Hydrocarb Energy Corporation (the “Corporation”) dated July 16, 2015 in the amount of $350,000 (the “Note”), held by us, we hereby elect to exercise our Conversion Option (as such term in defined in the Note). Please issue certificate(s) for the applicable securities issuable upon the Conversion, in the name of the person provided below.

	Very truly yours,


	Name:

	If on behalf of Entity:

Entity Name:

	Signatory’s Position with Entity:

Please issue certificate(s) for common stock as follows:

Name

Address

Social Security No./EIN of Shareholder

Please send the certificate(s) evidencing the common stock to:

Attn:

Address:

Exhibit 10.4

GUARANTY

DATE:	JULY 16, 2015

GUARANTOR:	KENT P. WATTS

BORROWER:	HYDROCARB ENERGY CORPORATION

LENDER:	DUMA HOLDINGS, LLC

GUARANTEED INDEBTEDNESS: The debt evidenced by the (1) the Promissory Note of event date in the original principal amount of THREE HUNDRED FIFTY THOUSAND AND 00/100 DOLLARS ($350,000.00), executed by Borrower and payable to the order of Lender (the “Promissory Note”), including any and all modifications, renewals, extensions thereto, and (2) all interest, penalties, expenses, attorney’s fees, and other collection costs as provided in the Promissory Note.

1. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees to pay, when due or declared due, the Guaranteed Indebtedness to Lender. Guarantor represents and warrants that is has received sufficient consideration for this guaranty. Guarantor is a large shareholder and executive of Borrower and acknowledges the benefit he is indirectly receiving from the Promissory Note and the transaction contemplated thereunder.

2. The Guarantor further acknowledges and agrees with Lender that:

a. No act or thing need occur to establish the liability of the Guarantor hereunder, and no act or thing, except full payment and discharge of all indebtedness, shall in any way exonerate the Guarantor or modify, reduce, limit or release the liability of the Guarantor hereunder.

b. This is an absolute, unconditional and continuing guaranty of payment of the Guaranteed Indebtedness and shall continue to be in force and be binding upon the Guarantor, whether or not all Guaranteed Indebtedness is paid in full, until this guaranty is revoked by written notice actually received by the Lender, and such revocation shall not be effective as to Guaranteed Indebtedness existing or committed for at the time of actual receipt of such notice by the Lender, or as to any renewals, extensions and refinancings thereof. If there be no more than one Guarantor, such revocation shall be effective only as to the one so revoking. The death or incompetence of the Guarantor shall not revoke this guaranty, except upon actual receipt of written notice thereof by Lender and then only as to the decedent or the incompetent and only prospectively, as to future transactions, as herein set forth.

c. If the Guarantor shall be dissolved, shall die, or shall be or become insolvent (however defined) or revoke this guaranty, then the Lender shall have the right to declare immediately due and payable, and the Guarantor will forthwith pay to the Lender, the full amount of all Guaranteed Indebtedness, whether due and payable or unmatured. If the Guarantor voluntarily commences or there is commenced involuntarily against the Guarantor a case under the United States Bankruptcy Code, the full amount or all Guaranteed Indebtedness, whether due and payable or unmatured, shall be immediately due and payable without demand or notice thereof.

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d. The liability of the Guarantor hereunder shall be limited to a principal amount of $UNLIMITED (if unlimited or if no amount is stated, the Undersigned shall be liable for all of the Guaranteed Indebtedness, without any limitation as to amount), plus accrued interest thereon and all other costs, fees, and expenses agreed to be paid under all agreements evidencing the Guaranteed Indebtedness and securing the payment of the Guaranteed Indebtedness, and all attorneys' fees, collection costs and enforcement expenses referable thereto. Guaranteed Indebtedness may be created and continued in any amount, whether or not in excess of such principal amount, without affecting or impairing the liability of the Guarantor hereunder. The Lender may apply any sums received by or available to Lender on account of the Guaranteed Indebtedness from Borrower or any other person (except the Guarantor), from their properties, out of any collateral security or from any other source to payment of the excess. Such application of receipts shall not reduce, affect or impair the liability of the Guarantor hereunder.

e. The Guarantor will pay or reimburse Lender for all costs and expenses (including reasonable attorney’s fees and legal expenses) incurred by Lender in connection with the protection, defense or enforcement of this guaranty in any litigation or bankruptcy or insolvency proceedings.

3. Whether or not any existing relationship between the Guarantor and Borrower has been changed or ended and whether or not this guaranty has been revoked, Lender may, but shall not be obligated to, enter into transactions resulting in the creation or continuance of Guaranteed Indebtedness, without any consent or approval by the Guarantor and without any notice to the Guarantor. The liability of the Guarantor shall not be affected or impaired by any of the following acts or things (which Lender is expressly authorized to do, omit or suffer from time to time, both before and after revocation of this guaranty, without notice to or approval by the Guarantor): (i) any acceptance of collateral security, guarantors accommodation parties or sureties for any or all Guaranteed Indebtedness; (ii) any one or more extensions or renewals of Guaranteed Indebtedness (whether or not for longer than the original period) or any modifications of the interest rates, maturities or other contractual terms applicable to any Guaranteed Indebtedness; (iii) any waiver, adjustment, forbearance, compromise or indulgence granted to Borrower, any delay or lack of diligence in the enforcement of Guaranteed Indebtedness, or any failure to institute proceedings, file a claim, give any required notices or otherwise protect Guaranteed Indebtedness; (iv) any full or partial release of, settlement with, or agreement not to sue, Borrower or any other guarantor or other person liable in respect of any Guaranteed Indebtedness; (v) any discharge of any evidence of Guaranteed Indebtedness or the acceptance of any instrument in renewal thereof or substitution therefor; (vi) any failure to obtain collateral security (including rights of setoff) for Guaranteed Indebtedness, or to see to the proper or sufficient creation and perfection thereof, or to establish the priority thereof, or to protect, insure, or enforce any collateral security; or any release, modification, substitution, discharge, impairment, deterioration, waste or loss of any collateral security; (vii) any foreclosure or enforcement of any collateral security; (viii) any transfer of any indebtedness or any evidence thereof; (ix) any order of application of any payments or credits upon Guaranteed Indebtedness; (x) any election by the Lender under § 1111(b)(2) of the United States Bankruptcy Code.

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4. The Guarantor waives any and all defenses, claims and discharges of Borrower, or any other obligor, pertaining to Guaranteed Indebtedness, except the defense of discharge by payment in full. Without limiting the generality of the foregoing, the Guarantor will not assert, plead or enforce against Lender any defense waiver, release, statute of limitations, res judicata, statute of frauds, fraud incapacity, minority, usury, illegality or unenforceability which may be available to Borrower or any such other person, whether or not on account of a related transaction. The Guarantor expressly agrees that the Guarantor shall be and remain liable, to the fullest extent permitted by applicable law, for any deficiency remaining after foreclosure of any mortgage or security interest securing Guaranteed Indebtedness, whether or not the liability of Borrower or any other obligor for such deficiency is discharged pursuant to statute or judicial decision. The undersigned shall remain obligated, to the fullest extent permitted by law, to pay such amounts as though the Borrower’s obligations had not been discharged.

5 The Guarantor further agrees that the Guarantor shall be and remain obligated to pay Guaranteed Indebtedness even though any other person obligated to pay Guaranteed Indebtedness, including Borrower, has such obligation discharged in bankruptcy or otherwise discharged by law. “Guaranteed Indebtedness” shall include post-bankruptcy petition interest and attorney’s fees and any other amounts which Borrower is discharged from paying or which do not otherwise accrue to Guaranteed Indebtedness due to Borrower’s discharge, and the Guarantor shall remain obligated to pay such amount at though Borrower’s obligations had not been discharged.

6. If any payment applied by Lender to Guaranteed Indebtedness is thereafter set aside, recovered, rescinded, or required to be returned for any reason (including, without limitation, the bankruptcy, insolvency or reorganization of Borrower or any other obligor), the Guaranteed Indebtedness to which such payment was applied shall for the purposes of this guaranty be deemed to have continued in existence, notwithstanding such application, and this guaranty shall be enforceable as to such Guaranteed Indebtedness as fully as if such application had never been made.

7. Until the obligations of the Borrower to Lender have been paid in full, the Guarantor waives any claim, remedy or other right which the Guarantor may now have or hereafter acquire against Borrower or any other person obligated to pay Guaranteed Indebtedness arising out of the creation or performance of the Guarantor’s obligation under this guaranty, including, without limitation, any right of subrogation, contribution, reimbursement, indemnification, exoneration, and any right to participate in any claim or remedy the Guarantor may have against the Borrower, collateral, or other party obligated for Borrower’s debts, whether or not such claim, remedy or right arises in equity, or under contract, statute or common law.

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8. The Guarantor waives presentment, demand for payment, notice of dishonor or nonpayment, and protest of any instrument evidencing Guaranteed Indebtedness. Lender shall not be required first to resort for payment of the Guaranteed Indebtedness to Borrower or other persons for their properties, or first to enforce, realize upon or exhaust any collateral security for Guaranteed Indebtedness, before enforcing this guaranty.

9. The liability of the Guarantor under this guaranty is in addition to and shall be cumulative with all other liabilities of the Guarantor to Lender as Guarantor or otherwise, without any limitation as to amount, unless the instrument or agreement evidencing or creating such other liability specifically provides to the contrary. To the maximum extent permitted by applicable law, Guarantor hereby waives all rights, remedies, claims and defenses based upon or related to Sections 51.003, 51.004 and 51.005 of the Texas Property Code, to the extent the same pertains or may pertain to any enforcement of this guaranty.

10. This guaranty will be governed by the laws of the state of Texas. Any term of this guaranty which is contrary to applicable law will not be effective, unless the law permits Guarantor and Lender to agree to such a variation. If any provision of this agreement cannot be enforced according to its terms, this fact will not affect the enforceability of the remainder of this agreement. Time is of the essence in this agreement. All disputes, claims, demands, actions, causes of action, suits or proceedings by and among the parties to this guaranty shall be adjudicated, litigated, heard or tried, if at all, exclusively in the state courts of Harris County, Texas or the United States District Court for the Southern District of Texas. Harris County, Texas shall be the mandatory, exclusive place for the adjudication, litigation, hearing or trial of any matter relating to this guaranty. Guarantor hereby irrevocably waives any right to have any such dispute, claim, demand, action, cause of action, suit or proceeding adjudicated, litigated, heard or tried in any place other than Harris County, Texas.

11. This guaranty shall be enforceable against each person signing this guaranty, even if only one person signs and regardless of any failure of other persons to sign this guaranty. If there be more than one signer, all agreements and promises herein shall be construed to be, and are hereby declared to be, joint and several in each of every particular and shall be fully binding upon and enforceable against either, any or all the Guarantor. This guaranty shall be effective upon delivery to Lender, without further act, condition, or acceptance by Lender, shall be binding upon the Guarantor and the heirs, representatives, successors and assigns of the Guarantor and shall inure to the benefit of Lender and its participants, successors and assigns. Any invalidity or unenforceability of any provisions of this guaranty shall not affect other lawful provisions and application hereof, and to this end the provisions of this guaranty are declared to be severable. Except as authorized by the terms herein, this guaranty may not be waived, modified, amended, terminated, released or otherwise changed except by a writing signed by the Guarantor and Lender.

12. WAIVER OF JURY TRIAL. GUARANTOR HEREBY WAIVES TRIAL BY JURY IN ANY PROCEEDINGS BROUGHT BY THE OTHER PARTY IN CONNECTION WITH ANY MATTER ARISING OUT OF OR IN ANYWAY CONNECTED WITH THIS GUARANTY. THE PROVISIONS OF THIS SECTION SURVIVE THE TERMINATION OF THIS GUARANTY.

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13. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

14. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS HEREOF, this guaranty has been duly executed by the Undersigned the day and year first above written.

GUARANTOR: KENT P. WATTS

/s/ Kent P. Watts

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Exhibit 10.5

GUARANTY

DATE:

JULY 16, 2015

GUARANTOR:

MIKE WATTS

BORROWER:

HYDROCARB ENERGY CORPORATION

LENDER:

DUMA HOLDINGS, LLC

1. For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Guarantor agrees to pay, when due or declared due, the Guaranteed Indebtedness to Lender. Guarantor represents and warrants that is has received sufficient consideration for this guaranty. Guarantor is a large shareholder and consultant for Borrower and acknowledges the benefit he is indirectly receiving from the Promissory Note and the transaction contemplated thereunder.

2. The Guarantor further acknowledges and agrees with Lender that:

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13. THIS WRITTEN AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.

14. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.

IN WITNESS HEREOF, this guaranty has been duly executed by the Undersigned the day and year first above written.

GUARANTOR: MIKE WATTS

/s/ Mike Watts

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