Unassociated Document


    THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED.  THESE SECURITIES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT.  ANY SUCH DISPOSITION MAY
ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.

    


    VOID
AFTER 5:00 P.M., NEW YORK, NEW YORK TIME, ON THE EXPIRATION DATE (AS DEFINED
BELOW).

    


     

    
      	Date of
      Issuance:  March 30, 2010	
              Number of
      Shares:  3,000,000

            


    

     

    WARRANT TO
PURCHASE

    SHARES OF COMMON STOCK
OF

    WORLDGATE COMMUNICATIONS,
INC.


    


    This certifies that, for value
received, ACN Digital Phone Service, LLC, a Delaware limited liability company,
and its permitted assigns or successors in interest (the “Holder”), is entitled
to purchase from WorldGate Communications, Inc., a Delaware corporation (the
“Company”),
subject to the terms and conditions hereof, up to 3,000,000 fully paid and
non-assessable shares of the Company’s common stock, par value $0.01 (the “Common
Stock”).

    


    This Warrant is being granted in
connection with the amendment of that certain Master Purchase Agreement, dated
as of April 6, 2009, between the Holder and the Company, as the same may be
amended from time to time (the “Commercial Agreement”).  The shares
underlying this Warrant are in addition to (and not in replacement of) the
shares underlying the warrant issued by the Company to the Holder on April 6,
2009.  Capitalized terms used but not defined herein have the meanings
given to such terms in the Commercial Agreement.

    


    1.           Definitions.  As
used in this Warrant, the following terms shall have the meanings set forth
below:

     

    (a)           “Exercise Period”
means, with respect to each Warrant Share, the period beginning
on  the date which such Warrant Share becomes fully vested and
immediately exercisable in accordance with the vesting schedule set forth in
Section 2 hereof, and ending on the Expiration Date.

     

    (b)           “Exercise Price” means
$0.0425 per share (as the same may be adjusted from time to time pursuant to the
terms of this Warrant).

     

    (c)           “Expiration Date”
means 5:00 P.M., New York, New York time on the date that is ten (10) years
after the date hereof.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    (d)           “Fair Market Value”
means, on any particular date (a) if the Common Stock is then traded on a
securities exchange, the average of the closing prices of such Common Stock on
such exchange over the five trading day period ending on such date, (b) if the
Common Stock is then regularly traded over-the-counter, the average of the
closing sale prices or secondarily the closing bid of such Common Stock over the
five trading day period ending on such date, or (c) if there is no active public
trading market for the Common Stock, the fair market value of one share of the
Warrant Shares as determined in good faith by the Board of Directors of the
Company.

     

    (e)           “Payment Date” means
the date the Company receives from the Holder, in accordance with Section 4.2 of
the Commercial Agreement, payment in full in respect of a Purchase Order(s) for
Product under the Commercial Agreement.

     

    (f)           “Person” (whether or
not capitalized) means an individual, entity, partnership, limited liability
company, corporation, association, trust, joint venture, unincorporated
organization or any other form of entity not specifically listed herein, and any
government, governmental department or agency or political subdivision
thereof.

     

    (g)           “Securities Act” means
the Securities Act of 1933, as amended, and all of the rules and regulations
promulgated thereunder.

     

    (h)           “Warrant” means this
Warrant and all stock purchase warrants issued in exchange therefor pursuant to
the terms thereof.

     

    (i)           “Warrant Shares”
means the shares of Common Stock issuable upon exercise of this Warrant, subject
to (i) in each instance, the vesting schedule set forth in Section 2 hereof, and
(ii) adjustment pursuant to the terms herein.

     

    2.           Vesting.  Subject
to the terms of this Warrant, the Warrant Shares (or the applicable portion
thereof) shall become fully vested and immediately exercisable in such number
and amounts as are set forth in the following table upon the Payment Date for
purchases made under the Commercial Agreement:

     

    
      
        	
                Number of Units of Product

              	
                Warrant Shares

              
	
                First
      50,000

              	
                500,000

              
	
                Second
      50,000

              	
                500,000

              
	
                Third
      50,000

              	
                500,000

              
	
                Fourth
      50,000

              	
                500,000

              
	
                Fifth
      50,000

              	
                500,000

              
	
                Sixth
      50,000

              	
                500,000

              


      

    

    


    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

    


    3.           Exercise of Warrant.

     

    (a)           Exercise Procedure.

     

    (i)           The
purchase rights represented by this Warrant may be exercised by the Holder, with
respect to the fully vested and immediately exercisable Warrant Shares in whole
or in part at any time during the applicable Exercise Period for such Warrant
Shares, by delivery of a notice of exercise in the form set forth on the last
page hereof (the “Exercise Notice”) at
the principal office of the Company, and by the payment to the Company of the
aggregate Exercise Price (in accordance with the next sentence) in an amount
equal to the Exercise Price per share multiplied by the number of Warrant Shares
then being purchased.  The aggregate purchase price for Warrant Shares
being purchased hereunder pursuant to such exercise may be paid either (A) by
cash or wire transfer of immediately available funds, (B) by cancellation of
indebtedness, (C) by surrender of a number of Warrant Shares which have a Fair
Market Value equal to the aggregate purchase price of the Warrant Shares being
purchased (“Net
Issuance”) as determined herein, or (D) any combination of the
foregoing.  If the Holder elects the Net Issuance method of payment,
the Company shall issue to Holder upon exercise a number of shares of Warrant
Shares determined in accordance with the following formula:

     

    X  =
Y(A-B)

             A

     

                                  

     

    
      
        	
                where:

              	
                X
      =

              	the
      number of Warrant Shares to be issued to the Holder;
	 	 	 
	
                 
      

              	
                Y
      =

              	
                the
      number of Warrant Shares with respect to which the Holder is

                
                  exercising
      its purchase rights under this
Warrant;

                

              


      

    

     

    
      
      

    

    
      
        	
                 
      

              	
                A
      =

              	
                the
      Fair Market Value of one (1) share of the Warrant Shares on the date
      immediately preceding the date of exercise; and

              
	 	 	 
	 	B
      =	the
      Exercise Price.


      

    

     

    (ii)           No
fractional shares arising out of the above formula for determining the number of
shares to be issued to the Holder shall be issued, and the Company shall, in
lieu thereof, make payment to the Holder of cash in the amount of such fraction
multiplied by the Fair Market Value of one (1) share of the Warrant Shares on
the date of exercise.

     

    (iii)           In
the event of any exercise of the rights represented by this Warrant,
certificates for the Warrant Shares so purchased shall be delivered to the
Holder as soon as practicable and, unless this Warrant has been fully exercised
or has expired, a new Warrant representing the portion of the Warrant Shares, if
any, with respect to which this Warrant shall not then have been exercised shall
also be issued to the Holder as soon as practicable.  Such exercise
shall be deemed to have been made immediately prior to the close of business on
the date the Holder delivers the Exercise Notice with respect to such
exercise.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    4.           Reservation of Warrant
Shares; Stock Fully Paid.  During the Exercise Period, the
Company shall reserve and keep available for issuance upon the exercise of the
Warrant such number of its authorized but unissued shares of Common Stock as
will be sufficient to permit the exercise in full of all outstanding
Warrants.  The Warrant Shares, upon issuance in accordance with the
terms of this Warrant, will be validly issued, fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issuance
thereof.

     

    5.           No Voting Rights; Limitations of Liability.  This
Warrant will not entitle the Holder to any voting rights or other rights as a
shareholder of the Company.  No provision of this Warrant, in the
absence of affirmative action by the Holder to purchase Warrant Shares, and no
enumeration in this Warrant of the rights or privileges of the Holder, will give
rise to any liability of such Holder as a stockholder of the
Company.

     

    6.           Representations
of Holder; Restrictions on Transfer.

     

    (a)           The
Holder certifies and represents to the Company that it is an “accredited
investor” as defined in Rule 501 of Regulation D promulgated under the
Securities Act.  The Holder’s financial condition is such that it is
able to bear the risk of holding the Securities for an indefinite period of time
and the risk of loss of its entire investment.  The Holder has
sufficient knowledge and experience in investing in companies similar to the
Company so as to be able to evaluate the risks and merits of its investment in
the Company.  The Holder is acquiring the Securities for its own
account for investment and not for resale or with a view to distribution thereof
in violation of the Securities Act.  The Holder understands that the
Securities have not been registered under the Securities Act, by reason of their
issuance by the Company in a transaction exempt from the registration
requirements of the Securities Act, and that the Securities must continue to be
held by the Holder unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration.

     

    (b)           The
Holder agrees that the Holder will not transfer, sell or otherwise dispose of
this Warrant without the express consent of the Company in its reasonable
discretion.  Notwithstanding the foregoing, the Holder may transfer
all or any portion of this Warrant to an affiliate (as such term is defined in
Rule 405 promulgated under the Securities Act) of the Holder.

     

    (c)           The
Holder agrees not to sell, pledge, distribute, offer for sale, transfer or
otherwise dispose of this Warrant or any Warrant Shares issued upon its exercise
except under circumstances which will not result in a violation of the
Securities Act.  Upon exercise of this Warrant, the Holder shall
confirm in writing, by executing the form attached hereto, that the securities
purchased thereby are being acquired for investment solely for the Holder’s own
account and not as a nominee for any other person, and not with a view toward
distribution or resale.

     

    
      
        
        

      

      
        4

        
          

        

      

      
        
        

      

    

     

    (d)           The
certificates representing the Warrant Shares shall have affixed thereto a legend
in substantially the following form, in addition to other legends required by
applicable state law:

     

    THE
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF UNLESS THE SAME ARE REGISTERED AND
QUALIFIED IN ACCORDANCE WITH THE ACT AND ANY APPLICABLE STATE SECURITIES LAWS,
OR IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE ISSUER SUCH
REGISTRATION IS NOT REQUIRED UNDER THE ACT.

    


    (e)           With
respect to any offer, sale or other disposition of this Warrant or any Warrant
Shares, the Holder agrees to give written notice to the Company prior thereto,
describing briefly the manner thereof together with a written opinion of the
Holder’s counsel, if reasonably requested by the Company, to the effect that
such offer, sale or other disposition of this Warrant or such Warrant Shares may
be effected without registration under the Securities Act or qualification under
any applicable state securities laws, and indicating whether or not under the
Securities Act certificates for this Warrant or such Warrant Shares, as the case
may be, to be sold or otherwise disposed of require any restrictive legend as to
applicable restrictions on transferability in order to insure compliance with
the Securities Act.  If the Company shall consent to the transfer of
this Warrant or such Warrant Shares, then each certificate representing this
Warrant or the Warrant Shares thus transferred (except a transfer pursuant to
Rule 144) shall bear a legend as to the applicable restrictions on
transferability in order to insure compliance with the Securities Act, unless in
the aforesaid reasonably satisfactory opinion of counsel for the Holder or the
security holder, as the case may be, such legend is not necessary in order to
insure compliance with the Securities Act.  The Company may issue stop
transfer instructions to its transfer agent in connection with such
restrictions.

     

    7.           Miscellaneous.

     

    (a)           Amendment and Waiver.  Except
as otherwise provided herein, the provisions of this Warrant may be amended only
if the Company has obtained the prior written consent of the
Holder.

     

    (b)           Notices.  Any
notices required to be sent to the Holder will be delivered to the address set
forth below.  Any notices required to be sent to the Company will be
delivered to the principal office of the Company as set forth on the signature
page hereto.  Any party may change the address to which correspondence
to it is to be addressed by written notification as provided
herein.  All notices required or permitted hereunder, to be effective,
shall be in writing and shall be deemed effectively given: (i) when sent by
confirmed facsimile if sent during normal business hours of the recipient, if
not, then on the next business day, (ii) five (5) days after having been sent by
registered or certified mail, return receipt requested, postage prepaid, or
(iii) one (1) business day after deposit with a nationally recognized overnight
courier, specifying next day delivery, with written verification of
receipt.

     

    
      
        
        

      

      
        5

        
          

        

      

      
        
        

      

    

     

    If to the
Holder, to:

    


    ACN
Digital Phone Service, LLC

    1000
Progress Place

    Concord,
NC 28025-2449

    Attention:   
Colleen R. Jones

    Facsimile:    
704.260.3304

    


    (c)           Descriptive Headings;
Pronouns.  The descriptive headings of the paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant.  All pronouns or any variation thereof shall be deemed to
refer to the masculine, feminine or neuter, singular or plural, as the identity
of the person, persons, entity or entities may require.

     

    (d)           Governing Law.  This
Warrant shall be governed by and construed in accordance with the internal and
substantive laws of the State of New York and without regard to any conflicts of
laws concepts which would apply the substantive law of some other
jurisdiction.

     

    (e)           Successors and
Assigns.  Subject to Section 6, the provisions of this Warrant
shall be binding upon, and inure to the benefit of, the respective successors
and assigns of the parties hereto.

     

    (f)           Severability.  In
the event that any one or more of the provisions of this Warrant shall for any
reason be held to be invalid, illegal or unenforceable, in whole or in part or
in any respect, or in the event that any one or more of the provisions of this
Warrant operate or would prospectively operate to invalidate this Warrant, then
and in any such event, such provision(s) only shall be deemed null and void and
shall not affect any other provision of this Warrant and the remaining
provisions of this Warrant shall remain operative and in full force and effect
and in no way shall be affected, prejudiced, or disturbed thereby.

     

    (g)           Waiver of Jury
Trial.  EACH OF THE COMPANY AND THE HOLDER WAIVES ALL RIGHTS TO
TRIAL BY JURY OF ANY SUITS, CLAIMS, COUNTERCLAIMS, AND ACTIONS OF ANY KIND
ARISING UNDER OR RELATING TO THIS AGREEMENT.  EACH OF THE COMPANY AND
THE HOLDER ACKNOWLEDGES THAT THIS IS A WAIVER OF A LEGAL RIGHT AND REPRESENTS TO
THE OTHER THAT THIS WAIVER IS MADE KNOWINGLY AND VOLUNTARILY.  THE
COMPANY AND THE HOLDER EACH AGREE THAT ALL SUCH SUITS, CLAIMS, COUNTERCLAIMS,
AND ACTIONS SHALL BE TRIED BEFORE A JUDGE OF A COURT OF COMPETENT JURISDICTION,
WITHOUT A JURY.

     

    (h)           Adjustments.

     

    
      
        
        

      

      
        6

        
          

        

      

      
        
        

      

    

     

    (i)           If
at any time after the date hereof there is any change in the outstanding shares
of capital stock of the Company by reason of stock dividends, splits,
recapitalizations, reclassifications, combinations or exchanges of shares,
separations, reorganizations, liquidations, or the like, the number and class of
shares available under this Warrant in the aggregate and the Exercise Price, as
applicable, shall be correspondingly adjusted to give the Holder, on exercise
for the same aggregate Exercise Price, the total number, class, and kind of
shares as the Holder would have owned had the Warrant been exercised prior to
the event and had the Holder continued to hold such shares until after the event
requiring adjustment.  The form of this Warrant need not be changed
because of any adjustment in the number of Warrant Shares subject to this
Warrant.

     

    (ii)           In
case of any reclassification or change of outstanding securities of the class
and series issuable upon exercise of this Warrant (other than a change in par
value, or from par value to no par value, or from no par value to par value, or
as a result of a subdivision or combination), or in case of any consolidation or
merger of the Company with or into a continuing corporation (other than a merger
with another corporation in which the Company is a continuing corporation and
which does not result in any reclassification or change of outstanding
securities issuable upon exercise of this Warrant), or in case of a sale of all
or substantially all of the assets of the Company, unless this Warrant shall
have been exercised or terminated in accordance with its terms, the Company, or
such successor or purchasing corporation, shall execute a new Warrant, which
provides that the Holder shall have the right to exercise such new Warrant and
procure upon such exercise in lieu of each Warrant Share theretofore issuable
upon exercise of this Warrant the kind and amount of shares of stock, other
securities, money and property receivable upon such reclassification, change,
merger or transfer by a holder of one share of the type of security issuable
upon exercise of this Warrant.  Such new Warrant shall provide for
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7(h).  The provisions of this
Section 7(h)(ii) shall similarly apply to successive reclassifications, changes,
mergers or transfers.

     

    (iii)           If
at any time after the date hereof any change occurs in the outstanding capital
stock of the Company or any other event occurs as to which the other provisions
of this Section 7(h) are not strictly applicable or if strictly applicable would
not fairly protect the purchase rights of the Holder in accordance with such
provisions, then the independent members of the Board of Directors of the
Company shall, in their reasonable good faith judgment, make an adjustment in
the number and class of shares available under the Warrant, the Exercise Price
or the application of such provisions, as applicable, so as to protect such
purchase rights as aforesaid.  The adjustment shall be such as to give
the Holder upon exercise for the same aggregate Exercise Price the total number,
class and kind of shares as the Holder would have owned had this Warrant been
exercised prior to the event and had the Holder continued to hold such shares
until after the event requiring adjustment.

     

    
      
        
        

      

      
        7

        
          

        

      

      
        
        

      

    

     

    (iv)           Whenever
the Exercise Price shall be adjusted pursuant to this Section 7(h), the Company
shall issue a certificate signed by its chief financial officer or other
executive officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Exercise Price (and, if applicable, the number and type
of security for which the Warrant may be exercised) after giving effect to such
adjustment, and shall cause copies of such certificate to be mailed (by first
class mail, postage prepaid) to the Holder.

     

     [Signature
page follows]

    


    
      
        
        

      

      
        8

        
          

        

      

      
        
        

      

       

    

    IN WITNESS WHEREOF, each of
the parties has caused this Warrant to be executed by its duly authorized
officer as of date first written above.

     

    
      
        
          
            	 	

                    COMPANY:

                    


                    WORLDGATE
      COMMUNICATIONS, INC.

                  	 
	 	 	 	 
	
                     

                  	
                    By:
      

                  	/s/ George
      E. Daddis, Jr.	 
	 	 	Name:
      George E. Daddis, Jr.	 
	 	 	Title:
      Chief Executive Officer	 
	 	 	 	 
	 	 	 	 
	 	 	

                    Address:

                    


                    3190
      Tremont Avenue

                    Trevose,
      PA 19503

                    Attention:   
      Chief Executive Officer

                    Facsimile:    
      215.354.1049

                  	 


          

        

      


      
        	 	
                HOLDER:

                


                ACN
      DIGITAL PHONE SERVICE, LLC

              	 
	 	 	 	 
	
                 

              	
                By:
      

              	/s/ Dave
      Stevanovski	 
	 	 	Name:
      Dave Stevanovski	 
	 	 	Title:
      President	 
	 	 	 	 


      

    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    NOTICE OF
EXERCISE

    


    
      	
               
      

            	
              TO:

            	
              WORLDGATE
      COMMUNICATIONS, INC.

            


    

    


    1.           The
undersigned hereby elects to purchase __________ shares of common stock, par
value $0.01 (the “Common Stock”), of
WorldGate Communications, Inc. (the “Company”) pursuant to
the terms of that certain Warrant issued by the Company to ACN Digital Phone
Service, LLC as of ________ __, 2010, and tenders herewith payment of the
purchase price of such shares in full, together with all applicable transfer
taxes, if any, in accordance with the election set forth in paragraph 2
below.

    


    2.           Manner
of Exercise.  The undersigned Holder elects to exercise the Warrant
for such shares of Common Stock in the following manner:

    


    
      	
               
      

            	
              ?

            	
              Cash
      Exercise.  The undersigned tenders herewith payment of
      the aggregate Exercise Price for the Common Stock in the form of cash or
      wire transfer of immediately available
funds.

            


    

    


    
      	
               
      

            	
              ?

            	
              Cancellation of
      Indebtedness.  The undersigned tenders payment of the
      aggregate Exercise Price for the Common Stock by cancelling $____________
      of outstanding indebtedness owed by the Company to Holder, which
      cancellation shall be deemed effective simultaneously with the delivery of
      this Notice;

            


    

    


    
      	
               
      

            	
              ?

            	
              Cashless or “Net
      Issuance” Exercise.  The undersigned hereby elects to
      exercise this Warrant by means of a Net Issuance exercise pursuant to the
      provision of Section 3(c)(i) of the
Warrant.

            


    

    


    3.           Please
issue a certificate or certificates representing said securities in the name of
the undersigned or in such other name as is specified below:

     

    


     

    
      
        
          
            
              
                
                  
                    
                      	 	 	 	 
	 	

                              (Name)

                            	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	
                              (Address)

                            	 	 


                    

                  

                

              

            

          

        

      

    

     

    


    4.           The
undersigned represents that the aforesaid shares of Common Stock are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof, and that the
undersigned has no present intention of distributing or reselling such shares in
violation of applicable securities laws.

     

    


     

    
      
        
          
            
              	 	 	 	 
	 	 	 	

                      (Signature)

                    
	 	 	 	 
	 	 	 	 
	

                      (Date)