NOTE EXCHANGE
AGREEMENT
THIS AGREEMENT
(the “ Agreement ”) is effective as of May 29,
2009 (the “ Effective Date ”) by and between
Shrink Nanotechnologies, Inc., a Delaware corporation f/k/a
AudioStocks, Inc. (the “ Company ”) and Noctua
Fund LP (“ Noctua ”). The Company and
Noctua may be individually referred to herein as a “
Party ” and collectively as the “ Parties
.”
RECITALS
WHEREAS, as of the Effective Date, the Company
acquired all of the equity ownership of Shrink Technologies, Inc.,
a California corporation (“ Shrink ”) pursuant
to a Share Exchange Agreement, resulting in Shrink becoming a
wholly owned subsidiary of the Company (“ Shrink
Acquisition ”); and
WHEREAS, Noctua is a creditor of the Company,
and, prior to the date hereof and among other securities of the
Company, owns a $100,000 Principal Amount of promissory note, which
accrues interest at a rate of fourteen percent (14%) per annum
commencing October 1, 2009 (the “ Existing Note
”) which Existing Note was issued to Noctua in an exchange
transaction on May 7, 2009 whereupon Noctua exchanged certain other
securities of the Company and agreed to the discharged of certain
obligations owed by the Company; and
WHEREAS, Noctua owns (i) a $91,000 face amount
promissory note of Shrink issued in 2008, (ii) a $10,000 principal
amount of note of Shrink issued on March 31, 2009, (iii) as well as
an additional $10,000 note issued on April 23, 2009
(collectively, the “ Noctua-Shrink Notes ”);
and
WHEREAS, Noctua has agreed to consent to the
Shrink Acquisition hereby and to exchange its Noctua-Shrink Notes
(inclusive of all interest capitalized thereon and rights relating
thereto) in exchange for a new note issued by the Company, with
terms identical in all material respects to those of the Existing
Note (the “ New Note ” and, together with the
Existing Note, the “ Noctua Notes ”),
NOW, THEREFORE, in consideration of the mutual
covenants contained in this Agreement, and for good and valuable
consideration, the receipt of which is hereby acknowledged, it is
hereby agreed as follows:
AGREEMENT
1.
Exchange and Release .
a. Noctua
hereby consents to the entry of the parties into the Share Exchange
Agreement, and consummation of the Shrink Acquisition thereby (and,
resulting change in control of Shrink) and, hereby waives any
rights or remedies or defaults, common law or otherwise as against
any of the parties in connection with the taking of any of the
actions relating to the consummation thereof.
b. Noctua
hereby tenders the Noctua-Shrink Notes to the Company and, hereby
further consents to the exchange of its Noctua-Shrink Notes of
Shrink along with all interest or principal thereon totaling
$188,121.28 as of the Effective Date, for the issuance by the
Company of the New Note to be issued in exchange therefore in the
principal amount of $118,121.28. The New Note shall be
identical in form and substance to the Existing Note, with the
exception of the issuance date.
c. Noctua
hereby discharges Shrink from any and all obligations relating to
the Noctua-Shrink Notes and any liabilities or obligations relating
thereto and accepts the New Note in exchange
therefore.
2.
Waiver of Section 1542 . In
signing this Agreement, Noctua has been advised of, understands and
knowingly waives his rights under California Civil Code Section
1542 which provides as follows: A GENERAL RELEASE DOES NOT EXTEND
TO OBLIGATIONS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST
IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN
BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE
DEBTOR.
3.
No Further Obligations . Noctua
covenants and agrees never to commence against the Company or
Shrink, any legal action or proceeding based in whole or in part
upon the Services, Obligations, demands, allegations, and/or
injuries released in this Agreement.
4.
No Admission . This Agreement shall
not be considered as an admission of liability by either Party and
by entering into this Agreement, neither Party has admitted the
validity of any Obligations herein released.
5.
Compliance with Securities Laws . In
the event of a conversion of the New Note, Noctua understands that
the New Note and shares of Common Stock of the Company issuable
thereunder are characterized as “restricted securities”
under the federal securities laws and that under such laws and
applicable regulations such securities may be resold without
registration under the United States Securities Act of 1933, as
amended only in certain limited circumstances. It understood that
the certificates evidencing the New Note and any Common Stock
issuable upon conversion thereof, will bear a legend in
substantially the below form:
“THESE
SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR
SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF A REGISTRATION
STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES UNDER SUCH ACT
OR A LEGAL OPINION THAT SUCH REGISTRATION IS NOT REQUIRED OR UNLESS
SOLD PURSUANT TO RULE 144 OF SUCH ACT.”
In addition, the Noctua hereby represents and
warrants that they are an “accredited investor” as such
term is defined in the Securities Act of 1933 and Securities and
Exchange Act of 1934.
a.
Necessary Acts . Each Party to this Agreement
agrees to perform any further acts and execute and deliver any
further documents that may be reasonably necessary to carry out the
provisions of this Agreement.
b.
Entire Agreement; Modifications; Waiver . This
Ag