STOCK GRANT AGREEMENT

THIS STOCK GRANT AGREEMENT (this “Agreement”) dated as of August 15, 2014 (the “Effective Date”), is by and between Hydrocarb Energy Corporation, a corporation duly formed and existing under the laws of the State of Nevada (the “Company”) and each of Shadow Tree Funding Vehicle A—Hydrocarb LLC, a limited liability company duly formed and existing under the laws of the State of Delaware, its successors and assigns, and Quintium Private Opportunity Fund, LP, its successors and assigns (each a “Grantee” and toegether, the “Grantees”).

W I T N E S S E T H:

WHEREAS, the Company and Grantee are parties to a certain Credit Agreement, dated as of the Effective Date (the “Credit Agreement”), under which each Grantee has extended a loan to the Company (the “Loans”), and as partial consideration for Grantees making such loans to the Company, in the Credit Agreement, the Company has agreed to issue and convey to Grantees a total of 150,000 shares (such shares issued and conveyed to Grantees hereunder, the “Common Shares”) of common stock (the “Common Stock”) of the Company, in proportion to the relative sizes of the loans and commitments made by the Grantees, subject to the terms and conditions set forth in this Agreement.

NOW THEREFORE, in consideration of the extension by Grantee to the Company of the Loan pursuant to the terms of the Credit Agreement, and in consideration of the mutual covenants and agreements herein contained, the parties hereto agree as follows:

i.	60,000 Common Shares on the Effective Date;

ii.	32,500 Common Shares on the twelve (12) month anniversary of the Effective Date;

iii.	32,500 Common Shares on the eighteen (18) month anniversary of the Effective Date; and

iv.	25,000 Common Shares on the twenty one (21) month anniversary of the Effective Date.

Each such conveyance of Common Shares shall be apportioned among the Grantees (including, as applicable, each Grantee’s successors and assigns at the time of each conveyance) in proportion to the relative size of each Grantee’s Commitment Amount (as defined in the Credit Agreement), after giving effect to any effective Assignment and Assumption (as defined in the Credit Agreement), as reflected in an updated Annex I to the Credit Agreement, with any rounding to be determined by the Agent. Based on the Commitment Amount of each Grantee at the Effective Date, 75% of each such conveyance of Common Shares shall be issued and conveyed to Shadow Tree Funding Vehicle A—Hydrocarb LLC, and 25% of each such conveyance of Common Shares shall be issued and conveyed to Quintium Private Opportunity Fund, LP.

[Signature Page to Stock Grant Agreement.]

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In connection with the Stock Grant, each Grantee hereby represents and warrants to and agrees with the Company as follows:

In connection with the Stock Grant, the Company hereby represents and warrants to and agrees with each Grantee as follows:

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“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE OFFERED OR SOLD UNLESS A REGISTRATION STATEMENT UNDER THE SECURITIES ACT SHALL HAVE BECOME EFFECTIVE WITH REGARD THERETO, OR AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS IS AVAILABLE IN CONNECTION WITH SUCH OFFER OR SALE. NOTWITHSTANDING THE FOREGOING BUT SUBJECT TO COMPLIANCE WITH THE REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, THESE SECURITIES MAY BE PLEDGED OR HYPOTHECATED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER OBLIGATIONS SECURED BY SUCH SECURITIES.”

If required by the authorities of any State in connection with the issuance of the Common Shares, the legend or legends required by such State authorities shall also be endorsed on all such certificates.

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Section 6.                  Notice.

All notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by telecopy, as follows:

If to the Company:

Hydrocarb Energy Corporation

800 Gessner, Suite 375

Houston, TX 77024

Attention: Charles Dommer

Facsimile:

Email:

With a copy to:

James Wes Christian

Christian, Smith & Jewell, L.L.P.

2302 Fannin, Suite 500

Houston, TX 77002

Facsimile: 713.659.7641

If to one Grantee:

Shadow Tree Funding Vehicle A—Hydrocarb LLC

7 Renaissance Square, 5th Floor

White Plains, NY 10601

Attention: Eric Keiter

Facsimile:

With a copy to (which copy shall not constitute notice):

Marino Partners LLP

15 Fisher Lane, Suite. 200

White Plains, NY 10528

Attention: Alexandra Lyras

If to the other Grantee:

Quintium Private Opportunity Fund, LP

9202 S. Northshore Drive, Suite 301

Knoxville, TN 37922

Attention: Todd Kidd

Email: todd@quintiumadvisors.com

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This Agreement, together with any applicable provisions of the Credit Agreement either referred to herein or, by the terms of the Credit Agreement made applicable hereto, constitute the entire contract between the parties hereto with regard to the subject matter hereof. This Agreement and such applicable provisions of the Credit Agreement supersede any other agreements, representations or understandings (whether oral or written and whether express or implied) that relate to the subject matter hereof.

In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided, that in such case the parties shall negotiate in good faith to replace such provision with a new provision which is not illegal, unenforceable or void, as long as such new provision does not materially change the economic benefits of this Agreement to the parties.

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[Signature Page to Follows.]

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IN WITNESS WHEREOF, each of the parties has executed this Agreement as of the Effective Date.

[Signature Page to Stock Grant Agreement.]

 

 

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