Exhibit 4.2


 


EXHIBIT A


 


NEITHER THESE SECURITIES NOR THE SECURITIES
FOR WHICH THESE SECURITIES ARE EXERCISABLE 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. 
NOTWITHSTANDING THE FOREGOING, THESE SECURITIES AND THE SECURITIES
ISSUABLE UPON EXERCISE OF THESE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A
BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES.


 


WORLDGATE COMMUNICATIONS, INC.


 


ADDITIONAL
INVESTMENT RIGHT


 


	
  Additional Investment Right No. [   ]

  	
   

  	
  Dated:  January
  [   ], 2004

  



 


WorldGate Communications, Inc., a Delaware
corporation (the “Company”),
hereby certifies that, for value received, [Name of Holder] or its registered
assigns (the “Holder”), is
entitled to purchase from the Company (a) up to a total of [          ](1) shares of common stock, $0.01
par value per share (the “Common Stock”),
of the Company (each such share, an “Additional
Investment Right Share” and all such shares, the “Additional Investment Right Shares”) at an
exercise price equal to $1.50 per share (as adjusted from time to time as provided
in Section 9, the “Exercise Price”),
and (b) only as part of and in connection with the purchase of the Additional
Investment Right Shares, warrants in the form attached as Exhibit B to
that certain Securities Purchase Agreement, dated as of the date hereof, by and
among the Company and the Purchasers identified therein (the “Purchase Agreement”), to purchase up to
[      ](2) shares of Common Stock
(including any warrants issued in replacement or partial exercise thereof, the
“Additional
Investment Right Warrants”), at any time and from time to time from
and after the date hereof and through and including the 30th Trading Day
following the Effective Date (the “Expiration
Date”), and subject to the following terms and conditions.  This Additional Investment Right (this “Additional Investment Right”) is one of a
series of similar additional investment rights issued pursuant the Purchase
Agreement.  All such additional
investment rights are referred to herein, collectively, as the “Additional Investment Rights.”  Common Stock issuable upon exercise of the
Additional Investment Right Warrants shall be known herein as the “Additional
Investment Right Warrant Shares.” 
Concurrently with the issuance of Additional Investment Right Shares to
the Holders upon the exercise of this


 












(1)  20% of Common Stock
purchased.


(2)  5% warrant coverage on
Additional Investment Right Shares purchased.


 

















 


Additional
Investment Right, the Holder shall be issued Additional Investment Right
Warrants exercisable for a number of Additional Investment Right Warrant Shares
equal to 30% of the number of Additional Investment Right Shares so issued to
the Holder upon such exercise.


 


1.             Definitions.  In addition to the terms defined elsewhere
in this Additional Investment Right, capitalized terms that are not otherwise
defined herein have the meanings given to such terms in the Purchase Agreement.


 


2.             Registration of
Additional Investment Right.  The
Company shall register this Additional Investment Right, upon records to be
maintained by the Company for that purpose (the “Additional Investment Right Register”), in the name of the
record Holder hereof from time to time. 
The Company may deem and treat the registered Holder of this Additional
Investment Right 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 assignment and transfer of any portion of this Additional
Investment Right in the Additional Investment Right Register, upon surrender of
this Additional Investment Right, with the Form of Assignment attached hereto
duly completed and signed, to the Transfer Agent or to the Company at its
address specified herein.  Upon any such
registration or transfer, a new additional investment right to purchase Common
Stock, in substantially the form of this Additional Investment Right (any such
new additional investment right, a “New
Additional Investment Right”), evidencing the portion of this
Additional Investment Right so transferred shall be issued to the transferee
and a New Additional Investment Right evidencing the remaining portion of this
Additional Investment Right not so transferred, if any, shall be issued to the
transferring Holder.  The acceptance of
the New Additional Investment Right by the transferee thereof shall be deemed
the acceptance by such transferee of all of the rights and obligations of a
holder of an Additional Investment Right.


 


4.             Exercise and
Duration of Additional Investment Right.


 


(a)           This Additional
Investment Right shall be exercisable by the registered Holder at any time and
from time to time on or after the date hereof to and including the Expiration
Date.  At 5:30 P.M., New York City time
on the Expiration Date, the portion of this Additional Investment Right not
exercised prior thereto shall be and become void and of no value.


 


(b)           The Holder may
exercise this Additional Investment Right by delivering to the Company (i) an
exercise notice, in the form attached hereto (the “Exercise Notice”), appropriately completed and duly signed,
and (ii) payment of the Exercise Price for the number of Additional
Investment Right Shares and Additional Investment Right Warrants as to which
this Additional Investment Right is being exercised (which may take the form of
a “cashless exercise” if so indicated in the Exercise Notice and if a “cashless
exercise” may occur at such time pursuant to Section 10 below), and the date
such items are delivered to the Company (as determined in accordance with the
notice provisions hereof) is an “Exercise Date.”  The Holder shall not be required to deliver
the original Additional Investment Right in order to effect an exercise
hereunder.  Execution and delivery of
the Exercise Notice shall have the same effect as


 


2

















 


cancellation of the original Additional
Investment Right and issuance of a New Additional Investment Right evidencing
the right to purchase the remaining number of Additional Investment Right
Shares and Additional Investment Right Warrants.


 


5.             Delivery of
Additional Investment Right Shares.


 


(a)           Upon exercise of
this Additional Investment Right, the Company shall promptly (but in no event
later than three Trading Days after the Exercise Date) issue or cause to be
issued and cause to be delivered to or upon the written order of the Holder and
in such name or names as the Holder may designate, a certificate for the
Additional Investment Right Shares and Additional Investment Right Warrants
issuable upon such exercise, free of restrictive legends unless a registration
statement covering the resale of the Additional Investment Right Shares or
Additional Investment Right Warrant Shares, respectively, and naming the Holder
as a selling stockholder thereunder is not then effective and the Additional
Investment Right Shares or the Additional Investment Right Warrant Shares,
respectively, are not freely transferable without volume restrictions pursuant
to Rule 144 under the Securities Act. 
The Holder, or any Person so designated by the Holder to receive
Additional Investment Right Shares and Additional Investment Right Warrants,
shall be deemed to have become holder of record of such Additional Investment
Right Shares and Additional Investment Right Warrants as of the Exercise
Date.  The Company shall, upon request
of the Holder, use its best efforts to deliver Additional Investment Right
Shares hereunder electronically through the Depository Trust Corporation or
another established clearing corporation performing similar functions.


 


(b)           This Additional
Investment Right is exercisable, either in its entirety or, from time to time,
for a portion of the number of Additional Investment Right Shares and
Additional Investment Right Warrants. 
Upon surrender of this Additional Investment Right following one or more
partial exercises, the Company shall issue or cause to be issued, at its
expense, a New Additional Investment Right evidencing the right to purchase the
remaining number of Additional Investment Right Shares and Additional
Investment Right Warrants.


 


(c)           In addition to any
other rights available to a Holder, if the Company fails to deliver to the
Holder a certificate representing Additional Investment Right Shares by the
third Trading Day after the date on which delivery of such certificate is
required by this Additional Investment Right and if after such third Trading
Day 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
Additional Investment Right Shares that the Holder anticipated receiving from
the Company (a “Buy-In”), then
the Company shall, within three Trading Days after the Holder’s request and in
the Holder’s discretion, either (i) pay cash to the Holder in an amount equal
to the Holder’s total purchase price (including brokerage commissions, if any)
for the shares of Common Stock so purchased (the “Buy-In
Price”), at which point the Company’s obligation to deliver such
certificate (and to issue such Common Stock) shall terminate, or (ii) promptly
honor its obligation to deliver to the Holder a certificate or certificates
representing such Common Stock and pay cash to the Holder in an amount equal to
the excess (if any) of the Buy-In Price over the product of (A) such number of
shares of Common Stock, times (B) the Closing Price on the date of the event
giving rise to the Company’s obligation to deliver such certificate.


 


3

















 


(d)           The Company’s
obligations to issue and deliver Additional Investment Right Shares and
Additional Investment Right Warrants 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 Additional Investment Right Shares and
Additional Investment Right Warrants. 
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 shares of Common
Stock upon exercise of the Additional Investment Right as required pursuant to
the terms hereof.


 


6.             Charges, Taxes
and Expenses.   Issuance and
delivery of certificates for shares of Common Stock and Additional Investment
Right Warrants upon exercise of this Additional Investment Right 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 Additional Investment Right Shares,
Additional Investment Right Warrants or Additional Investment Rights in a name
other than that of the Holder or an Affiliate thereof.  The Holder shall be responsible for all
other tax liability that may arise as a result of holding or transferring this
Additional Investment Right or receiving Additional Investment Right Shares and
Additional Investment Right Warrants upon exercise hereof.


 


7.             Replacement of
Additional Investment Right.  If
this Additional Investment Right 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 Additional
Investment Right, a New Additional Investment Right, but only upon receipt of
evidence reasonably satisfactory to the Company of such loss, theft or
destruction and customary and reasonable indemnity, if requested.  Applicants for a New Additional Investment
Right 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.


 


8.             Reservation of
Additional Investment Right 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
Additional Investment Right Shares upon exercise of this Additional Investment
Right and Additional Investment Right Warrant Shares upon exercise of the
Additional Investment Right Warrants as herein provided and as provided in the
Additional Investment Right Warrants, the number of Additional Investment Right
Shares which are then issuable and deliverable upon the exercise of this entire
Additional Investment Right and the number of Additional Investment Right
Warrant Shares which are then issuable and deliverable upon the exercise of any
Additional Investment Right Warrants, free from preemptive rights or any other
contingent


 


4

















 


purchase rights of persons other than the
Holder (taking into account the adjustments and restrictions of Section 9).
The Company covenants that all Additional Investment Right Shares and
Additional Invesment Right Warrant Shares so issuable and deliverable shall,
upon issuance and the payment of the applicable Exercise Price in accordance
with the terms hereof, or the Additional Investment Right Warrants, as the case
may be, be duly and validly authorized, issued and fully paid and
nonassessable.  The Company will take all such action as may
be necessary to assure that such shares of Common Stock may be issued as
provided herein and further to the Additional Investment Right Warrants without
violation of any applicable law or regulation, or of any requirements of any
securities exchange or automated quotation system upon which the Common Stock
may be listed.


 


9.             Certain
Adjustments.  The Exercise Price and
number of Additional Investment Right Shares issuable upon exercise of this
Additional Investment Right are subject to adjustment from time to time as set
forth in this Section 9.  The
exercise price and number of Additional Investment Right Warrant Shares
issuable upon exercise of the Additional Investment Right Warrants shall be
subject to adjustment pursuant to Section 9 of the Additional Investment Right
Warants.


 


(a)           Stock Dividends
and Splits.  If the Company, at any
time while this Additional Investment Right 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 clauses (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 Additional Investment Right is outstanding, distributes to
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 in each such case the Exercise Price in effect
immediately prior to the record date fixed for determination of stockholders
entitled to receive such distribution shall be adjusted (effective on such
record date) to equal the product of such Exercise Price times a fraction of
which the denominator shall be the average of the Closing Prices for the five
Trading Days immediately prior to (but not including) such record date and of
which the numerator shall be such average less the then fair market value of
the Distributed Property distributed in respect of  one outstanding share of Common Stock, as determined by the
Company’s independent certified public accountants that regularly examine the
financial statements of the Company (an “Appraiser”).  In such event, the Holder, after receipt of
the determination by the Appraiser, shall have the right to select an
additional appraiser (which shall be a nationally recognized accounting firm),
in which case such fair market value shall be deemed to equal the average of
the values determined by each of the Appraiser and such


 


5

















 


appraiser. 
As an alternative to the foregoing adjustment to the Exercise Price, at
the request of the Holder delivered before the 90th day after such record date,
the Company will deliver to such Holder, within five Trading Days after such
request (or, if later, on the effective date of such distribution), the
Distributed Property that such Holder would have been entitled to receive in
respect of the Additional Investment Right Shares for which this Additional
Investment Right could have been exercised immediately prior to such record
date.  If such Distributed Property is
not delivered to a Holder pursuant to the preceding sentence, then upon expiration
of or any exercise of the Additional Investment Right that occurs after such
record date, such Holder shall remain entitled to receive, in addition to the
Additional Investment Right Shares otherwise issuable upon such exercise (if
applicable), such Distributed Property.


 


(c)           Fundamental
Transactions.  If, at any time while
this Additional Investment Right 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 are permitted to 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 9(a) above) (in any
such case, a “Fundamental Transaction”),
then the Holder shall have the right thereafter to receive, upon exercise of
this Additional Investment Right, 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 Additional Investment
Right Shares then issuable upon exercise in full of this Additional Investment
Right (the “Alternate Consideration”).  The aggregate Exercise Price for this
Additional Investment Right will not be affected by any such Fundamental
Transaction, but the Company shall apportion such aggregate 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 Additional Investment Right
following such Fundamental Transaction. 
At the Holder’s request, any successor to the Company or surviving
entity in such Fundamental Transaction shall issue to the Holder a new
additional investment right consistent with the foregoing provisions and
evidencing the Holder’s right to purchase the Alternate Consideration for the
aggregate Exercise Price upon exercise thereof.  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 the Additional Investment Right (or any such replacement
security) will be similarly adjusted upon any subsequent transaction analogous
to a Fundamental Transaction. If any Fundamental Transaction constitutes or
results in a Change of Control, then at the request of the Holder delivered
before the 90th day after such Fundamental Transaction, the Company (or any
such successor or surviving entity) will purchase the Additional Investment
Right 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


 


6

















 


Fundamental Transaction), equal to the Black
Scholes value of the remaining unexercised portion of this Additional
Investment Right on the date of such request.


 


(d)           Number of
Additional Investment Right Shares. 
Simultaneously with any adjustment to the Exercise Price pursuant to
paragraphs (a) or (b) of this Section, the number of Additional Investment
Right Shares that may be purchased upon exercise of this Additional Investment
Right shall be increased or decreased proportionately, so that after such
adjustment the aggregate Exercise Price payable hereunder for the increased or
decreased number of Additional Investment Right Shares shall be the same as the
aggregate Exercise Price in effect immediately prior to such adjustment.


 


(e)           Calculations.  All calculations under this Section 9
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 9, the Company at its expense
will promptly compute such adjustment in accordance with the terms of this
Additional Investment Right and prepare a certificate setting forth such
adjustment, including a statement of the adjusted Exercise Price and adjusted
number or type of Additional Investment Right Shares or other securities
issuable upon exercise of this Additional Investment Right (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.


 


(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 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, 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 Holder is given
the practical opportunity to exercise this Additional Investment Right 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 shall
pay the Exercise Price in immediately available funds; provided, however, if
the Registration Statement did not become effective on or before Required
Effectiveness Date and is not continuously effective through the Expiration
Date, the Holder may satisfy its obligation to pay the Exercise Price through a


 


7

















 


“cashless exercise,” in which event the
Company shall issue to the Holder the number of Additional Investment Right
Shares determined as follows:


 


	
   

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

  
	
   

  	
  where:

  	
   

  
	
   

  	
  X = the number of Additional Investment Right Shares to be issued to
  the Holder.

  
	
   

  	
   

  
	
   

  	
  Y = the number of Additional Investment Right Shares with respect to
  which this Additional Investment Right 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
Additional Investment Right Shares issued in a cashless exercise transaction
shall be deemed to have been acquired by the Holder, and the holding period for
the Additional Investment Right Shares shall be deemed to have commenced, on
the date this Additional Investment Right was originally issued pursuant to the
Purchase Agreement.


 


11.           Limitation
on Exercise.


 


(a)           Notwithstanding
anything to the contrary contained herein, the number of shares of Common Stock
that may be acquired by the Holder upon any exercise of this Additional
Investment Right (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 4.999% (the “Maximum Percentage”) 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.  Each delivery
of an Exercise Notice hereunder will constitute a representation by the Holder
that it has evaluated the limitation set forth in this paragraph and determined
that issuance of the full number of Additional Investment Right Shares
requested in such Exercise Notice is permitted under this paragraph.  The Company’s obligation to issue shares of
Common Stock in excess of the limitation referred to in this Section shall be
suspended (and shall not terminate or expire notwithstanding any contrary
provisions hereof) until such time, if any, as such shares of Common Stock may
be issued in compliance with such limitation. 
By written notice to the Company, the Holder may waive the provisions of
this Section or increase or decrease the Maximum Percentage to any other
percentage specified in such notice, but (i) any such waiver or increase will
not be effective until the 61st day after such notice is delivered to the
Company, and (ii) any such waiver or increase


 


8

















 


or decrease will apply only to the Holder and
not to any other holder of Additional Investment Rights.


 


(b)           Notwithstanding
anything to the contrary contained herein, the maximum number of shares of
Common Stock that the Company may issue pursuant to the Transaction Documents
and the December 2003 Purchase Agreement, at an effective purchase price less
than the Closing Price on the Trading Day immediately preceding the Closing
Date shall equal 19.99% of the shares of Common Stock outstanding on December
1, 2003 (the “Issuable Maximum”),
unless the Company obtains the necessary stockholder approvals required by the
rules and regulations of the Trading Market. 
If, at the time any Holder requests an exercise of any of the Additional
Investment Rights, the Actual Minimum (excluding any shares issued or issuable
at an effective purchase price in excess of the Closing Price on the Trading
Day immediately preceding the Closing Date) exceeds the Issuable Maximum (and
if the Company has not previously obtained the required stockholder approval),
then the Company shall issue to the Holder requesting such exercise a number of
shares of Common Stock not exceeding such Holder’s pro-rata portion of the
Issuable Maximum (based on such Holder’s share (vis-à-vis other Holders) of the
aggregate purchase price paid under the Purchase Agreement and taking into
account any Additional Investment Right Shares previously issued to such
Holder).  For the purposes hereof, “Actual Minimum” shall mean, as of any date, the maximum
aggregate number of shares of Common Stock then issued or potentially issuable
in the future pursuant to the Transaction Documents, including any Underlying
Shares issuable upon exercise in full of all Additional Investment Rights,
ignoring any limits on the number of shares of Common Stock that may be owned
by a Holder at any one time.


 


12.           Fractional Shares.  The Company shall not be required to issue
or cause to be issued fractional Additional Investment Right Shares or
Additional Investment Right Warrants to purchase fractional Additional
Investment Right Warrant Shares on the exercise of this Additional Investment
Right.  If any fraction of a Additional
Investment Right Share or if any Additional Investment Right Warrant to
purchase a fraction of an Additional Investment Right Warrant Share would,
except for the provisions of this Section, be issuable upon exercise of this
Additional Investment Right, the number of Additional Investment Right Shares
and/or Additional Investment Right Warrant Shares issuable upon exercise of the
Additional Investment Right Warrants, as the case may be, 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 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 deposit with a nationally recognized
overnight courier service, or (iv) upon actual receipt by the party to whom
such notice is required to be given. 
The address and facsimile numbers for such notices or communications
shall be as set forth in the Purchase Agreement.


 


9

















 


14.           Additional
Investment Right Agent.  The Company
shall serve as additional investment right agent under this Additional
Investment Right.  Upon 30 days’ notice
to the Holder, the Company may appoint a new additional investment right
agent.  Any corporation into which the
Company or any new additional investment right agent may be merged or any
corporation resulting from any consolidation to which the Company or any new
additional investment right agent shall be a party or any corporation to which
the Company or any new additional investment right agent transfers
substantially all of its corporate trust or stockholders services business
shall be a successor additional investment right agent under this Additional
Investment Right without any further act. 
Any such successor additional investment right agent shall promptly
cause notice of its succession as additional investment right agent to be
mailed (by first class mail, postage prepaid) to the Holder at the Holder’s
last address as shown on the Additional Investment Right Register.


 


15.           Miscellaneous.


 


(a)           Subject to the
restrictions on transfer set forth on the first page hereof, this Additional
Investment Right may be assigned by the Holder.  This Additional Investment Right may not be assigned by the
Company except to a successor in the event of a Fundamental Transaction.  This Additional Investment Right 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 Additional Investment Right 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 Additional Investment
Right.  This Additional Investment Right
may be amended only in writing signed by the Company and the Holder and their
successors and assigns.


 


(b)           The Company will
not, by amendment of its governing documents or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Additional Investment Right, but
will at all times in good faith assist in the carrying out of all such terms
and in the taking of all such action as may be necessary or appropriate in
order to protect the rights of the Holder against impairment.  Without limiting the generality of the
foregoing, the Company (i) will not increase the par value of any Additional
Investment Right Shares or Additional Investment Right Warrant Shares above the
amount payable therefor on such exercise, (ii) will take all such action as may
be reasonably necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable Additional Investment Right
Shares or Additional Investment Right Warrant Shares on the exercise of this
Additional Investment Right and Additional Investment Right Warrants,
respectively, and (iii) will not close its stockholder books or records in any
manner which interferes with the timely exercise of this Additional Investment
Right.


 


(c)           GOVERNING LAW;
VENUE; WAIVER OF JURY TRIAL.  ALL
QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION
OF THIS ADDITIONAL INVESTMENT RIGHT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF
NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY


 


10

















 


OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY
OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO
ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY
SUBJECT TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR
PROCEEDING IS IMPROPER.  EACH PARTY
HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS
BEING SERVED IN ANY SUCH SUIT, ACTION OR 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
AGREEMENT 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.  THE COMPANY HEREBY WAIVES ALL
RIGHTS TO A TRIAL BY JURY.


 


(d)                                 The headings herein
are for convenience only, do not constitute a part of this Additional
Investment Right 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 Additional Investment Right shall be invalid or
unenforceable in any respect, the validity and enforceability of the remaining
terms and provisions of this Additional Investment Right 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 Additional Investment Right.


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]


 


11

















 


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


 


 


	
   

  	
  WORLDGATE COMMUNICATIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
						



 


12

















 


FORM OF EXERCISE NOTICE


 


(To be executed by the Holder to exercise the
right to purchase shares of Common Stock under the foregoing Additional
Investment Right)


 


To: 
Worldgate Communications, Inc.


 


The undersigned is the Holder of Additional
Investment Right No.
              
(the “Additional Investment Right”)
issued by Worldgate Communications, Inc., a Delaware corporation (the “Company”). 
Capitalized terms used herein and not otherwise defined have the
respective meanings set forth in the Additional Investment Right.


 


1.                                       The
Additional Investment Right is currently exercisable to purchase a total of
                            
Additional Investment Right Shares and Additional Investment Right Warrants exercisable
for
                  
shares of Additional Investment Right Shares.


 


2.                                       The
undersigned Holder hereby exercises its right to purchase
                                  
Additional Investment Right Shares and Additional Investment Right Warrants
exercisable for
                  
shares of Additional Investment Right Shares (which number of shares underlying
such Additional Investment Right Warrants shall be equal to 30% of the
Additional Investment Right Shares so issued upon exercise of the Additional
Investment Right) in accordance with the terms of the Additional Investment
Right.


 


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


 


	
   

  	
  o

  	
  ”Cash Exercise”

  
	
   

  	
   

  	
   

  
	
   

  	
  o

  	
  ”Cashless Exercise” (under Section 10)

  



 


4.                                       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 Additional Investment Right.


 


5.                                       Pursuant
to this exercise, the Company shall deliver to the holder
                              
Additional Investment Right Shares and Additional Investment Right Warrants
exercisable for                   
shares of Additional Investment Right Shares (which number of shares underlying
such Additional Investment Right Warrants shall be equal to 30% of the
Additional Investment Right Shares so issued upon exercise of the Additional
Investment Right) in accordance with the terms of the Additional Investment
Right.


 


6.                                       Following
this exercise, the Additional Investment Right shall be exercisable to purchase
a total of
                            
Additional Investment Right Shares and Additional Investment Right Warrants
exercisable for
                  
shares of Additional Investment Right Shares (which number of shares underlying
such Additional Investment Right Warrants shall be equal to 30% of the
Additional Investment Right Shares so issued upon exercise of the Additional
Investment Right).


 

















 


	
  Dated:

  	
   

  	
  ,

  	
   

  	
   

  	
  Name of Holder:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Print)

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature must conform in all respects to

  name of holder as specified on the face of the

  Additional Investment Right)

  
													



 

















 


FORM OF ASSIGNMENT


 


[To be completed and signed only upon
transfer of Additional Investment Right]


 


FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto
                                                                
the right represented by the within Additional Investment Right to purchase 
                        
shares of Common Stock and warrants to purchase shares of Common Stock (which
number of shares underlying such warrants shall be equal to 30% of the shares
so issued upon exercise of the Additional Investment Right) in accordance with
the terms of the Additional Investment Right.of Worldgate Communications, Inc.
to which the within Additional Investment Right relates and appoints
                                
attorney to transfer said right on the books of Worldgate Communications, Inc.
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 Additional Investment

  Right)

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Address of Transferee

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  In the presence of: