James
McLoughlin


[address]





As of May
15, 2009





Chief
Executive Officer


WorldGate
Communications, Inc.


WorldGate
Service, Inc.


3190
Tremont Avenue


Trevose,
PA 19355





Dear
Sir:





As was
discussed on May 15, 2009 (the “Resignation Date”), I am hereby tendering my
resignation as Vice President Sales and Marketing of WorldGate Communications,
Inc., and any other offices or positions I may hold in WorldGate Communications,
Inc. or any of its affiliates, including without limitation WorldGate Service,
Inc., and each of WorldGate Communications, Inc.’s subsidiaries (collectively
with WorldGate Communications, Inc., the “Company”).   We have
mutually agreed that my resignation is to be treated as a termination without
cause effective on the Resignation Date under that certain Employment Agreement
between me and the Company dated April 6, 2009 (the “Employment
Agreement”).




The
Employment Agreement calls for me to be provided with certain post-termination
benefits in the event that my employment is terminated by the Company without
cause.  In exchange for my resignation and undertakings in this
letter, and in exchange for the general release upon which any severance
benefits are conditioned by the Employment Agreement, which release is set forth
in this letter, the Company is offering me the following severance benefits (the
“Severance Benefits”):




(a)           beginning
with the next regular payday following the Resignation Date, and in accordance
with the Company’s regularly-scheduled paydays thereafter, the Company will
continue to pay me my monthly base salary amount of $15,865.25 (which equals
$190,383 annually), less applicable withholdings from May 15, 2009 through April
7, 2010 (the “Severance Period”), with the first payment to be retroactive to
the Resignation Date;




(b)           because
I have been employed by the Company for the first forty-five days of the 91-day
second quarter of 2009, the Company will pay me the accrued portion of the cash
bonus for the second quarter of 2009 as described in Section 2(a) of the
Employment Agreement, in the amount of $8,237.73, which shall be paid on August
14, 2009;




(c)           notwithstanding
anything to the contrary in the Company’s 2003 Equity Incentive Plan, as amended
to date (the “2003 Plan”), or in any award agreement issued to me thereunder, if
and to the extent any options I hold were vested as of the Resignation Date,
then any such options will continue to be exercisable (as to such vested portion
only) until 5:00pm Eastern time on April 7, 2010, and shall thereupon terminate
if not so exercised; and


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(d) the
Company will retain me as part of its insured group covered by the Company’s
health, dental and vision benefits providers, and will continue to pay the
employer portion of the insurance premiums for such benefits, and will continue
to deduct my portion from the severance payments.  COBRA notice and
coverage will begin upon the cessation of the Severance Period.




Notwithstanding
the foregoing, if at any time during the Severance Period I breach the terms of
the Non-Disclosure, Non-Circumvention and Non-Competition Agreement dated April
6, 2009 (the “Non-Disclosure Agreement”), or the terms of this letter, I shall
have no further right to receive the Severance Benefits.  I also agree
that I will return to the Company any Severance Benefits (or portions thereof)
made to me for any time period after I first breach the Non-Disclosure Agreement
or the terms of this letter.  During the Severance Period, I will
immediately notify the Company, in writing, of the date on which I will begin
non-competing employment with another company, my position and annual salary or
wages.  During the Severance Period, the Company may reasonably
request in writing from me, and I will not withhold, information reflecting my
employment status and salary, including my paystubs and earnings
statements.




I
acknowledge that I am receiving the Severance Benefits outlined above in
consideration, the sufficiency of which is hereby acknowledged, for my
undertakings set forth in this letter, including releasing and waiving my rights
to claims referred to below, and that I would not otherwise be entitled to
receive the Severance Benefits.




I agree
that the Severance Benefits shall be in full and complete satisfaction of any
and all sums which are now or might hereafter become owing to me for services
rendered by me during my employment or in connection with my resignation of
employment.  I acknowledge that I have received from the Company all
wages, expense reimbursements, accrued but unused vacation pay, and incentive
compensation of all types, including deferred or foregone salary or cash or
equity compensation, due and owing to me by the Company.  I hereby
waive all claims or entitlement to any deferred salary, and to any unvested
stock option or other unvested equity grants, and I also waive any entitlement
to the unvested stock options that might have been granted to me in accordance
with Section 2.2(b) of the Employment Agreement.  I acknowledge this
letter does not constitute an admission of wrongdoing of any kind by me or by
the Company and agree that I have not suffered any wrongdoing by the
Company.  I acknowledge and agree that I have not suffered any
discrimination or harassment based on any category protected by law including,
but not limited to, age, religion, race, gender, sexual orientation, national
original, and disability.  I acknowledge and represent that the
Company has not violated or denied me any right under the Family Medical Leave
Act (FMLA), or any other federal, state or local law, statute or
ordinance.  I acknowledge and agree that the Company has not
interfered with, restrained, or denied the exercise of or the attempt to
exercise any rights under the FMLA, and that the Company has not discriminated
against or retaliated against me in any way regarding the exercise of any rights
under the FMLA.  I agree that my resignation from the Company is
final, and that the Company has no obligation to consider me for rehire or
reinstatement.  I represent that all of the factual representations
made herein, which induced the Company to enter into this letter, are true in
all material respects.


2


I
acknowledge and agree that all of my options that were not vested as of the
Resignation Date and all other equity or similar awards granted to me under the
2003 Plan or otherwise, including all performance shares, terminate in full upon
the Resignation Date prior to the existence of any right of exercise, payment or
other benefit thereunder.  I also acknowledge and understand that as a
result of the extension of my exercise period for vested stock options described
in paragraph (c) above, any such stock options affected thereby that were
granted as incentive stock options will be treated for tax purposes as
non-qualified stock options, and I will be solely responsible for any tax
consequences to me resulting from such change in treatment.




I agree
that I will not, at any time following the Resignation Date, disparage the
Company or any of the people or organizations associated with it currently, in
the past, or in the future; and that I will not otherwise do or say anything
that would harm their respective business or reputation. I shall not hold myself
out to any customers or any other third parties as a representative or employee
of the Company.  I will not enter onto the Company’s premises unless
expressly invited to do so by the Chief Executive Officer of the Company. I
agree that all Company paid fringe benefits, including life insurance, long-term
disability insurance, short-term disability insurance, and any other Company
bonus program or practice, stock option program or practice, or 401(k) program,
cease on the Resignation Date (other than the period in which I may exercise any
vested options I may have that has been extended by paragraph (c) of this
letter.)




In
signing this letter I represent that I have returned to the Company any and all
Confidential Information as that term is defined in the Non-Disclosure Agreement
and other documents, materials and information related to the business, whether
present or otherwise, of the Company and its affiliates, and all copies, and all
keys, credit cards, computers, phone, and other tangible property of the Company
and its affiliates, in my possession or control, including without limitation
all items set forth and initialed by me on the Company Property Return Checklist
attached as Exhibit
A to this letter.  I acknowledge that as an insider of the
Company, I possess material non-public information about the Company and
therefore acknowledge and agree that during the Severance Period I will be
subject to and will comply with the Company’s insider trading policy to the
extent that I am in possession of material non-public information regarding the
Company or its securities.  I also acknowledge and agree that the
Company shall have no responsibility for any filings required to be made by me
under applicable securities laws (including Form 144 or Form 4
filings).




As a
material inducement to the Company to enter into this letter, and for good and
valuable consideration to be paid pursuant to this letter, I, with full
understanding of the content and legal effect of this letter and having the
right and opportunity to consult with my attorney, and on behalf of myself, my
heirs, personal representatives, beneficiaries, agents and assigns, irrevocably,
unconditionally and forever release and discharge the Company and its affiliates
and subsidiaries from any and all claims, actions, causes of action, grievances,
suits, charges or complaints of any kind or nature against the Company, its
affiliates, successors, assigns, officers, directors, shareholders, employees,
agents, attorneys and representatives, that I ever had or now have up to and
including the end of the Revocation Period, whether fixed or contingent,
liquidated or unliquidated, known or unknown, suspected or unsuspected, and
whether arising in tort, contract, statute or equity, before any federal, state,
administrative, local or private court, agency, arbitrator, mediator or other
entity, regardless of the relief or remedy.


3


Without
limiting the generality of the foregoing, it being my intention and the
Company’s intention to make this release as broad and as general as the law
permits, this release specifically includes any and all claims arising from my
employment or positions with the Company or its affiliates and any alleged
violation by the Company or its affiliates of the Age Discrimination in Employment Act
of 1967, as amended; the Older Workers’ Benefits
Protection Act,as amended; the Americans with Disabilities
Act; Title VII of the Civil Rights Act of 1964, as amended;the Civil Rights Act of
1866, as amended by the
Civil Rights Act of 1991; thePennsylvania Human Relations Act,or any other federal, state or local statute, regulation or
ordinance, breach of an
expressed or implied contract of employment or other expressed or implied
contract claim; promissory estoppel; wrongful discharge in violation of the
public policy of Pennsylvania or any other state; any common law claim for
wrongful discharge; breach of an implied covenant of good faith and fair
dealing; tortious interference with contractual relations and/or advantageous
business relationship; public policy wrongful discharge claim; assault, battery,
conspiracy, defamation, invasion of privacy or intentional or negligent
infliction of emotional distress arising out of or involving my employment with
the Company, my resignation or any continuing effects of my employment with
and/or separation from the Company.  (This letter shall not include
any claims that may arise after the date I execute this letter, any claims for
vested benefits under the Company’s 401(k) or any employee retirement plan, any
claims under this letter or any claims arising out of any vested stock options
that I may have that remain unexpired.)




Nothing
in this letter shall be construed to affect the Equal Employment Opportunity
Commission’s or any similar state or local commission’s or agency’s (the
“Commission”) independent right and responsibility to enforce the
law.  I understand, however, that, while this letter, including its
general release of claims, does not affect my right to file a charge or
participate in an investigation or proceeding conducted by the Commission, it
does bar any claim I might have to receive monetary damages in connection with
any Commission proceeding concerning matters covered by this letter, including
its general release of claims.




If any
provision of this letter shall be found by a court to be invalid or
unenforceable, in whole or in part, then such provision shall be construed
and/or modified or restricted to the extent and in the manner necessary to
render the same valid and enforceable, or shall be deemed excised from this
letter, as the case may require, and this letter shall be construed and enforced
to the maximum extent permitted by law, as if such provision had not been
originally incorporated herein, as the case may be.  Upon a finding by
a court, administrative agency or other tribunal of competent jurisdiction that
any release, waiver or covenant contained in this letter is void, illegal or
unenforceable, the Company and I agree to promptly execute a release, waiver or
covenant that is modified to the minimum extent necessary to be deemed legal and
enforceable by the authority making the finding.




A waiver
by the Company or me of a breach of any provision of this letter shall not
operate or be construed as a waiver or estoppel of any subsequent breach by
either me or the Company.  No waiver on behalf of the Company shall be
valid unless in writing and signed by an authorized officer of the
Company.  No waiver on behalf of me shall be valid unless in writing
and signed by me.


4


Except
for the Non-Disclosure Agreement, which remains in full force and effect, this
letter sets forth the entire agreement between me and the Company and
supersedes, voids, extinguishes and replaces all prior and contemporaneous
agreements, communications and understandings, whether written or oral, between
the Company and me.  This letter shall be binding upon and inure to
the benefit of me, my heirs, executors, administrators and beneficiaries, and
shall be binding upon and inure to the benefit of the Company and its
affiliates, successors and assigns.  This letter may not be altered or
modified except in writing signed by both me and the Company.  The
Company and I agree that Pennsylvania law shall govern the enforceability and
construction of this letter, without regard to its principles of conflicts of
laws.





The
Company and I agree to submit any dispute (i) concerning the interpretation or
enforcement of the rights and duties under this letter, or (ii) relating to this
letter to final and binding arbitration pursuant to the National Rules for the
Resolution of Employment Disputes of the American Arbitration Association then
existing.  At the request of any party, the arbitrator, attorneys,
parties to the arbitration, witnesses, experts, court reporters, or other
persons present at the arbitration shall agree in writing to maintain the strict
confidentiality of the arbitration proceedings.  The arbitration shall
be conducted in Pennsylvania by a single, neutral arbitrator.  The
award of the arbitrator may be enforced in any court having jurisdiction over
the award, the relevant party or such party’s assets.





I agree
that I am physically and mentally able to perform all duties of the positions I
have resigned from and that I am not suffering from any injury or illness, which
I attribute to the Company.  I represent and certify that I have
carefully read and fully understand all of the provisions and effects of this
letter, have knowingly and voluntarily entered into this letter freely and
without coercion, and acknowledge and agree that I have been advised in writing
to consult with an attorney prior to executing this letter, and that I have had
opportunity to do so.  I represent that neither the Company nor the
Company’s agents, representatives or attorneys, have made any representations
concerning the terms or effect of this letter other than those contained in this
letter itself.  I acknowledge that I have been advised that I have at
least twenty-one (21) days within which to consider this letter.  I
acknowledge and agree that my execution of this letter before the full
twenty-one (21) day period has elapsed is a decision made by me voluntarily, and
I freely and knowingly have chosen not to wait at least twenty-one (21) days to
sign this letter. I further acknowledge that I have seven (7) days from the date
this letter is executed in which to revoke my acceptance of this letter (the
“Revocation Period”); provided that all Severance Benefits shall cease
immediately upon any such revocation.  To be effective, the revocation
must be in writing and delivered to WorldGate Service, Inc., 3190 Tremont
Avenue, Trevose, PA 19355, Attn: General Counsel.  This letter will
not be effective or enforceable until the day after such seven (7) day period
has expired as required by law.  I understand, agree and deem that the
consideration exchanged for the various releases, covenants and agreements
contained herein is sufficient and apportionable and waive any and all rights to
assert any claim of lack of sufficiency and/or apportionability of
consideration.


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Sincerely,/s/
      James McLoughlinJames
      McLoughlinAccepted
      and agreed:WorldGate
      Service, Inc.By:
                /s/ Joel BoyarskiName:
      Joel BoyarskiTitle:
      Senior Vice President and Chief Financial OfficerWorldGate
      Communications, Inc.By:
                /s/ Joel BoyarskiName:
      Joel BoyarskiTitle:
      Senior Vice President and Chief Financial Officer




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