WARRANT TO PURCHASE SHARES OF COMMON STOCK OF WORLDGATE COMMUNICATIONS, INC

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

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

This certifies that, for value received, ACN Digital Phone Service, LLC, a Delaware limited liability company, and its permitted assigns or successors in interest (the “ Holder ”), is entitled to purchase from WorldGate Communications, Inc., a Delaware corporation (the “ Company ”), subject to the terms and conditions hereof, up to 38,219,897  fully paid and non-assessable shares of the Company’s common stock, par value $0.01 (the “ Common Stock ”).

This Warrant represents the warrant contemplated by that certain Master Purchase Agreement, dated as of the date hereof, between the Holder and the Company, as the same may be amended from time to time (the “ Commercial Agreement ”).  Capitalized terms used but not defined herein have the meanings given to such terms in the Commercial Agreement.

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

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

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

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

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

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

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

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

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

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

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

3.             Exercise of Warrant .

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

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

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

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

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

6.             Restrictions on Transfer .

  (a)           The Holder agrees that the Holder will not transfer, sell or otherwise dispose of this Warrant without the express c