Exhibit 10.16

 

SUBSCRIPTION AGREEMENT

 

THIS SUBSCRIPTION AGREEMENT (this “Agreement”) is dated as of September 24,
2007, by and between Antonio Tomasello., a individual (“Investor”) and WorldGate
Communications, Inc., a Delaware corporation (the “Company” and together with
the Investor, the “Parties” or a “Party” as the case may be).

 

RECITALS

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and
pursuant to Section 4(2) of the Securities Act of 1933, as amended (the
“Securities Act”), the Company desires to issue and sell to the Investor, and
the Investor desires to purchase from the Company, securities of the Company as
more fully described in this Agreement.

 

WHEREAS, the Company and the Investor are executing and delivering this
Agreement in reliance upon an exemption from securities registration pursuant to
Section 4(2) and/or Rule 506 of Regulation D (“Regulation D”) as promulgated by
the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act
of 1933, as amended (the “Securities Act”);

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions
contained herein, the Company shall issue and sell to the Investor, as provided
herein, and the Investor shall purchase One Million Dollars ($1,000,000) (the
“Investment Amount”) of the Company’s common stock, par value $0.01 (the “Common
Stock”), at a price per share of Common Stock equal to $0.39. (the “Purchase
Price”);

 

WHEREAS, contemporaneously with the execution and delivery of this Agreement,
the parties hereto are executing and delivering an Investor Registration Rights
Agreement (in the form attached hereto as Exhibit A, the “Investor Registration
Rights Agreement”,) one or more Warrant Agreements (each in the form attached
hereto as Exhibit B, the “Warrant Agreements”) and together with this Agreement
and any other contemporaneous written agreement executed by the Parties, the
“Transaction Documents”) pursuant to which the Company has agreed to provide
certain registration rights under the Securities Act and the rules and
regulations promulgated there under, and applicable state securities laws;

 

NOW THEREFORE, in consideration of the mutual agreements hereinafter set forth,
and such other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto do hereby covenant, promise,
agree, represent and warrant as follows:

 

ARTICLE 1

PURCHASE AND SALE OF SHARES

 

1.1   Incorporation of Recitals.  The recitals to this Agreement set forth above
are hereby incorporated by reference into this Agreement

 

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1.2  Purchase of Shares.  Subject to the satisfaction (or waiver) of the terms
and conditions of this Agreement, Investor agrees to purchase at each Closing
and the Company agrees to sell and issue to Investor at Closing, Common Stock in
amounts corresponding to the Investment Amount, divided by the Purchase Price,
or 2,564,102 shares (the “Shares”).

 

1.3  Closing Date.  The closing (the “Closing”) of the purchase and sale of the
Common Stock shall take place at 4:00 p.m. Eastern Daylight Time on
September 18, 2007, subject to notification of satisfaction of the conditions to
the closing set forth herein (or such later date as is mutually agreed to by the
Company and the Investor) (the “Closing Date”).  The Closing shall occur on the
respective Closing Dates at the offices of Drinker Biddle & Reath LLP, 1000
Westlakes Drive, Berwyn, PA (or such other place as is mutually agreed to by the
Company and the Investor(s)).

 

1.4  Closing Deliveries.  (a) At the Closing, the Company shall deliver or cause
to be delivered to each Investor the following (the “Company Deliverables”):

 

irrevocable instructions addressed to the Company’s transfer agent instructing
it to issue a certificate or to make an appropriate book entry evidencing the
Shares, registered in the name of such Investor; and

 

the Warrant Agreement with respect to Investor’s Investment Amount, duly
executed by the Company;

 

the Registration Rights Agreement duly executed by the Company.

 

(b)  At the Closing, each Investor shall deliver or cause to be delivered to the
Company the following (the “Investor Deliverables”):

 

the Investment Amount in United States dollars and in immediately available
funds, by wire transfer to an account designated in writing by the Company for
such purpose; and

 

the Registration Rights Agreement, duly executed by such Investor.

 

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

 

2.1  Status of Investor.

 

(a)   Investor has such knowledge and experience in financial and business
matters that he is capable of evaluating the merits and risks of an investment
in the Shares.

 

(b)   Investor is an “accredited investor” as defined in Rule 501(a) under the
Securities Act.  Such Investor is not a registered broker-dealer under
Section 15 of the Exchange Act.  .

 

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(c)  Investor is acquiring the Shares as principal for its own account for
investment purposes only and not with a view to or for distributing or reselling
such Shares or any part thereof, without prejudice, however, to such Investor’s
right at all times to sell or otherwise dispose of all or any part of such
Shares in compliance with applicable federal and state securities laws.  Subject
to the immediately preceding sentence, nothing contained herein shall be deemed
a representation or warranty by such Investor to hold the Shares for any period
of time.  Such Investor is acquiring the Shares hereunder in the ordinary course
of its business.  Such Investor does not have any agreement or understanding,
directly or indirectly, with any person to distribute any of the Shares.

 

(d)  Investor has not directly or indirectly, nor has any person acting on
behalf of or pursuant to any understanding with such Investor, engaged in any
transactions in the securities of the Company (including, without limitation,
any short sales as defined in Rule 200 promulgated under Regulation SHO under
the Exchange Act and all types of direct and indirect stock pledges, forward
sale contracts, options, puts, calls, short sales, swaps and similar
arrangements (including on a total return basis), and sales and other
transactions through non-US broker dealers or foreign regulated brokers (“Short
Sales”) involving the Company’s securities) since the earlier to occur of
(1) the time that such Investor was first contacted by the Company or any other
person regarding an investment in the Company and (2) the 30th day prior to the
date of this Agreement.  Such Investor covenants that neither it nor any person
acting on its behalf or pursuant to any understanding with it will engage in any
transactions in the securities of the Company (including Short Sales) prior to
the time that the transactions contemplated by this Agreement are publicly
disclosed.

 

2.2  Access to Information.  Investor has been furnished with such materials and
has been given access to such information relating to the Company as he or his
representative has requested and has been afforded the opportunity to ask
questions regarding the Company and the Shares, all as Investor has found
necessary to make an informed decision regarding the Investor’s entering into
this Agreement.

 

2.3  Understanding of Risks Associated with the Acquisition of the Shares. 
Investor understands that an investment in the Shares is speculative and subject
to numerous risks, including but not limited to the risks set forth in the
Company’s filings with the U.S. Securities and Exchange Commission under the
heading “Risk Factors.”

 

2.4  Understanding of Nature of Securities.  Investor understands that:

 

(a)  the Shares have not been registered by the Company under the Act or any
State Act, and the Company does not intend to register the Shares for sale under
the Act or any State Act in reliance on the exemption from registration
available under the Act and the Missouri Securities Act.

 

(b)  the Shares are “restricted securities” as that term is defined in Rule 144
under the Act.

 

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(c) the certificates, if any, evidencing the Shares shall include provisions
substantially in the form of the legend set forth below, which Investor has
read, understands and agrees to be bound by:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR UNDER APPLICABLE STATE
SECURITIES ACTS (THE “STATE ACTS”) NOR IS SUCH REGISTRATION CONTEMPLATED.  SUCH
SECURITIES MAY NOT BE SOLD, ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED UNLESS REGISTERED UNDER THE ACT OR THE STATE ACTS, EXCEPT UPON
DELIVERY TO THE COMPANY OF AN OPINION OF COUNSEL SATISFACTORY TO THE BOARD OF
DIRECTORS OF THE COMPANY THAT REGISTRATION IS NOT REQUIRED FOR SUCH TRANSFER OR
THE SUBMISSION TO THE BOARD OF DIRECTORS OF THE COMPANY OF EVIDENCE SATISFACTORY
TO THE BOARD TO THE EFFECT THAT ANY SUCH TRANSFER WILL NOT BE IN VIOLATION OF
THE ACT OR STATE ACTS OR ANY RULE OR REGULATION PROMULGATED THEREUNDER.

 

(d) the Company may, from time to time, make stop transfer notations in the
Company’s records to ensure compliance with the Act and any applicable State
Acts.

 

(e) Investor agrees, prior to any transfer of the Shares, to give written notice
to the Company expressing his desire to effect such transfer and describing
briefly the proposed transfer.  Upon receiving such notice, the Company shall
present copies thereof to counsel for the Company and the following provisions
shall apply:

 

(i)            If, in the opinion of such counsel, the proposed transfer of such
Shares may be effected without registration of such Shares under the Act and the
State Acts, the Company shall promptly thereafter notify the person desiring to
transfer such Shares, whereupon such person shall be entitled to transfer such
Shares, all in accordance with the terms of the notice delivered by such person
to the Company and upon such further terms and conditions as shall be required
by the Company to ensure compliance with the Act and the State Acts.

 

(ii)           If, in the opinion of such counsel, the proposed transfer of such
Shares may not be effected without registration of such Shares under the Act and
the State Acts, a copy of such opinion shall be promptly delivered to the person
who has proposed such transfer, and such proposed transfer shall not be made
unless such registration is then in effect.

 

2.5   Investment Intent.  Investor represents and warrants that:

 

(a)     Investor is acquiring the Shares for the Investor’s own account and not
on behalf of any other person.

 

(b)    Investor is the sole party in interest in his investment in the Shares
and is acquiring the Shares for investment and not for distribution or with the
intent to divide Investor’s participation with others or of selling, assigning,
transferring or otherwise disposing of the Shares.

 

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2.6  Further Assurances.  Investor will execute and deliver to the Company any
document, or do any other act or thing, which the Company may reasonably request
in connection with the acquisition of the Shares.

 

2.7  Non-disclosure.  Investor has not distributed any written materials
furnished to Investor by the Company to anyone other than the Investor’s
professional advisors.

 

2.8  Ability to Bear Economic Risk.  Investor has adequate means of providing
for its current needs and possible future contingencies, and has no need, and
anticipates no need in the foreseeable future, to sell the Shares which it is
acquiring pursuant to this Agreement. Investor is able to bear the economic
risks related to the acquisition of the Shares and, consequently, without
limiting the generality of the foregoing, is able to hold the Shares for an
indefinite period of time and has sufficient net worth to sustain a loss of its
interest in the Company in the event such loss should occur.  Investor has no
need for liquidity with respect to his Shares.

 

2.9  Tax Matters.  Investor has reviewed with Investor’s own tax advisors the
federal, state, local and foreign tax consequences in connection with the
acquisition of the Shares (including any tax consequences that may result under
recently enacted tax legislation).  Investor is relying solely on such advisors
and not on any statements or representations of the Company or any of its agents
and understands that Investor (and not the Company) shall be responsible for
Investor’s own tax liability that may arise as a result of this transaction.

 

2.10  Accuracy of Representations.  All of the representations and information
provided herein and any additional information that Investor has furnished to
the Company or its agents with respect to Investor’s financial position and
business experience is accurate and complete as of the date of this Subscription
Agreement.  If there should be any material adverse change in any such
representation or information, Investor will immediately furnish accurate and
complete information concerning any such material change to the Company.

 

2.11  Piggyback Registration Rights.  If at any time during the twelve month
period following the Closing Date the Company proposes to register any Common
Stock under the Securities Act (other than an underwritten public offering or a
registration on Form S-8 or S-4, or any successor forms, relating to Common
Stock issuable upon exercise of employee stock options or in connection with any
employee benefit or similar plan of the Company or in connection with a direct
or indirect acquisition by the Company of another entity), whether or not for
sale for its own account, the Company shall each such time give prompt notice at
least ten (10) days prior to the anticipated filing date of the registration
statement relating to such registration to Investor, which notice shall offer
Investor the opportunity to include in such registration statement the number of
Shares such Investor may request. Upon the request of Investor made within five
(5) days after the receipt of notice from the Company (which request shall
specify the number of Shares intended to be registered by Investor), the Company
shall use all reasonable efforts to effect the registration under the Act of all
Shares that the Company has been so requested to register by Investor, to the
extent requisite to permit the disposition of the Shares so to be registered,
provided that if, at any time after giving notice of its intention to register
any Common Stock pursuant to this Paragraph 2.11 and prior to the effective date
of the registration statement filed in connection with such registration, the
Company shall determine for any reason not to register such securities, the
Company shall give notice to Investor and,

 

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thereupon, shall be relieved of its obligation to register any Shares in
connection with such registration. The obligations under this Section 2.11 shall
expire when the Shares are saleable by Investor pursuant to Rule 144 without
limitation as to volume.

 

ARTICLE 3

INDEMNIFICATION

 

Investor recognizes that the Company’s entering into of this Agreement will be
based to a material extent upon Investor’s representations and warranties set
forth herein and Investor agrees to indemnify and hold harmless the Company and
its officers, directors and employees from and against any and all loss,
damages, liabilities or expenses including reasonable attorneys’ fees which any
such person may incur by reason of or in connection with any misrepresentation
made by Investor in this Agreement or otherwise, any breach by Investor of its
agreements with the Company or any sale or distribution of any Shares by
Investor in violation of the Act or State Acts.  All representations and
warranties of Investor contained in this Agreement shall survive this Agreement.

 

ARTICLE 4

 MISCELLANEOUS PROVISIONS

 

4.1  Captions and Headings.  The Article and Section headings throughout this
Agreement are for convenience of reference only and shall in no way be deemed to
define, limit, or add to any provision of this Agreement.

 

4.2  Entire Agreement; Amendment.  This Agreement states the entire agreement
and understanding of the parties and shall supersede all prior agreements and
understandings.  No amendment of the Agreement shall be made without the express
written consent of the parties.

 

4.3  Severability.  The invalidity or unenforceability of any particular
provision of this Agreement shall not affect any other provision hereof, which
shall be construed in all respects as if such invalid or unenforceable provision
were omitted.

 

4.4  Governing Law.  This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania, without reference
to principles of conflicts of laws.

 

4.5  Notices.  All notices, requests, demands, consents, and other
communications hereunder shall be transmitted in writing and shall be deemed to
have been duly given when hand delivered or sent by certified mail, postage
prepaid, with return receipt requested, addressed to the parties as follows: to
the Company at 3190 Tremont Avenue, Trevose, PA, Attention: General Counsel; and
to the Investor:
at                                                              .  Any party may
change its address for purposes of this Section by giving notice as provided
herein.

 

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
parties hereto as of the date first above written.

 

 

 

COMPANY:

 

 

 

 

 

WORLDGATE COMMUNICATIONS, INC.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTOR:

 

 

 

 

 

ANTONIO TOMASELLO

 

 

 

 

 

 

 

 

 

 

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