Exhibit 10.5

 

Execution Version

 

EXCHANGE AGREEMENT

 

This EXCHANGE AGREEMENT (the “Agreement”) is made as of the 13th day of July,
2016, by and among Sigma Opportunity Fund II, LLC, a Delaware limited liability
company (the “Fund”), Sigma Capital Advisors, LLC, a Delaware limited liability
company (“Advisors” and together with the Fund, the “Holders”), and SNAP
Interactive, Inc., a Delaware corporation (the “Company”).

 

WHEREAS, the Fund is the record owner of warrants (the “Fund Warrants”) to
purchase 10,500,000 shares of common stock, par value $.001 per share, of the
Company (“Common Stock”);

 

WHEREAS, Advisors is the record owner of warrants (the “Advisors Warrants” and
together with the Fund Warrants, the “Warrants”) to purchase 4,500,000 shares of
Common Stock;

 

WHEREAS, the Holders desire to exchange the Warrants for an aggregate of
2,000,000 shares of Common Stock, and the Company has agreed to issue such
shares of Common Stock to the Holders in exchange for the Warrants, upon the
terms and conditions set forth in this Agreement.

 

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

 

 

1. Exchange of Shares.

 

Exchange. On the terms and subject to the conditions set forth in this
Agreement, on the date hereof (i) the Holders will surrender for cancellation
the Warrants and (ii) the Company will issue to the Holders an aggregate of
2,000,000 shares of Common Stock (the “Shares”), 1,400,000 of which shall be
issued to the Fund and 600,000 of which shall be issued to Advisors (the
“Exchange”). The Holders acknowledge and agree that upon completion of the
Exchange, the Warrants shall be terminated and cancelled in full and rendered
null and void without any additional action on the part of the Company or the
Holders, and the Holders shall have no surviving right, title or interest in or
to the Warrants or any Common Stock purchasable thereunder.

 

Piggy-Back Registrations. If at any time the Company shall determine to prepare
and file with the commission a registration statement relating to an offering
for its own account or the account of others under the Securities Act of 1933,
as amended (the “Securities Act”), of any of its equity securities, other than
on Form S-4 or Form S-8 or their then equivalents relating to equity securities
to be issued solely in connection with any acquisition of any entity or business
or equity securities issuable in connection with stock option or other employee
benefit plans, the Company shall send to the Holders written notice of such
determination and, if within ten (10) days after receipt of such notice, such
Holder shall so request in writing, the Company shall include in such
registration statement all or any part of the Shares such Holder requests to be
registered, except that if, in connection with any underwritten public offering
for the account of the Company the managing underwriter(s) thereof shall impose
a limitation on the number of Shares which may be included in the registration
statement because, in such underwriter(s)’ reasonable judgment, such limitation
is necessary for marketing purposes or to effect an orderly public distribution,
then the Company shall be obligated to include in such registration statement
only such limited portion of the Shares, if any, with respect to which such
Holder has requested inclusion hereunder and the managing underwriter(s) has
approved. Any exclusion of Shares shall be made pro rata among the Holders
seeking to include Shares and any other holders including securities in the
registration statement, in proportion to the number of Shares sought to be
included by such persons. Notwithstanding anything in this Agreement to the
contrary, the registration rights contemplated by this section shall expire
automatically 180 days following the consummation of an M&A Event (as defined in
the Lockup Agreement between the Fund and the Company, dated as of the date
hereof).

 

 

 

Removal of Legend. Not later than three (3) trading days after request from the
Holders (the “Share Delivery Date”) on or after the date that the Shares have
been sold by the Holders pursuant to Rule 144 (“Rule 144”) promulgated under the
Securities Act, or a currently effective registration statement, the Company
shall issue to the Holders Shares that are free of restrictive legends and
trading restrictions (other than those which may then be required by law or
separate agreement between the Company and the Holders). Such Shares will be
delivered electronically through the Depository Trust Company or another
established clearing corporation performing similar functions.

 

If the Company fails for any reason to deliver to the Holders the Shares as
described above, the Company shall pay to the Holders, in cash, as liquidated
damages and not as a penalty, for each $1,000 of Share value (calculated based
upon closing price of the Common Stock on the date of notice from the Holders
and the number of Shares for which the legend is requested to be removed), $10
per trading day (increasing to $20 per trading day on the fifth (5th) trading
day after such liquidated damages begin to accrue) for each trading day
following such Share Delivery Date until such Shares are delivered. Nothing
herein shall limit the Holders’ right to pursue actual damages for the Company’s
failure to deliver Shares without restrictive legends and trading restrictions
(other than those which may then be required by law or separate agreement
between the Company and the Holders) within the period specified herein, and the
Holders shall have the right to pursue all remedies available to them hereunder,
at law or in equity including, without limitation, a decree of specific
performance and/or injunctive relief. The exercise of any such rights shall not
prohibit the Holders from seeking to enforce damages under applicable law.

 

Buy-in Obligation. In addition to such Holders’ other available remedies, if the
Company fails to issue and deliver (or cause to be delivered) to a Holder by the
Share Delivery Date a certificate representing the Shares so delivered to the
Company by such Holder that is free from all restrictive and other legends and
if after the Share Delivery Date such Holder is required by such Holder’s
brokerage firm to purchase (in an open market transaction or otherwise), or the
Holder’s brokerage firm otherwise purchases, shares of Common Stock to deliver
in satisfaction of a sale by such Holder of all or any portion of the number of
shares of Common Stock that such Holder anticipated receiving from the Company
without any restrictive legend, then the Company shall pay in cash to the Holder
an amount equal to the excess of such Holder’s total purchase price (including
brokerage commissions and other out-of-pocket expenses, if any) for the shares
of Common Stock so purchased (including brokerage commissions and other
out-of-pocket expenses, if any) (the “Buy-In Price”) over the product of (A)
such number of Shares that the Company was required to deliver to such Holder by
the Share Delivery Date multiplied by (B) the actual sale price at which the
sell order giving rise to such purchase obligation was executed (including any
brokerage commissions).

 

Consent. The Holders acknowledge that the Company is party to (i) the Warrants,
(ii) the 12% Senior Secured Convertible Note in the principal amount of
$3,000,000 issued to the Fund on February 13, 2015 (the “Note”), (iii) the
Securities Purchase Agreement, dated as of February 13, 2015, between the Fund
and the Company (the “SPA”) and (iv) the Advisory Services Agreement, dated
February 13, 2015, by and between the Company and Advisors (the “Advisory
Agreement” and collectively with the Warrants, the Note and the SPA, the
“Private Placement Documents”). Notwithstanding anything else in the Private
Placement Documents to the contrary, each of the Holders consents to the
Company’s entry into this agreement and the fulfillment of the Company’s
obligations hereunder and waives any claim of breach, violation or default or
right to adjustment under the Private Placement Documents as a result of the
Company’s entry into this agreement and the fulfillment of the Company’s
obligations hereunder.

 

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2. Representations and Warranties.

 

  (a) Representations and Warranties of the Holders. Each of the Holders hereby
represent and warrant to the Company, as follows:

 

  (i)

Organization and Qualification. Each of the Holders is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation.

 

  (ii) Authorization; No Restrictions, Consents or Approvals. Each of the
Holders has full power and authority to enter into and perform its obligations
under this Agreement. This Agreement has been duly executed by each of the
Holders and constitutes the legal, valid, binding and enforceable obligation of
each of the Holders, enforceable against each of the Holders in accordance with
its terms, except that such enforcement may be subject to (a) bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting or
relating to enforcement of creditors’ rights generally, and (b) general
principles of equity.         (iii) Title to Warrants. All of the Warrants are
owned free and clear of all liens, pledges, encumbrances, changes, restrictions
or known claims of any kind, nature or description. No Holder has, in whole or
in part, (i) assigned, transferred, hypothecated, pledged or otherwise disposed
of the Warrants or its rights in such Warrants or (ii) given any person or
entity any transfer order, power of attorney or other authority of any nature
whatsoever with respect to such Warrants which would limit the Holder’s power to
transfer its Warrants hereunder.

  

  (iv) Investment Representations.

 

  (A) Each of the Holders understands that the Shares have not been registered
under the Securities Act or any other applicable securities laws. Each of the
Holders also understands that the Shares are being offered and issued pursuant
to an exemption from the registration requirements of the Securities Act under
Section 3(a)(9) thereof. Each of the Holders acknowledges that the Company will
rely on such Holder’s representations, warranties and certifications set forth
below for purposes of determining such Holder’s suitability as an investor in
the Shares and for purposes of confirming the availability of the
Section 3(a)(9) exemption from the registration requirements of the Securities
Act.

  (B)

Each of the Holders has received all the information Holder considers necessary
or appropriate for deciding whether to acquire the Shares. Each of the Holders
understands the risks involved in an investment in the Shares. Each of the
Holders further represents that such Holder has had an opportunity to ask
questions and receive answers from the Company regarding the terms and
conditions of the offering of the Shares and the business, properties, prospects
and financial condition of the Company and to obtain such additional information
(to the extent the Company possessed such information or could acquire it
without unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to such Holder or to which such Holder had access.

 

  (C) Each of the Holders further represents that it is an “accredited investor”
within the meaning of Rule 501(a) of Regulation D promulgated under the
Securities Act.

 

  (D) Each of the Holders is acquiring the Shares for its own account for
investment purposes only and not with a view towards resale or “distribution”
(within the meaning of the Securities Act) of any part of the Shares.

 

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  (E) Each of the Holders understands that the Shares may not be offered, sold
or otherwise transferred except in compliance with the registration requirements
of the Securities Act and any other applicable securities laws or pursuant to an
exemption therefrom, and in each case in compliance with the conditions set
forth in this Agreement. Each of the Holders acknowledges and is aware that the
Shares may not be sold pursuant to Rule 144 unless certain conditions are met
and until such Holder has held the Shares for the applicable holding period
under Rule 144.

 

  (F) Each of the Holders acknowledges and agrees that each certificate
representing the Shares shall bear a legend substantially in the following form:

 

   

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS OF
ANY STATE. THE SECURITIES MAY NOT BE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH
ACT AND SUCH LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR,
THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY.”

 

  (G) No Holder has been solicited by anyone on behalf of the Company to enter
into this transaction.

 

  (v) No Reliance. No Holder has relied on, and no Holder is relying on, any
representations, warranties or other assurances regarding the Company or the
Shares other than the representations and warranties expressly set forth in this
Agreement.

  

  (b) Representations and Warranties of the Company. The Company hereby
represents and warrants to each of the Holders as follows:

 

  (i) Organization and Qualification. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation.

 

  (ii)

Authorization; No Restrictions, Consents or Approvals. The Company has full
power and authority to enter into and perform its obligations under this
Agreement. This Agreement has been duly executed by the Company and constitutes
the legal, valid, binding and enforceable obligation of the Company, enforceable
against the Company in accordance with its terms, except that such enforcement
may be subject to (a) bankruptcy, insolvency, reorganization, moratorium or
other similar laws affecting or relating to enforcement of creditors’ rights
generally, and (b) general principles of equity.

 

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    Except as would not be reasonably expected to materially adversely affect
the Company’s ability to perform its obligations to complete the transactions
contemplated herein or otherwise have a material adverse effect on the results
of operations, assets, business, prospects or condition (financial or otherwise)
of the Company, the execution and delivery of this Agreement and the
consummation by the Company of the transactions contemplated herein do not
(A) conflict with or violate any of the terms of the articles of incorporation
and bylaws of the Company or any applicable law relating to the Company,
(B) conflict with, or result in a breach of any of the terms of, or result in
the acceleration of any indebtedness or obligations under, any material
agreement, obligation or instrument by which the Company is bound or to which
any property of the Company is subject, or constitute a default thereunder,
other than those material agreements, obligations or instruments for which the
Company has obtained consent for the transactions contemplated under this
Agreement (including, without limitation, the consent given by the Holders with
respect to the Private Placement Documents in Section 1 herein), (C) result in
the creation or imposition of any lien on any of the assets of the Company,
(D) constitute an event permitting termination of any material agreement or
instrument to which the Company is a party or by which any property or asset of
the Company is bound or affected, pursuant to the terms of such agreement or
instrument, other than those material agreements or instruments for which the
Company has obtained consent for the transactions contemplated under this
Agreement (including, without limitation, the consent given by the Holders with
respect to the Private Placement Documents in Section 1 herein) or (E) conflict
with, or result in or constitute a default under or breach or violation of or
grounds for termination of, any license, permit or other governmental
authorization to which the Company is a party or by which the Company may be
bound, or result in the violation by the Company of any laws to which the
Company may be subject.            No authorization, consent or approval of,
notice to, or filing with, any public body or governmental authority or any
other person is necessary or required in connection with the execution and
delivery by the Company of this Agreement or the performance by the Company of
its obligations hereunder.

  

  (iii) Issuance of Shares. The issuance of the Shares has been duly authorized
and, upon issuance in accordance with the terms hereof, shall be validly issued
and free from all taxes, liens and charges with respect to the issue thereof,
and the Shares shall be fully paid and non-assessable with each of the Holders
being entitled to all rights accorded to a holder of Common Stock.

 

3. General Provisions.

 

  (a) Governing Law. This Agreement is to be construed in accordance with and
governed by the internal laws of the State of New York without giving effect to
any choice of law rule that would cause the application of the laws of any
jurisdiction other than the internal laws of the State of New York to the rights
and duties of the parties.

  

  (b) Severability. If any provision of this Agreement is held by a court or
other tribunal of competent jurisdiction to be invalid or unenforceable for any
reason, the remaining provisions shall continue in full force and effect without
being impaired or invalidated in any way, and the parties agree to replace any
invalid provision with a valid provision which most closely approximates the
intent and economic effect of the invalid provision.

 

  (c) Waiver. The waiver by either party of a breach of or default under any
provision of this Agreement shall not be effective unless in writing and shall
not be construed as a waiver of any subsequent breach of or default under the
same or any other provision of this Agreement. Further, any failure or delay on
the part of either party to exercise or avail itself of any right or remedy that
it has or may have hereunder shall not operate as a waiver of any such right or
remedy or preclude other or further exercise thereof or of any other right or
remedy.

 

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  (d)

Notices. Any notices required or permitted hereunder shall be given to the
appropriate party at the address specified below or at such other address as the
party may specify in writing. Such notice shall be deemed given: (i) if
delivered personally, upon delivery as evidenced by delivery records; (ii) if
sent by email or facsimile, upon confirmation of receipt; (iii) if sent by
certified or registered mail, postage prepaid, five (5) days after the date of
mailing; or (iv) if sent by nationally recognized express courier, two
(2) business days after date of placement with such courier.

 

If to the Holders:

 

c/o Sigma Capital Advisors, LLC

800 Third Avenue

17th Floor

New York, NY 10022

Facsimile: ________________

 

If to the Company:

 

SNAP Interactive, Inc.

320 W. 37th Street

New York, NY 10018

Attn: Alexander Harrington

Facsimile: _________________

        (e) No Third Party Beneficiaries. Nothing in this Agreement shall be
construed to confer any rights or benefits upon any person other than the
parties hereto, and no other person shall have any rights or remedies hereunder.

 

  (f) Public Announcements. The Holders and the Company will consult with each
other before issuing, and provide each other the opportunity to review and
comment upon, any press release or other public statements with respect to this
Agreement and the transaction contemplated hereby and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by applicable law.

 

 

(g)

Counterparts. This Agreement may be executed in one or more counterparts
(including electronic (PDF) or fax counterparts) each of which shall be deemed
an original and all of which shall be taken together and deemed to be one
instrument.

        (h) Fees and Expenses. The Company shall pay all reasonable fees and
expenses of the Holders incurred in connection with the negotiation,
preparation, execution, delivery and enforcement of this Agreement.         (i)
Further Assurances. The Holders and the Company hereby agree to execute and
deliver, or cause to be executed and delivered, such other documents,
instruments and agreements, and take such other actions, as either party may
reasonably request in connection with the transactions contemplated by this
Agreement.      

[SIGNATURE PAGES FOLLOW]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.

 

  HOLDER: Sigma Opportunity Fund II, LLC       /s/ Thom Waye   (Signature of
Signatory)       Thom Waye   (Print Name of Signatory)       Manager   (Title of
Signatory)       HOLDER: Sigma Capital Advisors, LLC       /s/ Thom Waye  
(Signature of Signatory)       Thom Waye   (Print Name of Signatory)      
Manager   (Title of Signatory)

 

  COMPANY:       SNAP INTERACTIVE, INC.       By: /s/ Alexander Harrington    
Name: Alex Harrington     Title: CEO

 

 

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