Document:

Software
Development and Integration

    and

    Manufacturing
Assistance Agreement

    

    This
Software Development and
Integration and Manufacturing Assistance Agreement (this “Agreement”) is
made as of April 6, 2009 between ACN Digital Phone Service, LLC, a Delaware
limited liability company with its principal place of business at 1000 Progress
Place, Concord, NC 28025 (“ACN”), and Ojo Video Phones LLC, a Pennsylvania
limited liability company with its principal place of business at 3190 Tremont
Avenue, Trevose, PA 19053 (“OJO” and together with ACN, the “Parties” or a
“Party” as the case may be).

    

    Recitals

    

    Whereas, ACN sells video
phones together with digital phone service using Voice over Internet Protocol;
and

    

    Whereas, OJO develops software
for, manufactures, and sells certain video phone communication devices and
related accessories, providing a variety of services with respect thereto;
and

    

    Whereas, ACN, in accordance
with the terms of this Agreement, wants to retain OJO to develop software (the
“Developed Software”) for ACN’s existing video phone (“IRIS 3000”) according to
mutually agreed specifications, and to assist ACN with the capability to
manufacture and acquire IRIS video phones, including, without limitation, the
IRIS 3000 with the Developed Software integrated therein (the “IRIS 3000W”),
with such effort being generally referred to hereunder as Phase 1;
and

    

    Whereas, pursuant to the terms
and conditions of an ACN Consumer Communications Equipment Master Purchase
Agreement (the “Commercial Agreement”) that is being executed by the Parties
concurrently herewith, OJO has agreed to develop and to sell to ACN a new video
phone, using the DaVinci chip and the Developed Software (the “IRIS 4000”)
according to mutually agreed specifications with such effort being generally
referred to hereunder as Phase 2.

    

    Now, Therefore, in
consideration of the mutual covenants, representations and warranties
of the Parties contained in this Agreement, the Parties hereby agree as
follows:

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.1.           Phase
1 Development

    

    OJO shall
carry out a project (the “Project”) to specify, develop and deliver software
that (i) is specially developed or customized for the IRIS 3000, (ii) shall
reasonably fulfil ACN's objectives and requirements as described in Appendix 1,
and (iii) shall be compliant with the  mutually agreed specifications
that are to be developed as part of the Project.

    

    1.2           Development
tools – development method

    

    OJO shall
be responsible for selecting the development tools, methods and environment, and
establishing and maintaining this development environment.  If ACN has
any special requirements concerning the development environment or method, then
such requirements will be communicated in writing to OJO.

    

    1.3           Project
implementation and cooperation

    

    1.3.1  OJO
shall carry out the Project in accordance with a mutually agreed work schedule
to be developed as part of the Project.

    

    1.3.2  Both
ACN and OJO shall have a development project manager. The development project
managers are responsible for the day-to-day follow-up of their own personnel,
and they are responsible for planning and following up their own
obligations.

    

    1.3.3  The
development project managers shall meet frequently to monitor the progress of
the development effort and to provide feedback to each other as the Project
progresses.  The development project managers shall also provide each
other with the information from their respective organizations that is
reasonably required to manage, monitor and complete this development
effort.

    

    1.4           Detailed
specifications and project plan

    

    1.4.1  OJO
shall prepare Detailed Specifications and a Software Development Project Plan
for the Developed Software based on consultation with ACN and the documentary
materials provided to OJO by ACN for such purpose.   The Detailed
Specifications shall consist of a detailed itemization and/or definition of the
Developed Software and its required operation and functionality.  The
Detailed Specifications shall form the basis for the development to be carried
out in the development. The Software Development Project Plan shall consist of
the anticipated schedule for the development project, and the allocation of
project responsibilities as required for this schedule.  This work
shall be carried out in close cooperation and consultation with
ACN.

     

    
      
        
        

      

      
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    1.4.2  Upon
agreement of the parties on the Detailed Specifications and the Software
Development Project Plan the same shall be finalized in writing and attached
hereto as Appendices 2 and 3 respectively.

    

    1.4.3  The
Parties acknowledge and agree that the Detailed Specifications and the Software
Development Project Plan may be subject to change during the course of the
development effort, and as such, the Parties will reasonably cooperate to
evaluate and accommodate proposed changes as the same may arise.

    

    1.5           Development
of the Developed Software

    

    OJO shall
develop the Developed Software described in the Detailed Specifications. OJO is
responsible for designing, developing and testing the Developed Software in
accordance with the Detailed Specifications and the Software Development Project
Plan.

    

    1.6           Title,
Rights and Interests

    

    As
between the Parties, each Party expressly retains all title, right and interest
in and to their respective confidential and/or proprietary information and work
product as the same may be developed, furnished or utilized
hereunder.

    

    1.7           Testing

    

    OJO and
ACN shall cooperate to carry out any tests that are necessary to verify that the
Developed Software functions in accordance with the agreed Detailed
Specifications prior to field installation and use in IRIS 3000W.

    

    1.8           Manufacture
and sourcing of IRIS 3000 and 3000W

    

    Pending
the development of the IRIS 4000, the Parties will jointly develop a plan to
provide for the manufacture and purchase of the IRIS 3000 (and ultimately the
IRIS 3000 W) through and with OJO’s assistance, from ACN’s existing IRIS 3000
manufacturing partner, UMEC. Such plan may involve the assignment to OJO, in
whole or in part, of ACN’s current contract with UMEC (attached hereto as
Appendix 4 and referred to herein as the UMEC Contract), the creation of an
agency relationship, or some other arrangement as the Parties may mutually
agree, and that would reasonably facilitate continued supply to ACN of products
and services as required for its business.  Such plan would also
provide for the potential download of the Developed Software to deployed IRIS
3000’s, resulting in an upgrade of the same to IRIS 3000Ws.

     

    
      
        
        

      

      
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    1.9           Project
implementation and cooperation

    

    1.9.1  OJO
shall carry out the Project in accordance with a mutually agreed work schedule
to be developed as part of the Project.

    

    1.9.2  Both
ACN and OJO shall have a manufacturing project manager. The manufacturing
project managers are responsible for the day-to-day follow-up of their own
personnel, and they are responsible for planning and following up their own
obligations.

    

    1.9.3  The
manufacturing project managers shall meet frequently to monitor the progress of
the Project and to provide feedback to each other as the Project
progresses.  The manufacturing project managers shall also provide
each other with the information from their respective organizations that is
reasonably required to manage, monitor and complete the Project.

    

    1.9.4  The
Parties acknowledge and agree that the manufacture and purchase of Phase 1 video
phone products will inherently involve the application of the terms and
conditions of the UMEC Contract, and to the extent such terms and conditions are
different from the terms and conditions set forth in the Commercial Agreement
which provide for the routine development and sourcing by ACN from OJO of the
Phase 2 video phone products, such UMEC Contract shall govern.  The
Parties however agree to reasonably cooperate to modify or adapt the terms and
conditions of the UMEC Contract as they are applied hereunder to the extent
possible and necessary to facilitate the object and scope of the
Project.

    

    2.1           Product
Manufacture and Software Integration Project Plan

    

    2.1.1  OJO
shall prepare a Product Manufacture and Software Integration Project Plan for
the Project based on consultation with ACN and the documentary materials
provided to OJO by ACN for such purpose.  The Product Manufacture and
Software Integration Project Plan shall consist of a detailed itemization and/or
definition of the efforts required for the Project, the anticipated schedule for
the Project and the responsibility of the Parties with respect to the
Project.  This work shall be carried out in close cooperation and
consultation with ACN.

     

    
      
        
        

      

      
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    2.1.2  Upon
agreement of the parties on the Product Manufacture and Software Integration
Project Plan the same shall be finalized in writing and attached hereto as
Appendix 5.

    

    2.1.3  The
Parties acknowledge and agree that the Product Manufacture and Software
Integration Project Plan may be subject to change during the course of the
development effort, and as such, the Parties will reasonably cooperate to
evaluate and accommodate proposed changes as the same may arise.

    

    2.2           Price
and payment

    

    ACN shall
pay OJO an aggregate of $1.2 million USD for the Project.  Payment
will be made in three installments of $400,000 USD each as
follows:  the first such installment shall be made on April 30, 2009,
the second installment shall be made on May 30, 2009, and the third installment
shall be made on June 30, 2009.  Each such payment shall be made by
wire transfer.  Such payments are intended only to partially
compensate WorldGate for its efforts under the Phase 1 project as payment for a
worldwide, irrevocable, transferable, perpetual up-front, pre-paid software
license , and such payments are expressly not intended as a payment of, or
consideration for, any per unit download or integration software license fees,
product purchase price, or other per unit hardware, software or intellectual
property acquisition cost, whether through UMEC or OJO.  All such
other fees, prices and costs are subject to future negotiation and agreement by
the Parties.

    

    
      2.3       
General
provisions

    

    

    2.3.1  Notices.  All
notices required to be given hereunder shall be in writing and shall be
considered received (a) on the day of actual transmittal when transmitted by
facsimile or email with written confirmation of such transmittal, (b) on the
next business day following actual transmittal when transmitted by a nationally
recognized overnight courier, or (c) on the third business day following actual
transmittal when transmitted by registered or certified mail, return receipt
requested, postage prepaid, in each case when transmitted to a Party at the
address shown below, or at such other addresses as that Party may, from time to
time, advise in writing in accordance with this Section.

    

    OJO:    
WorldGate Service Inc.

                 
3190 Tremont Ave.

                 
Trevose, PA  19355

                 
Attn:  General Counsel

     

    
      
        
        

      

      
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    ACN:  
ACN Digital Phone Service, LLC

                
1000 Progress Place

                
Concord, NC 28025

                
Attn:  General Counsel – North America

    

    2.3.2  Assignment.  Neither
Party shall have the right to assign, transfer or sublicense its rights or
obligations under this Agreement without the prior written consent of the other
Party, except that either Party may assign its rights and obligations under this
Agreement without the other Party's approval to the extent such assignment is
limited to a change in corporate form of such Party only.  Any
prohibited assignment shall be null and void.

    

    2.3.3  Relationship.  Each
of ACN and OJO shall conduct its business in its own legal name and at its own
expense and risk, and shall be responsible, as an independent contractor, for
(i) paying all taxes, levies, tariffs, duties, fees and other charges imposed by
the applicable governmental authorities in connection with activities hereunder,
(ii) securing and maintaining all required approvals, registrations, permits and
licenses, and (iii) otherwise complying with all laws and regulations governing
the conduct of its business.  ACN and OJO are independent contractors,
and as such, shall not act or represent themselves, directly or by implication,
as an agent for the other or assume or create any obligation on behalf of or in
the name of the other, or otherwise bind the other in any
manner.  Nothing herein shall be deemed to create an agency,
partnership, franchise or joint venture between the parties.

    

    2.3.4  Waiver.  The
failure of either Party to enforce at any time the terms, conditions,
requirements, or any other provisions of this Agreement shall not be construed
as a waiver by such Party.

    

    2.3.5  Headings.  The
headings of paragraphs contained herein are for convenience and reference only
and are not a part of this Agreement, nor shall they in any way affect the
interpretation thereof.

    

    2.3.6  Severability.  The
Parties agree that if any portion of this Agreement shall be held illegal and/or
unenforceable, the remaining portions of this Agreement shall continue to be
binding and enforceable provided that the efficacy of the remaining portion of
this Agreement would not defeat the overall business intent of the Parties, or
give one Party any substantial financial benefit to the detriment of the other
Party.

    

    2.3.7  Governing
Law.  This Agreement and its Appendices shall be governed by the laws
of the State of New York, excluding its conflicts of law rules.

     

    
      
        
        

      

      
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    2.3.8  Dispute
Resolution

    

    2.3.8.1  Informal
Dispute Resolution.

    Prior to
filing any arbitration proceeding pursuant to Section 2.3.8.2 below, the Party
intending to file such a proceeding shall be required to notify the other Party
in writing of the existence and the nature of any dispute.  Within
fifteen (15) business days after the other Party’s receipt of such notice, the
authorized representatives of both of the Parties shall meet in order to attempt
to resolve the dispute amicably.  If such informal dispute resolution
attempts prove to be unsuccessful, either Party may initiate an arbitration
proceeding as described in Section 2.3.8.2 below.

    

    2.3.8.2   Arbitration.

    All
controversies, disputes or claims arising in connection with, from or with
respect to this Agreement which are not resolved by the informal dispute
resolution described in Section 2.3.8.1 above, shall be finally settled in
accordance with the commercial arbitration rules of the American Arbitration
Association ("AAA") then obtaining, by a panel of three
arbitrators.  Each Party shall have the right to appoint one
arbitrator from the list of arbitrators supplied to the Parties by the AAA, and
the two arbitrators so appointed shall appoint the third.  The place
of arbitration shall be the City of New York, New York, USA and the language of
the arbitration shall be in English.  The arbitrators shall determine
the matters in dispute in accordance with the internal law of the State of New
York, without reference to the Convention on Contracts for the International
Sale of Goods.  Except as precluded by the United Nations Convention
on the Recognition and Enforcement of Foreign Arbitral Awards, the internal
procedure and substantive laws of New York and the United States Federal
Arbitration Act shall govern all questions of arbitral procedure, arbitral
review, scope of arbitral authority, and arbitral enforcement.  The
Parties agree that the award of the arbitrators shall be the sole and exclusive
remedy between them regarding any claims, counterclaims, issues or accountings
presented or pled to the arbitrators, that the award shall be made and shall be
promptly payable in U.S. Dollars, free of any tax, deduction or offset, and that
any costs, fees or taxes instant to enforcing the award shall, to the maximum
extent permitted by law, be charged against the Party resisting such
enforcement.  No claim may be submitted by a Party to arbitration in
accordance with this Section unless such submitting Party notifies the other
Party within two (2) years of the date on which the submitting Party first knew
or should have known of the existence of the facts indicating the existence of
such dispute.

    Each
Party shall continue performing its obligations under this Agreement while any
dispute is being resolved except to the extent the issue in dispute precludes
performance (dispute over payment shall not be deemed to preclude
performance).

     

    
      
        
        

      

      
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    2.3.9  Entire
Agreement.  This Agreement constitutes the entire Agreement between
the Parties and supersedes all prior discussion, either oral or in
writing.

    

    2.3.10  Amendment.  The
terms and conditions of this Agreement will prevail notwithstanding any variance
with the terms and conditions of any order.  Except as expressly set
forth in this Agreement, this Agreement shall not be deemed, or construed to be,
modified, amended, rescinded, or canceled in whole or in part, except by written
amendment executed by the Parties hereto.

    

    2.3.11  Survival.  Provisions
of this Agreement relating to confidentiality, license, branding, warranty,
indemnity, limit of liability, export, assignment, governing law, dispute
resolution, and survival shall survive the termination or expiration of this
Agreement.

    

    2.3.12  Incorporation.  All
Appendices attached hereto are incorporated herein by this
reference.

    

    [Remainder
of Page Intentionally Blank]

     

    
      
        
        

      

      
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    INTENDING TO BE LEGALLY BOUND,
the Parties hereto have caused this Software Development and Integration and
Manufacturing Assistance Agreement to be executed as of the date and year first
above written.

    

    
      
        
          
            
              
                	
                        ACN
      Digital Phone Service, LLC

                      	 	
                        Ojo
      Video Phones LLC

                      
	 
      	 	 
      
	
                          /s/ Dave
      Stevanovski

                      	 	
                          /s/ Harold M.
      Krisbergh

                      
	
                        (Signature)

                      	 	
                        (Signature)

                      
	 
      	 	 
      
	
                        Dave Stevanovski

                      	 	
                        Harold M. Krisbergh

                      
	
                         (Typed/Printed
      Name)

                      	 	
                        (Typed/Printed
      Name)

                      
	 
      	 	 
      
	
                        President

                      	 	 
      
	
                         (Title)

                      	 	
                        (Title)REGISTRATION
RIGHTS AND GOVERNANCE AGREEMENT

     

    by
and among

     

    WORLDGATE
COMMUNICATIONS, INC.,

     

    WGI
INVESTOR LLC,

     

    and

     

    ACN
DIGITAL PHONE SERVICE, LLC

     

    April
6, 2009

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    TABLE OF
CONTENTS

    

    
      
        
          	 
      	 
      	
                  Page

                
	
                  1.

                	
                  DEFINITIONS

                	
                  1

                
	
                  2.

                	
                  REGISTRATION

                	
                  3

                
	
                  3.

                	
                  “PIGGYBACK
      REGISTRATION”

                	
                  5

                
	
                  4.

                	
                  OBLIGATIONS
      OF THE COMPANY

                	
                  5

                
	
                  5.

                	
                  REGISTRATION
      EXPENSES

                	
                  8

                
	
                  6.

                	
                  DELAY
      OF REGISTRATION AND PAYMENTS

                	
                  8

                
	
                  7.

                	
                  INDEMNIFICATION

                	
                  8

                
	
                  8.

                	
                  REPORTS
      UNDER THE EXCHANGE ACT

                	
                  10

                
	
                  9.

                	
                  TRANSFER
      OF REGISTRATION RIGHTS

                	
                  11

                
	
                  10.

                	
                  PRE-EMPTIVE
      RIGHTS

                	
                  11

                
	
                  11.

                	
                  BOARD
      NOMINATIONS

                	
                  12

                
	
                  12.

                	
                  ENTIRE
      AGREEMENT

                	
                  14

                
	
                  13.

                	
                  MISCELLANEOUS

                	
                  14

                

        

      

    

     

    
      
         

      

      
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      WORLDGATE
COMMUNICATIONS, INC.

    

     

    REGISTRATION
RIGHTS AND GOVERNANCE AGREEMENT

     

    This
REGISTRATION RIGHTS AND GOVERNANCE AGREEMENT (this “Agreement”) is made
as of April 6, 2009 by and among (i) WorldGate Communications, Inc., a
Delaware corporation (the “Company”),
(ii) WGI Investor LLC, a Delaware limited liability company (the “Purchaser”), and
(iii) ACN Digital Phone Service, LLC, a Delaware limited liability company
(“ACN”).

     

    WHEREAS,
the Company has agreed to issue and sell to the Purchaser, and the Purchaser has
agreed to purchase from the Company, (i) an aggregate of 202,462,155 shares
(subject to adjustment as set forth in the Purchase Agreement) (the “Shares”) of the
authorized but unissued shares of common stock, $0.01 par value per share, of
the Company (including any securities into which or for which such shares may be
exchanged for, or converted into, pursuant to any stock dividend, stock split,
stock combination, recapitalization, reclassification, reorganization or other
similar event, the “Common Stock”) and
(ii) the Anti-Dilution Warrant (as defined below), in each case all upon the
terms and subject to the conditions set forth in that certain Securities
Purchase Agreement, dated as of December 12, 2008, between the Company and the
Purchaser (the “Purchase
Agreement”);

     

    WHEREAS,
the Company has agreed to (i) enter into that certain ACN Consumer
Communications Equipment Master Purchase Agreement with ACN, as of the date
hereof, pursuant to which the Company will sell video phones to ACN (the “Commercial
Agreement”) and (ii) issue and sell to ACN, the ACN Warrant (as defined
below); and

     

    WHEREAS,
the terms of the Purchase Agreement provide that it shall be a condition
precedent to the closing of the transactions thereunder, for the Company, the
Purchaser and ACN to enter into, execute and deliver this
Agreement.

     

    NOW,
THEREFORE, in consideration of the premises and mutual covenants contained
herein, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:

     

    1.           DEFINITIONS.  The
following terms shall have the meanings provided therefor below or elsewhere in
this Agreement as described below:

     

    “ACN Warrant” means
that certain Warrant issued by the Company to ACN as of the date hereof in
connection with the Commercial Agreement.

     

    “Anti-Dilution
Warrant” means that certain Warrant to purchase shares of Common Stock
issued by the Company to the Purchaser as of the date hereof in connection with
the Purchase Agreement.

     

    “Board” means the
board of directors of the Company.

     

    “Business Day” means
any day except Saturday, Sunday and any day which shall be a federal legal
holiday or a day on which banking institutions in the State of Delaware are
authorized or required by law or other governmental action to
close.

     

    “Closing Date” means the date
of the closing of the transactions contemplated by the Purchase
Agreement.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.

     

    “Existing Contingent
Equity” means any and all outstanding options, restricted stock,
convertible notes and debentures, warrants, rights, pledges, calls, puts,
contracts or other rights, agreements or commitments to subscribe for, purchase,
or issue any equity interests of the Company or that grant any rights to
acquire, any of the capital stock of the Company, existing as of the date
hereof, but expressly excluding the YA Global Warrants (as defined in the
Purchase Agreement).

     

    “Holders” means each
of the Purchaser and ACN.

     

    “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.

     

    “Prospectus” means the
prospectus included in any Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from a
prospectus filed as part of an effective Registration Statement in reliance upon
Rule 430A promulgated under the Securities Act), as amended or supplemented by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by such Registration Statement,
and all other amendments and supplements to the Prospectus, including
post-effective amendments, and all material incorporated by reference in such
Prospectus.

     

    “Registrable Securities” means, at
the relevant time of reference thereto, any shares of Common Stock or any shares
of Common Stock underlying any warrant, right or other security held by any of
the Holders now or at any time in the future (including in each case any shares
of capital stock that may be issued in respect thereof pursuant to a stock
split, stock dividend, recombination, reclassification, exchange, conversion or
the like), provided, however, that the
term “Registrable
Securities” shall not include any securities referred to above that are
actually sold pursuant to a registration statement that has been declared
effective under the Securities Act by the SEC.

     

    “Registration
Statement” means the Mandatory Registration Statement, any Demand
Registration Statement, and any additional registration statements contemplated
by this Agreement, including (in each case) the Prospectus, amendments and
supplements to such registration statement or Prospectus, including pre- and
post-effective amendments, all exhibits thereto, and all material incorporated
by reference in such registration statement or Prospectus.

     

    “Rule 144” means Rule 144
promulgated under the Securities Act and any successor or substitute rule, law
or provision.

     

    “SEC” means the
Securities and Exchange Commission.

     

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

     

    “Warrants” means the
ACN Warrant and the Anti-Dilution Warrant.

     

    “Warrant Shares” means
the shares of Common Stock issued or issuable upon the exercise of the
Warrants.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    2.           REGISTRATION.

     

    (a)           Mandatory Registration
Statement.  Not later than thirty (30) days after the date that
the Company becomes eligible to file on Form S-3 (or any successor form
thereto), the Company shall file with the SEC a shelf registration statement
pursuant to Rule 415 of the Securities Act (the “Mandatory Registration
Statement”) on Form S-3 (or any successor form thereto) (such date, the
“Mandatory
Registration Statement Filing Date”), with respect to the resale, from
time to time, covering all of the Registrable Securities held by the
Holders.  The Mandatory Registration Statement shall permit the
Holders to offer and sell, on a delayed or continuous basis pursuant to Rule 415
under the Securities Act or any similar rule that may be adopted by the SEC, any
or all of the Registrable Securities.  Such Registration Statement
also shall cover, to the extent allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable
Securities.  Such Registration Statement shall not include any shares
of Common Stock or other securities for the account of any other holder without
the prior written consent of the Holders, which consent shall not be
unreasonably withheld.  The Company agrees to use its reasonable best
efforts to cause the Mandatory Registration Statement to be declared effective
as soon as possible but in no event later than (the “Mandatory Effective Date”) forty-five
(45) calendar days after the Mandatory Registration Statement Filing Date (if
there is no SEC review of the Mandatory Registration Statement) or one hundred
twenty (120) calendar days after the Mandatory Registration Statement Filing
Date (if there is an SEC review of the Mandatory Registration Statement), and to
file with the SEC, within three (3) Business Days of the date that the Company
is notified (orally or in writing, whichever is earlier) by the SEC that the
Mandatory Registration Statement will not be “reviewed” or will not be subject
to further review, a request for acceleration of effectiveness in accordance
with Rule 461 promulgated under the Securities Act (an “Acceleration
Request”), which request shall request an effective date that is within
three (3) Business Days of the date of such request.  The Company
shall notify each Holder in writing promptly (and in any event within one (1)
Business Day) after the Company’s submission of an Acceleration Request to the
SEC.  The Company shall promptly prepare and file with the SEC (i)
such amendments (including post-effective amendments) and supplements to such
Mandatory Registration Statement or (ii) an additional Registration Statement in
the event that the original Mandatory Registration Statement does not cover all
of the Registrable Securities.  The Company shall be required to keep
the Mandatory Registration Statement continuously effective (including through
the filing of any required post-effective amendments) until all of the
Registrable Securities covered by such Mandatory Registration Statement (y)
cease to be Registrable Securities or (z) are eligible for resale under Rule 144
without limitation.

     

    (b)           Demand
Registration.  Notwithstanding anything to the contrary in this
Agreement, upon the written request of any of the Holders (the date of such
request, the “Demand
Date”) the Company shall file with the SEC, as promptly as possible after
the Demand Date, and in any event no later than forty-five (45) days after
the Demand Date (in the event of a filing on Form S-1) or ten (10) days after
the Demand Date (in the event of a filing on Form S-3) (such date, the “Filing Date”), a
registration statement on Form S-3 (or other available form, including Form S-1)
to register all or part of the Registrable Securities under and in accordance
with the Securities Act (the “Demand Registration
Statement”), so long as such Registrable Securities are not then subject
to an effective Registration Statement and eligible for resale without
limitation thereunder.  Such Demand Registration Statement shall also
cover, to the extent allowable under the Securities Act and the rules
promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable
Securities.  Such Registration Statement shall not include any shares
of Common Stock or other securities for the account of any other holder without
the prior written consent of the Holders, which consent shall not be
unreasonably withheld.  The Company agrees to use its reasonable best
efforts to cause the Demand Registration Statement to be declared effective as
soon as possible but in no event later than (the “Demand Effective
Date”) forty-five (45) calendar days after the Filing Date (if there is
no SEC review of the Demand Registration Statement) or one hundred twenty (120)
calendar days after the Filing Date (if there is an SEC review of the Demand
Registration Statement), and to file with the SEC, within three (3) Business
Days of the date that the Company is notified (orally or in writing, whichever
is earlier) by the SEC that the Demand Registration Statement will not be
“reviewed” or will not be subject to further review, an Acceleration Request,
which request shall request an effective date that is within three (3) Business
Days of the date of such request.  The Company shall notify each
Holder in writing promptly (and in any event within one (1) Business Day) after
the Company’s submission of an Acceleration Request to the SEC.  The
Company shall promptly prepare and file with the SEC (i) such amendments
(including post-effective amendments) and supplements to such Demand
Registration Statement or (ii) an additional Registration Statement in the event
that the original Demand Registration Statement does not cover all of the
Registrable Securities requested to be so registered.  The Company
shall be required to keep the Demand Registration Statement continuously
effective (including through the filing of any required post-effective
amendments) until all of the Registrable Securities covered by such Demand
Registration Statement (y) cease to be Registrable Securities or (z) are
eligible for resale under Rule 144 without limitation.

    
      
         

      

      
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    (c)           Excluded Registrable
Securities.

     

    (i)           Notwithstanding
anything to the contrary contained in this Agreement, if the staff of the SEC
(the “Staff”)
or the SEC seeks to characterize any offering pursuant to a Registration
Statement filed pursuant to this Agreement as constituting a primary offering of
securities by or on behalf of the Company, or in any other matter, such that the
Staff or the SEC does not permit such Registration Statement to become effective
and used for resales in a continuous at the market offering pursuant to Rule 415
under the Securities Act by the Holders (or otherwise as may be acceptable to
the Holders) without being named therein as “underwriters” (a “Resale Registration
Statement”), and the Company has used its reasonable best efforts to
contest such determination, then the Company shall have the right to reduce the
number of Registrable Securities to be included in such Registration Statement
by the Holders, to the extent that the Staff or the SEC shall permit such
Registration Statement to become effective as a Resale Registration
Statement.  In making such reduction, the Company shall reduce the
number of Registrable Securities to be included by all Holders on a pro rata
basis (based upon the number of Registrable Securities otherwise required to be
included for each Holder), unless the inclusion of Registrable Securities by a
particular Holder or a particular type of Holder is the cause of the refusal by
the Staff or the SEC to allow such registration to become effective as a Resale
Registration Statement, in which event the Registrable Securities held by such
Holder or type of Holder shall be the only Registrable Securities subject to
reduction (and if by a set of Holders on a pro rata basis with respect to such
Holders or on such other basis as would result in the exclusion of the least
number of shares by all such Holders).  In addition, if the Staff or
the SEC requires any of the Holders to be identified as an “underwriter” in
order to permit such Registration Statement to become effective, and such Holder
does not consent to being so named as an underwriter in such Registration
Statement, then, in each such case, the Company shall be entitled to reduce the
total number of Registrable Securities to be registered on behalf of such
Holder, until such time as the Staff or the SEC does not require such
identification.

     

    (ii)           In
the event of any reduction in Registrable Securities pursuant to this Section
2(c), the Holders shall have the right, upon delivery of a written request to
the Company, to require the Company to file a Resale Registration Statement
under Rule 415 within thirty (30) days after its receipt of such request
(subject to (x) any restrictions imposed by Rule 415 or (y) comments by the
Staff or the SEC) for resale by the Holders in a manner reasonably acceptable to
the Holders, and the Company shall, following such request, use its reasonable
best efforts to cause such registration statement to be declared and kept
effective in the same manner as otherwise contemplated in this Agreement for
Registration Statements hereunder and under the same timing and procedural
guidelines set forth in Section 2(b) for a Demand Registration
Statement.

    
      
         

      

      
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    (d)           Holder
Information.  It shall be a condition precedent to the
obligations of the Company to register Registrable Securities for the account of
an Holder pursuant to this Section 2 and Section 3 that such Holder furnish to
the Company such information regarding itself, the Registrable Securities held
by it, and the method of disposition of such securities as shall be required to
effect the registration of such Holder’s Registrable Securities.

     

    (e)           Registration Rights of Other
Persons.  Except as disclosed in Section 3.3 of the Purchase
Agreement, the Company hereby represents and warrants to the Holders that no
Person other than the Holders has any registration rights in respect of the
securities of the Company.  The Company hereby agrees that it shall
not grant any registration rights to any Person (other than the Holders) without
the prior written consent of the Holders.

     

    3.           “PIGGYBACK
REGISTRATION”.

     

    (a)           If
at any time any Registrable Securities are not able to be resold pursuant to an
effective Registration Statement, and the Company proposes to register any of
its Common Stock under the Securities Act, whether as a result of an offering
for its own account or the account of others (but excluding any registrations to
be effected on Forms S-4 or S-8 or other applicable successor Forms), the
Company shall, each such time, give to the Holders twenty (20) days prior
written notice of its intent to do so, and such notice shall describe the
proposed registration and shall offer such Holders the opportunity to register
such number of Registrable Securities as each such Holder may
request.  Upon the written request of any Holder given to the Company
within fifteen (15) days after the receipt of any such notice by the
Company, the Company shall include in such Registration Statement all or part of
the Registrable Securities of such Holder, to the extent requested to be
registered.

     

    (b)           If
a registration pursuant to this Section 3 involves an underwritten offering and
the managing underwriter shall advise the Company in writing that, in its
opinion, the number of shares of Common Stock requested by the Holders to be
included in such registration is likely to affect materially and adversely the
success of the offering or the price that would be received for any shares of
Common Stock offered in such offering, then, notwithstanding anything in this
Section 3 to the contrary, the Company shall only be required to include in such
registration, to the extent of the number of shares of Common Stock which the
Company is so advised can be sold in such offering, (i) first, the number of
shares of Common Stock requested to be included in such registration for the
account of any stockholders of the Company (including the Holders), pro rata among such
stockholders on the basis of the number of shares of Common Stock that each of
them has requested to be included in such registration, and (ii) second, any
shares of Common Stock proposed to be included in such registration for the
account of the Company.

     

    (c)           In
connection with any offering involving an underwriting of shares, the Company
shall not be required under this Section 3 or otherwise to include the
Registrable Securities of any Holder therein unless such Holder accepts and
agrees to the terms of the underwriting, which shall be
reasonable  and customary, as agreed upon between the Company and the
underwriters selected by the Company.

     

    4.           OBLIGATIONS OF THE
COMPANY.  In connection with the Company’s registration
obligations hereunder, the Company shall, as expeditiously as
practicable:

    
      
         

      

      
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    (a)           No
less than five (5) Business Days prior to filing, as required hereunder, the
Mandatory Registration Statement or Prospectus or any amendments or supplements
thereto (including any document that would be incorporated or deemed to have
been incorporated therein by reference (other than documents containing material
non-public information)) or any other registration statement contemplated by
this Agreement, the Company shall (i) furnish to the Holders and the
Holders’ counsel copies of all such documents to be filed with the SEC, which
documents shall be subject to the review of the Holders and the Holders’
counsel, (ii) cause its officers and directors, counsel and certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of the Holders’ counsel, to conduct a reasonable
investigation within the meaning of the Securities Act, and (iii) notify
the Holders and the Holders’ counsel of any stop order issued or threatened by
the SEC and use reasonable best efforts to prevent the entry of such stop order
or to remove it if entered.  The Company shall not file any
Registration Statement, Prospectus or any amendments or supplements (other than
periodic reports required under the Exchange Act) thereto to which the Holders
shall reasonably object to in writing prior to filing; provided, however that the
deadline set forth in Section 2 hereof by which date the Mandatory Registration
Statement and any Demand Registration Statement are to be filed shall be tolled
during any period in which the Company and the Holders address matters raised by
the Holders in such written objection.

     

    (b)           (i)
Prepare and file with the SEC such amendments and supplements, including
post-effective amendments, to each Registration Statement and the Prospectus
used in connection therewith as may be necessary to keep the Registration
Statement continuously effective as required herein, and prepare and file with
the SEC such additional Registration Statements as necessary to register for
resale under the Securities Act all of the Registrable Securities (including
naming any permitted transferees of Registrable Securities as selling
stockholders in such Registration Statement); (ii) cause any related Prospectus
to be amended or supplemented by any required Prospectus supplement, and as so
supplemented or amended to be filed pursuant to Rule 424; (iii) respond as
promptly as possible to any comments received from the SEC with respect to each
Registration Statement or any amendment thereto and as promptly as possible
provide the Holders true and complete copies of all correspondence from and to
the SEC relating to the Registration Statement; and (iv) comply with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by such Registration Statement
as so amended or in such Prospectus as so supplemented.

     

    (c)           Notify
the Holders in accordance herewith as promptly as possible (i) when the SEC
notifies the Company whether there will be a “review” of a Registration
Statement and whenever the SEC comments in writing on such Registration
Statement; and (ii) when a Registration Statement, or any post-effective
amendment or supplement thereto, has become effective, and after the
effectiveness thereof: (A) of any request by the SEC or any other federal or
state governmental authority for amendments or supplements to the Registration
Statement or Prospectus or for additional information; (B) of the issuance by
the SEC or any state securities commission of any stop order suspending the
effectiveness of the Registration Statement covering any or all of the
Registrable Securities or the initiation of any proceedings for that purpose;
and (C) of the receipt by the Company of any notification with respect to the
suspension of the qualification or exemption from qualification of any of the
Registrable Securities for sale in any jurisdiction, or the initiation or
threatening of any proceeding for such purpose.  Without limitation of
any remedies to which the Holders may be entitled under this Agreement, if any
of the events described in Section 4(c)(ii)(A), 4(c)(ii)(B), and 4(c)(ii)(C)
occur, the Company shall use reasonable best efforts to respond to and correct
the event.

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    (d)           Notify
the Holders in accordance herewith as promptly as possible of the happening of
any event as a result of which the Prospectus included in or relating to a
Registration Statement contains an untrue statement of a material fact or omits
any fact necessary to make the statements therein not misleading; and,
thereafter, as promptly as possible prepare (and, when completed, give notice to
the Holders) a supplement or amendment to such Prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such Prospectus will
not contain an untrue statement of a material fact or omit to state any fact
necessary to make the statements therein not misleading; provided that upon
such notification by the Company, the Holders will not offer or sell Registrable
Securities until the Company has notified the Holders that it has prepared a
supplement or amendment to such Prospectus and delivered copies of such
supplement or amendment to the Holders (it being understood and agreed by the
Company that the foregoing proviso shall in no way diminish or otherwise impair
the Company’s obligation to as promptly as possible prepare a Prospectus
amendment or supplement as above provided in this Section 4(d) and deliver
copies of same as provided herein).

     

    (e)           Upon
the occurrence of any event described in Section 4(d) hereof, as promptly as
possible, prepare a supplement or amendment, including a post-effective
amendment, to the Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated therein by
reference, and file any other required document so that, as thereafter
delivered, neither the Registration Statement nor such Prospectus will contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they are made, not misleading.

     

    (f)           Use
reasonable best efforts to avoid the issuance of or, if issued, obtain the
withdrawal of, (i) any order suspending the effectiveness of any Registration
Statement or (ii) any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities for sale in any
jurisdiction, as promptly as possible.

     

    (g)           Furnish
to the Holders in accordance with Section 13(c), without charge, at least one
conformed copy of each Registration Statement and each amendment thereto, and
all exhibits to the extent requested by the Holders and the Holders’ counsel
(including those previously furnished or incorporated by reference) as promptly
as possible after the filing of such documents with the SEC.

     

    (h)           As
promptly as possible furnish to the Holders, without charge, such number of
copies of a Prospectus, including a preliminary Prospectus, in conformity with
the requirements of the Securities Act, and such other documents (including,
without limitation, Prospectus amendments and supplements) as the Holders may
reasonably request in order to facilitate the disposition of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto.  The Company hereby consents to the use of such Prospectus
and each amendment or supplement thereto by the Holders in connection with the
offering and sale of the Registrable Securities covered by such Prospectus and
any amendment or supplement thereto to the extent permitted by federal and state
securities laws and regulations.

     

    (i)           Use
reasonable best efforts to register and qualify (or obtain an exemption from
such registration and qualification) the Registrable Securities under such other
securities or blue sky laws of such jurisdictions as each Holder shall
reasonably request, to keep such registration or qualification (or exemption
therefrom) effective during the periods each Registration Statement is
effective, and do any and all other acts or things which may be reasonably
necessary or advisable to enable each Holder to consummate the public sale or
other disposition of Registrable Securities in such jurisdiction, provided that the
Company shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions where it is not then qualified or subject to
process.

     

    (j)           Cooperate
with the Holders to facilitate the timely preparation and delivery of
certificates representing the Registrable Securities to be delivered to a
transferee pursuant to a Registration Statement, which certificates shall be
free, to the extent permitted by the Purchase Agreement and applicable law, of
all restrictive legends, and to enable such Registrable Securities to be in such
denominations and registered in such names as the Holders may
request.

    
      
         

      

      
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    (k)           Cooperate
with any reasonable due diligence investigation undertaken by the Holders, any
managing underwriter participating in any disposition pursuant to a Registration
Statement and any attorney, accountant or other agent retained by the Holders or
any managing underwriter, in connection with the sale of the Registrable
Securities, including, without limitation, making available any documents and
information; provided, however, that the
Company will not deliver or make available to any Holder material, non-public
information unless such Holder specifically requests and consents in advance in
writing to receive such material, non-public information and, if requested by
the Company, such Holder agrees in writing to treat such information as
confidential.

     

    (l)           At
the request of an Affiliate, amend any Registration Statement to include such
Affiliate as a selling stockholder in such Registration Statement.

     

    (m)           Comply
with all applicable rules and regulations of the SEC in all material
respects.

     

    5.           REGISTRATION EXPENSES.  The
Company shall pay for all of its expenses incurred in connection with a
registration pursuant to this Agreement and compliance with Section 4 of this
Agreement, including without limitation (i) all registration, filing and
qualification fees and expenses (including without limitation those related to
filings with the SEC and in connection with applicable state securities or blue
sky laws), (ii) all expenses relating to the preparation, printing,
distribution and reproduction of the Registration Statement, the related
Prospectus, each amendment or supplement to the foregoing, the certificates
representing the Registrable Securities and all other documents related thereto,
(iii) all messenger, telephone and delivery expenses incurred by the
Company, (iv) all fees and disbursements of counsel for the Company, and
(v) all fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement; provided, however, that any reasonable fees and expenses incurred by
the Company solely in connection with any Registration Statement that includes
only those Registrable Securities other than the Shares and the Warrant Shares
(including in each case any shares of capital stock that may be issued in
respect thereof pursuant to a stock split, stock dividend, recombination,
reclassification, exchange, conversion or the like) shall be reimbursed to the
Company by the applicable Holder.

     

    6.           DELAY OF REGISTRATION AND
PAYMENTS.  Subject to Section 13(d) hereof, the Holders and the
Company (other than with respect to Section 4(d) hereof) shall not take any
action to restrain, enjoin or otherwise delay any registration as the result of
any controversy which might arise with respect to the interpretation or
implementation of this Agreement.

     

    7.           INDEMNIFICATION.

     

    (a)           The
Company agrees to indemnify and hold harmless each Holder and each officer,
director, fiduciary, agent, investment advisor, employee, member (or other
equity holder), general partner and limited partner (and affiliates thereof) of
such Holder, each broker or other person acting on behalf of such Holder and
each person, if any, who controls such Holder within the meaning of either the
Securities Act or the Exchange Act, against any and all losses, claims, damages
or liabilities, joint or several, (the “Losses”) to which
they or any of them may become subject under the Securities Act, the Exchange
Act or other federal or state statutory law or regulation, at common law or
otherwise, insofar as such Losses (or actions in respect thereof) arise out of
or relate to any untrue or alleged untrue statement of a material fact contained
in the Registration Statement or any Prospectus forming part thereof or in any
amendment or supplement thereto, or arise out of or relate to the omission or
alleged omission to state therein a material fact required to be stated therein,
or necessary to make the statements therein not misleading, or any violation by
the Company of the Securities Act or state securities or blue sky laws
applicable to the Company and leading to action or inaction required of the
Company in connection with such registration or qualification under such
Securities Act or state securities or blue sky laws; and, subject to the
provisions of Section 7(c) hereof, the Company will reimburse on demand such
Holder, such broker or other person acting on behalf of such Holder or such
officer, director, fiduciary, employee, member (or other equity holder), general
partner, limited partner, affiliate or controlling person for any legal or other
expenses reasonably incurred by any of them in connection with investigating or
defending any such Loss; provided, however, that the
indemnity agreement contained in this Section 7(a) shall not apply to amounts
paid in settlement of any such Losses if such settlement is effected without the
consent of the Company (which consent shall not be unreasonably withheld), nor
shall the Company be liable in any such case for any such Loss to the extent
that it arises out of or is based upon an untrue statement of any material fact
contained in the Registration Statement or an omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in the
Registration Statement in reliance upon and in conformity with written
information furnished by such Holder expressly for use in connection with such
Registration Statement.

    
      
         

      

      
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    (b)           Each
Holder, severally and not jointly, agrees to indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
Registration Statement, each person, if any, who controls the Company within the
meaning of the Securities Act, and the other Holders against any Losses to which
the Company or any such director, officer, controlling person or other Holder
may become subject to, under the Securities Act, the Exchange Act or other
federal or state statutory law or regulation, at common law or otherwise,
insofar as such Losses (or actions in respect thereto) arise out of or are based
upon any untrue statement of any material fact contained in the Registration
Statement or any Prospectus forming part thereof or in any amendment or
supplement thereto, or arise out of or relate to the omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, in each case to the extent that such untrue statement or
alleged untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished by such Holder
expressly for use in connection therewith; and, subject to the provisions of
Section 7(d) hereof, such Holder will reimburse on demand any legal or
other expenses reasonably incurred by the Company or any such director, officer,
controlling person or other Holder in connection with investigating or defending
any such Loss, provided, however, that the
maximum amount of liability of such Holder hereunder shall be limited to the
proceeds (net of underwriting discounts and commissions, if any) actually
received by such Holder from the sale of Registrable Securities covered by such
Registration Statement; and provided, further, however, that the
indemnity agreement contained in this Section 7(b) shall not apply to amounts
paid in settlement of any such Losses if such settlement is effected without the
consent of such Holder against which the request for indemnity is being made
(which consent shall not be unreasonably withheld).

     

    (c)           As
promptly as possible after receipt by an indemnified party under this Section 7
of notice of the threat, assertion or commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made against any
indemnifying party under this Section 7, notify the indemnifying party in
writing of the commencement thereof and the indemnifying party shall have the
right to participate in and, to the extent the indemnifying party desires,
jointly with any other indemnifying party similarly noticed, to assume at its
expense the defense thereof with counsel mutually satisfactory to the parties;
provided, however, that, the
failure to notify an indemnifying party promptly of the threat, assertion or
commencement of any such action shall not relieve such indemnifying party of any
liability to the indemnified party under this Section 7 except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
indemnifying party.

    
      
         

      

      
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    (d)           If
any indemnified party shall have reasonably concluded that there may be one or
more legal defenses available to such indemnified party which are different from
or additional to those available to the indemnifying party, or that such claim
or litigation involves or could have an effect upon matters beyond the scope of
the indemnity agreement provided in this Section 7, the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
indemnified party, and such indemnifying party shall reimburse such indemnified
party and any person controlling such indemnified party for the fees and
expenses of counsel retained by the indemnified party which are related to the
matters covered by the indemnity agreement provided in this Section
7.  Subject to the foregoing, an indemnified party shall have the
right to employ separate counsel in any such action and to participate in the
defense thereof but the fees and expenses of such counsel shall not be at the
expense of the Company.

     

    (e)           If
the indemnification provided for in this Section 7 from the indemnifying
party is applicable by its terms but unavailable to an indemnified party
hereunder in respect of any Losses, then the indemnifying party, in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such Losses in such proportion
as is appropriate to reflect the relative fault of the indemnifying party and
indemnified party in connection with the actions which resulted in such Losses,
as well as any other relevant equitable considerations.  The relative
faults of such indemnifying party and indemnified party shall be determined by
reference to, among other things, whether any action in question, including any
untrue or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties’
relative intent, knowledge, access to information and opportunity to correct or
prevent such action.  The amount paid or payable by a party as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in Sections 7(a), 7(b), 7(c) and 7(d), any legal
or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding.  No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any
person.  The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 7(e) were determined by pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph.  Any amount to be paid by the Company to any Holder under
this Section 7 shall be paid, at the election of such Holder, either in (i) cash
or (ii) shares of Common Stock of the Company, which number of shares to be paid
shall be determined by dividing (A) the aggregate amount of such payment by (B)
the volume-weighted average closing price per share of the Common Stock (as
reported on the primary exchange or over-the-counter quotation system on which
the Company’s Common Stock is then traded) for the twenty (20) trading days
prior to such payment.

     

    (f)           The
indemnity and contribution agreements contained in this Section 7 are in
addition to any liability that any indemnifying party may have to any
indemnified party.

     

    8.           REPORTS UNDER THE EXCHANGE
ACT.

     

    (a)           With
a view to making available to the Holders the benefits of Rule 144 and any other
rule or regulation of the SEC that may at any time permit the Holders to sell
the Registrable Securities to the public without registration, the Company
agrees to use reasonable best efforts to:  (i) make and keep
public information available, as those terms are understood and defined in Rule
144, (ii) file with the SEC in a timely manner all reports and other
documents required to be filed by an issuer of securities registered under the
Securities Act or the Exchange Act, (iii) undertake any additional actions
reasonably necessary to maintain the availability of a Registration Statement,
including any successor or substitute forms, or the use of Rule 144, and
(iv) as long as any Holder owns any Shares or Warrant Shares and is subject
to any restrictions on resale, furnish in writing upon such Holder’s request a
written statement by the Company that it has complied with the reporting
requirements of Rule 144 and of the Securities Act and the Exchange Act,
and to furnish to such Holder a copy of the most recent annual and quarterly
reports of the Company, and such other reports and documents so filed by the
Company as may be reasonably requested in availing such Holder of any rule or
regulation of the SEC permitting the selling of any such Shares or Warrants
Shares without registration.

    
      
         

      

      
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    (b)           Without
limiting the generality of Section 8(a), the Company agrees to use reasonable
best efforts to take all such actions and maintain all such filings as may be
necessary or desirable in order to enable the Company to become eligible to use
Form S-3 in respect of any securities to be registered hereunder, and thereafter
to maintain such eligibility until all of the Registrable Securities have been
or can be sold without any volume or other restriction.

     

    9.           TRANSFER OF REGISTRATION
RIGHTS.  Each Holder may assign or transfer any or all of its
rights under this Agreement to any Person who acquires at least twenty-five
million (25,000,000) shares of Common Stock, provided such
assignee or transferee agrees in writing to be bound by the provisions hereof
that apply to such assigning or transferring Holder.  Upon any such,
and each successive, assignment or transfer to any permitted assignee or
transferee in accordance with the terms of this Section 9, such permitted
assignee or transferee shall be deemed to be a “Holder” for all
purposes of this Agreement.

     

    10.           PRE-EMPTIVE
RIGHTS.

     

    (a)           If
at any time or from time to time after the Closing Date, but subject to Section
10(d) below, the Company authorizes the issuance and sale of any shares of any
class or series of the Company’s capital stock, or any other securities
convertible into or exercisable for Common Stock or shares of any class or
series of the Company’s capital stock, including, without limitation, preferred
shares, convertible securities, securities, redeemable securities, and debt with
warrants, the Company will first offer to sell to each Holder a pro rata portion of such
securities equal to the percentage determined by dividing (x) the sum of (i) the
number of shares of Common Stock then held by such Holder plus (ii) the number
of shares of Common Stock issuable to such Holder upon the conversion of all
outstanding convertible securities (including, without limitation, preferred
shares) and the exercise of all outstanding options and warrants, then held by
such Holder, by (y) the sum of (i) the number of shares of Common Stock then
outstanding plus (ii) the number
of shares of Common Stock then issuable upon the conversion of all outstanding
convertible securities (including, without limitation, preferred shares) and the
exercise of all outstanding options and warrants.  Each Holder will be
entitled to purchase all or part of such securities at the same price and on the
same terms as such securities are to be offered to any other
Persons.

     

    (b)           Holders’ Exercise of
Right.  Each Holder entitled to purchase securities under this
Section 10 must exercise its pre-emptive rights hereunder within ten (10)
business days after receipt of written notice from the Company describing in
reasonable detail the securities being offered, the purchase price thereof, the
payment terms and such Holder’s percentage allotment.

     

    (c)           Company’s Exercise of
Right.  Upon the expiration of the offering period described
above, the Company will be free to sell such securities which the Holders
entitled to purchase such securities have not elected to purchase during the
ninety (90) days following such expiration on terms and conditions no more
favorable to the purchasers thereof, in the aggregate, than those offered to the
Holders.  Any securities offered or sold by the Company after such
ninety (90) day period must be reoffered to the Holders pursuant to the terms of
this Section 10.

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    (d)           Exempt
Securities.  The pre-emptive rights established by this Section
10 shall have no application to:

     

    (i)           the
grant or issuance of shares of Common Stock to employees, directors and
consultants of the Company pursuant to the Company’s 2003 Equity Incentive Plan
or a successor plan approved by the Board;

     

    (ii)           the
issuance of securities pursuant to the Existing Contingent Equity;
or

     

    (iii)           the
issuance of Warrant Shares pursuant to the Warrants.

     

    11.           BOARD
NOMINATIONS.

     

    (a)           Purchaser Nomination
Rights.  Purchaser shall have the right, based upon its
aggregate beneficial ownership of Common Stock (as calculated for purposes of
Section 13 of the Exchange Act, and including without limitation any Common
Stock underlying any warrant, right or other security convertible into or
exchangeable for Common Stock) (“Aggregate Beneficial
Ownership”), to designate for nomination by the Board a number of
individuals to serve as directors of the Company (each a “Purchaser Nominated
Director”) as follows:

     

    (i)           if
the Purchaser’s Aggregate Beneficial Ownership is equal to fifty percent (50%)
or more of the Company’s voting stock, the Purchaser shall have the right to
nominate four (4) Purchaser Nominated Directors;

     

    (ii)           if
the Purchaser’s Aggregate Beneficial Ownership is less than fifty percent (50%)
but equal to or greater than forty-three percent (43%) of the Company’s voting
stock, the Purchaser shall have the right to nominate three (3) Purchaser
Nominated Directors;

     

    (iii)           if
the Purchaser’s Aggregate Beneficial Ownership is less than forty-three percent
(43%) but equal to or greater than twenty-nine percent (29%) of the Company’s
voting stock, the Purchaser shall have the right to nominate two (2) Purchaser
Nominated Directors; and

     

    (iv)           if
the Purchaser’s Aggregate Beneficial Ownership is less than twenty-nine percent
(29%) but equal to or greater than fourteen percent (14%) of the Company’s
voting stock, the Purchaser shall have the right to nominate one (1) Purchaser
Nominated Director.

     

    (b)           Composition of the
Board.  The parties hereto each acknowledge and agree that
Robert Stevanovski, Gregory Provenzano, Anthony Cassara and David Stevanovski
are the initial Purchaser Nominated Directors for purposes of this
Agreement.

     

    (c)           Reductions in Aggregate
Beneficial Ownership.  Notwithstanding anything in this Section
11 to the contrary, from and after the date hereof:

     

    (i)           if
the Purchaser’s Aggregate Beneficial Ownership falls below fifty percent (50%)
but is equal to or greater than forty-three percent (43%) of the Company’s
voting stock, one (1) Purchaser Nominated Director then serving on the Board
shall tender a Written Resignation to the Board (provided, however, that if
three (3) or fewer Purchaser Nominated Directors are then serving on the Board,
then no such Written Resignation shall be required to be
tendered);

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    (ii)           if
the Purchaser’s Aggregate Beneficial Ownership falls below forty-three percent
(43%) but is equal to or greater than twenty-nine percent (29%) of the Company’s
voting stock, one (1) additional Purchaser Nominated Director then serving on
the Board shall tender a Written Resignation to the Board (provided, however, that if two
(2) or fewer Purchaser Nominated Directors are then serving on the Board, then
no such Written Resignation shall be required to be tendered);

     

    (iii)           if
the Purchaser’s Aggregate Beneficial Ownership falls below twenty-nine percent
(29%) but is equal to or greater than fourteen percent (14%) of the Company’s
voting stock, one (1) additional Purchaser Nominated Director then serving on
the Board shall tender a Written Resignation to the Board (provided, however, that if one
(1) or fewer Purchaser Nominated Directors are then serving on the Board, then
no such Written Resignation shall be required to be tendered); and

     

    (iv)           if
the Purchaser’s Aggregate Beneficial Ownership falls below fourteen percent
(14%) of the Company’s voting stock, each remaining Purchaser Nominated Director
then serving on the Board shall tender a Written Resignation to the
Board.

     

    For the
purposes of this Agreement, the term “Written Resignation”
shall mean a written offer to resign from the Board (including all committees
thereof on which such director may serve), addressed to the Chairman of the
Board or the lead independent director of the Board, which offer shall be deemed
effective upon acceptance by action by a majority of the members of the Board
who are not Purchaser Nominated Directors (“Non-Purchaser
Directors”).  Notwithstanding anything herein to the contrary, if and
to the extent any Written Resignation is tendered to the Board pursuant to the
requirements of this Section 11, but a majority of the Non-Purchaser Directors
does not accept such Written Resignation within ten (10) Business Days following
the receipt by the Chairman or lead independent director of such Written
Resignation, (y) such Written Resignation shall be deemed to have been
affirmatively rejected by the Board and shall no longer be of any force and
effect, and (z) from and after such time such director shall no longer be deemed
a Purchaser Nominated Director.

     

    (d)           Efforts to Effect Election
of Purchaser Nominated Directors.  The Company (including
without limitation the Board and all applicable committees thereof) shall use
its reasonable best efforts to cause each Purchaser Nominated Director
designated by the Purchaser in accordance with the terms hereof to be duly
elected or appointed as a director of the Company in accordance with the terms
hereof, the Company’s bylaws and applicable law.  Without limiting the
foregoing, with respect to any meeting of the Company’s stockholders at which
directors are to be elected, if the Purchaser is entitled to designate one (1)
or more Purchaser Nominated Directors in accordance with the terms hereof, the
Board (and any nominating or similar committee thereof) shall unanimously
recommend to the Company’s stockholders that such Purchaser Nominated
Director(s) be so elected, and the Board shall solicit proxies to be voted in
favor of the election of such nominee(s).  Nothing in this Section 11,
however, shall require the Board (including for purposes hereof, all members of
the Board and any committees thereof) to breach or violate any provision of
applicable law (including any fiduciary duty) or the certificate of
incorporation or bylaws of the Company.

     

    (e)           Vacancies.  In
the event of the death, resignation (other than a resignation pursuant to
Section 11(c) hereof) or removal of a director of the Company that is a
Purchaser Nominated Director, the Purchaser shall be entitled to designate such
Purchaser Nominated Director’s successor, and any vacancy on the Board resulting
from any such death, resignation or removal shall be filled by the Board (or an
applicable committee thereof) with such designee of the Purchaser, whereupon
such designee shall become a Purchaser Nominated Director for all purposes
hereunder.

     

    (f)           Satisfaction of Bylaw
Requirements.  The Company represents, acknowledges and agrees
that each nomination of a Purchaser Nominated Director in accordance with the
terms hereof will be deemed for all purposes to be a nomination by or at the
direction of the Board in accordance with the Company’s bylaws (including as the
same may be modified or amended from time to time) and that the Company will not
claim or assert otherwise.

    
      
         

      

      
        -13-

        
          

        

      

      
         

      

    

    (g)           Changes in Board
Size.  Upon any change in the number of directors constituting
the full Board, the number of Purchaser Nominated Directors which Purchaser is
entitled to appoint pursuant to this Section 11 shall be increased or decreased
(as applicable) to provide the Purchaser with the right to designate for
nomination no less than the same proportion of the members of the Board as
provided in this Section 11.

     

    (h)           Rights Not
Exclusive.  The rights granted to the Purchaser in this Section
11 are in addition to, and not to the exclusion of, any other rights that the
Purchaser may have as a stockholder of the Company, including pursuant to the
Company’s certificate of incorporation or bylaws or pursuant to applicable
law.

     

    (i)           Termination of
Rights.  The rights and
obligations of the Purchaser and the Company as set forth in this Section 11
shall automatically terminate and be of no further force and effect if and when
the Purchaser’s Aggregate Beneficial Ownership falls below fourteen percent
(14%) of the Company’s voting stock; provided, however, that for the
avoidance of doubt no other rights or obligations under this Agreement shall be
affected by the termination of the rights and obligations set forth in this
Section 11.  The Company shall upon written request promptly deliver
to the Purchaser a certificate of the Company’s transfer agent reflecting the
outstanding voting stock of the Company as of the date(s) requested by the
Purchaser.

     

    12.           ENTIRE
AGREEMENT.  This Agreement, together with the Purchase
Agreement and the Warrants, constitute and contain the entire agreement and
understanding of the parties with respect to the subject matter hereof, and
supersede any and all prior negotiations, correspondence, agreements or
understandings with respect to the subject matter hereof.

     

    13.           MISCELLANEOUS.

     

    (a)           This
Agreement, and any right, term or provision contained herein, may not be
amended, modified or terminated, and no right, term or provision may be waived,
except with the written consent of (i) the Purchaser, (ii) ACN, and
(iii) the Company.

     

    (b)           This
Agreement shall be governed by and construed and enforced in accordance with the
laws of the State of New York, and shall be binding upon the parties hereto and
their respective heirs, personal representatives, successors and permitted
assigns and transferees, provided that the
terms and conditions of Section 9 hereof are
satisfied.  Notwithstanding anything in this Agreement to the
contrary, if at any time a Holder (including any successors or assigned) shall
cease to own any Registrable Securities, the Company’s obligations with respect
to such Holder under Sections 2, 3, 4, 5, 6 and 8 of this Agreement shall
immediately terminate.

     

    (c)           Any
notices to be given pursuant to this Agreement shall be in writing and shall be
given by certified or registered mail, return receipt
request.  Notices shall be deemed given when personally delivered or
when mailed to the addresses of the respective parties as set forth below, or to
such changed address of which any party may notify the others pursuant hereto,
except that a notice of change of address shall be deemed given when
received.

    
      
         

      

      
        -14-

        
          

        

      

      
         

      

    

    (i)            If
to the Company, to:

     

    WorldGate Communications,
Inc.

    3190 Tremont Avenue

    Trevose, PA 19503

    
      	 	
              Attention: 

            	
              Hal
      Krisbergh

            

    

    Randall
J. Gort

    
      	 	
              Facsimile:

            	
              215.354.1049

            

    

     

    With a copy to (which shall not
constitute notice):

     

    Drinker Biddle & Reath
LLP

    1000 Westlakes Drive,

    Berwyn, PA 19312

    
      	 	
              Attention: 

            	
              Walter
      J. Mostek, Jr.

            

    

    
      	 	
              Facsimile: 

            	
              610.993.8585

            

    

    

    (ii)           If
to the Purchaser, to:

     

    WGI Investor LLC

    349-L Copperfield Blvd,
#392

    Concord, NC 28025

    
      	 	
              Attention:

            	
              Robert
      Stevanovski, Manager

            

    

    
      	 	
              Facsimile: 

            	
              704.260.3304

            

    

    

    With a copy to (which shall not
constitute notice):

     

    Bingham McCutchen LLP

    2020 K Street, NW

    Washington, DC 20006

    Attention:  Andrew M. Ray,
Esquire

    Facsimile:  202.373.6452

     

    (iii)          If
to ACN, to:

     

    ACN Digital Phone Service,
LLC

    1000 Progress Place

    Concord, NC 28025-2449

    
      	 	
              Attention:

            	
              Richard
      L. Boughrum

            

    

    Colleen
R. Jones

    
      	 	
              Facsimile:

            	
              704.260.3304

            

    

    

    With a copy to (which shall not
constitute notice):

     

    Bingham McCutchen LLP

    2020 K Street, NW

    Washington, DC 20006

    Attention:  Andrew M. Ray,
Esquire

    Facsimile:  202.373.6452

     

    (d)           The
parties acknowledge and agree that in the event of any breach of this Agreement,
remedies at law will be inadequate, and each of the parties hereto shall be
entitled to specific performance of the obligations of the other parties hereto
and to such appropriate injunctive relief as may be granted by a court of
competent jurisdiction.  All remedies, either under this Agreement or
by law or otherwise afforded to any of the parties, shall be cumulative and not
alternative, and shall be in addition to the payment of fees as set forth in
this Agreement.

    
      
         

      

      
        -15-

        
          

        

      

      
         

      

    

    (e)           This
Agreement may be executed in a number of counterparts.  All such
counterparts together shall constitute one Agreement, and shall be binding on
all the parties hereto notwithstanding that all such parties have not signed the
same counterpart.  The parties hereto confirm that any facsimile copy
or electronic mail message in “pdf” or similar format of another party’s
executed counterpart of this Agreement (or its signature page thereof) will be
deemed to be an executed original thereof.

     

    (f)           Except
as contemplated in Section 9 hereof, this Agreement is intended solely for the
benefit of the parties hereto and is not intended to confer any benefits upon,
or create any rights in favor of, any Person (including, without limitation, any
stockholder or debt holder of the Company) other than the parties
hereto.

     

    (g)           If
any provision of this Agreement is invalid, illegal or unenforceable, such
provision shall be ineffective to the extent, but only to the extent, of such
invalidity, illegality or unenforceability, without invalidating the remainder
of such provision or the remaining provisions of this Agreement, unless such a
construction would be unreasonable.

     

    [signature pages
follow]

    
      
         

      

      
        -16-

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, the parties hereto have executed this Registration Rights and
Governance Agreement as of the date and year first above written.

     

    
      
        
          	 
      	
                  COMPANY:

                
	 
      	 
      
	 
      	
                  WORLDGATE
      COMMUNICATIONS, INC.

                
	 
      	 
      
	 
      	
                  By:

                	
                  /s/ Harold M. Krisbergh

                
	 
      	
                  Name:

                	
                  Harold
      M. Krisbergh

                
	 
      	
                  Title:

                	
                  Chairman
      of the Board and

                
	 
      	 
      	
                  Chief
      Executive Officer

                

        

      

    

    

    Signature
Page to Registration Rights and Governance Agreement

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    
      
        
          	 
      	
                  HOLDERS:

                
	 
      	 
      
	 
      	
                  WGI
      INVESTOR LLC

                
	 
      	 
      
	 
      	
                  By:

                	
                  Praescient,
      LLC, its Manager

                
	 
      	 
      	 
      
	 
      	 
      	
                  By:

                	
                  /s/ Robert Stevanovski

                
	 
      	 
      	
                  Name:

                	
                  Robert
      Stevanovski

                
	 
      	 
      	
                  Title:

                	
                  Manager

                
	 
      	 
      	 
      	 
      
	 
      	
                  ACN
      DIGITAL PHONE SERVICE, LLC

                
	 
      	 
      	 
      	 
      
	 
      	
                  By:

                	
                  /s/ David
      Stevanovski

                
	 	
                   

                	
                        
                    Name:  
      David Stevanovski

                  

                
	 
      	
                   

                	
                        
                    Title:    
      President

                  

                

        

      

    

    

    Signature
Page to Registration Rights and Governance Agreement

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