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Exhibit 10.4
 
FIRST AMENDMENT TO EXCHANGE AGREEMENT

This First Amendment to Exchange Agreement (this “Agreement”) dated September
21, 2015 (the “Execution Date”), is by and between, Hydrocarb Energy
Corporation, a Nevada corporation (the “Company”) and Kent P. Watts, an
individual (“Watts”), each a “Party” and collectively the “Parties”.
 
W I T N E S S E T H:
 

WHEREAS, the Parties previously entered into an Exchange Agreement dated and
effective June 10, 2015 (the “Exchange Agreement”, a copy of which is attached
as Exhibit A hereto)1;

WHEREAS, pursuant to the Exchange Agreement, Watts exchanged all rights he had
to 8,188 shares of Series A 7% Convertible Voting Preferred Stock (which were
required to have a face value of $3,275,200)(which were never validly issued or
outstanding), and accrued and unpaid dividends, which would have been due
thereunder, assuming such Series A 7% Convertible Voting Preferred Stock was
correctly designated and issued on December 9, 2013, totaling, $327,879, into 32
units (“Units”), each consisting of (a) 25,000 shares of the restricted common
stock of the Company (the “Shares”); and (b) $100,000 in face amount of
Convertible Subordinated Promissory Notes;

WHEREAS, specifically pursuant to the Exchange Agreement, Watts received an
aggregate of 800,000 shares of common stock and a Convertible Promissory Note
with an aggregate principal amount of $3.2 million and a maturity date of June
10, 2018 in connection with the Exchange Agreement;

WHEREAS, the Parties would like to adjust the number of Units issuable to Watts
pursuant to the Exchange Agreement to 30 Units (i.e., 750,000 shares of common
stock and a Convertible Promissory Note in the aggregate principal amount of $3
million, with such remaining 50,000 shares of common stock and Convertible
Promissory Note in the amount of $200,000 being defined herein as the “Cancelled
Units”); and

WHEREAS, the Parties now desire to amend the Exchange Agreement to adjust to 30
Units, the number of Units due, pursuant to the terms and conditions of this
Agreement.

NOW, THEREFORE, in consideration of the premises and the mutual covenants,
agreements, and considerations herein contained, and other good and valuable
consideration, which consideration the Parties hereby acknowledge and confirm
the sufficiency thereof, the Parties hereto agree as follows:
 
______________________
1 https://www.sec.gov/Archives/edgar/data/1425808/000114036115024911/ex10_3.htm

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1.           Amendment to Exchange Agreement.

(a)           Effective for all purposes as of the Effective Date, the sixth
“WHEREAS” of the Exchange Agreement is hereby amended, superseded and replaced
in its entirety, by the following:

“WHEREAS, notwithstanding the fact that the Company is seeking shareholder
approval for the ratification of the designation of the Series A Preferred Stock
at the Company’s 2015 Annual Shareholders Meeting, the Company and Watts desire
for Watts to exchange all rights he has to the 8,188 Series A Preferred Stock
shares (the “Series A Shares”) and all accrued and unpaid dividends which would
have accrued and be due thereon, in the event the Series A Preferred was
properly designated and issued, totaling an aggregate of $327,879 as of the date
of this Agreement (collectively, the “Accrued Dividends”) into 30 Units (as
defined below) which the Company is in the process of offering in a private
offering to ‘accredited investors’; and”

(b)           Effective for all purposes as of the Effective Date, Section 2.1
of the Exchange Agreement is hereby amended, superseded and replaced in its
entirety, by the following:

“2.1.                       In exchange for the right to receive the Series A
Preferred Shares and in full consideration for such Series A Preferred Shares
and the Accrued Dividends, the Company agrees to issue Watts an aggregate of 30
“Units”, each consisting of (a) 25,000 shares of the Company’s restricted common
stock; and (b) Convertible Subordinated Promissory Notes with a face amount of
$100,000 (in the form of Convertible Subordinated Promissory Note being offered
by the Company to ‘accredited investors’ in the Company’s current private
placement offering of Units)(the “Exchange”). As such, Watts will receive an
aggregate of 750,000 shares of common stock (the “Shares”) and a Convertible
Subordinated Promissory Note with an aggregate principal amount of $3.0 million
and a maturity date of June 10, 2018 (the “Convertible Note” in the form
of Exhibit A hereto) in connection with the Exchange which shall be issued
promptly after the Parties entry into this Agreement. The Convertible Note is
convertible into common stock of the Company at any time at Watt’s option at a
conversion price of $4 per share, and is automatically convertible into shares
of Series B Convertible Preferred Stock of the Company upon designation of such
Series B Convertible Preferred Stock with the Secretary of State of Nevada.”
 
 

 
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2.           Effective Date. The “Effective Date” of this Agreement shall be
July 21, 2015 for all purposes.

3.           Cancellation of Units. Watts shall promptly return any and all
certificates, documents, agreements or notes evidencing the 50,000 shares of
common stock and $200,000 Convertible Promissory Note relating to the Cancelled
Units, to the Company or its Transfer Agent, for cancellation with appropriate
stock power (with notarized signature guaranty) and instructions for
cancellation (the “Cancellation”). The Company and/or the Company’s Transfer
Agent shall be authorized to take whatever action necessary, if any, following
the effectiveness of this Agreement to affect the Cancellation and by agreeing
to the terms and conditions of this Agreement, Watts agrees to release the
Company and the Company’s Transfer Agent from any and all liability whatsoever
in connection with the Cancellation. Notwithstanding the above, Watts hereby
covenants that he will, whenever and as reasonably requested by the Company and
the Transfer Agent, at his sole cost and expense, do, execute, acknowledge and
deliver any and all such other and further acts, deeds, assignments, transfers,
conveyances, confirmations, powers of attorney and any instruments of further
assurance, approvals and consents as the Company or the Transfer Agent may
reasonably require in order to complete, insure and perfect the Cancellation, if
such may be reasonably required by the Company and/or the Company’s Transfer
Agent.  Notwithstanding the above, the Cancellation shall be deemed to have
occurred automatically and without any required action by either Party on the
Effective Date.
 
 
4.           Consideration. Each of the Parties agrees and confirms by signing
below that they have received valid consideration in connection with this
Agreement and the transactions contemplated herein.

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

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

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

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(c)           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.

6.           Further Assurances. The Parties agree that, from time to time, each
of them will take such other action and to execute, acknowledge and deliver such
contracts, deeds, or other documents as may be reasonably requested and
necessary or appropriate to carry out the purposes and intent of this Agreement
and the transactions contemplated herein.
 
7.           Effect of Agreement. Upon the effectiveness of this Agreement, each
reference in the Exchange Agreement to “Agreement,” “hereunder,” “hereof,”
“herein” or words of like import shall mean and be a reference to such Exchange
Agreement as modified or amended hereby.
 
 
8.           Reconfirmation of Representations. Except to the extent amended or
modified hereby, each of the Parties hereby reaffirm all terms, conditions,
covenants, representations and warranties made in the Exchange Agreement.
 
 
9.            Exchange Agreement to Continue in Full Force and Effect. Except as
specifically modified or amended herein, the Exchange Agreement and the terms
and conditions thereof shall remain in full force and effect.
 

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

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

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

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

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

[Remainder of page left intentionally blank. Signature page follows.]
 
 
 
 
 
 
 
 
 
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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement as of the
Execution Date to be effective as of the Effective Date.

“Company”
     
Hydrocarb Energy Corporation
     
By: /s/ Christine Spencer
      Its: Chief Accounting Officer

 

  Printed Name: Christine Spencer        
“Watts”

 

  /s/ Kent P. Watts    
Kent P. Watts

 
 

 
 
 
 
 
 
 
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