Document:

EXHIBIT 10.15

 

Execution Version

 

MASTER AGREEMENT

 

This Master Agreement (“Master Agreement”) is made this 31st day of
March, 2008 between Aequus (as defined in Exhibit X hereto), and WorldGate
(as defined in Exhibit X hereto).

 

WHEREAS, Aequus and WorldGate have previously entered into certain
contracts, including without limitation a Reseller Agreement, dated March 22,
2006; a Video Service Provider Agreement, dated May 16, 2006; a
Professional Services Agreement, dated August 14, 2006; and an Amendment and
Master Contract dated June 20, 2007 (collectively, the “Contracts”);

 

WHEREAS, certain disputes have arisen between the Parties regarding the
services and payments required under the Contracts, including, without
limitation, whether such Contracts have been terminated or breached (the “Disputes”);

 

WHEREAS, in connection with the Disputes, WorldGate has asserted claims
against Aequus for certain expenses related to non-recurring engineering
services (“NRE Services”), totaling in excess of $1 million;

 

WHEREAS, WorldGate has taken actions that have shut down the phone
service it had been providing to Aequus under the Contracts;

 

WHEREAS, in connection with such disputes, Aequus filed an action
against WorldGate in the Supreme Court of the State of New York, County of
Rockland, captioned Aequus Technologies
Corp., and Snap Telecommunications Inc.,
d/b/a Snap!VRS v. WorldGate Communications, Inc., and OJO Service, LLC– Index
No. 258/08 (the “Action”),  in
which, among other things, Aequus sought damages and permanent injunctive
relief preventing WorldGate from disabling, terminating or otherwise
interfering with its Phone Service (as defined below);

 

WHEREAS, without any admission of liability by either Aequus or
WorldGate, the Parties have decided to resolve all outstanding disputes between
them (except, as set forth below, regarding WorldGate’s claim for NRE expenses)
by executing this Master Agreement together with the Related Documents (as
defined in Exhibit X);

 

WHEREAS, this
Master Agreement sets forth only those terms of the parties understanding which
are not otherwise addressed in one or more of the Related Documents;

 

WHEREAS, if
not otherwise defined herein, capitalized terms used in this Master Document
shall have the meaning ascribed to such terms in Exhibit X hereto.

 

 

NOW, THEREFORE, for good and valuable consideration, receipt of which
is hereby acknowledged and in consideration of the premises and mutual
covenants and agreements set forth herein, the Parties, intending to be
mutually and legally bound, hereby agree as follows:

 

1.                                       This
Master Agreement shall not be deemed to be fully executed and delivered unless
and until each of the Related Documents has itself been executed and delivered,
all of which shall occur at Closing. 
This Master Agreement, together with the Related Documents, shall
constitute the entire understanding agreed to by the parties with respect to
their rights and obligations with respect to one another from and after the
date hereof (except as otherwise hereafter agreed by them in writing) and
(except to the extent preserved in the Revised Amendment) shall supercede all
prior understandings and agreements between them of any kind, all of which
(subject to the foregoing exception) shall terminate and be of no further force
and effect following the Closing.  For
clarity, the Resellers Agreement and the Professional Services Agreement, as
revised by the Revised Amendment, shall survive the Closing.

 

2.                                       a.                                       At
the Closing, Aequus shall purchase 950 units of the OJO video phone at a
purchase price of 316.25 per phone (which price represents WorldGate’s cost
plus fifteen percent (15%) mark-up, but excluding handling (approximately
$8/unit) and shipping (approximately $10/unit) to Aequus or Aequus’ customer); provided,
however, that the number of units to be purchased at Closing shall be
reduced by 317 for each $100,000 paid to WorldGate by Aequus since the
commencement of the Action but prior to Closing (the “Pre-Closing Payments”).  The aggregate Purchase Price for such phones
in the amount of $300,437.50 shall be paid by Aequus at the Closing; provided,
however, that the aggregate Purchase Price shall be reduced by all
Pre-Closing Payments.  Aequus shall also
pay the actual costs of shipping and handling such phones within 30 days of its
receipt of an invoice therefor.

 

b.             At
the Closing, Aequus shall also purchase all of WorldGate’s remaining current
inventory of the OJO phone, approximately 3,650 units.  The purchase price for such additional phones
shall be $322 per phone for 3,500 units and $316.25 for 150 units (which prices
represent WorldGate’s cost, other than shipping and handling, plus fifteen
percent (15%) mark-up), for a total of $1,174,437.50.  At the Closing, Aequus shall deliver and
execute a promissory note in the principal amount of the Purchase Price, as
adjusted by this Section 2(b), in substantially the form of Attachment
A, in payment for such additional purchases.  Aequus shall also pay the actual costs of the
handling and shipping for the delivery of the Bailed Property to another
warehouse designated by Aequus (or to Aequus Customers, if requested by Aequus)
within 30 days of its receipt of an invoice therefor.

 

c.             WorldGate
agrees to hold such additional phones (the “Bailed Property”) under bailment
for the benefit of Aequus until such time as Aequus designates an alternative
warehouse for storage of the Bailed Property. 
Immediately after the Closing, title to the Bailed Property shall vest
in and at all times remain vested in Aequus. 
WorldGate shall store all Bailed Property in WorldGate’s warehouse
facilities in a secure location, and shall segregate, identify and designate
such Bailed Property as owned by Aequus, including without limitation: (i) designating
all Bailed Property as Aequus property in WorldGate’s inventory records,
including computer database; (ii) maintaining the Bailed Property in an
identifiable and segregated fashion so as to permit Aequus or others to easily
and accurately identify the Bailed Property owned by 

 

2

 

Aequus, and (iii) segregating tracking
of the Bailed Property inventory so as to permit WorldGate to generate separate
sales and inventory reports, provided, however, that both parties
recognize that such segregation will not require WorldGate to maintain a
separate area dedicated only to Bailed Property. Aequus shall bear all risk of
casualty loss with respect to Bailed Property while such Bailed Property
remains in WorldGate’s custody and control. 
Aequus shall, at its sole cost and expense, maintain casualty loss
insurance for Bailed Property.  Aequus
shall not be under any obligation to inspect any of the Bailed Property for
conformity or to accept or reject such goods until such time as the Bailed
Property are delivered to Aequus or its designees.

 

3.                                       WorldGate
shall use commercially reasonable efforts to deliver to Aequus, within fourteen
(14) days after Closing, one of the following forms of agreement executed by
the parties thereto, other than Aequus, to supply Purchased Phones to Aequus
following a Release Event: (a) an agreement between Aequus and Mototech
Inc. whereby Mototech Inc. agrees to supply Purchased Phones to Aequus on
substantially the same terms as are in effect between WorldGate and Mototech at
the time of such Release Event or (b) an agreement among Aequus, WorldGate
and Mototech, whereby Mototech agrees to supply Purchased Phones directly to
Aequus under its then-current contract with WorldGate on the terms and
conditions specified therein; provided, however, that if
WorldGate determines that it will be unable to deliver one of such agreements
within such 14-day period, or a reasonable time thereafter, then it shall
promptly notify Aequus thereof in writing and shall thereupon use commercially
reasonable efforts (including disclosing Manufacturing Documentation to the
extent reasonably necessary) to obtain from an alternative manufacturer an
agreement to manufacture and supply Purchased Phones to Aequus following a
Release Event on substantially the same terms and conditions as are specified
in the contract between WorldGate and Mototech in effect on the date
hereof.  WorldGate shall keep Aequus
informed on a current basis with WorldGate’s efforts to comply with this Section 3
and Aequus shall cooperate with all reasonable requests of WorldGate to
facilitate the execution and delivery of any such agreement.  If none of the agreements described in this Section 3
have been delivered to Aequus within six (6) months after the Closing,
then Aequus shall have the right, at Aequus sole option, to declare WorldGate
in breach of this Agreement.

 

4.                                       In
connection with the transactions contemplated by this Master Agreement and the
Related Documents, Aequus agrees to pay WorldGate $5 million (the “Rights Fee”),
which shall be paid in accordance with the following schedule:

 

a.             the sum of $200,000 (the “Closing
Payment”) at Closing;

 

b.             the sum of $1,200,000 (the “Second
Payment”), payable within fourteen (14) days following the Closing;

 

c.             $400,000
per month (the “Monthly Rights Payment”) until the total Rights Fee has been
paid.  The first Monthly Rights Payment
shall be due on May 1, 2008, and each successive monthly payment shall be
due on the first business day of each succeeding month (each, a “Monthly
Payment Date”).  Within twenty-four (24)
hours following receipt by Aequus of at least $15 million in gross cash
proceeds from an additional financing (beyond bridge financing of up to $4.5
million in connection with the Closing Payment and the Second Payment and other
immediate cash needs), Aequus shall pay to WorldGate the difference between (i) the

 

3

 

Rights Fee and (ii) the total amount of
the Closing Payment, the Second Payment and all Monthly Rights Payments made
prior to such financing (the “Fee Payments Made”) pursuant to this Master
Agreement.  If, however, Aequus receives
the additional financing in one or more installments or closings that are
individually less than $15 million, then, within twenty-four (24) hours following
each such installment or closing, Aequus shall pay the pro rata share of the difference between (i) the
Rights Fee and (ii) the total amount of the Fee Payments Made, based upon
the amount of financing obtained through such installment or closing in relation
to $15 million.

 

d.                                      Within
fourteen (14) days after the Closing, Aequus will (i) establish a bank
account controlled by an independent third-party escrow agent from which the
Monthly Rights Payments shall be paid to WorldGate.  Aequus shall (subject to terminating its
existing receivables financing arrangement, which shall occur as soon as
possible but in no event shall be more than sixty (60) days after Closing)
require all funds paid to Aequus by NECA (or its successor) to be directly
deposited by the paying authority in such account.  Until the Rights Fee has been paid in full,
on each Monthly Payment Date all amounts in the account up to $400,000 shall be
paid to WorldGate and all amounts in excess of $400,000 (if any) shall be paid
to Aequus.  In the event that WorldGate
receives less than $400,000 from the escrow agent, it shall promptly notify
Aequus of the amount of the deficiency and Aequus shall within three (3) business
days thereafter pay to WorldGate the amount of such deficiency.

 

5.                                       The
Parties agree that Justice William J. Kelly of the Supreme Court of Rockland
County, New York (the “Court”), shall retain jurisdiction of the Action solely
as required to enforce the specific terms of this Section 5.

 

a.         WorldGate shall not take or omit to take any action which
has the effect of disrupting, terminating or otherwise impairing the ability of
the ODC or ADC to provide the Pre-Dispute Phone Service to Aequus and its
customers absent an express order from Justice Kelly permitting it to do so, provided
that this provision shall only apply to intentional acts or omissions or
actions or omissions constituting gross negligence but not to actions or
omissions constituting ordinary negligence. 
Similarly, Aequus shall not take or omit to take any action which has
the effect of withholding payment of any portion of the Rights Fee when due
absent an express order from Justice Kelly permitting it to do so provided that
this provision shall only apply to intentional acts or omissions or actions or
omissions constituting gross negligence but not to actions or omissions
constituting ordinary negligence.

 

b.         In
the event Aequus violates paragraph (a) of this Section 5, Aequus
shall be deemed to have consented to a court order (i) directing Aequus to
make such payment within two (2) days and (ii) providing that if the
required payment has not been made prior to the expiration of such two (2) day
period, (A) Aequus shall be in contempt of court, (B) Aequus shall be
fined Fifty Thousand Dollars ($50,000) for each day such contempt is not cured,
(C) Aequus shall promptly convey to WorldGate full title and rights to,
and ownership of, the ADC and all escrowed materials shall be returned to
WorldGate; (D) WorldGate shall be relieved of any further obligation to
provide products and services to Aequus or its customers; and (E) all
intellectual property and marketing licenses granted to Aequus pursuant to this
Master Agreement or any Related Document shall be terminated.

 

4

 

c.         In
the event WorldGate violates paragraph (a) of this Section 5, then
WorldGate shall be deemed to have consented to a court order (i) directing
WorldGate to fully restore such Phone Service within two (2) days, (ii) providing
that if the required restoration has not been made prior to the expiration of
such two (2) day period (A) WorldGate shall be in contempt of court, (B) fining
WorldGate Fifty Thousand Dollars ($50,000) for each day such contempt is not
cured, (C) relieving Aequus of any further obligation to pay any unpaid
amount of the Rights Fee; (D) requiring WorldGate to refund all amounts of
the Rights Fee previously paid; (E) the Escrow Materials shall be released
to Aequus for use solely in providing the Services in the Territory to Customers;
and (F) all intellectual property and marketing licenses granted to Aequus
pursuant to this Master Agreement or any Related Document shall continue in
full force and effect for use solely in providing the Services in the Territory
to Customers.

 

6.                                       a.         The
Parties shall submit WorldGate’s NRE expense claim of no more than $1,354,039
(representing all fees due for NRE services performed for Aequus by WorldGate
through December 31, 2007) to binding arbitration under the Commercial
Arbitration Rules for Large, Complex Commercial Disputes of the American
Arbitration Association (the “AAA Commercial Rules”) in accordance with the
terms of Attachment B to this Master Agreement.  The Parties hereby agree that each Party
shall be responsible for all of its own costs (including, without limitation,
attorneys’ fees) and for one-half the cost of the arbitration.  The Parties shall initiate the arbitration
proceeding within thirty (30) days following the Closing.  The Parties agree that the amount by which
the $200,000 paid by Aequus to WorldGate for NRE Services in December 2007
exceeds the Monthly Service Fees for December 2007 and January 2008
shall either be applied against any NRE expenses awarded to WorldGate in the
arbitration or shall be paid to Aequus if it prevails in the arbitration (or if
the amount of the award to WorldGate is less than such excess, then the
difference between such award and such excess shall be paid to Aequus).

 

b.         The Parties agree that the value of all
of the additional Phase 3 work described on Attachment C, which includes
all NRE services performed by WorldGate since January 1, 2008, equals
$75,000 and that Aequus may apply in full and complete satisfaction for
WorldGate’s performance of such additional Phase 3 work the $75,000 credit due
to Aequus under Section 1(c) of the Professional Services Agreement
(as amended by the Amended and Restated Amendment and Master Contract) for the
month following the Effective Date. 
WorldGate shall complete such Phase 3 work as promptly as practicable in
accordance with the terms of such Professional Services Agreement, as amended.

 

7.                                       At
the Closing, the Parties shall execute the Mutual General Release which is a
Related Document.  The Mutual General
Release shall waive, release and relinquish each and every claim either Party
may have against the other Party, excluding WorldGate’s NRE expense claim
referred to in Section 6 above and any claim which may hereafter arise
under this Agreement or any Related Document. 
The Parties shall execute and file with the Court, within twenty four
hours after Closing, all documentation necessary to terminate with prejudice
the Action (subject only to the jurisdiction of the Court, as set forth in Section 5
above).

 

5

 

8.             All notices,
requests, demands, consents or waivers and other communications required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given immediately upon delivery by hand or by electronic transmission (e.g.,
email or facsimile with immediate confirmation), one (1) business day
after being sent if by nationally recognized overnight courier or, if mailed,
then four (4) days after being sent by certified or registered mail,
return receipt requested with postage prepaid:

 

(i)             If to WorldGate, to:

 

WorldGate Communications, Inc.

3190 Tremont Avenue

Trevose, PA 19355

 

Attention:  Hal Krisbergh, CEO
and President

Telecopy:  215-354-1049

Email: hkrisbergh@wgate.com

 

with a copy to:

 

Randall Gort, CLO at the same address and telecopy number

Email: rgort@wgate.com

 

 (ii)          If
to AEQUUS, to:

 

Snap
Telecommunications Inc.

1
Blue Hill Plaza, 14th Floor

PO Box 1626

Pearl River, NY  10965

 

Attention: Richard Schatzberg, President

Telecopy: (973) 227-5400

Email: rschatzberg@aequustechnologies.com

 

with
a copy to:

 

Pryor Cashman LLP

410 Park Avenue

New York, New York 10022

 

Attention: Eric M. Hellige, Esq.

Telecopy: (212) 326-0806

Email: ehellige@pryorcashman.com

 

or, in each case, to such other person or address as any party shall
furnish to the other parties in writing.

 

6

 

9.             This Agreement
constitutes the entire agreement between the Parties with respect to the
subject matter hereof and supersedes all prior proposals, understandings, and
agreements, whether oral or written between the Parties with respect to the
subject matter hereof.  No modification,
amendment or supplement to this Agreement shall be effective for any purpose
unless agreed to in writing and signed by authorized representatives of the
Parties.

 

10.           This Agreement and
all of the provisions hereof shall be binding upon and inure to the benefit of
the Parties hereto and their respective successors and permitted assigns.

 

11.           No failure to
exercise, and no delay in exercising, on the part of either Party, any right,
power or privilege hereunder will operate as a waiver thereof, nor will any
Party’s exercise of any right, power or privilege hereunder preclude further
exercise of the same right or the exercise of any other right hereunder.

 

12.           If any part of
this Agreement shall be adjudged by any court of competent jurisdiction to be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not be affected or impaired thereby and shall
be enforced to the maximum extent permitted by applicable law.  If any remedy set forth in this Agreement is
determined to have failed of its essential purpose, then all other provisions
of this Agreement, including the limitations of liability and exclusion of
damages, shall remain in full force and effect.

 

13.           Either Party shall
be excused from performance and shall not be liable for any delay, in whole or
in part, caused by the occurrence of any contingency beyond the reasonable
control either of the excused Party or its subcontractors or suppliers.  These contingencies include, but are not
limited to, war, sabotage, insurrection, riot or other act of civil
disobedience, act of public enemy, failure or delay in transportation, act of
any government or any agency or subdivision thereof affecting the terms hereof,
accident, fire, explosion, flood, severe weather or other act of God, or
shortage of labor or fuel or raw materials.

 

14.           The Parties
acknowledge and agree that this Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania as to all matters including, but not limited to,
matters of validity, construction, effect, performance and liability, without
consideration of conflicts of laws provisions contained therein.  In the event of any dispute between the
Parties, (a) if suit shall be brought by Aequus, it shall be brought
either in the United States District Court for the Eastern District of
Pennsylvania or any state court of the Commonwealth of Pennsylvania and (b) if
suit shall be brought by WorldGate, it shall be brought in the either in the
United States District Court for the Southern District of New York or any state
court of the State of New York.  Each of
the Parties waives, to the fullest extent permitted by law, any objection which
it may now or hereafter have to the laying of the venue of any such proceeding
brought in such a court and any claim that any such proceeding brought in such
a court has been brought in an inconvenient forum.

 

15.           This Agreement may
be executed simultaneously in two or more original or facsimile counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

 

7

 

16.           A breach or other
default under this Agreement by either Party shall not constitute a breach or
default under any other agreement between the Parties.

 

17.           Except as
specifically set forth or referred to herein, nothing herein expressed or
implied is intended or shall be construed to confer upon or give to any person
or corporation other than the Parties hereto and their respective successors or
permitted assigns any rights or remedies under or by reason of this Agreement.

 

18.           Unless otherwise
expressly provided in this Agreement, neither Party may assign its rights
(other than the right to receive payments) or delegate its duties and
obligations under this Agreement without the prior written consent of the other
Party, which will not be unreasonably withheld or delayed; provided, however,
that either Party may assign this Agreement, without the need to obtain consent
of the other Party, to an Affiliate of such Party or to a successor-in-interest
to substantially all of the business of that Party to which this Agreement relates
by providing written notice to the other Party of such assignee’s agreement to
be bound by the terms of this Agreement and to assume all of the rights and
obligations of the assigning Party set forth in this Agreement; provided,
however, that in no event shall either Party assign this Agreement to an
Affiliate or successor who is a competitor of the other Party.  Any assignment made in violation of the
foregoing provisions shall be deemed null and void and of no force or effect.

 

19.           WorldGate and Aequus
have all participated in the negotiation and drafting of this Agreement and
have each been represented throughout to their satisfaction by legal counsel of
their choosing.  In the event any
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.

 

20.           Section headings
are provided for convenience of reference and do not constitute part of this
Agreement.  Any references to a
particular section of this Agreement shall be deemed to include reference to
any and all subsections thereof

 

21.           The provisions of
Sections that, by their nature or as explicitly stated, are to survive
termination of this Agreement shall survive termination hereof.

 

22.           Where the context or
construction requires, all words applied in the plural shall be deemed to have
been used in the singular, and vice versa; the masculine shall include the
feminine and neuter, and vice versa; and the present tense shall include the
past and future tense, and vice versa.

 

23.           All references to
days in this Agreement shall be deemed to refer to calendar days, unless otherwise
specified.

 

24.           The Parties will
undertake to use all reasonable efforts to present each other in a positive
light and to refrain from characterizations or statements that are disparaging
of the other.

 

8

 

25.           Nothing in this
Master Agreement or any other Related Document shall be deemed an admission of
liability or wrongdoing by any of the Parties and neither this Master Agreement
nor any Related Document shall be deemed or construed to be an admission or
evidence of any violation of any law or contract, or of any liability or
wrongdoing by any of the Parties.

 

26.           a.             The Parties agree that,
notwithstanding anything to the contrary in this Master Agreement or any
Related Document, and except as provided in paragraph (b) to this Section 26,
the exclusive means for resolving any dispute which arises between the Parties
prior to the first anniversary of the Effective Date with respect to or in
connection with this Master Agreement or any Related Document shall be the
submission of such dispute to arbitration in accordance with the then current
Commercial Arbitration Rules of the American Arbitration Association. The
parties shall endeavor to select a mutually acceptable arbitrator knowledgeable
about issues relating to the subject matter of the agreement in dispute. In the
event the parties are unable to agree to such a selection, each party will
select an arbitrator and the arbitrators in turn shall select a third
arbitrator. The arbitration shall take place at a location that is reasonably
centrally located between the parties, or otherwise mutually agreed upon by the
parties.  All documents, materials, and
information in the possession of each party that are in any way relevant to the
claim(s) or dispute(s) shall be made available to the other party for
review and copying no later than thirty (30) days after the notice of
arbitration is served.  The arbitrator
shall have the power to issue mandatory orders and restraining orders in
connection with the arbitration. The award rendered by the arbitrator shall be
final and binding on the parties, and judgment may be entered thereon in any
court having jurisdiction. This agreement to arbitrate shall be specifically
enforceable under prevailing arbitration law. During the continuance of any
arbitration proceeding, the parties shall continue to perform their respective
obligations under the agreement in dispute.

 

b.             Nothing
set forth in paragraph (a) of this Section 26 shall apply to disputes
(a) which are covered by Section 5 of this Agreement, (b) which
otherwise relate to disputes regarding Aequus’s ability to get or provide the
Services or (c) which are based on any breach of the parties’ exclusivity
rights and obligations under Section 1(a) of the Reseller Agreement,
as amended by the Revised and Restated Amendment and Master Contract which is a
Related Document.

 

IN WITNESS WHEREOF, the authorized
representatives of the parties hereto have duly executed this amendment on
behalf of the parties on the date first written above.

 

 

	
   

  	
   

  	
   

  
	
  Hal Krisbergh

  	
   

  	
  Richard Schatzberg

  
	
  President & CEO

  	
   

  	
  CEO

  
	
  WorldGate Communications, Inc.

  	
   

  	
  Aequus Technologies Corp.

  

 

9

 

	
   

  	
   

  	
   

  
	
  Hal Krisbergh

  	
   

  	
  Richard Schatzberg

  
	
  President & CEO

  	
   

  	
  CEO

  
	
  OJO Service LLC

  	
   

  	
  Snap Telecommunication Inc.

  

 

Attachments and Exhibits

 

Attachment A – Additional Purchases – Payment Terms

Attachment B – Arbitration Procedures

Attachment C – Phase 3 Agreed Work

Exhibit X – Certain Definitions

 

10

 

ATTACHMENT A

 

PROMISSORY NOTE

 

11

 

ATTACHMENT
B

 

ARBITRATION
PROCEDURES

 

1.             Pursuant
to Section 6 of the Master Agreement, the dispute regarding whether or not
Aequus is obligated to pay to WorldGate approximately $1.35M in NRE expenses
(the “Dispute”) shall be submitted to binding arbitration in accordance with
the following:

 

1.1           For
the purpose of such arbitration, there shall be a board of arbitration (the “Board of Arbitration”) consisting of three
arbitrators.  Each of Assignor and
Assignee shall select one (1) member and the third member shall be
selected by mutual agreement of the other members, or if the other members fail
to reach agreement on a third member within ten (10) days after their
selection, such third member shall thereafter be selected by the American Arbitration Association (“AAA”)
upon application made to it for such purpose. The place of arbitration shall be
in Philadelphia, PA or such other location as the parties may agree. All arbitration
proceedings shall be conducted under and pursuant to the Commercial Arbitration
Rules for Large, Complex Commercial Disputes of the AAA (the “AAA
Commercial Rules”).

 

1.2           The
arbitrators shall decide the Dispute in accordance with the governing law
specified in Section 14 of the Master Agreement.  Judgment upon any award rendered hereunder
may be entered in any court of competent jurisdiction, and/or application may
be made to any such court for a judicial acceptance of the award and/or an
order of enforcement, as the case may be.

 

1.3           Each
party shall cooperate in good faith to expedite and to reduce the procedural
costs associated with (each to the maximum extent practicable) the conduct of
any arbitration proceedings commenced under this Agreement.

 

1.4           The
cost of each arbitration proceeding, including without limitation the
arbitrators’ compensation and expenses, hearing room charges, court reporter
transcript charges, etc., shall be borne by the parties in such proportions as
shall be determined by the arbitrators.

 

1.5           Subject
to the control of and enforcement by the arbitrators, the parties shall have
the right to conduct and enforce pre-hearing discovery in accordance with the
then current Federal Rules of Civil Procedure.  The arbitrators shall permit and facilitate
such other discovery as they may determine is appropriate under the
circumstances, taking into account the needs of the parties and the
desirability of making discovery expeditious and cost effective.  The arbitrators shall decide discovery
disputes.  In addition to any powers
provided under the AAA Commercial Rules, the arbitrators are empowered:

 

(a)                                  to
issue subpoenas to compel pre-hearing document or deposition discovery;

 

12

 

(b)                                 to
require the deposition of not more than three individuals from each side

 

(c)                                  to
enforce the discovery rights and obligations of the parties; and

 

(d)                                 to
otherwise control the scheduling and conduct of the proceedings.

 

Notwithstanding any foregoing provisions to the contrary, the
arbitrators shall have the power and authority to, and to the fullest extent
practicable shall, abbreviate arbitration discovery in a manner that is fair to
all parties in order to expedite the arbitration proceeding and render a final
decision within six months after the pre-hearing conference.

 

1.6           Within
thirty (30) days after filing of notice of demand for binding arbitration, the
arbitrators shall hold a pre-hearing conference to establish schedules for
completion of discovery, for exchange of exhibit and witness lists, for
arbitration briefs, for the hearing, and to decide procedural matters and all
other questions that may be presented.

 

1.7           The
hearing shall be conducted to preserve its privacy and to allow reasonable procedural
due process.  Rules of evidence need
not be strictly followed, and the hearing shall be streamlined as follows:

 

(a)           Documents
shall be self-authenticating, subject to valid objection by the opposing party;

 

(b)           Expert
reports, witness biographies, depositions, and affidavits may be utilized,
subject to the opponent’s right of a live cross-examination of the witness in
person;

 

(c)           Charts,
graphs, and summaries may be utilized to present voluminous data, provided that
the underlying data was made available to the opposing party thirty (30) days
prior to the hearing, and that the preparer of each chart, graph, or summary is
available for explanation and live cross-examination in person;

 

(d)           The
hearing should be held on consecutive business days without interruption to the
maximum extent practicable; and

 

(e)           The
arbitrators shall establish all other procedural rules for the conduct of
the arbitration in accordance with the AAA Commercial Rules.

 

.

 

1.8           This
arbitration provision shall be governed by, and all rights and obligations
specifically enforceable under and pursuant to, the Federal Arbitration Act (9
U.S.C. Section 1 et seq.) and the laws of the Commonwealth of Pennsylvania
shall be applied, without

 

13

 

reference to the choice of law principles thereof, in resolving matters
submitted to such arbitration.

 

1.9           No
arbitration shall include, by consolidation, joinder, or in any other manner,
any additional person not a party to this Agreement (other than affiliates of
any such party, which affiliates may be included in the arbitration), except by
written consent of the parties hereto containing a specific reference to this
Agreement.

 

1.10 
The arbitrators shall be required to render their final decision within
thirty (30) days after the pre-hearing conference.  The arbitrators are not empowered to render
an award of general compensatory damages and equitable relief (including,
without limitation, injunctive relief), but are not empowered to award punitive
or presumptive damages.  The award
rendered by the arbitrators (1) shall be final and (2) shall not be
subject to vacation, modification or appeal, except in the event of fraud or
gross misconduct on the part of the arbitrators.

 

1.11 
The parties hereto will maintain the substance of any proceedings
hereunder in confidence and make disclosures to others only to the extent
necessary to properly conduct the proceedings or as required by law.

 

2.             Any
award made by the arbitration tribunal shall be final and binding on each of
the parties that were parties to the Dispute and their respective successors
and permitted assigns. Except in the event of fraud or gross misconduct on the
part of the arbitrators, the parties expressly agree to waive the applicability
of any laws and regulations that would otherwise give the right to appeal the
decisions of the arbitration tribunal so that there shall be no appeal to any
court of law from the award of the arbitration tribunal, and a party shall not
challenge or resist the enforcement action taken by any other party in whose
favor an award of the arbitration tribunal was given.

 

14

 

ATTACHMENT C

 

PHASE 3 – AGREED WORK

 

·             Ojo passes the hearing person’s number to SNAP.

 

·             Secure Remote Assist (TSR support tool)

 

·             Ojo employs bandwidth adaptation techniques for
unencrypted H.263 calls

 

·             Ojo Phonebook entry “Name” input field is already
selected when first entering a new entry

 

·             Ojo presents “Mailbox is Full” greeting to a caller

 

·             Ojo has a new Audio Mute configuration option

 

·             The Snap!VRS CSR phone number (711-7627) is
preloaded in the phonebook

 

·             Ojo detects the hardware model to appropriately
display TALK or CALL in the on-screen hints and text

 

·             When a user enters a number that takes them to the
dialer, we now place that number into each input buffer, so the number is
retained when the user changes the type of call (Ojo, VRS, IP dialer).

 

15

 

EXHIBIT X

 

CERTAIN DEFINITIONS

 

16Exhibit 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

 

 

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.  .

 

2

 

(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.

 

3

 

(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.

 

4

 

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, 

 

5

 

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.

 

6

 

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

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

7

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