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AudioStocks, Inc.
2038 Corte del Nogal, Suite 110
Carlsbad, California 92011
Tel: 760-804-8844
Fax: 760-804-8845

May 13, 2009

Re: Acquisition of 100% of Shrink Technologies, Inc. Common Stock

Dear Mr. Khine:

This binding letter of intent (the “Letter of Intent”) sets forth the
understanding of the mutual intentions of the below parties regarding the
proposed transaction between on the one hand, AudioStocks, Inc., a Delaware
corporation (“AudioStocks”) and, on the other hand, Marshall Khine (“Khine”), an
individual residing in the state of California.  Hereinafter, AudioStocks and
Khine may be referred to hereinafter individually as a “Party” and collectively
as the “Parties.”

Each Party understands and acknowledges that this is a binding Letter of Intent
and therefore creates a legally binding contract, which will be subject to the
Definitive Agreements (as defined below). All Parties agree to make all best and
expeditious efforts to complete the Definitive Agreement on or before May 31,
2009 (the “Closing Date”).

1.           Transaction Architecture. At the Closing Date, AudioStocks will own
100% of the common shares of Shrink Technologies, Inc., a California corporation
(the “Shrink Equity”).  The Shrink Equity shall consist of one hundred percent
(100%) of the equity interests in Shrink.  In exchange, Khine will receive (i)
8,888,888 common shares of AudioStocks common stock (the “Common Stock”) and
(ii) one third of issuable Series C Preferred stock (the “Preferred Stock”) of
AudioStocks (collectively, the Common Stock and the Preferred Stock” shall be
referred to as the “AudioStocks Shares”).  At the Closing Date: (a) the
AudioStocks Shares will be owned by Khine, (b) the Shrink Equity will be owned
by AudioStocks, (c) Noctua Fund LP shall agree (A) by way of an assent (see
Schedule A attached hereto)), (B) to consolidate approximately $91,000 in
convertible notes and other obligations into a $100,000 secured convertible note
issued by AudioStocks on April 20, 2009 (the “April 20 Note”), thereby
increasing the principal face amount of the April 20 Note to approximately
$191,000 and (d) consistent with this Letter of Intent, AudioStocks and Khine
shall abide by the terms of this Letter of Intent as well as all subsequent
final transaction documents which evidence the Parties’ respective intentions.
(The above items (a) through (d), including item (c) which includes parts (A)
and (B), shall be referred to herein as the “Transaction”.)  Upon the execution
of the Letter of Intent, AudioStocks shall immediately commence a procedure to
change its corporate name to “Shrink Nanotechnologies, Inc.”

2.           Employment Issues, Resignations and Board of Directors
Appointments. Concurrent with or immediately following the Definitive Agreements
(referred to below) being executed, Luis Leung shall tender his resignation (the
“Leung Resignation”) from all positions then held (executive and Board of
Directors).  The AudioStocks Board of Directors shall appoint Khine to serve as
a director of AudioStocks.  All compensation for Khine, if any, shall be
subsequently approved by the Board of Directors.

3.           Definitive Agreements. After receipt of this executed Letter of
Intent, the Parties will commence preparation of definitive agreements which
will reflect the Transaction and the arrangements contemplated herein
(hereinafter, the documents referred in this Section shall be the “Definitive
Agreements”). The Definitive Agreements will contain the provisions outlined
above, in addition to the usual and customary representations and warranties,
covenants assuring marketable title to the Shrink Equity, conditions to closing
and indemnifications for transaction of this kind, including, without
limitations: tax and securities filings, and corporate filings, and the
accuracies of all of the same.

4.           Due Diligence and Conflicts of Interest. For a period not to exceed
ten (10) days subsequent to the execution of this Letter of Intent, the Parties
shall comply with reasonable requests to review relevant information concerning
themselves and business entities they are affiliated with, insofar as such
requests are reasonably related to the completion of the Transaction and the
execution of the going-forward plan of operating the post-Transaction business.
Upon the execution of this Letter of Intent by all Parties, the Parties shall
immediately mutually exchange the following:

§  
All Financial Statements of Shrink;

§  
the Shrink Certificate of Incorporation (with any amendments thereto);

§  
Operating Agreements, if any;

§  
A schedule of Shrink assets, leases, as well as a current list of service
agreements and work orders, all as of a recent date, all of which shall be kept
confidential.

ALL PARTIES AGREE TO THOROUGHLY REVIEW THE FORM 10-K FILED BY AUDIOSTOCKS FOR
THE PERIOD ENDED DECEMBER 31, 2008, AS WELL AS THE AMENDED VERSION OF THE FORM
10-K FILED ON APRIL 21, 2009 AND ALL ADDITIONAL FILINGS MADE BY AUDIOSTOCKS AND
ALL RELATED DISCLOSURES AND CONFLICTS OF INTERESTS RELATED TO THE TRANSACTION
CONTEMPLATED HEREIN.

THERE ARE NUMEROUS CONFLICTS AND RELATED PARTY INTERESTS  INVOLVED WITH THE
TRANSACTION CONTEMPLATED HEREIN.

THESE FILINGS MAY BE FOUND AT WWW.SEC.GOV.

5.           Transaction Document Expenses. Each Party respectively shall be
responsible for their own fees and expenses of the Parties agents, advisors,
attorneys and accountants with respect to the negotiation of this Letter of
Intent, the negotiation and drafting of the Definitive Agreements and, if
Definitive Agreements are executed, the closing of the Transaction.

6.           Termination Fee/No Shop. Until June 30, 2009, Khine shall not enter
into any transaction or agreement to enter into a transaction for the sale of
Shrink Equity.

7.           Public Announcement. Within four (4) days following the following
the date of this Letter of Intent, AudioStocks shall (i) release a Form 8-K with
the U.S. Securities and Exchange Commission regarding the Transaction, and (ii)
jointly release a press release regarding the Transaction.  With the exception
of the Form 8-K and Joint Press Release, the Parties agree not to issue any
further press releases or make any further public announcement regarding the
Transaction without prior written mutual consent of all Parties, except where a
public announcement is otherwise required by law.

8.           Jurisdiction. California state courts, using California law.

We trust that these terms accurately reflect our understanding. If there are any
questions or comments regarding the same, please feel to contact me at your
convenience. Otherwise kindly execute this Letter of Intent acknowledging your
agreement to the terms outlined above and fax it to 760-804-8845.

Best regards,

AUDIOSTOCKS, INC.

_____________________
By: Luis Leung
Its: Chief Executive Officer

Agreed and accepted by:

MARSHALL KHINE

_____________________________
By: Marshall Khine, Esq.
An: Individual

 
 

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SCHEDULE A

For the good and valuable consideration of the appreciation of the value of
instruments held by Noctua Fund LP (“Noctua”) which have been issued to Noctua
by AudioStocks, Noctua hereby assents to Item 1 (c) of this Letter of Intent.

____________________________
James B. Panther, II
Managing Member
of Noctua Fund Manager, LLC
the General Partner of Noctua Fund LP

 
 

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