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

o 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.

Stock Purchase Agreement

On November 23, 2015, Hydrophi Technologies Group, Inc., a Florida corporation (the “Company”, “we,” “us,” or “our”) entered into a Stock Purchase Agreement (the “Purchase Agreement”), whereby the Company purchased, all of the outstanding stock of each of Pro Star Freight Systems Inc. and Pro Star Truck Center Inc. (collectively, “Pro Star”).  The Pro Star Purchase Agreement is an attempt to preserve and enhance shareholder value in light of ongoing challenges in the execution of the Company’s business mission to bring hydrogen on demand technology to older, mechanical injection vehicles. Pro Star had unaudited management reported 2014 revenue of $27.3 million with net income of $660,000.

The purchase price for Pro Star consists of (i) up to an aggregate of $1,512,500 in cash, payable in installments as set forth in the Purchase Agreement (“Closing Cash”), (ii) a promissory note in the principal amount of $2,500,000, which is convertible into 4.9% of the issued and outstanding capital stock of the Company on a fully-diluted basis (the “Note”), (iii) Series A preferred stock of the Company, which will be convertible into 80% of the issued and outstanding capital stock of the Company on a fully-diluted basis (the “Preferred Stock”) and (iv) a form of warrant that will be exercisable for a number of shares of common stock of the Company necessary to ensure that the Note and Preferred Stock collectively result in the issuance of 84.9% of the issued and outstanding capital stock of the Company on a fully-diluted basis (the “Goldenshare”).  Following the eighteen month anniversary of the issuance of the Preferred Stock, holders of Preferred Stock shall be entitled to dividends at the rate of 5% per annum, payable quarterly.  Holders of Preferred Stock shall vote together as a single class with holders of common stock of the Company.

Further, certain existing investors have agreed to either forgive certain outstanding debt of the Company or exchange such debt for common stock of the Company.  Such forgiveness and/or exchange has resulted in the elimination of debt liability of almost $2.5 million, and the net return to treasury of approximately 30 million shares of common stock.

New Notes

The Closing Cash will be funded to the Company by existing investors in the Company in exchange for the issuance of certain convertible promissory notes (the “New Notes”).  New Notes representing $1,250,000 of the Closing Cash will (i) have a term of one year, which in certain circumstances may be extended by an additional nine months, (ii) accrue interest at 10%, (iii) have a conversion price equal to a 20% discount from the average of the three lowest trading prices in the five trading days prior to the day that the holder elects conversion and (iv) contain standard events of default.  New Notes representing up to $262,500 of the Closing Cash will (i) have a term of nine months, (ii) accrue interest at 10%, (iii) have a conversion price equal to a 15% discount from the average of the three lowest trading prices in the five trading days prior to the day that the holder elects conversion and (iv) contain standard events of default.    

Settlement and Extinguishment

In connection with the Company’s entering into the Purchase Agreement, existing investors agreed to return to the Company, for cancellation, that certain warrant to purchase 2,647,059 shares of the Company’s common stock, dated April 28, 2014.  In addition, the existing investors agreed that the Company shall no longer be obligated to make any “Royalty Payments” pursuant to Section 4s. of that certain Securities Purchase Agreement, dated as of December 4, 2014, by and between the Company and the investor party thereto.

2

The foregoing description of the Purchase Agreement, the Note, the Preferred Stock, the New Notes and the Goldenshare does not purport to be complete and is subject to, and qualified in its entirety by reference to, the full text of the Preferred Stock, Purchase Agreement, the Note, the New Notes and the Goldenshare, copies of which are filed herewith as Exhibits 4.1, 10.1, 10.2, 10.3 and 10.4, respectively, and are incorporated by reference herein. The provisions of the Purchase Agreement, the Note, the Preferred Stock and the New Notes, including the representations and warranties contained therein, are not for the benefit of any party other than the parties to such agreements and are not intended as documents for investors and the public to obtain factual information about our current state of affairs. Rather, investors and the public should look to other disclosures contained in our filings with the Securities and Exchange Commission.

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

The information provided under Item 1.01 in this Current Report on Form 8-K is incorporated by reference into this Item 2.03.

Item 3.02.  Unregistered Sales of Equity Securities.

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 3.02.

Item 5.01.  Changes in Control of Registrant.

The information set forth in Item 1.01 of this Current Report on Form 8-K is incorporated by reference into this Item 5.01.

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

Effective immediately upon the closing of the transactions contemplated by the Purchase Agreement, our directors Reid Meyer and Mark Robinson resigned.  Roger M. Slotkin will remain a director, and Chief Executive Officer of the Company.

Simultaneously with the resignation of Messrs. Meyer and Robinson, Nikola Zaric was appointed to our Board of Directors, effective immediately.  Further, Mr. Zaric was also, effective immediately, appointed President of the Company.

Mr. Zaric founded Pro Star Freight Systems Inc. in May 2012.  His career in trucking and logistics began in October 2009 when he founded, and was the operational manager of, Arrow Freight Inc.  Prior to 2009, when Mr. Zaric moved from Serbia to the United States, he obtained his medical degree as a general practitioner.  Upon arriving in the United States he recognized the business opportunity in trucking and logistics in the mid-United States region.  Beginning with one truck, he has built a business with 150 trucks and over 200 employees.

Item 9.01. Financial Statements and Exhibits

(b)

Unaudited Pro Forma Financial Information

3

(d) Exhibits

4

SIGNATURE

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

5

EXHIBIT INDEX

6

Exhibit 10.1

STOCK PURCHASE AGREEMENT

This STOCK PURCHASE AGREEMENT, dated as of November 23, 2015, (this “Agreement”), is made and entered into by and among Pro Star Freight Systems Inc. and Pro Star Truck Center Inc. (collectively, the “Company”), Prostar Holdings Trust (the “Seller”) and Hydrophi Technologies Group, Inc., a Florida corporation (“Buyer”).

P R E M I S E S:

WHEREAS, the Buyer is engaged in the business of providing new clean energy technologies (such business as conducted by the Buyer being hereinafter referred to as the “Business”);

WHEREAS, the Seller is the record and beneficial owner of all of the issued and outstanding stock of the Company (the “Stock”); and

WHEREAS, Buyer wishes to purchase all of the Stock from Seller and Seller wishes to sell all of the Stock to Buyer, all pursuant to the terms, conditions, limitations and exclusions contained herein.

A G R E E M E N T S:

NOW, THEREFORE, in consideration of the mutual agreements contained herein, intending to be legally bound hereby, the parties hereto agree as follows:

ARTICLE I

DEFINED TERMS

1.1

Defined Terms.  The following terms shall have the following meanings in this Agreement:

“Affiliate” means, with respect to any specified Person, (a) any other Person which, directly or indirectly, owns or controls, is under common ownership or control with, or is owned or controlled by, such specified Person, (b) any other person which is a director, officer or general partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, of the specified Person, (c) another Person of which the specified Person is a director, officer or general partner or is, directly or indirectly, the beneficial owner of ten percent (10%) or more of any class of equity securities, (d) another Person as to which the specified Person serves as trustee or in a similar capacity, or (e) any relative or spouse of the specified Person within the first degree of consanguinity, and to the extent they share a common household with the specified Person, any relative of such spouse or any spouse of any such relative.

“Assets” means the interest of the Buyer in all the tangible and intangible assets owned by or leased or licensed to the Buyer on the Closing Date.

“Audit” means any audit, assessment of Taxes, any other examination or claim by any Tax Authority, judicial, administrative or other proceeding or litigation (including any appeal of any such judicial, administrative or other proceeding or litigation) relating to Taxes and/or Tax Returns.

“Business Day” means any day other than any Saturday or Sunday or any other day on which banks located in New York, New York generally are closed for business.

“CERCLA” means the Comprehensive Environmental Response, Compensation and Liability Act, as amended.

“Closing” means the consummation of the transactions contemplated by this Agreement in accordance with the provisions of Article VIII hereof.

“Code” means the Internal Revenue Code of 1986, as amended to the date hereof.

“Confidential Information” shall mean (a) all of the Seller’s technical, commercial, marketing, strategic, business or other information, data, plans and material of the kind either identified as confidential or proprietary or which a reasonable person would recognize to be confidential or proprietary, either from its nature or the manner of its disclosure, or which has not entered the public domain and (b) the terms and provisions of this Agreement and any other material information relating to this Agreement or the transactions contemplated hereunder.

“Consents” means the consents of third parties necessary or advisable to consummate the transactions contemplated hereby, as more particularly set forth in Section 3.9.

“Contract” means any material agreement, written or oral (including any amendments and other modifications thereto), to which the Buyer is a party or is bound.

“Encumbrance” means any lien, mortgage, pledge, claim, security interest, imperfection in title or other third party right or interest of any kind whatsoever, or restrictive agreement, conditional sales agreement, option, encumbrance or charge of any kind whatsoever.

“Equity Conditions” means (i) the Buyer is current in its periodic reporting with the Securities and Exchange Commission, (ii) the Common Stock is DWAC eligible, (iii) the Common Stock remains trading on the same, or similar trading market, on which it is trading on the Closing Date, (iv) there is not then an existing declared event of default under any Exhibit D Note (as defined herein) and (v) the Common Stock has traded with an average daily trading volume of no less than $10,000 of shares per day over the prior twenty Trading Days.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

“GAAP” shall mean United States generally accepted accounting principles, consistently applied.

“Governmental Entity” means any (a) federal, state, local or other government; (b) governmental or quasi-governmental authority of any nature (including any governmental agency, branch, bureau, department or other entity and any court or other tribunal); (c) body exercising, or entitled to exercise any administrative, executive, judicial, legislative, police, regulatory, arbitration, mediation or taxing authority or power of any nature; or (d) official of any of the foregoing.

“Hazardous Substances” shall mean any toxic or hazardous substance, material, or waste, and any other contaminant, pollutant or constituent thereof, including, without limitation, (a) any “hazardous substance,” “pollutants,” or “contaminant” (as defined in Sections 101(14) and (33) of CERCLA or the regulations issued pursuant to Section 102 of CERCLA and found at 40 C.F.R. § 302, each as of the date of this Agreement; (b) any substance that is, as of the date of this Agreement, designated pursuant to Section 311(b)(2)(A) of the Federal Water Pollution Control Act, as amended (33 U.S.C. §§ 1251, 1321(b)(2)(A)) (“FWPCA”); (c) hazardous waste having the characteristics identified under or listed pursuant to Section 3001 of the Resource Conservation and Recovery Act, as amended (42 U.S.C. §§ 6901, 6921) (“RCRA”) as of the date of this agreement; (d) substances containing petroleum, as that term is defined in Section 9001(8) of RCRA, as of the date of this Agreement; (e) toxic pollutant that is listed, as of the date of this Agreement, under Section 307(a) of FWPCA; (f) hazardous air pollutant that is listed under Section 112 of the Clean Air Act, as amended (42 U.S.C. §§ 7401, 7412) as of the date of this Agreement.

“Intellectual Property Rights” shall have the meaning set forth in Section 3.10.

“Knowledge” shall mean the actual knowledge of the party to whom such knowledge is imputed or the knowledge of the party after reasonable due inquiry and investigation, including inquiry of any employees of the Buyer that have responsibility for such matter.  For the purposes of this definition, any applicable party shall be deemed to have knowledge of information in documents that are or have been in his possession (including in electronic format).

“Law” means any law, rule or regulation of any federal, state or local governmental authority having jurisdiction over the Buyer and in effect and applicable to the Buyer as of the date of this Agreement.

“Licenses” means all of the licenses, permits and other authorizations issued by any federal, state or local governmental authorities to the Buyer or used in the operation of its business, all of which are listed on Schedule 3.5 hereto, with any additions thereto between the date hereof and the Closing Date.

“Material Adverse Effect” shall mean a material adverse effect on the business, Assets, liabilities, financial condition, or results of operations of the Buyer, taken as a whole.

“Operating Hydro” shall mean HydroPhi Technologies, Inc.

“Person” means an individual, a partnership, a corporation, a limited liability company, an association, a joint stock company, a trust, a joint venture, an unincorporated organization or a governmental entity or any department, agency or political subdivision thereof.

“Personal Property” means all of the interest of the Buyer in all machinery, equipment, computer programs, computer software, tools, motor vehicles, furniture, leasehold improvements, office equipment, supplies, plant, spare parts and other tangible personal property which are owned by or leased to the Buyer, or otherwise used or possessed by the Buyer, together with any additions or deletions thereto expressly permitted by Seller or this Agreement between the date hereof and the Closing Date.

“Real Property” means all of the Buyer’s owned or occupied real property, leasehold interests, easements, real estate licenses, rights to access and rights-of-way, all of which are identified in Schedule 3.6 hereto, together with any additions or deletions thereto expressly permitted by Seller or this Agreement between the date hereof and the Closing Date.

“Related Document” shall mean any document attached as an exhibit hereto or required of the Seller or Buyer as a condition to closing under Articles VII and VIII hereof.

“Release” shall mean any manner of spilling, leaking, dumping, discharging, releasing, migrating or emitting, including the definitions given to any of such terms under CERCLA or any other environmental Law.

“Securities” shall mean, collectively, Unit One and the Goldenshare.

“Subsidiary” shall mean, with respect to the Buyer, HydroPhi Technologies, Inc. and HydroPhi Technologies Europe S.A.

“Tax” shall mean any federal, territorial, state, county, local, or foreign income, gross receipts, license, payroll, wage, employment, excise, utility, communications, production, occupancy, severance, stamp, occupation, premium, windfall profits, environmental, customs duties, capital stock, capital levy, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, real property gains, recordation, business license, workers’ compensation, Pension Benefit Guaranty Corporation, personal property, sales, use, transfer, registration, value added, ad valorem, alternative or add-on minimum, estimated, or other tax, fee, charge, premium, imposition of any kind whatsoever, in effect as of the date of this Agreement, however denominated, imposed by any Tax Authority, including, without limitation, the Commonwealth of Puerto Rico, together with any interest, penalties or other additions to tax and any interest on any such interest, penalties and additions to tax payable in respect thereof.

“Taxable Period” means any taxable year or any other period that is treated as a taxable year with respect to which any Tax may be imposed under any applicable statute, rule or regulation of any Tax Authority.

“Tax Authority” shall mean the Internal Revenue Services (“IRS”) and any other federal, territorial, state, local or foreign authority responsible for the administration and/or collection of any Taxes.

“Tax Laws” shall mean the Code, and any other federal, state, county, local or foreign laws related to any Tax, as well as any regulations, administrative pronouncements, rules or requirements pursuant thereto, each as in effect and applicable to the warranting party as of the date of this Agreement.

“Tax Returns” shall mean reports, estimates, declarations of estimated tax, information statements and returns, including information returns or reports with respect to backup withholding and other payments to third parties, relating to or required to be filed with any Tax Authority by any Tax Law in connection with any Taxes.

ARTICLE II

PURCHASE AND SALE OF STOCK

2.1

2.2

(a)

Cash.  On the Closing Date, Buyer will pay to the Seller an aggregate amount in cash equal to One Hundred and Fifty Thousand Dollars ($150,000) (the “Closing Date Cash Payment”).  At such time as is mutually agreed to between Seller and Magna Management LLC and/or its designates (the “Investor”), but in no event later than the fifth (5) calendar day following the Closing Date, Buyer will pay to the Seller an additional aggregate amount in cash equal to One Hundred and Fifty Seven Thousand Five Hundred Dollars ($157,500).  By the third Business Day following the Closing upon which the Buyer files financial statements audited in accordance with GAAP with the Commission (as defined hereafter) (the “Filing Date”), Buyer will pay to the Seller an aggregate amount in cash equal to Three Hundred and Fifty Thousand Dollars ($350,000).  On the one week anniversary of the Filing Date, and on each seven Trading Day anniversary thereafter until the aggregate cash paid to Seller pursuant to this Section 2.2(a) totals One Million Two Hundred and Fifty Thousand Dollars ($1,250,000) (the “Section 2.2 Limit”, and each such date, a “Payment Date”), Buyer shall pay to Seller; provided, however, that the Equity Conditions are satisfied as of such Payment Date, an amount equal to the lesser of (1) $100,000 and (2) the product of (A) [seven (7) multiplied by the average daily trading volume of the Common Stock over the prior seven (7) Trading Day period] multiplied by (B) [a fraction, the numerator of which is the aggregate actual cash proceeds received by Investor as a result of the sale of Common Stock from the Closing Date through such applicable Payment Date, and the denominator of which is $2,000,000].  Should such formula yield an amount less than $50,000 for a particular Payment Date, and criteria (i)-(iv) in the definition of “Equity Conditions” are then satisfied, Buyer shall have the option to borrow from Investor an additional amount, subject to the Section 2.2 Limit, which such note shall be in the form attached hereto as Exhibit D, except that beginning on the seven month anniversary of the issuance of any such note, and on each monthly anniversary thereafter, 1/6^th of such note shall amortize by being converted into Common Stock, except that if on any such amortization date the Equity Conditions are not satisfied, then Buyer has to make such amortization payment in cash by paying Investor 112.5% of such particular monthly amortization amount.  All amounts payable pursuant to this Section 2.2(a) shall be (i) made by wire transfer of immediately available funds to an account(s) designated by Seller and (ii) funded by Investor within the time frame set forth herein, in return for which the Buyer shall issue to Investor a convertible promissory note in the form of Exhibit D (each such note, an “Exhibit D Note”), except as set forth in the prior sentence.

(b)

Subsidiary Cash.  In addition to the cash payable pursuant to Section 2.2(a) above, on the Closing Date, Buyer will pay to the Seller an aggregate amount in cash equal to Ninety Thousand Dollars ($90,000), Sixty Seven Thousand Five Hundred Dollars ($67,500) of which shall be deposited by Seller into the operating account of Operating Hydro to be used for working capital and general corporate purposes of Operating Hydro.  On each of the next five monthly anniversaries of the Closing Date, Investor shall pay to Buyer Twenty Two Thousand Five Hundred Dollars ($22,500).  Within [ ] calendar days following the Closing Date, Buyer will pay to the Seller an additional aggregate amount in cash equal to Sixty Thousand Dollars ($60,000), which shall be deposited by Seller into the operating account of Operating Hydro to be used for working capital and general corporate purposes of Operating Hydro.  All amounts payable pursuant to this Section 2.2(b) shall be

(i) made by wire transfer of immediately available funds to an account(s) designated by Seller and (ii) funded by Investor, in return for which the Buyer shall issue to Investor a convertible promissory note in the form of Exhibit E.

(c)

(d)

2.3

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF BUYER

The Buyer represents and warrants to Seller as follows:

3.1

3.2

Due Organization; Subsidiaries.  Buyer is a corporation duly organized, validly existing and in good standing under the laws of the State of Florida, and has full corporate power and authority and all requisite rights, licenses, permits and franchises to own, lease and operate the Assets that it currently owns, leases or operates and to conduct the Business as it is now being conducted.  Buyer is duly licensed, registered and qualified to do business as a foreign corporation and is in good standing in all jurisdictions in which the ownership, leasing or operation of its Assets, or the conduct of the Business, requires such qualification, except where the failure to be so licensed, registered or qualified would not have a Material Adverse Effect.  Schedule 3.2 sets forth each state or other jurisdiction in which the Buyer is licensed or qualified to do business.  The Buyer has delivered to Seller an accurate and complete copy of the organizational documents of Buyer, and each agreement, trust, proxy or other arrangement among the stockholders or directors of the Buyer, and each other agreement or document affecting any ownership rights or interests, or any management rights or economic rights, of the Buyer, or any rights to share in the profits of or

to receive distributions or the return of capital from the Buyer, along with an accurate and complete copy of the contents of the minute book of the Buyer.  HydroPhi Technologies, Inc. and HydroPhi Technologies Europe S.A are the only Subsidiaries of Buyer, and Buyer is not a stockholder, partner, joint venturer or other equity owner of any entity.

3.3

3.4

3.5

3.6

3.7

Title to and Condition of Personal Property.  Schedule 3.7 hereto contains a list of the items of Personal Property that comprise all Personal Property with a value in excess of $10,000 used in connection with the Business as of a recent date indicated on such schedule.  The Buyer owns and has good and marketable title to all Personal Property free and clear of any Encumbrance, except for Encumbrances that shall be discharged or removed by the Buyer prior to or at Closing.  The Buyer is not, and to the Knowledge of Buyer no other party is, in default under any of the leases, licenses and other agreements relating

3.8

3.9

3.10

3.11

the requirements of the Securities Act and the Exchange Act, as applicable, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The financial statements of the Buyer included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing.  Such financial statements have been prepared in accordance with GAAP, except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Buyer and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, non-material, year-end audit adjustments.

3.12

3.13

(a)

(b)

Neither the Buyer nor any Commonly Controlled Entity maintains, nor have they ever maintained or contributed to, a “multiemployer plan,” as that term is defined in Section 414(f) of the Code or Sections 3(37) or 4001(a)(31) of ERISA, or an “employee benefit pension plan,” as defined in Section 3(2) of ERISA, that is subject to Section 412 of the Code, Section 302 of ERISA or Title IV of ERISA.  Except as set forth on Schedule 3.13(b), neither the Buyer nor any Commonly Controlled Entity has terminated any “employee benefit plan” as defined in Section 3(3) of ERISA.

(c)

Full payment has been made of all amounts (other than current outstanding routine claims for benefits) that the Buyer is required to contribute or pay under the terms of any Plan, and all contributions to any Plan that are required or recommended with respect to any period of time prior to the Closing have been made or such amounts have been accrued in accordance with generally accepted accounting principles.  There are no funded benefit obligations for which contributions have not been made or properly accrued and there are no unfunded benefit obligations that have not been accounted for by reserves, or otherwise properly footnoted in accordance with GAAP on the financial statements of the Buyer.

(d)

Each of the Plans is and has been operated and administered in all material respects in accordance with applicable Laws, including but not limited to, ERISA and the Code, and all required material governmental filings and material participant disclosures have been made on a timely basis.  No prohibited transaction within the meaning of Section 406 of ERISA or 4975 of the Code, or breach of fiduciary duty under Title I of ERISA, has occurred with respect to any Plan or with respect to the Buyer.  The Buyer does not maintain any Plan that is subject to Section 401(a) of the Code, other than its 401(k) plan set forth on Schedule 3.13(a).

(e)

There are no pending, or to the Knowledge of Seller, threatened or anticipated, claims, litigation, administrative actions or proceedings against or otherwise involving any of the Plans or related trusts, or any fiduciary thereof, by any governmental agency, or by any employee, former employee, leased employee, former leased employee, retiree or sales personnel or by any participant or beneficiary covered under any of the Plans, or otherwise involving the Plans (other than routine claims for benefits), nor, to the Knowledge of Seller, is there any basis for one.  There is no judgment, decree, injunction, rule or order of any court, governmental body, commission, agency or arbitrator outstanding against or in favor of any Plan or, to the Knowledge of the Seller, any fiduciary thereof in that capacity.  No Assets of the Buyer are allocated to or held in a “rabbi trust” or similar funding vehicle.

(f)

(g)

Except as set forth on Schedule 3.13(g), the consummation of the transactions contemplated by this Agreement will not, of itself, entitle any current or former employee or leased or contract employee of the Buyer to severance pay, unemployment compensation or any similar payment or accelerate the time of payment or vesting, or increase the amount of compensation due to, or in respect of, any current or former leased or contract employee, nor will it result in the breach of any agreement with any current or former employee or leased or contract employee.

(h)

None of the Assets is subject to any Encumbrance under Section 302(f) of ERISA or Section 412(n) of the Code.

3.14

(a)

Buyer is in compliance in all material respects with all applicable Laws respecting employment and employment practices, terms and conditions of employment and wages and hours and is not engaged in any unfair labor practice.

(b)

There are no agreements or arrangements between Buyer and a consultant, former consultant, employee or former employee obligating the Buyer to make any payment to any such individual as a result of the transactions contemplated by this Agreement or the termination of any Employee in connection therewith.  The transactions contemplated by this Agreement or the termination of any Employee in connection therewith shall not result in any payment being made under any agreement or arrangement between Buyer and a consultant, former consultant, employee or former employee that would be subject to the excise tax imposed by Section 4999 of the Code.

(c)

Other than those loans reflected on the Financial Statements, there are no loans outstanding from Buyer to any of the Employees.

(d)

(e)

(f)

With respect to all Employees, the Buyer has complied in all material respects with the employment eligibility verification form requirements under the Immigration and Naturalization Act, as amended (“INA”), in recruiting, hiring, reviewing and documenting prospective employees for employment eligibility verification purposes and the Buyer has complied in all material respects with the paperwork provisions and anti-discrimination provisions of the INA.  With respect to all Employees, the Buyer has obtained and maintained the employee records and I-9 forms in proper order as required by United States law.  To the Knowledge of Buyer, Buyer does not employ any workers unauthorized to work in the United States.

3.15

3.16

(a)

(b)

Except as set forth on Schedule 3.16(b), no Tax Return of the Buyer has been subject to an Audit, nor is there any Audit in progress, pending or, to Buyer’s Knowledge, threatened in writing, involving the Buyer.  No information regarding any Tax matter relating to the Buyer has been requested in writing by any Tax Authority.

(c)

There is not currently outstanding any waiver of any applicable statute of limitations nor any consent for the extension of the time for the assessment of any Tax against the Buyer.

(d)

There are no Tax liens upon the property or assets of the Buyer, except liens for Taxes not yet due and payable and for which adequate reserves have been established on the relevant entity’s books and financial records (in accordance with sound accounting practices) for the payment thereof.

(e)

The Buyer has not agreed to, or has been required to, make any adjustment under Section 481(a) of the Code (and comparable provisions of any other applicable Tax Law) by reason of a change in accounting method or otherwise.

(f)

The Buyer is not liable for the Taxes of any Person including, without limitation, as a transferee or successor, by contract, indemnity under Treasury Regulations Section 1.1502-6 (and comparable provisions of any other applicable Tax Law), or otherwise.

(g)

The Buyer has never been a party to any Tax sharing agreement, Tax indemnity agreement or other similar Tax sharing arrangement.

(h)

(i)

Schedule 3.16(i) sets forth all foreign, state and local jurisdictions in which the Buyer is or has been subject to Tax and each type of Tax payable in such jurisdiction.

(j)

The Buyer has, within the meaning of Section 6662(d)(2)(B)(ii)(I) of the Code (and comparable provisions of any other applicable Tax Law), adequately disclosed on its federal income Tax Returns the relevant facts affecting any item or position taken for which substantial authority (within the meaning of Section 6662(d)(2)(B)(i) of the Code and comparable provisions of any other applicable Tax Law) did not exist at the time the Tax Return was filed.  The Buyer has not reflected on any Tax Return any item the tax treatment for which there was no “reasonable basis” (within the meaning of Section 6662(d)(2)(B)(ii)(II) of the Code and comparable provisions of any other applicable Tax Law).

(k)

(l)

(m)

Except to the extent that the following requested information is set forth on a Tax Return that has been furnished to Seller pursuant to Section 3.16(l)(ii) at least 10 business days prior to the Closing Date, Schedule 3.16(m) sets forth, for federal, state, local and foreign income and franchise Tax purposes and as of the first day of the current Taxable Period of the Buyer, such entity’s adjusted basis in its assets, by category, the original and remaining useful life of such assets, the method under which such assets are being depreciated and the original unadjusted basis of such assets.  The Buyer will not, as of immediately prior to the Closing, have any net operating losses, built-in losses or other Tax attributes subject to limitation under Section 382, 383 or 384 of the Code, the consolidated return regulations under Section 1502 of the Code or under any other comparable provision of applicable Tax Law.

(n)

The Buyer has not constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock to which Section 355 of the Code (or so much of Section 356 of the Code as relates to Section 355 of the Code) applies and which occurred within two years of the date of this Agreement.

(o)

(p)

(q)

Schedule 3.16(q) sets forth all elections with respect to Taxes made by the Buyer.

(r)

The Buyer has not entered into or been a party to any arrangement designed wholly or partly for the purpose of it or any other Person avoiding or evading Tax.

3.17

Claims; Legal Actions.  Except as disclosed on Schedule 3.17, there are no actions, suits, proceedings, orders, investigations or claims pending or, to the Knowledge of Buyer, threatened against Buyer, or pending or threatened by the Buyer, against any third party, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality (including, without limitation, any actions, suits, proceedings or investigations with respect to the transactions contemplated by this Agreement), and to the Knowledge of Buyer there is no basis for any of the foregoing.  The Buyer is not subject to any arbitration proceedings under collective bargaining agreements or otherwise or, to the Knowledge of Buyer, any governmental investigations or inquiries (including, without limitation, inquiries as to the qualification to hold or receive any license or permit), and, to the Knowledge of Buyer, there is no basis for any of the foregoing.  Except as disclosed on Schedule ?3.17, the Buyer is not subject to any judgment, order or decree of any court or other governmental agency.

3.18

3.19

3.20

3.21

Interim Change.  Except as set forth in Schedule 3.21, disclosed in the Buyer’s filings on EDGAR or as set forth in this Agreement, since June 30, 2015 the Business has been conducted and operated only in the ordinary course, consistent with past practices.  In addition, except as set forth on Schedule 3.21, since June 30, 2015:

(a)

there has been no Material Adverse Effect on the Assets or the Buyer;

(b)

except in the ordinary course of business, no party has accelerated, terminated, modified or cancelled any agreement, contract, lease or license (or series of related agreements, contracts, leases and licenses) to which the Buyer is a party or by which it is bound, or has threatened the same;

(c)

the Buyer has not borrowed any amount or incurred or become subject to any liabilities in excess of Ten Thousand Dollars ($10,000), except current liabilities incurred in the ordinary course of business and liabilities under contracts entered into in the ordinary course of business;

(d)

the Buyer has not mortgaged or pledged any Asset or Common Stock, or subjected any Asset or Common Stock, to any Encumbrance, except liens for Taxes not yet due and payable;

(e)

the Buyer has not sold, leased, assigned, transferred or otherwise disposed of, or agreed to sell, lease, assign, transfer or otherwise dispose of at some future date, or granted an option or other right to any party to acquire, any of the Assets (other than in the ordinary course of business), nor has the Buyer forgiven or canceled any debts owing to the Buyer or waived any claims or rights;

(f)

the Buyer has not sold, assigned, transferred, or permitted to lapse, any Intellectual Property Rights;

(g)

the Buyer has not made any change in any method of accounting or accounting practice or its practices with respect to the other payment or other discharge of debts;

(h)

the Buyer has not suffered any extraordinary losses, whether or not in the ordinary course of business, or consistent with past practice;

(i)

the Buyer has not made capital expenditures or commitments therefor that aggregate in excess of Ten Thousand Dollars ($10,000);

(j)

the Buyer has not made any loans or advances to, guarantees for the benefit of or any investments in, any Persons;

(k)

the Buyer has not suffered any damage, destruction or casualty loss, not fully covered by insurance (subject to payment of the applicable deductible);

(l)

the Buyer has not acquired (including, without limitation, by merger, consolidation or acquisition of stock or assets) any operating business, corporation, partnership, limited liability company, joint venture, association or other business organization or division thereof, or any assets, outside of the ordinary course of business, or entered into any commitment to do so;

(m)

the Buyer has not, except for this Agreement or any other agreement contemplated hereby, entered into any agreement, contract, lease or license (or series of related agreements, contracts, leases or licenses) outside of the ordinary course of business;

(n)

the Buyer has not discharged or satisfied any Encumbrance or paid any obligation or liability, other than current liabilities in the ordinary course of business;

(o)

Buyer has not declared, made any payment, set aside or made any distribution to its stockholders, or redeemed, purchased or otherwise acquired any Common Stock;

(p)

the Buyer has not granted to any officer or employee any increase in compensation or benefits;

(q)

the Buyer has not: (i) paid any pension, retirement allowance or other employee benefit to any Person; or (ii) adopted or agreed to adopt any pension, retirement or other employee benefit plan, program or policy;

(r)

the Buyer has not entered into any agreement (i) in which the obligation exceeds Ten Thousand Dollars ($10,000) or (ii) which may not be terminated by the Buyer at any time, without penalty, upon fifteen (15) days’ notice;

(s)

the Buyer has not disposed of any Asset valued in excess of Five Thousand Dollars ($5,000) outside the ordinary course of business;

(t)

the Buyer has not amended its certificate of formation, by-laws or other organizational documents; and

(u)

3.22

3.23

3.24

Affiliated Transactions.  Except as set forth in Schedule 3.24 or as  disclosed in the Buyer’s filings on EDGAR, no Affiliate of the Buyer: (i) owns any debt, equity or other interest or investment in any Person that is a competitor, lessor, lessee, licensor, licensee, customer, supplier, distributor sales agent or advertiser of the Business; (ii) has any cause of action or other claim whatsoever against or, owes any material amount to, or is owed any material amount by the Buyer, except for accrued compensation (including but not limited to accrued vacation pay), employee benefits and similar matters; (iii) has any interest in or owns any Intellectual Property Rights or any other property or right used in the conduct of the Business; or (iv) is a party to any Contract to which the Buyer is a party.

3.25

Banking Relationships and Investments.  Schedule 3.25 sets forth an accurate and complete list of all banks and financial institutions in which the Buyer has an account, deposit, safe-deposit box, lock box or line of credit or other loan facility or relationship, including the names of all persons authorized to draw on those accounts or deposits, or to borrow under such lines of credit or other loan facilities, or to obtain access to such boxes.  Schedule 3.25 sets forth an accurate and complete list of all certificates of deposit, debt or equity securities and other investments owned, beneficially or of record, by the Buyer (the “Investments”).  The Buyer has good and marketable title to all of the Investments.

3.26

Powers of Attorney.  There are no outstanding powers of attorney executed on behalf of either the Buyer or any of its Subsidiaries.

3.27

Business Practices.   Neither the Buyer, nor, to the Knowledge of the Buyer, any of its directors, officers, managers, agents or employees has, for or on behalf of the Buyer (i) directly or indirectly, used any funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to foreign or domestic political activity, (ii) made any unlawful payment to foreign or domestic government officials or employees or to any foreign or domestic political parties or campaigns from corporate funds, (iii) failed to disclose fully any contribution made by the Buyer (or made by any person acting on its behalf of which the Buyer is aware) which is in violation of Law, or (iv) violated in any material respect any provision of the Foreign Corrupt Practices Act of 1977, as amended.

3.28

Export Control.  The Buyer has at all times conducted its export and related transactions in all material respects in accordance with (i) all applicable U.S. export, re-export, and anti-boycott Laws and regulations, including the Export Administration Regulations, the Arms Export Control Act and International Traffic in Arms Regulations, and U.S. economic sanctions laws and regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control and (ii) all other applicable import and export controls in the other countries in which the Buyer conducts business.

3.29

Purchase for Own Account.  Buyer hereby confirms that the Stock purchased hereunder will be acquired for investment for Buyer’s own account, not as a nominee or agent, and not with a view to the resale or distribution of any part of the Stock in contravention of applicable Law.

3.30

Full Disclosure.  No representation or warranty made by Buyer herein or in any Related Document contains or will contain any untrue statement of any fact, or omits any fact necessary in order to make any statement herein or therein, in light of the circumstances in which it was made, not misleading.  The Buyer has disclosed to Seller all facts of which they have Knowledge that are material to the Business, the Assets, liabilities, prospects, condition (financial or otherwise) or results of operations of the Buyer.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Seller represents and warrants to the Buyer as follows:

4.1

Organization; Due Authorization.  Seller has full power to execute, deliver and perform this Agreement and any Related Document to which it is a party.  The execution, delivery and performance of this Agreement and the Related Documents have been duly and validly authorized by all necessary corporate actions on the part of such Seller.

4.2

Binding Obligation.  Assuming due authorization, execution and delivery of this Agreement by the Buyer, this Agreement (and when executed and delivered at Closing, each Related Document) will be duly executed by Seller and constitutes the legal, valid, and binding obligation of Seller, enforceable against such Seller in accordance with their respective terms, except that (i) such enforcement may be limited by or subject to any bankruptcy, insolvency, reorganization, moratorium or similar laws now or hereafter in effect relating to or limit­ing creditors’ rights generally and (ii) the remedy of specific performance and injunctive and other forms of equitable relief are subject to certain equitable defenses and to the discretion of the court before which any proceeding therefor may be brought.

4.3

4.4

Brokerage.  Except as set forth on Schedule 4.4, the Seller has not incurred any liability for brokerage commissions, finders’ fees or other similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement binding upon Seller.

4.5

Certain Proceedings.  There are no actions, suits, proceedings, orders, investigations or claims pending or, to the Knowledge of Seller, threatened against Seller, at law or in equity, or before or by any governmental department, commission, board, bureau, agency or instrumentality that would materially affect Seller’s ability to consummate the transactions contemplated by this Agreement.

4.6

Licenses.  The Seller represents and warrants that the Company has all of the licenses, permits and other authorizations necessary from any governmental agency to conduct its business, none of which are subject to any restriction or condition which would materially limit the operation of the Company’s business as presently operated.  Such licenses are validly issued, and the applications therefor are complete and accurate and such licenses are in full force and effect, and, to the Knowledge of Seller, the conduct of the Company’s business is in full accordance therewith.

4.7

Compliance with Laws.  Seller represents that the Company conforms, in all material respects, to all applicable statutes, codes, ordinances, licensing requirements and other laws applicable to the Company.  The Seller has, since the Company’s inception, complied in all material respects with all laws, decrees, and orders applicable to the Company, including those relating to employment, employee benefits, marketing, sale and distribution of products, labeling of products, trade regulation, antitrust and warranties; and to the Knowledge of Seller there is not any liability arising from or related to any violations thereof.

4.8

(a)

Seller holds of record and beneficially all of the Stock purported to be owned by such Seller as set forth opposite such Seller’s name on Schedule 4.6.  Seller has good and marketable title to all of the Stock in such Seller’s name as set forth on Schedule 4.6 and all right, power, authority and capacity to sell, assign, transfer and deliver all right, title and interest, both legal and equitable, in and to the Stock set forth next to such Seller’s name on Schedule 4.6, free and clear of all Encumbrances.  All of the Stock held by Seller has been duly authorized, is validly issued, fully paid and non-assessable.  No Seller has violated any applicable Laws in connection with the sale of any Stock.  Upon delivery to Buyer at the Closing of the Stock and upon receipt by Seller of the Closing Date Cash Payment, Promissory Note, Unit One and Goldenshare, good and valid title to such Stock will pass to Buyer, free and clear of any Encumbrances.

(b)

Seller hereby confirms that the Securities acquired hereunder will be acquired for investment for such Seller’ own account, not as a nominee or agent, and not with a view to the resale or distribution of any part of the Securities in contravention of applicable Law.

(c)

No representation or warranty made by Seller herein contains or will contain any untrue statement of any fact, or omits any fact necessary in order to make any statement herein or therein, in light of the circumstances in which it was made, not misleading.

ARTICLE V

COVENANTS OF BUYER

5.1

Pre-Closing Covenants.  Except as contemplated or required by this Agreement, commencing on the date hereof until the Closing Date, Buyer shall operate the Business in the ordinary course of business in accordance with past practices; provided, however:

(a)

Negative Covenants.  Except as contemplated or required by this Agreement, the Buyer shall not, without the prior written consent of Seller:

(i)

General.  Take any action referenced in Section 3.21 hereof;

(ii)

Compensation.  Except as contemplated herein, (A) increase the compensation of any person employed by the Buyer, (B) pay or grant bonuses or other benefits payable or to be payable to any person employed by the Buyer, or (C) enter into any employment, severance or similar agreement with any employee of the Buyer which does not by its terms terminate, or cannot be terminated or satisfied by the Buyer without premium or penalty, prior to or at the Closing;

(iii)

Dividends, Distributions.  (A) Declare, set aside or pay any dividend or distribution that is payable in cash, stock, membership interests or other property with respect to the Buyer; (B) redeem, purchase or otherwise acquire directly or indirectly any shares or membership interests of the Buyer, or any other securities thereof or any rights, warrants, or options to acquire any such shares or other securities; (C) authorize for issuance, issue, sell, pledge, deliver or agree to commit to issue, sell or pledge (whether through the issuance or granting of any options, warrants, calls, subscriptions, equity appreciation rights or other rights or other agreements) any equity or debt securities of the Buyer, or any other securities that are convertible into or exchangeable for shares or membership interests of any class of the Buyer; or (D) split, combine or reclassify the outstanding shares or membership interests of the Buyer, or authorize the issuance of any other securities in respect of, in lieu of or in substitution for shares of any equity securities of the Buyer; or

(iv)

No Inconsistent Action.  Take any action, or fail to take any action, which is inconsistent with their obligations hereunder or which could reasonably be anticipated to hinder or delay the consummation of the transaction con­templated by this Agreement.  Such inconsistent action shall include, but is not limited to, the following: (a) failing to preserve substantially the relationships with the employees, suppliers and customers of the Buyer, except in the ordinary course of business; (b) failing to perform, in all material respects, any required obligations pursuant to any Contracts, leases or permits; (c) failing to comply with all applicable Laws; (d) failing to confer with Seller regarding operational matters of a material nature; (e) failing to report periodically to Seller regarding the status and results of business operations; (f) adopting any plan of liquidation, dissolution,

merger, consolidation, restructuring, recapitalization or other reorganization of the Buyer; or (g) settling or compromising any claim or action against the Buyer.

(b)

Affirmative Covenants.  Buyer shall do the following:

(i)

Access to Information.  From the date hereof through the Closing Date, the Buyer shall give Seller and its representatives reasonable access during normal business hours to all properties, facilities, personnel, books, contracts, leases, commitments and records, and during this period the Buyer shall furnish Seller with all financial and operating data and other information as to the Business and its assets, properties, rights and claims, as Seller may from time to time reasonably request.  In particular, the Buyer shall (A) afford to the officers, employees, directors, attorneys, accountants, appraisers and other authorized representatives of Seller reasonable access, during normal business hours, to the offices, plants, properties, books and records of the Buyer in order that Seller may have full opportunity to make such legal, financial, accounting, environmental and other reviews or investigations of the Business and the Assets as Seller shall desire to make, and (B) use its commercially reasonable efforts to cause its independent public accountants to permit Seller’s independent public accountants to inspect their work papers and other records relating to the Business and the Assets;

(ii)

Notification.  Promptly notify Seller in writing of the following:

(A)

any notice or other communication from any Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement;

(B)

any notice or other communication from any governmental entity in connection with the transactions contemplated by this Agreement;

(C)

any notice or other communication from any governmental entity with respect to condemnation proceedings and fees to be paid to the Buyer in connection therewith;

(D)

any actions, suits, claims, investigations or proceedings commenced or threatened, relating to or involving or otherwise affecting the Buyer that, if pending on the date of this Agreement, would have been required to have been disclosed in the Schedules hereto or that relate to the consummation of the transactions contemplated by this Agreement;

(E)

without prejudice to the termination rights of the parties hereunder, the occurrence, or failure to occur, of any condition, event or development that (1) causes any representation or warranty of the Seller and/or the Buyer contained in this Agreement to be untrue or inaccurate, at any time from the date hereof to the Closing Date, or (2) would have been required to be set forth or described in the Schedules hereto if existing or known at the date of this Agreement; and

(F)

any failure on the part of the Seller or the Buyer to comply with or perform in any respect any agreement or covenant to be complied with or performed by it or them hereunder; provided that the delivery of any notice pursuant to this Section 5.1(b)(ii) shall not limit or otherwise affect the remedies available hereunder to Buyer; and

(iii)

Supplemental Disclosure.  Provide information in writing to Seller with respect to any matter hereafter arising or discovered which, if existing or known at the date of this Agreement, would have been required to be set forth in a Schedule to, or representation or warranty set forth in, this Agreement; provided that no such information shall constitute an amendment of such Schedule or of any statement, representation or warranty in this Agreement and shall not cure any breach of any representation or warranty made in this Agreement for purposes of indemnification of Seller by the Buyer under Article X hereof.

ARTICLE VI

SPECIAL COVENANTS AND AGREEMENTS

6.1

Fees and Expenses.  Except as otherwise provided in this Agreement, each party shall pay its own expenses incurred in connection with the authorization, preparation, execution and performance of this Agreement, including all fees and expenses of counsel, accountants, agents and other representatives; provided that expenses of the Buyer incurred up to the Closing Date shall be paid by the Buyer.

6.2

Announcements.  Other than as required by law or regulation, commencing on the date hereof, Buyer shall not make any public announcement or press release concerning the transactions contemplated hereby without the written consent of the Seller, which consent shall not be unreasonably withheld, delayed or conditioned.

6.3

Cooperation.  Buyer and Seller shall cooperate fully with each other and their respective counsel and accountants in connection with any actions required to be taken as a part of their respective obligations under this Agreement, including, but not limited to, the obtaining of Consents.  After the Closing, the Seller and Buyer shall take such actions, and shall execute and deliver to any other party such further documents as, in the reasonable opinion of counsel for such other party, may be necessary to ensure, complete and evidence the full and effective consummation of the transactions contemplated by this Agreement.

6.4

6.5

Tax Covenants.

(a)

(b)

Tax Returns.  Buyer shall duly prepare, or cause to be prepared, and timely file, or cause to be timely filed, solely at Buyer’s expense, all Tax Returns required to be filed by the Buyer for any Pre-Closing Tax Period (“Pre-Closing Tax Returns”).  All Pre-Closing Tax Returns shall be prepared in accordance with historic practices of the Buyer, to the extent permitted by applicable Law.  To the extent permitted by applicable Law, the Sellers shall include any income, gain, loss, deduction or other Tax items for any Pre-Closing Tax Period on their Tax Returns in a manner consistent with the schedules furnished by the Buyer to Sellers for such periods.  Buyer shall be solely liable for any and all late filing fees, interest or penalties incurred as a result of the late filing of any Pre-Closing Tax Return.  Buyer shall permit Sellers to review and comment on each Pre-Closing Tax Return prior to filing and shall make such revisions to such Pre-Closing Tax Returns as are reasonably requested by Sellers.  Buyer shall duly prepare, or cause to be prepared, and timely file, or cause to be timely filed, all Tax Returns required to be filed by the Buyer for any Straddle Period (“Straddle Tax Return”) and for any Taxable Period beginning after the Closing Date (a “Post-Closing Tax Period” and such returns “Post-Closing Tax Returns”).  The cost of preparing all Straddle Tax Returns

and Post-Closing Tax Returns shall be borne by the Buyer.  Buyer shall permit Sellers to review and comment on each Straddle Tax Return prior to filing.

(c)

Cooperation on Tax Matters.  Buyer and Sellers shall cooperate fully, as and to the extent reasonably requested by the other party, in connection with Tax matters (including, without limitation, any Audit) involving the Buyer.  Such cooperation shall include the retention and (upon the other party’s request) the provision of records and information which are reasonably relevant to such Audit.  Buyer shall not dispose of any records relating to Taxes paid or payable by the Buyer and which are attributable to Pre-Closing Tax Periods prior to the later of six (6) months after the expiration of the applicable limitations period on assessment with respect to any such Taxes, or the final resolution of all Audits or litigation initiated prior to the expiration of the applicable limitations period.

(d)

(e)

Section 338(h)(10) Election.  Sellers shall join with Buyer in making an election under Section 338(h)(10) of the Code (and any corresponding election under any other comparable provision of applicable Tax Law) with respect to the purchase and sale of the Stock hereunder (“338(h)(10) Election”).  Sellers shall include any income, gain, loss, deduction, or other Tax item resulting from the 338(h)(10) Election on their Tax Returns to the extent required by applicable Tax Law.

(f)

Transfer Taxes.  All transfer, documentary, sales, use, stamp, registration and other such Taxes and fees (including any penalties and interest) incurred in connection with this Agreement shall be paid by Buyer when due, and Buyer shall, at its own expense, file all necessary Tax Returns and other documentation with respect to all such transfer, documentary, sales, use, stamp, registration and other Taxes and fees, and, if required by applicable Law, Buyer shall, and shall cause its affiliates to, join in the execution of any such Tax Returns and other documentation.

(g)

Status.  Prior to the Closing Date, Buyer shall maintain its respective classification under the Code and applicable Tax Law as an association taxable as a corporation and shall not take or allow any action that would change the tax classification of Buyer.

6.6

Confidentiality Obligations.

(a)

(b)

Buyer expressly acknowledges that the covenants contained in Section 6.6, are integral to the sale by Seller of the Stock and that without the protection of such covenants, Seller would not have entered into this Agreement, that the consideration received by Seller bears no relationship to the damages Seller may suffer in the event of any breach of any of the covenants of Section 6.6.  If this Section 6.6 shall nevertheless for any reason be held to be excessively broad, it shall be

enforceable to the extent compatible with applicable Laws that shall then apply.  Buyer hereby further acknowledges that money damages will be impossible to calculate and may not adequately compensate Seller in connection with an actual or threatened breach by it of the provisions of this Section 6.6.  Accordingly, Buyer hereby expressly waives all rights to raise the adequacy of Seller’s remedies at law as a defense if Seller seeks to enforce by injunction or other equitable relief the due and proper performance and observance of the provisions of this Section 6.6.  In addition, Seller shall be entitled to pursue any other available remedies at law or equity, including the recovery of money damages, in respect of the actual or threatened breach of the provisions of this Section 6.6.

(c)

Buyer hereby expressly waives any right to assert inadequacy of consideration as a defense to enforcement of the confidentiality covenants in this Section 6.6 should such enforcement ever become necessary.

6.7

No Debt Payments in Cash.  To the extent that Buyer has to issue a debt instrument (“Buyer Debt”) in order to obtain funding to be able to repay the Promissory Note, all payments required to be made in accordance with the Buyer Debt must only be made with Common Stock of the Buyer, and not with cash or cash equivalents.

6.8

Slotkin Consulting Agreement. Roger M. Slotkin will have entered into a consulting agreement with Buyer, in form and substance reasonably satisfactory to Mr. Slotkin, which shall provide for, among other things, for the payment of a consulting fee in the aggregate amount of $135,000, payable in equal biweekly installments over a term of seven and one-half months following the Closing; provided, that if the consulting agreement is terminated prior to Mr. Slotkin receiving the full $135,000, such balance shall be due and payable immediately upon termination of the agreement.

6.9

Sands Consults.  SCS, LLC shall be due a cash fee of $100,000 in the aggregate, $50,000 of which is payable by Buyer at Closing, with the remaining $50,000 payable by Buyer following the first date after the Closing Date that the Buyer files audited financial statements with the SEC.  The Buyer shall secure the $100,000 cash fee referenced in this Section 6.9 by obtaining financing from the Investor, in return for which the Buyer shall issue to Investor a convertible promissory note in the form of Exhibit E.  In addition to the cash fee referenced herein, Buyer shall, at Closing, issue to SCS, LLC a warrant to purchase a number of shares of Common Stock of Buyer equal to 2% of the issued and outstanding Common Stock of Buyer on the Closing Date.

6.10

Magna Funding of Closing Date Cash Payment.  Magna Management LLC and/or its Affiliates will have entered into a funding agreement with the Buyer, having terms and conditions reasonable satisfactory to Buyer, pursuant to which Manga shall provide Buyer with sufficient funds to allow Buyer to make the Closing Date Cash Payment to Seller pursuant to Section 2.2(a).

6.11

Special Compensation to Hydrophi Employees.   Buyer, after the Closing and not later than one month after the Closing, shall cause its Board of Directors and officers to take all such action necessary so as to issue to each of Messrs. Reid Meyers and Mark Robinson 1,000,000 shares of common stock of Buyer in consideration of the transitional services past and future in connection with the integration of the Seller’s businesses into and with the Buyer. The foregoing shares of common stock will be restricted securities of Buyer, and will not be afforded contractual registration rights.

6.12

Settlement and Extinguishment Agreement.  Buyer will have received a settlement and extinguishment agreement from 31 Group, LLC, terminating the warrant held by 31 Group, LLC to purchase up to 2,647,059 shares of Common Stock of Buyer and terminating the provisions in the Securities Purchase Agreement, dated December 4, 2014, including without limitation Section 4.s thereof, requiring the Buyer to make Royalty Payments (as that term is defined therein).

6.13

Waivers. Buyer will have received waivers from 31 Group, LLC, Riverside Merchant Partners, LLC, and Magna Equities II, LLC, waiving of the rights of those parties to any and all pre-emptive rights, co-investment rights, participation rights, rights of first refusal and similar rights which they hold under the forms of loan documentation entered into by those parties and Buyer, and a waiver of all defaults under the securities purchase agreements and notes and any and all related documentation therefore in any and all agreements between those parties and Buyer, as of and through the Closing, including but not limited to, covenants to maintain a certain number of reserved shares of common stock, issuances of common stock, and notice requirements, among other things.

6.14

Continuing Director and Officer Insurance.  Buyer will continue the current director and officer insurance policy(is) of Buyer, or replace those policies with another insurance policy or policies, provided that (i) the continuation or the replacement policies provide for basic coverage of $2,000,000 and (ii) such policy or policies cover former officers and directors.  Buyer shall continue the continuation or replacement policies for not less than two full calendar years after the Closing.

ARTICLE VII

CONDITIONS TO OBLIGATIONS OF BUYER AND SELLER

7.1

(a)

(b)

Covenants and Conditions.  The Seller shall have in all material respects performed and complied with all covenants, agreements and conditions required by this Agreement to be performed or complied with by them prior to or on the Closing Date.

(c)

Deliveries.  The Seller shall have made or cause to be made, or stand willing and able to make or cause to be made, all the deliveries to Buyer set forth in Section 8.1 hereof.

(d)

Adverse Change.  Since June 30, 2015, there shall not have occurred a Material Adverse Effect.

(e)

Good and Marketable Title to Stock.  At Closing, (i) the title of the Seller to the Stock will be free and clear of all Encumbrances and (ii) the title to all of the Stock will be transferred to Buyer, free and clear of all Encumbrances.

(f)

No Adverse Proceedings.  No action, suit, proceeding or investigation before any court, administrative agency or other governmental authority shall be pending or, to the Knowledge of the Seller, threatened against Seller or the Company wherein an unfavorable judgment, decree or order would prevent the carrying out of this Agreement or any of the transactions contemplated hereby, declare unlawful the transactions contemplated hereby or cause such transactions to be rescinded, or which could reasonably be expected to materially adversely affect the right of Buyer to own and exercise all rights under the Stock, or to materially adversely affect the Assets or the Business operations (financial or otherwise) of the Company.

(g)

Consents.  All Consents described on Schedule 3.9 shall have been obtained and copies shall have been delivered to Buyer.

(h)

Regulatory Approvals.  All authorizations, approvals, orders, licenses, certificates and permits as may be required to permit the consummation of the transactions contemplated hereby and the transfer of any and all Licenses necessary for Buyer to operate the Business after the Closing shall have been obtained, shall remain in full force and effect and shall be reasonably satisfactory in form and substance to Buyer and its counsel.

(i)

Slotkin Consulting Agreement.  Mr. Roger Slotkin will have received a fully executed copy of a consulting agreement with Buyer providing for payment of $135,000 as specified in Section 6.8 of this Agreement.

(j)

Opinion Instruction to Transfer Agent.  Buyer and the current transfer agent for Buyer will have received and acknowledged through an irrevocable instruction letter that Andrew D. Hudders, Esq., currently with the law firm of Golenbock Eiseman Assor Bell & Peskoe LLP is the authorized attorney to issue all legal opinions in respect of any preferred stock and common stock owned or to be owned and transferred or to be transferred by Roger Slotkin.

(k)

Series A Preferred Stock – Class 1.  Roger Slotkin will have received a fully executed stock certificate representing 1,000,000 shares of preferred stock of the Series A Preferred Stock – Class 1 entitling him to acquire 4% of the fully diluted common stock of Buyer on the sixth month anniversary of the Closing  and copy of the filed Certificate of Designations for the Series A Preferred Stock, Class 1 and Class 2.

(l)

Resignations. Buyer will have received the resignations of Reid Meyers and Mark Robinson as directors and officers (to the extent applicable) of Buyer, effective as of the Closing Date.

(m)

Settlement and Extinguishment Agreement.  Buyer will have received a fully executed copy of the settlement and extinguishment agreement with 31 Group, LLC as specified in Section 6.13 of this Agreement.

(n)

Waivers.  Buyer will have received fully executed waivers from 31 Group, LLC, Riverside Merchant Partners, LLC, and Magna Equities II, LLC as specified in Section 6.13 of this Agreement.

(o)

Operating Hydro. Buyer will have received/entered into financing documents to provide up to $255,000 in funding for Operating Hydro.

7.2

(a)

(b)

Covenants and Conditions.  Buyer shall have in all material respects performed and complied with all covenants, agreements, and conditions required by this Agreement to be per­formed or complied with by it prior to or on the Closing Date.

(c)

Deliveries.  Buyer shall have made or cause to be made, or stand willing and able to make or cause to be made, all the deliveries set forth in Section 8.3 hereof.

(d)

(e)

Settlement and Extinguishment Agreement.  Buyer will have received a fully executed copy of the settlement and extinguishment agreement with 31 Group, LLC as specified in Section 6.13 of this Agreement.

(f)

Waivers.  Buyer will have received fully executed waivers from 31 Group, LLC, Riverside Merchant Partners, LLC, and Magna Equities II, LLC as specified in Section 6.13 of this Agreement.

(g)

Operating Hydro. Buyer will have received/entered into financing documents to provide up to $255,000 in funding for Operating Hydro.

(h)

Elimination of Debt.  Buyer shall have eliminated, either by settling or cancelling, to Seller’s satisfaction, the debt referenced on Schedule 7.2(h) hereto.  

ARTICLE VIII

CLOSING AND CLOSING DELIVERIES

8.1

8.2

Deliveries by the Company and Seller.  Prior to or on the Closing Date, the Company and the Seller shall deliver or cause to be delivered to Buyer the following, in form and substance reasonably satisfactory to Buyer and its counsel:

(a)

Transfer of Stock.  Certificate(s) representing the Stock duly endorsed in blank for transfer, which Stock shall constitute 100 percent of the issued and outstanding capital stock of each of Pro Star Freight Systems Inc. and Pro Star Truck Center Inc. on the Closing Date, along with any assignments, stock powers or other transfer documents reasonably satisfactory to Buyer and its counsel;

(b)

Good Standing.  A certificate of Good Standing of Sellers, issued by the secretary of state of the state of incorporation of Sellers; and

(c)

8.3

Deliveries by Buyer.  Prior to or on the Closing Date, Buyer shall deliver or cause to be delivered to Seller the following, in form and substance reasonably satisfactory to Seller:

(a)

Closing Date Cash Payment.  The Closing Date Cash Payment;

(b)

Unit One and Unit Two.  Certificate of Designation consisting of Unit One and Unit Two, in the form attached here to as Exhibit B, stamped with evidence that it has been filed with the secretary of state of the State of Florida, along with certificates evidencing Unit Two, issued to Roger Slotkin prior to the Closing (“Unit Two”), which such Unit Two shall be placed in escrow subject to the certain Escrow Agreement, until such time as the condition set forth in Section 7.2 herein has been satisfied, and Unit One, issued to Seller at Closing;

(c)

Goldenshare.  The Goldenshare, in the form of Exhibit C hereto, duly executed by Buyer;

(d)

Promissory Note.  The Promissory Note, duly executed by Buyer;

(e)

Buyer’s Certificate.  A certificate, dated as of the Closing Date, executed by an officer of Buyer, which states that the warranties and representations made by Buyer on the date that Agreement is executed continue to be true in all material respects as of the Closing Date in accordance with Section 7.2(a); and that Buyer shall have performed and complied, in all material respects, with all covenants, agreements and conditions required by this Agreement to be performed by it as of the Closing Date, in accordance with Section 7.2(b);

(f)

Officer’s Certificate.  A certificate, dated as of the Closing Date, executed by the Chief Executive Officer of Buyer, certifying that the resolutions, as attached to such certificate, were duly adopted by Buyer’s board of directors, authorizing and approving the execution of this Agreement and the consummation of the transactions contemplated hereby and that such resolutions remain in full force and effect;

(g)

Good Standing.  A certificate of Good Standing of Buyer issued by the secretary of state of Florida dated within five (5) days prior to the Closing Date;

(h)

UCC-3 Termination Statements. UCC-3 Termination Statements terminating any outstanding Encumbrances on the Assets of Buyer, that will be terminated at the Closing in accordance with the Security Agreement dated on or about October 15, 2015;

(i)

Conversion of Debt.  Any outstanding debt of Buyer existing immediately prior to the Closing (other than debt issued to 31 Group, LLC, Riverside Merchant Partners, LLC, and Magna Equities II, LLC) shall be converted into Common Stock of the Buyer, which such Common Stock shall be subject to a 180 day lockup period during which time sales of such Common Stock are prohibited;

(j)

Resignations.  Resignations of all current directors and officers of Buyer, except for Mr. Roger M. Slotkin, whom shall remain a director of Buyer; provided, however, that Mr. Slotkin’s resignation as a director of Buyer shall be effective immediately upon his ceasing to be an employee of Buyer or any Affiliate of Buyer, or such earlier time as Buyer determines in its sole discretion; and

(k)

ARTICLE IX

TERMINATION

9.1

Termination.  This Agreement may be terminated by Seller or Buyer, if the terminating party is not then in breach of any material obligation under this Agreement (provided that Section 6.6 will continue in full force and effect), on written notice to the other at any time prior to Closing as follows:

(a)

by mutual consent of Buyer and the Seller;

(b)

by Buyer, if there has been a material misrepresentation, material breach of warranty or material breach of a covenant by the Seller or by the Company in the case of a covenant by the Seller to cause the Company to take or refrain from taking an action set forth in this Agreement, the Related Documents or the Schedules and Exhibits hereto, which has not been cured or waived within five (5) business days after written notification thereof by Buyer to the Seller;

(c)

by the Seller, if there has been a material misrepresentation, material breach of warranty or material breach of a covenant by Buyer set forth in this Agreement, the Related Documents, or the Schedules and Exhibits hereto, which has not been cured or waived within five (5) business days after written notification thereof by the Seller to Buyer;

(d)

9.2

ARTICLE X

SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND INDEMNIFICATION

10.1

Survival.  All representations and warranties contained in this Agreement or in any Related Document delivered pursuant hereto shall survive the Closing and shall be fully effective and enforceable for a period of two (2) years following the Closing Date (unless a different period is specifically assigned thereto in this Agreement), but shall thereafter be of no further force or effect, except as they relate to claims for indemnification timely made pursuant to this Article X; provided, however, that the representations and warranties contained in Section 3.1 (“No Violation; Authorization”), Section 3.4 (“Capitalization”), Section 3.13 (“Employee Plans; ERISA”), Section 3.16 (“Taxes”) and Section 3.22 (“Environmental Claims”) shall survive until 90 days after the expiration of the applicable statute of limitations period.  Any claim for indemnification asserted

10.2

Indemnification.

(a)

(b)

Indemnification by Buyer.  Subject to the limitations and provisions set forth in this Agreement, Buyer shall indemnify and hold harmless the Sellers against any Damages related to, caused by or arising from: (i) any misrepresentation, breach of any representation or warranty, or failure to fulfill any covenant or agreement contained herein or in any Related Document by Buyer; (ii) any and all liabilities and obligations of the Company, or arising out of or related to the ownership of the Assets after the Closing Date; (iii) third party claims arising in breach of contract, breach of warranty, product liability, unfair competition, personal or other injury, tort or infringement of property rights of others or other third party claims, in each case which claim is with respect to any and all activities of the Company, Buyer or any Affiliate thereof in connection with the conduct of the Business after the Closing Date; and (iv) any and all actions, suits, proceedings, claims, demands, assessments, judgments, costs and expenses, including reasonable legal fees, in enforcing this indemnity against Buyer.

(c)

Tax Damages.  The calculation of, and the liability for, Damages related to Taxes shall be governed solely by Section 6.5 and Sections ?10.2, ?10.3, ?10.4, ?10.5 and ?10.6, but only to the extent such latter sections are not inconsistent with specific provisions of Section ?6.5.

10.3

Notice of Claims.  Any party seeking indemnification shall give prompt written notice to the indemnifying party of the facts and circumstances giving rise to the claim (the “Notice”) for which such indemnified party intends to assert a right to indemnification under this Agreement (“Claims”).  Failure to give Notice shall not relieve any indemnifying party of any obligations which the indemnifying party may have to the indemnified party under this Article X, except to the extent that such failure has prejudiced the indemnifying party under the provisions for indemnification contained in this Agreement.  The indemnifying party shall reimburse an indemnified party promptly after delivery of a Notice certifying that the indemnified party has incurred Damages after compliance with the terms of this Article X; provided, however, the party receiving the Notice shall have the option to contest any such Damages or its obligations to indemnify therefor in accordance with the terms of this Agreement, at such party’s own cost and expense.  Such option shall be exercised by the giving of notice by the exercising party to the other party within twenty (20) days of receipt of a Notice.  If the parties do not agree upon the amount of Damages, the party seeking indemnification may seek appropriate legal remedy in accordance with this Agreement.

10.4

(“Environmental Claims”) or (y) a breach of any covenants of the Company or the Sellers, including, without limitation, ?6.55 (“Tax Covenants”) and 6.7 (“Confidentiality Obligations”).  For the sole purpose of calculating the amount of monetary damages that Buyer may be entitled to under this Article X (as opposed to determining if there has been a breach of a representation or warranty), the representations and warranties of the Company and the Sellers shall not be deemed qualified by any references to materiality, Material Adverse Effect or Knowledge.  All indemnification payments under Section ?10.2 shall be deemed adjustments to the Purchase Price.

10.5

Assumption and Defense of Third-Party Action.  If any Claim by Buyer or the Sellers hereunder arises out of a claim by a third party (a “Third-Party Claim”), the indemnifying party shall have the right, at its own expense and upon written notice to the indemnified party of its intent to do so within twenty (20) days of the Notice, to participate in or assume control of the defense of the Third-Party Claim, with counsel reasonably satisfactory to the indemnified party, and to settle or compromise any such Third-Party Claim; provided, however, that such settlement or compromise shall be effected only with the consent of the indemnified party, which consent shall not be unreasonably withheld.  The indemnified party shall have the right to employ counsel to represent it if, in its reasonable judgment, it is advisable for it to be represented by separate counsel, and in that event the fees and expenses of such separate counsel shall be paid by the indemnified party.  The indemnified party shall have the right to control the defense of any Third-Party Claim, notwithstanding the indemnifying party’s election to control the defense, if it notifies the indemnifying party that it is assuming the defense of such Claim and that the indemnifying party is relieved of its obligations to the claimant with respect to such Third-Party Claim and to the indemnified party, whereupon the indemnifying party shall be relieved of its obligations under this Article X with respect to such Third-Party Claim.  Except as provided in the preceding sentences, if the indemnifying party does not elect to assume control of the defense of any Third-Party Claim, the indemnifying party shall be bound by the results obtained by the indemnified party with respect to such Third-Party Claim.  The indemnifying party agrees to render such assistance as may reasonably be requested in order to insure the proper and adequate defense of any Third-Party Claim.  It is expressly agreed and understood that any defense by the indemnifying party of any Third-Party Claims affecting or involving the Business shall not be conducted in a manner which adversely affects or impairs the value or usefulness of the Business, the Assets or the Stock.

10.6

Remedies Exclusive.  The remedies provided in Section ?10.2, subject to the limitations set forth in this Article X, and except for the remedy of specific performance where otherwise set forth in this Agreement, shall be the exclusive remedy available for any breach of a representation, warranty, covenant, or other agreement contained in this Agreement; provided, however, that nothing herein shall limit the rights of the parties to seek any remedy based upon fraud or criminal misconduct.

ARTICLE XI

MISCELLANEOUS

11.1

Notices.  All notices, demands and requests required or permitted to be given under the provisions of this Agreement shall be (i) in writing, (ii) delivered by personal delivery, or sent by commercial delivery service or registered or certified mail, return receipt requested or sent by telecopy, (iii) deemed to have been given on the date of personal delivery or the date set forth in the records of the delivery service or on the return receipt or, in the case of a telecopy, upon receipt thereof if received during normal business hours and otherwise on the next business day and (iv) addressed as follows:

If to the Company or the Seller:

Pro Star Freight Systems Inc.

1325 W Irving Park Rd., Suite 201

Bensenville, IL 60106

Attn.:  President

Telecopy No.:

With a copy to:

Pryor Cashman LLP

7 Times Square

New York, NY  10036

Attn.:  M. Ali Panjwani, Esq.

Telecopy No.: (212) 798-6319

If to Buyer:

Hydrophi Technologies, Inc.

3440 Oakcliff  Road, Suite 100

Doraville, GA 30340

Attn.:  Chief Executive Officer

Telecopy No.:

With a copy to:

Golenbock Eiseman Assor Bell & Peskoe
437 Madison Avenue, 40^th Floor
New York, NY 10022

Attn.:  Andrew Hudders, Esq.

Telecopy No.: (212) 754-0330

11.2

Benefit and Binding Effect.  Neither Buyer nor the Seller may assign this Agreement without the prior written consent of the other party.  This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns.  Except as specifically set forth or referred to herein, nothing herein expressed or implied is intend­ed or shall be construed to confer upon or give to any Person other than the parties hereto and their respective successors or assigns any rights or remedies under or by reason of this Agreement.

11.3

Headings.  The headings herein are included for ease of reference only and shall not control or affect the meaning or construction of the provisions of this Agreement.

11.4

Gender and Number.  Words used herein, regardless of the gender and number specifically used, shall be deemed and construed to include any other gender, masculine, feminine or neuter, and any other number, singular or plural, as the context requires.

11.5

Counterparts.  This Agreement may be signed in any number of counterparts with the same effect as if the signature on each such counterpart were upon the same instrument.

11.6

Entire Agreement.  This Agreement, all Schedules and Exhibits hereto and all documents, writings, instruments and certificates delivered or to be delivered by the parties pursuant hereto collectively represent the sole and entire understanding and agreement between Buyer and Seller with respect to the subject matter hereof.  All Schedules and Exhibits attached to this Agreement shall be deemed part of this Agreement and incorporated herein, as if fully set forth herein.  This Agreement supersedes all prior negotiations and understandings between Buyer and Seller whatsoever with respect to the subject matter hereof, and all letters of intent and other writings relating to such negotiations and understandings.

11.7

Amendment.  This Agreement shall not be amended, supplemented or modified except by an agreement in writing which makes specific reference to this Agreement or an agreement delivered pursuant hereto, as the case may be, and which is signed by the party against which enforce­ment of any such amendment, supplement or modification is sought.

11.8

Severability.  If in any jurisdiction any provision of this Agreement or its application to any party or circumstance is restricted, prohibited or held unenforceable, such provision shall, as to such jurisdiction, be ineffective only to the extent of the restriction, prohibition or unenforceability without invalidating the remaining provisions hereof and without affecting the validity or enforceability of such provision in any other jurisdiction or its application to other parties or circumstances.  In addition, if any one or more of the provisions contained in this Agreement shall for any reason in any jurisdiction be held

11.9

Governing Law; Consent to Jurisdiction.

(a)

The parties acknowledge and agree that this Agreement constitutes a contract pertaining to a transaction covering in the aggregate not less than $1,000,000 and that their choice of law and choice of jurisdiction specified below have been made pursuant to and in accordance with Sections 5-1401 and 5-1402, respectively, of the New York General Obligations Law.  Accordingly, the parties acknowledge and agree that this Agreement shall be governed by the laws of the State of New York, as to all matters including matters of validity, construction, effect, performance and liability, without consideration of conflicts of laws provisions contained therein, and any New York State or Federal Court sitting in New York County shall have exclusive jurisdiction of all disputes with respect to an alleged breach of any representation, warranty, agreement or covenant of this Agreement, including, but not limited to, any dispute relating to the construction or interpretation of the rights and obligations of any party.

(b)

The parties hereby irrevocably and unconditionally submit to the exclusive jurisdiction of any New York State or Federal court sitting in New York County in any action or proceeding commenced by the other party or to which such party is a party arising out of or relating to this Agreement or any Related Document or any transaction contemplated hereby or thereby.  The parties hereby irrevocably waive, to the fullest extent they may effectively do so under applicable Law, the defense of an inconvenient forum to the maintenance of such action or proceeding.  The parties also irrevocably and unconditionally consent to the service of any and all process in any such action or proceeding by the mailing of copies of such process by overnight courier to such party and its counsel at their respective addresses specified in Section 11.1.  The parties further irrevocably and unconditionally agree that a final judgment in any such action or proceeding (after exhaustion of all appeals or expiration of the time for appeal) shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

11.10

Third Party Beneficiaries.  This Agreement is solely for the benefit of the parties hereto and no provision of this Agreement shall be deemed to confer upon third parties, either express or implied, any remedy, claim, liability, reimbursement, cause of action or other right.

11.11

Further Assurances and Consents.  From time to time after the Closing Date, without further consideration, the Seller and Buyer shall use reasonable efforts, to cooperate with the other party or parties to obtain any necessary third party consents or approvals to the assignment to Buyer of any contracts, leases, licenses and permits included in the Assets.

[remainder of page intentionally left blank; signature page follows]

This Agreement has been executed by the parties hereto as of the date first above written.

[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]

[SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT]

Exhibit 10.2

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THESE SECURITIES AND THE SECURITIES ISSUABLE UPON CONVERSION OF THESE SECURITIES MAY BE PLEDGED IN A MANNER CONSISTENT WITH THE SECURITIES ACT IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

HYDROPHI TECHNOLOGIES GROUP, INC.
SENIOR UNSECURED CONVERTIBLE NOTE

THIS NOTE is one of a series of duly authorized and issued notes of Hydrophi Technologies Group, Inc., a Florida corporation (the "Company"), designated as its Senior Unsecured Convertible Notes, in the original aggregate principal amount of Two Million Five Hundred Thousand Dollars ($2,500,000.00) (the "Note").

FOR VALUE RECEIVED, the Company promises to pay to the order of JMD Aviation Holdings LLC or its registered assigns (the "Investor"), the principal sum of Two Million Five Hundred Thousand Dollars ($2,500,000.00), on such dates as are provided herein, but no later than November 23, 2016 (the "Maturity Date"), and to pay interest to the Investor on the principal amount of this Note outstanding from time to time in accordance with the provisions hereof.  This Note is subject to the following additional provisions:

1.

Definitions.

In addition to the terms defined elsewhere in this Note, the following terms have the meanings indicated below:

“Bankruptcy Event” means any of the following events:  (a) the Company or any subsidiary commences a case or other proceeding under any bankruptcy, reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction relating to the Company or any subsidiary thereof; (b) there is commenced against the Company or any subsidiary any such case or proceeding that is not dismissed within 60 days after commencement; (c) the Company or any subsidiary is adjudicated by a court of competent jurisdiction insolvent or bankrupt or any order of relief or other order approving any such case or proceeding is entered; (d) the Company or any subsidiary suffers any appointment of any custodian or the like for it or any substantial part of its property that is not discharged or stayed within 60 days; (e) under applicable law the Company or any subsidiary makes a general assignment for the benefit of creditors; (f) the Company or any subsidiary fails to pay, or states that it is unable to pay or is unable to pay, its debts generally as they become due; (g) the Company or any subsidiary calls a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (h) the Company or any subsidiary, by any act or failure to act, expressly indicates its consent to, approval of or acquiescence in any of the foregoing or takes any corporate or other action for the purpose of effecting any of the foregoing.

"Change of Control" shall mean (a) any sale or disposition of all or substantially all of the assets of the Company to a third party in one or a number of related transactions, (b) any merger of the Company with or into

"Closing Price" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the closing sale price per share of the Common Stock for such date (or the nearest preceding date) on the primary Trading Market or exchange on which the Common Stock is then listed or quoted; (b) if prices for the Common Stock are then reported in the "Pink Sheets" published by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent sale price per share of the Common Stock so reported; or (c) in all other cases, the fair market value of a share of Common Stock as determined by an independent qualified appraiser selected in good faith and paid for by the Investor.

"Common Stock" means the common stock of the Company, $0.0001 par value per share, and any securities into which such common stock may hereafter be reclassified.

"Common Stock Equivalents" means any securities of the Company or a subsidiary thereof which entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.

“Conversion Date" means the date a Conversion Notice together with the Conversion Schedule is delivered to the Company in accordance with Section 5(a).

"Conversion Notice" means a written notice in the form attached hereto as Exhibit A.

"Conversion Price" means $0.0001 subject to adjustment from time to time in accordance with Section 11.

"Debt" of any Person shall mean, without duplication, (a) all obligations of such Person for borrowed money or with respect to deposits or advances of any kind, (b) all obligations of such Person evidenced by bonds, debentures, notes or similar instruments, (c) all obligations of such Person upon which interest charges are customarily paid, (d) all obligations of such Person under conditional sale or other title retention agreements relating to property or assets purchased by such Person, (e) all obligations of such Person issued or assumed as the deferred purchase price of property or services (other than unsecured accounts payable incurred in the ordinary course of business and no more than ninety (90) days past the date of the invoice therefor), (f) all Debt of others secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on property owned or acquired by such Person, whether or not the obligations secured thereby have been assumed, and (g) all obligations of such Person as an account party in respect of letters of credit and bankers’ acceptances.

"Default" means any event or condition which constitutes an Event of Default or that upon notice, lapse of time or both would, unless cured or waived, become an Event of Default.

"Event Equity Value" means the average of the Closing Prices for the five consecutive Trading Days preceding either: (a) the date of an Event Notice or the date the Company becomes obligated to pay the Event Price under Section 7(b), as applicable, or (b) the date on which the Event Price with respect thereto is paid in full, whichever is greater.

"Event of Default" means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

2

(i)

any default in the payment (free of any claim of subordination), when the same becomes due and payable (whether on the Maturity Date or by acceleration or prepayment or otherwise), of (a) liquidated damages in respect of this Note which default continues unremedied for a period of three Trading Days after the date on which written notice of such default is first given to the Company by the Investor, or (b) principal or interest in respect of this Note.

(ii)

the Company or any subsidiary (1) fails to pay when due any monetary obligation (regardless of amount) under any currently existing or hereafter arising debenture (other than a Note) or any mortgage, credit agreement or other facility (including the Company’s Senior Credit Facility), indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced, any Debt or under any long term leasing or factoring arrangement, if the aggregate amount of the obligations and liabilities of the Company and the Subsidiaries thereunder exceed $10,000 (each of the foregoing a “Material Debt Agreement”), or (2) fails to observe or perform any other obligation under any Material Debt Agreement, and such failure results in the obligations thereunder becoming or being declared due and payable prior to the date on which they would otherwise become due and payable.

(iii)

the occurrence or entering into by the Company or any subsidiary, or consummation of, any Change of Control transaction.

(iv)

the Company shall fail to observe, satisfy, or perform any covenant, condition or agreement contained in this Note (other than those specified in clause (i) above), and such failure shall continue unremedied for a period of five Trading Days after the date on which written notice of such default is first given to the Company by the Investor (it being understood that no prior notice need be given in the case of a default that cannot reasonably be cured within five Trading Days).

(v)

the occurrence and continuance of an Event of Default under any other Note.

(vi)

the occurrence of a Bankruptcy Event.

(vii)

one or more judgments for the payment of money in an aggregate amount in excess of $10,000 shall be rendered against the Company or any subsidiary or any combination thereof (which shall not be fully covered by insurance without taking into account any applicable deductibles) and which shall remain undischarged or unbonded for a period of 30 consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any assets of the Company or any subsidiary to enforce any such judgment.

(viii)

the Common Stock shall not be listed or quoted, or is suspended from trading, on a Trading Market for a period of three Trading Days (which need not be consecutive Trading Days).

(ix)

the Company fails to deliver a stock certificate evidencing Underlying Shares to an Investor within five Trading Days after a Conversion Date, or the conversion rights of the Investor pursuant to the terms hereof are otherwise suspended for any reason (other than as a result of the limitations set forth in Section 5(c).

(x)

the Company fails to have available a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock available to issue Underlying Shares upon any conversion of the Note.

"Original Issue Date" has the meaning set forth on the face of this Note.

"Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

"Trading Day" means (i) a day on which the Common Stock is traded on a Trading Market, or (ii) if the Common Stock is not quoted on a Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets, LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.

"Trading Market" means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market,

3

the Nasdaq Global Select Market, the New York Stock Exchange, the OTCQB, the OTCQX or the OTC Pink (or any successors to any of the foregoing).

"Underlying Shares" means the shares of Common Stock issuable upon conversion of the Note and payment of interest thereunder.

2.

Payments; Interest.  The unpaid principal amount under this Note shall be repaid by the Company to the Investor as follows:  (i) $250,000 shall be due on the first date following the Original Issue Date that the Company files audited financial statements with the Securities and Exchange Commission (the “Filing Date”) and (ii) $100,000 on each monthly anniversary of the Filing Date until such time as all amounts due pursuant to this Note have been paid in full.  The Company shall pay interest in cash at the rate of 5% per annum to the Investor on the aggregate unconverted and then outstanding principal amount of this Note as follows: (a) on the Filing Date, for the period from and including the Original Issue Date through and including the Filing Date, and (b) thereafter, interest shall be payable in arrears on each Filing Date (each, an “Interest Payment Date”).  If an Interest Payment Date is not a Trading Day, interest shall be payable on the next succeeding Trading Day.  Interest shall be calculated on the basis of a 360-day year for the actual number of days elapsed and shall accrue daily commencing on the Original Issue Date.

3.

Registration of Notes.  The Company shall register the Notes upon records maintained by the Company for that purpose (the "Note Register") in the name of each record Investor thereof from time to time. The Company may deem and treat the registered Investor of this Note as the absolute owner hereof for the purpose of any conversion hereof or any payment of interest hereon, and for all other purposes, absent actual notice to the contrary from such record Investor.

4.

Registration of Transfers and Exchanges.  The Company shall register the transfer of any portion of this Note in the Note Register upon surrender of this Note to the Company at its address for notice set forth herein. Upon any such registration or transfer, a new Note, in substantially the form of this Note (any such new debenture, a "New Note"), evidencing the portion of this Note so transferred shall be issued to the transferee and a New Note evidencing the remaining portion of this Note not so transferred, if any, shall be issued to the transferring Investor. The acceptance of the New Note by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Note. This Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the Investor surrendering the same.  No service charge or other fee will be imposed in connection with any such registration of transfer or exchange.  The Company agrees that its prior consent is not required for the transfer of any portion of this Note.

5.

Conversion.

(a)

At the Option of the Investor.  All or any portion of the principal amount of this Note then outstanding together with any accrued and unpaid interest hereunder shall be convertible into shares of Common Stock at the Conversion Price (subject to limitations set forth in Section 5(c)), at the option of the Investor, at any time and from time to time from and after the Original Issue Date. The Investor may effect conversions under this Section 5(a), by delivering to the Company a Conversion Notice together with a schedule in the form of Schedule 1 attached hereto (the "Conversion Schedule"). If the Investor is converting less than all of the principal amount represented by this Note, or if a conversion hereunder may not be effected in full due to the application of Section 5(c), the Company shall honor such conversion to the extent permissible hereunder and shall promptly deliver to the Investor a Conversion Schedule indicating the principal amount which has not been converted.

(b)

Intent Regarding Underlying Shares.  This Note shall be convertible into that number of Underlying Shares which would entitle the Investor to 4.9% of such fully-diluted Common Stock and Common Stock Equivalents as of any such date.

(c)

Certain Conversion Restrictions.  Notwithstanding anything to the contrary contained herein, the number of shares of Common Stock that may be acquired by Investor upon each conversion of this Note (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such conversion (or other issuance), the total number of shares of Common Stock then beneficially owned by Investor and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with

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Investor's for purposes of Section 13(d) of the Exchange Act, does not exceed 9.9% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such conversion).  For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. This provision shall not restrict the number of shares of Common Stock which Investor may receive or beneficially own in order to determine the amount of securities or other consideration that Investor may receive in the event of a Fundamental Transaction (defined below) involving the Company as contemplated herein.  This restriction may not be waived.

6.

Mechanics of Conversion.

(a)

The number of Underlying Shares issuable upon any conversion hereunder shall equal the outstanding principal amount of this Note to be converted, divided by the Conversion Price on the Conversion Date, plus (if indicated in the applicable Conversion Notice) the amount of any accrued but unpaid interest on this Note through the Conversion Date, divided by the Conversion Price on the Conversion Date.

(b)

The Company shall, by the third Trading Day following each Conversion Date, issue or cause to be issued and cause to be delivered to or upon the written order of the Investor and in such name or names as the Investor may designate a certificate for the Underlying Shares issuable upon such conversion, free of restrictive legends if at such time a Registration Statement is then effective and available for use by the Investor. The Investor, or any Person so designated by the Investor to receive Underlying Shares, shall be deemed to have become holder of record of such Underlying Shares as of such Conversion Date. The Company shall use its best efforts to deliver Underlying Shares hereunder electronically (via a DWAC) through the Depository Trust Corporation or another established clearing corporation performing similar functions.

(c)

The Investor shall not be required to deliver the original Note in order to effect a conversion hereunder.  Execution and delivery of the Conversion Notice shall have the same effect as cancellation of the Note and issuance of a New Note representing the remaining outstanding principal amount.

(d)

The Company's obligations to issue and deliver Underlying Shares upon conversion of this Note in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Investor to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Investor or any other Person of any obligation to the Company or any violation or alleged violation of law by the Investor or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Investor in connection with the issuance of such Underlying Shares.

(e)

If by the third Trading Day after a Conversion Date the Company fails to deliver to the Investor such Underlying Shares in such amounts and in the manner required pursuant to Section 5, then the Investor will have the right to rescind the Conversion Notice pertaining thereto by giving written notice to the Company prior to such Investor’s receipt of such Underlying Shares.

(f)

If by the third Trading Day after a Conversion Date the Company fails to deliver to the Investor the required number of Underlying Shares in the manner required pursuant to Section 5, and if after such third Trading Day and prior to the receipt of such Underlying Shares, the Investor purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Investor of the Underlying Shares which the Investor anticipated receiving upon such conversion (a "Buy-In"), then the Company shall: (1) pay in cash to the Investor (in addition to any other remedies available to or elected by the Investor) the amount by which (x) the Investor's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Underlying Shares that the Company was required to deliver to the Investor in connection with the exercise at issue by (B) the Closing Price on the Conversion Date and (2) at the option of the Investor, either void the conversion at issue and reinstate the principal amount of Notes (plus accrued interest therein) for which such conversion was not timely honored or deliver to the Investor the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  The Investor shall provide the Company reasonably detailed evidence or written notice indicating the amounts payable to the Investor in respect of the Buy-In.

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7.

Events of Default.

(a)

At any time or times following the occurrence and during the continuance of an Event of Default (other than under clause (viii) of such defined term with respect to the Company), the Investor may elect, by notice to the Company (an "Event Notice"), to require the Company to purchase all or any portion of the outstanding principal amount of this Note, as indicated in such Event Notice, at a purchase price in Dollars in cash equal to the greater of: (A) 100% of such outstanding principal amount (except that such amount shall equal 110% in the case of an Event of Default under clause (iii) of the definition of “Event of Default”), plus all accrued but unpaid interest thereon, through the date of purchase, or (B) the Event Equity Value of the Underlying Shares that would be issuable upon conversion of such principal amount and payment in Common Stock of all such accrued but unpaid interest thereon (without regard to any condition precedent or conversion limitation contained herein).  The aggregate amount payable pursuant to the preceding sentence is referred to as the "Event Price." The Company shall pay the aggregate Event Price to the Investor (free of any claim of subordination) no later than the third Trading Day following the date of delivery of the Event Notice, and upon receipt thereof the Investor shall deliver the original Note so repurchased to the Company.

(b)

Upon the occurrence of any Bankruptcy Event with respect to the Company, all outstanding principal and accrued but unpaid interest on this Note shall immediately become due and payable in full in Dollars in cash (free of any claim of subordination), without any action by the Investor, and the Company shall immediately be obligated to repurchase this Note held by such Investor at the Event Price pursuant to the preceding paragraph as if the Investor had delivered an Event Notice immediately prior to the occurrence of such Bankruptcy Event.

(c)

In connection with any Event of Default, the Investor need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind (other than the Event Notice), and the Investor may immediately enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Any such declaration may be rescinded and annulled by the Investor at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereto.

8.

Ranking.  This Note ranks senior in all respects to all existing and hereafter created unsecured Debt of the Company.  The Company will not, directly or indirectly, enter into, create, incur, assume or suffer to exist any unsecured Debt of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, that is senior in any respect to the Company's obligations under this Note.

9.

Charges, Taxes and Expenses.  Issuance of certificates for Underlying Shares upon conversion of (or otherwise in respect of) this Note shall be made without charge to the Investor for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Underlying Shares or Notes in a name other than that of the Investor. The Investor shall be responsible for all other tax liability that may arise as a result of holding or transferring this Note or receiving Underlying Shares in respect hereof.

10.

Reservation of Underlying Shares.  The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Underlying Shares as required hereunder, the number of Underlying Shares which are then issuable and deliverable upon the conversion of (and otherwise in respect of) this entire Note (taking into account the adjustments of Section 11), free from preemptive rights or any other contingent purchase rights of persons other than the Investor. The Company covenants that all Underlying Shares so issuable and deliverable shall, upon issuance in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

11.

Certain Adjustments.  The Conversion Price is subject to adjustment from time to time as set forth in this Section 11.

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(a)

Stock Dividends and Splits.  If the Company, at any time while this Note is outstanding: (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of shareholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b)

Pro Rata Distributions.  If the Company, at any time while this Note is outstanding, distributes to all holders of Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) rights or warrants to subscribe for or purchase any security, or (iv) any other asset (in each case, "Distributed Property"), then, at the request of the Investor delivered before the 90th day after the record date fixed for determination of shareholders entitled to receive such distribution, the Company will deliver to the Investor, within five Trading Days after such request (or, if later, on the effective date of such distribution), the Distributed Property that the Investor would have been entitled to receive in respect of the Underlying Shares for which this Note could have been converted immediately prior to such record date.  If such Distributed Property is not delivered to the Investor pursuant to the preceding sentence, then upon any conversion of this Note that occurs after such record date, the Investor shall be entitled to receive, in addition to the Underlying Shares otherwise issuable upon such conversion, the Distributed Property that the Investor would have been entitled to receive in respect of such number of Underlying Shares had the Investor been the record holder of such Underlying Shares immediately prior to such record date.  Notwithstanding the foregoing, this Section 11(b) shall not apply to any distribution of rights or securities in respect of adoption by the Company of a shareholder rights plan, which events shall be covered by Section 11(a).

(c)

Fundamental Transactions.  If, at any time while this Note is outstanding, (i) the Company effects any merger or consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock tender or exchange their shares for other securities, cash or property, or (iv) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 11(a) above) (in any such case, a "Fundamental Transaction"), then upon any subsequent conversion of this Note, the Investor shall have the right to: (x) declare an Event of Default pursuant to clause (iii) thereunder, (y) receive, for each Underlying Share that would have been issuable upon such conversion absent such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the "Alternate Consideration") or (z) require the surviving entity to issue to the Investor and instrument identical to this Note (with an appropriate adjustments to the conversion price). For purposes of any such conversion, the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Investor shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Note following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction (or, if different, the ultimate parent of such successor or entity or the entity issuing the Alternate Consideration) shall issue to the Investor a new debenture consistent with the foregoing provisions and evidencing the Investor's right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (c) and insuring that this Note (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

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(d)

Reclassifications; Share Exchanges.   In case of any reclassification of the Common Stock, or any compulsory share exchange pursuant to which the Common Stock is converted into other securities, cash or property (other than compulsory share exchanges which constitute Change of Control transactions), the Investor shall have the right thereafter to convert such shares only into the shares of stock and other securities, cash and property receivable upon or deemed to be held by holders of Common Stock following such reclassification or share exchange, and the Investor shall be entitled upon such event to receive such amount of securities, cash or property as a holder of the number of shares of Common Stock of the Company into which such shares of Notes could have been converted immediately prior to such reclassification or share exchange would have been entitled. This provision shall similarly apply to successive reclassifications or share exchanges.

(e)

Calculations.  All calculations under this Section 11 shall be made to the nearest cent or the nearest 1/100th of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(f)

Notice of Adjustments.  Upon the occurrence of each adjustment pursuant to this Section 11, the Company at its expense will promptly compute such adjustment in accordance with the terms hereof and prepare a certificate describing in reasonable detail such adjustment and the transactions giving rise thereto, including all facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Investor.

(g)

Notice of Corporate Events.  If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any subsidiary, (ii) authorizes and publicly approves, or enters into any agreement contemplating or solicits shareholder approval for any Fundamental Transaction or (iii) publicly authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Investor a notice describing the material terms and conditions of such transaction, at least 20 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Investor is given the practical opportunity to convert this Note prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

12.

Fractional Shares.  The Company shall not be required to issue or cause to be issued fractional Underlying Shares on conversion of this Note. If any fraction of an Underlying Share would, except for the provisions of this Section, be issuable upon conversion of this Note or payment of interest hereon, the number of Underlying Shares to be issued will be rounded up to the nearest whole share.

13.

Notices.  Any and all notices or other communications or deliveries hereunder (including without limitation any Conversion Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given. The addresses for such communications shall be: (i) if to the Company, to 3440 Oakcliff Road, Suite 100, Doraville, GA 30340, facsimile: [        ], attention Chief Executive Officer, (ii) if to the Investor, to the address or facsimile number appearing on the Company's shareholder records or such other address or facsimile number as the Investor may provide to the Company in accordance with this Section.

14.

Miscellaneous.

(a)

This Note shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.

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(b)

Subject to Section 14(a), above, nothing in this Note shall be construed to give to any person or corporation other than the Company and the Investor any legal or equitable right, remedy or cause under this Note. This Note shall inure to the sole and exclusive benefit of the Company and the Investor.

(c)

All questions concerning the construction, validity, enforcement and interpretation of this Note shall be governed by and construed and enforced in accordance with the laws of the State of New York.  Each party agrees that all Proceedings shall be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”).  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for any Proceeding, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court or that a New York Court is an inconvenient forum for such Proceeding.  Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Note and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal Proceeding.  The prevailing party in a Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.

(d)

The headings herein are for convenience only, do not constitute a part of this Note and shall not be deemed to limit or affect any of the provisions hereof.

(e)

In case any one or more of the provisions of this Note shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Note shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Note.

(f)

No provision of this Note may be waived or amended except in a written instrument signed, in the case of an amendment, by the Company and the Investor or, in the case of a waiver, by the party against whom enforcement of any such waiver is sought. No waiver of any default with respect to any provision, condition or requirement of this Note shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right.

(g)

To the extent it may lawfully do so, the Company hereby agrees not to insist upon or plead or in any manner whatsoever claim, and will resist any and all efforts to be compelled to take the benefit or advantage of, usury laws wherever enacted, now or at any time hereafter in force, in connection with any claim, action or Proceeding that may be brought by any Investor in order to enforce any right or remedy under the Notes. Notwithstanding any provision to the contrary contained in the Notes, it is expressly agreed and provided that the total liability of the Company under the Notes for payments in the nature of interest shall not exceed the maximum lawful rate authorized under applicable law (the "Maximum Rate"), and, without limiting the foregoing, in no event shall any rate of interest or default interest, or both of them, when aggregated with any other sums in the nature of interest that the Company may be obligated to pay under the Notes exceed such Maximum Rate. It is agreed that if the maximum contract rate of interest allowed by law and applicable to the Notes is increased or decreased by statute or any official governmental action subsequent to the date hereof, the new maximum contract rate of interest allowed by law will be the Maximum Rate of interest applicable to the Notes from the effective date forward, unless such application is precluded by applicable law. If under any circumstances whatsoever, interest in excess of the Maximum Rate is paid by the Company to any Investor with respect to indebtedness evidenced by the Notes, such excess shall be applied by such Investor to the unpaid principal balance of any such indebtedness or be refunded to the Company, the manner of handling such excess to be at such Investor’s election.

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IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by a duly authorized officer as of the date first above indicated.

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EXHIBIT A

CONVERSION NOTICE

 (To be Executed by the Registered Investor
in order to convert Notes)

The undersigned hereby elects to convert the principal amount of Note indicated below, into shares of Common Stock of HYDROPHI TECHNOLOGIES GROUP, INC., as of the date written below. If shares are to be issued in the name of a Person other than undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the Investor for any conversion, except for such transfer taxes, if any. All terms used in this notice shall have the meanings set forth in the Note.

By the delivery of this Conversion Notice the Investor represents and warrants to the Company that its ownership of the Common Stock does not exceed the restrictions set forth in Section 5(c) of the Note.

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Schedule 1

HYDROPHI TECHNOLOGIES GROUP, INC.
Senior Unsecured Convertible Note

CONVERSION SCHEDULE

This Conversion Schedule reflects conversions made under the above referenced Notes.

Dated:

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Exhibit 10.4

NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.  THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

HYDROPHI TECHNOLOGIES GROUP, INC.

GREENSHOE WARRANT

HYDROPHI TECHNOLOGIES GROUP, INC., a Florida corporation (the "Company"), hereby certifies that, for value received, Prostar Holdings Trust or its registered assigns (the "Holder"), is entitled to purchase from the Company the number of shares of Common Stock (each such share, a "Warrant Share" and all such shares, the "Warrant Shares") set forth in Section 4 herein, at any time and from time to time from and after the Original Issue Date and through and including November 23, 2020 (the "Expiration Date"), and subject to the following terms and conditions:

1.

Definitions.  As used in this Warrant, the following terms shall have the respective definitions set forth in this Section 1.

"Business Day" means any day except Saturday, Sunday and any day that is a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close.

"Common Stock" means the common stock of the Company, par value $0.0001 per share, and any securities into which such common stock may hereafter be reclassified.

"Exercise Price" means $0.0001, subject to adjustment in accordance with Section 9.

"Fundamental Transaction" means any of the following: (1) the Company effects any merger or consolidation of the Company with or into another Person, (2) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (3) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (4) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property.

“Original Issue Date” means the Original Issue Date first set forth on the first page of this Warrant.

“New York Courts” means the state and federal courts sitting in the City of New York, Borough of Manhattan.

"Trading Day" means (i) a day on which the Common Stock is traded on a Trading Market, or (ii) if the Common Stock is not quoted on a Trading Market, a day on which the Common Stock is quoted in the over-the-counter market as reported by the Pink Sheets, LLC (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i) and (ii) hereof, then Trading Day shall mean a Business Day.

"Trading Market" means any of the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market, the Nasdaq Global Select Market, the New York Stock Exchange, the OTCQB, the OTCQX or the OTC Pink (or any successors to any of the foregoing).

2.

Registration of Warrant.  The Company shall register this Warrant upon records to be maintained by the Company for that purpose (the "Warrant Register"), in the name of the record Holder hereof from time to time.  The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.

3.

Registration of Transfers.  The Company shall register the transfer of any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company at its address specified herein.  Upon any such registration or transfer, a new Warrant to purchase Common Stock, in substantially the form of this Warrant (any such new Warrant, a "New Warrant"), evidencing the portion of this Warrant so transferred shall be issued to the transferee and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant.

4.

Exercise and Duration of Warrants.

(a)

This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Original Issue Date through and including the Expiration Date.  At 5:30 p.m., New York City time on the Expiration Date, the portion of this Warrant not exercised prior thereto shall be and become void and of no value.

(b)

Intent Regarding Warrant Shares.  In the event that, while this Warrant is outstanding, the preferred stock of the Company issued to Holder on the date hereof (the “Preferred Stock”) converts, in the aggregate, into less than 84.9% of the fully-diluted Common Stock and Common Stock Equivalents of the Company, then this Warrant shall be exercisable into that number of Warrant Shares which would entitle the Holder to, when aggregated with the Preferred Stock, 84.9% of such fully-diluted Common Stock and Common Stock Equivalents as of any such date.  The Company shall notify the Holder in writing, no later than the Trading Day following the Company’s discovery of circumstances requiring such an adjustment or of any claim made by a third party that may cause such an adjustment.

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5.

Delivery of Warrant Shares.

(a)

To effect exercises hereunder, the Holder shall not be required to physically surrender this Warrant unless the aggregate Warrant Shares represented by this Warrant is being exercised.  Upon delivery of the Exercise Notice (in the form attached hereto) to the Company (with the attached Warrant Shares Exercise Log) at its address for notice set forth herein and upon payment of the Exercise Price multiplied by the number of Warrant Shares that the Holder intends to purchase hereunder, the Company shall promptly (but in no event later than three Trading Days after the Date of Exercise (as defined herein)) issue and deliver to the Holder, a certificate for the Warrant Shares issuable upon such exercise, which shall be free of restrictive legends.  The Company shall, upon request of the Holder and subsequent to the date on which a registration statement covering the resale of the Warrant Shares has been declared effective by the Securities and Exchange Commission, use its reasonable best efforts to deliver Warrant Shares hereunder electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions, if available, provided, that, the Company may, but will not be required to change its transfer agent if its current transfer agent cannot deliver Warrant Shares electronically through the Depository Trust Corporation.  A "Date of Exercise" means the date on which the Holder shall have delivered to the Company: (i) the Exercise Notice (with the Warrant Exercise Log attached to it), appropriately completed and duly signed and (ii) if such Holder is not utilizing the cashless exercise provisions set forth in this Warrant, payment of the Exercise Price for the number of Warrant Shares so indicated by the Holder to be purchased.

(b)

If by the third Trading Day after a Date of Exercise the Company fails to deliver the required number of Warrant Shares in the manner required pursuant to Section 5(a), then the Holder will have the right to rescind such exercise.

(c)

If by the third Trading Day after a Date of Exercise the Company fails to deliver the required number of Warrant Shares in the manner required pursuant to Section 5(a), and if after such third Trading Day and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a "Buy-In"), then the Company shall (1) pay in cash to the Holder the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue by (B) the closing bid price of the Common Stock on the Date of Exercise and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.  The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In.

(d)

The Company's obligations to issue and deliver Warrant Shares in accordance with the terms hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares.  Nothing herein shall limit a Holder's right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver certificates representing Warrant Shares upon exercise of the Warrant as required pursuant to the terms hereof.

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6.

Charges, Taxes and Expenses.  Issuance and delivery of Warrant Shares upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder.  The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

7.

Replacement of Warrant.  If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity (which shall not include a surety bond), if requested.  Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe.  If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

8.

Reservation of Warrant Shares.  The Company covenants that it will at all times reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of Persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable.

9.

Certain Adjustments.  The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject to adjustment from time to time as set forth in this Section 9.

(a)

Stock Dividends and Splits.  If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event.  Any adjustment made pursuant to clause (i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b)

Fundamental Transactions.  If, at any time while this Warrant is outstanding there is a Fundamental Transaction, then the Holder shall have the right thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the "Alternate Consideration").  For purposes of any such exercise, the determination of the Exercise Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Exercise Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration.  If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction.  At the Holder's option and request, any successor to the Company or surviving entity in such Fundamental Transaction shall, either (1) issue to the Holder a new warrant substantially in the form of this Warrant and consistent with the foregoing provisions and evidencing the Holder's right to purchase the Alternate Consideration for the aggregate Exercise Price upon exercise thereof, or (2) purchase the Warrant from the Holder for a purchase price, payable in cash within five Trading Days after such request (or, if later, on the effective date of the Fundamental Transaction), equal to the Black Scholes value of the remaining unexercised portion of this Warrant on the date of such request.  The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (b) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction.

(c)

Number of Warrant Shares.  Simultaneously with any adjustment to the Exercise Price pursuant to this Section 9, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the adjusted number of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.

(d)

Calculations.  All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100^th of a share, as applicable.  The number of shares of Common Stock outstanding at any given time shall not include shares owned or held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common Stock.

(e)

Notice of Adjustments.  Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based.  Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company's Transfer Agent.

(f)

Notice of Corporate Events.  If the Company (i) declares a dividend or any other distribution of cash, securities or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe for or purchase any capital stock of the Company or any Subsidiary, (ii) authorizes or approves, enters into any agreement contemplating or solicits stockholder approval for any Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions of such transaction (but only to the extent such disclosure would not result in the dissemination of material, non-public information to the Holder) at least 10 calendar days prior to the applicable record or effective date on which a Person would need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice or any defect therein shall not affect the validity of the corporate action required to be described in such notice.

10.

Payment of Exercise Price. The Holder may pay the Exercise Price in one of the following manners:

(a)

Cash Exercise.  The Holder may deliver immediately available funds; or

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(b)

Cashless Exercise.  The Holder may notify the Company in an Exercise Notice of its election to utilize cashless exercise, in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

X = Y [(A-B)/A]

where:

X = the number of Warrant Shares to be issued to the Holder.

Y = the number of Warrant Shares with respect to which this Warrant is being exercised.

A = the average of the closing prices for the five Trading Days immediately prior to (but not including) the Exercise Date.

B = the Exercise Price.

For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued.

11.

Limitations on Exercise.  Notwithstanding anything to the contrary contained herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to insure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by such Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder's for purposes of Section 13(d) of the Exchange Act, does not exceed 9.9% of the total number of issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise).  For such purposes, beneficial ownership shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder.  This provision shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 9 of this Warrant.  This restriction may not be waived, and notwithstanding anything to the contrary, may not be amended by agreement of the parties.

12.

No Fractional Shares.  No fractional shares of Warrant Shares will be issued in connection with any exercise of this Warrant.  In lieu of any fractional shares which would, otherwise be issuable, the Company shall pay cash equal to the product of such fraction multiplied by the closing price of one Warrant Share as reported by the applicable Trading Market on the date of exercise.

13.

Notices.  Any and all notices or other communications or deliveries hereunder (including, without limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (New York City time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New York City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) upon actual receipt by the party to whom such notice is required to be given.  The addresses for such communications shall be:  (i) if to the Company, to 3440 Oakcliff Road, Suite 100, Doraville, GA 30340, facsimile: [  ], (or such other address as the Company shall indicate in writing in accordance with this Section), or (ii) if to the Holder, to the address or facsimile number appearing on the Warrant Register or such other address or facsimile number as the Holder may provide to the Company in accordance with this Section.

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14.

Warrant Agent.  The Company shall serve as warrant agent under this Warrant.  Upon 10 days' notice to the Holder, the Company may appoint a new warrant agent.  Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act.  Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder's last address as shown on the Warrant Register.

15.

Miscellaneous.

(a)

This Warrant shall be binding on and inure to the benefit of the parties hereto and their respective successors and assigns.  Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.  This Warrant may be amended only in writing signed by the Company and the Holder and their successors and assigns.

(b)

All questions concerning the construction, validity, enforcement and interpretation of this Warrant shall be governed by and construed and enforced in accordance with the internal laws of the State of New York (except for matters governed by corporate law in the State of Delaware), without regard to the principles of conflicts of law thereof.  Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of this Warrant and the transactions herein contemplated (“Proceedings”) (whether brought against a party hereto or its respective Affiliates, employees or agents) shall be commenced exclusively in the New York Courts.  Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Warrant and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Warrant or the transactions contemplated hereby.  If either party shall commence a Proceeding to enforce any provisions of this Warrant, then the prevailing party in such Proceeding shall be reimbursed by the other party for its attorney’s fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.

(c)

The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(d)

In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

(e)

Prior to exercise of this Warrant, the Holder hereof shall not, by reason of being a Holder, be entitled to any rights of a stockholder with respect to the Warrant Shares.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,
SIGNATURE PAGE FOLLOWS]

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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.

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EXERCISE NOTICE
HYDROPHI TECHNOLOGIES GROUP, INC.
WARRANT DATED NOVEMBER 23, 2015

The undersigned Holder hereby irrevocably elects to purchase  _____________ shares of Common Stock pursuant to the above referenced Warrant.  Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.

(1)

The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares pursuant to the Warrant.

(2)

The Holder intends that payment of the Exercise Price shall be made as (check one):

____

“Cash Exercise” under Section 10

____

“Cashless Exercise” under Section 10

(3)

If the holder has elected a Cash Exercise, the holder shall pay the sum of $____________ to the Company in accordance with the terms of the Warrant.

(4)

Pursuant to this Exercise Notice, the Company shall deliver to the holder _______________ Warrant Shares in accordance with the terms of the Warrant.

(5)

By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (determined in accordance with Section 13(d) of the Securities Exchange Act of 1934) permitted to be owned under Section 11 of this Warrant to which this notice relates.

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Warrant Shares Exercise Log

9

HYDROPHI TECHNOLOGIES GROUP, INC.
WARRANT ORIGINALLY ISSUED NOVEMBER 23, 2015
WARRANT NO. 2015-1

FORM OF ASSIGNMENT

[To be completed and signed only upon transfer of Warrant]

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto ________________________________ the right represented by the above-captioned Warrant to purchase  ____________ shares of Common Stock to which such Warrant relates and appoints ________________ attorney to transfer said right on the books of the Company with full power of substitution in the premises.

Dated:

_______________, ____

_______________________________________
(Signature must conform in all respects to name of holder

as specified on the face of the Warrant)

_______________________________________
Address of Transferee

_______________________________________

_______________________________________

In the presence of:

__________________________

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