x	No fee required.
¨	Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
	1)	Title of each class of securities to which transaction applies:
	2)	Aggregate number of securities to which transaction applies:
	3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):
	4)	Proposed maximum aggregate value of transaction:
	5)	Total fee paid:

¨	Fee paid previously with preliminary materials.
¨	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing:
	1)	Amount previously paid:
	2)	Form, Schedule or Registration Statement No:
	3)	Filing Party:
	4)	Date Filed:

The enclosed Notice of Annual Meeting and Proxy Statement fully describes the business to be transacted at the Meeting, which includes (i) the election of seven directors of the Company, (ii) the proposal to approve Amendment 2009-1 to the WorldGate Communications, Inc. 2003 Equity Incentive Plan; (iii) the proposal to approve the adoption of the WorldGate Communications, Inc. 2010 Stock Incentive Plan, (iv) the proposal to approve the Third Amended and Restated Certificate of Incorporation of WorldGate Communications, Inc. to, among other things, effect a reverse stock split of our issued and outstanding Common Stock by a ratio of between one-for-five and one-for-twenty five shares, at the discretion of the Board of Directors, and to reduce the number of authorized shares of our Common Stock and Preferred Stock by the same ratio, (v) the ratification of the appointment by the Board of Directors of Marcum LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2010 and (vi) the transaction of any other business that may properly be brought before the Meeting or any adjournment or postponement thereof.

1.	The election of seven directors for a one-year term expiring at our Annual Meeting of Stockholders in 2011 and until their successors are duly elected and qualified;
2.	The proposal to approve Amendment 2009-1 to the WorldGate Communications, Inc. 2003 Equity Incentive Plan;
3.	The proposal to approve the adoption of the WorldGate Communications, Inc. 2010 Stock Incentive Plan;
4.	The proposal to approve the Third Amended and Restated Certificate of Incorporation of WorldGate Communications, Inc. to, among other things, effect a reverse stock split of our issued and outstanding Common Stock by a ratio of between one-for-five and one-for-twenty five shares, at the discretion of the Board of Directors, and to reduce the number of authorized shares of our Common Stock and Preferred Stock by the same ratio;
5.	The ratification of the appointment by the Board of Directors of Marcum LLP as the Company’s independent registered public accounting firm for the year ending December 31, 2010; and
6.	Such other matters as may properly come before the Meeting or any adjournment or postponement thereof

INFORMATION ABOUT THE ANNUAL MEETING	1
General	1
Notice Regarding the Availability of Proxy Materials	1
Solicitation and Voting of Proxies	1
Record Date and Voting Securities	2
Quorum and Voting	2
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT	4
CHANGE IN CONTROL	6
LEGAL PROCEEDINGS	7
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD	7
Director Nominations	7
Board Committees	8
Director Independence	9
Board Leadership Structure and Risk Oversight	10
STOCKHOLDER COMMUNICATIONS TO THE BOARD	10
AUDIT COMMITTEE REPORT	10
PROPOSAL NO. 1 - ELECTION OF DIRECTORS	11
PROPOSAL NO. 2 - APPROVE THE ADOPTION OF AMENDMENT 2009-1 TO THE WORLDGATE COMMUNICATIONS, INC. 2003 EQUITY INCENTIVE PLAN	14
PROPOSAL NO. 3 - APPROVE THE ADOPTION OF THE WORLDGATE COMMUNICATIONS, INC. 2010 STOCK INCENTIVE PLAN	21
PROPOSAL NO. 4 - APPROVE THE THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF WORLDGATE COMMUNICATIONS, INC. TO, AMONG OTHER THINGS, EFFECT A REVERSE STOCK SPLIT OF OUR ISSUED AND OUTSTANDING COMMON STOCK BY A RATIO OF BETWEEN ONE-FOR-FIVE AND ONE-FOR-TWENTY FIVE SHARES, AT THE DISCRETION OF THE BOARD OF DIRECTORS, AND TO REDUCE THE NUMBER OF AUTHORIZED SHARES OF OUR COMMON STOCK AND PREFERRED STOCK BY THE SAME RATIO	26
PROPOSAL NO. 5 - RATIFICATION OF THE APPOINTMENT OF THE COMPANY’S INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2010	35
EXECUTIVE COMPENSATION AND OTHER INFORMATION	36
Summary Compensation Table	36
Outstanding Equity Awards at Fiscal Year-End	39
Director Compensation	40
Equity Compensation Plan Information	42
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS	42
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE	45
CODE OF CONDUCT	45
STOCKHOLDER PROPOSALS FOR 2011 ANNUAL MEETING	45
OTHER MATTERS	46
MISCELLANEOUS	46
APPENDIX A: WORLDGATE COMMUNICATIONS, INC. 2003 EQUITY INCENTIVE PLAN, AS AMENDED BY AMENDMENT 2009-1	A-1
APPENDIX B: WORLDGATE COMMUNICATIONS, INC. 2010 STOCK INCENTIVE PLAN	B-1
APPENDIX C: THIRD AMENDED AND RESTATED CERTIFICATE OF INCORPORATION	C-1

(iv)

FOR the proposal to approve the Third Amended and Restated Certificate of Incorporation of WorldGate Communications, Inc. to, among other things, effect a reverse stock split of our issued and outstanding Common Stock by a ratio of between one-for-five and one-for-twenty five shares, at the discretion of the Board of Directors, and to reduce the number of authorized shares of our Common Stock and Preferred Stock by the same ratio, discussed under “Proposal 4—Approve the Third Amended and Restated Certificate of Incorporation of WorldGate Communications, Inc. to, among other things, Effect a Reverse Stock Split of our Issued and Outstanding Common Stock by a Ratio of Between One-For-Five and One-For-Twenty Five Shares, at the Discretion of the Board of Directors, and to Reduce the Number of Authorized Shares of our Common Stock and Preferred Stock by the Same Ratio,”

(v)

FOR the ratification of the appointment by the Board of the independent registered public accounting firm named under “Proposal 5—Ratification of the appointment of the Company’s independent registered public accounting firm for year ending December 31, 2010” and

(vi)

at the discretion of the proxy holders with regard to any matter not known to the Board on the date of mailing this Proxy Statement that may properly come before the Meeting or any adjournment or postponement thereof.

If you are a beneficial owner of shares held in street name and you received a printed copy of these proxy materials by mail, you should have received a voting instruction form with these proxy materials from the organization that is the record owner of your shares rather than from us. If you are a beneficial owner of shares held in street name and you received a Notice of Internet Availability by mail, you should have received the Notice of Internet Availability from the organization that is the record owner of your shares rather than from us. Beneficial owners that received a printed copy of these proxy materials by mail from the record owner may complete and mail that voting instruction form or may vote over the Internet as instructed by that organization in the proxy card. Beneficial owners that received a Notice of Internet Availability by mail from the record owner should follow the instructions included in the Notice of Internet Availability to view the proxy statement and transmit their voting instructions. For a beneficial owner to vote in person at the Meeting, you must obtain a valid proxy from the record owner. To request the requisite proxy form, follow the instructions provided by your broker or contact your broker.

(1)	Percentage of beneficial ownership is based on 338,627,636 shares of Common Stock outstanding as of March 24, 2010.

(2)	Ownership is based on a Schedule 13D filed April 16, 2009 by WGI Investor LLC (“WGI”), Manna Holdings, LLC (“Manna Holdings”), Praescient, LLC (“Praescient”) and Robert Stevanovski and includes (a) 202,462,155 shares of Common Stock held by WGI, (b) 23,960,194 shares of Common Stock issuable under the Anti-Dilution Warrant (defined below under the heading “Change in Control”) as of March 24, 2010 and (c) 6,000,000 shares of Common Stock issuable under the March 2010 WGI Warrant (defined below under the heading “Certain Relationships and Related Transactions”). Robert Stevanovski is the manager of Praescient, which serves as the sole manager of WGI and as the managing member of Manna Holdings. Manna Holdings is the holder of a substantial majority of the membership interests of WGI. As such, Mr. Stevanovski, Praescient and Manna Holdings may be deemed to beneficially own all of the securities reported in the table. Each of Mr. Stevanovski, Praescient and Manna Holdings disclaims beneficial ownership of such securities, and the information reported herein shall not be deemed an admission that such reporting person is the beneficial owner of the securities for any purpose, except to the extent of such person’s pecuniary interest therein.

(3)	Includes (a) 582,238 shares which underlie options that are currently exercisable or will be exercisable within 60 days after March 24, 2010 and (b) 9,371 shares of Common Stock held directly. Although Mr. Boyarski has previously been granted 250,000 restricted shares of Common Stock pursuant to a performance share grant which vest upon the Company achieving certain performance criteria, these restricted shares are not included in the table above because the performance share grant can be paid in cash, shares of Common Stock, or a combination thereof as determined by the Compensation and Stock Option Committee and therefore Mr. Boyarski does not have a right to acquire the Common Stock within 60 days after March 24, 2010. Performance share grants of restricted shares under the WorldGate Communications, Inc. 2003 Equity Incentive Plan are bookkeeping entries representing a right to receive a payment in cash, shares of Common Stock, or a combination thereof as determined by the Compensation and Stock Option Committee equal to the value of the shares of Common Stock on achievement of performance criteria.

(4)	Includes (a) 203,662 shares of Common Stock issuable under the Anti-Dilution Warrant, (b) 51,000 shares of Common Stock issuable under the March 2010 WGI Warrant and (c) 1,720,928 shares held directly by WGI. The shares held directly by WGI indicated in the table reflect Mr. Van Buhler’s pro rata interest as a member of WGI in the securities of the Company held by WGI, and Mr. Van Buhler disclaims beneficial ownership of the securities held by WGI, and the information reported herein shall not be deemed an admission that Mr. Van Buhler is the beneficial owner of the securities for any purpose, except to the extent of his pecuniary interest therein.

(5)	The securities reported in the table are held directly by WGI and include (a) 202,462,155 shares of Common Stock held by WGI, (b) 23,960,194 shares of Common Stock issuable under the Anti-Dilution Warrant as of March 24, 2010 and (c) 6,000,000 shares of Common Stock issuable under the March 2010 WGI Warrant. Each of Anthony Cassara, David Stevanovski and Gregory Provenzano indirectly owns a membership interest in Manna Holdings, which is the holder of a substantial majority of the membership interests of WGI. As such, each of Messrs. Cassara, Stevanovski and Provenzano may be deemed to beneficially own all of the securities reported herein and owned directly by WGI. Each of Messrs. Cassara, Stevanovski and Provenzano disclaims beneficial ownership of such securities, and the information reported herein shall not be deemed an admission that such reporting person is the beneficial owner of the securities for any purpose, except to the extent of his pecuniary interest therein.

(6)	Includes 25,000 shares which underlie options that are currently exercisable or will be exercisable within 60 days after March 24, 2010.

(7)	Includes (a) 204,192,454 shares of Common Stock, (b) 682,238 shares which underlie options that are currently exercisable or will be exercisable within 60 days after March 24, 2010 and (c) an aggregate of 29,960,194 shares of Common Stock issuable under the Anti-Dilution Warrant and the March 2010 Warrant as of March 24, 2010 and held directly (or deemed to be beneficially owned) by the executive officers and directors as a group.

On April 6, 2009, we completed a private placement of securities to WGI Investor LLC (“WGI”), pursuant to the terms of a Securities Purchase Agreement, dated December 12, 2008 (the “Securities Purchase Agreement”), between us and WGI. In connection with the closing on April 6, 2009 of the transactions contemplated by the Securities Purchase Agreement, we issued to WGI an aggregate of 202,462,155 shares of our Common Stock, representing approximately 63% of the total number of the then issued and outstanding shares of our Common Stock, as well as a warrant to purchase up to 140,009,750 shares of our Common Stock in certain circumstances (the “Anti-Dilution Warrant”) in exchange for (i) cash consideration of $1,450,000, (ii) the cancellation of convertible debentures held by WGI under which approximately $5,100,000 in principal and accrued interest was outstanding, and (iii) the cancellation of certain outstanding warrants held by WGI. WGI is a private investment fund whose ownership includes owners of ACN, Inc. (“ACN”), a direct seller of telecommunications services and a distributor of video phones.

The Anti-Dilution Warrant entitles WGI to purchase up to 140,009,750 shares of Common Stock at an exercise price of $0.01 per share to the extent we issue any capital stock upon the exercise or conversion of (i) any warrants, options and other purchase rights that were outstanding as of April 6, 2009 (“Existing Contingent Equity”), (ii) up to 19.7 million shares underlying future options, warrants or other purchase rights issued by us after April 6, 2009 (“Future Contingent Equity”), or (iii) the ACN Warrant described below. The Anti-Dilution Warrant is designed to ensure that WGI may maintain 63% of our issued and outstanding shares of capital stock in the event that any of our capital stock is issued in respect to the Existing Contingent Equity, the Future Contingent Equity or the ACN Warrant (i.e., upon each issuance of a share pursuant to Existing Contingent Equity, Future Contingent Equity or the ACN Warrant, the Anti-Dilution Warrant may be exercised for 1.7027027 shares). The term of the Anti-Dilution Warrant is ten years from the date of issuance, and the shares subject to the Anti-Dilution Warrant will be decreased proportionally upon the expiration of Existing Contingent Equity, Future Contingent Equity and the ACN Warrant.

Concurrently with the closing on April 6, 2009 of the transactions contemplated by the Securities Purchase Agreement, we entered into a Registration Rights and Governance Agreement with WGI and ACN (the “Rights Agreement”) granting them certain rights with respect to the shares purchased pursuant to the Securities Purchase Agreement and the securities underlying the Anti-Dilution Warrant and the ACN Warrant. Under the terms of the Rights Agreement, we agreed to file a registration statement on Form S-3 covering the resale of any shares held by WGI and ACN and to maintain its effectiveness for a minimum period of time. In addition, WGI and ACN have the right to require us to file additional registration statements covering the resale of such securities to the extent they are not covered by an effective registration statement and will be entitled to “piggy-back” registration rights on all of our future registrations (with certain limitations) and on any demand registrations of any other investors, subject to customary underwriters’ cutbacks to reduce the number of shares to be registered in view of market conditions.

On April 29, 2009, the Board determined to suspend the Nominating and Governance Committee. The Board determined that it is important for each member of the Board to actively participate in all matters that were previously the responsibility of the Nominating and Governance Committee. In addition to the three independent members of our Board identified below, four members were appointed, pursuant to the terms of the Securities Purchase Agreement and the Rights Agreement, by WGI which is actively involved in the management of the Company and owns approximately 59.8% of the outstanding shares of our Common Stock. Accordingly, we believe that it is important that the members who are appointed by WGI participate in the selection of nominees to the Board and our corporate governance matters. In addition, the Board believes that this nomination process provides the Company with a much broader focus for potential candidates than might be achieved by a nominating committee. As such, each of our Board members participates in, among other matters, identifying and recommending qualified candidates for director, recommending the director nominees for our annual meetings of stockholders and recommending the director nominees for each of the Board committees.

As part of the Board’s responsibility relating to nominating of candidates to the Board, our Board may consider candidates recommended by stockholders as well as from other sources such as other directors or officers, third party search firms or other appropriate sources. For all potential candidates, the Board may consider all factors it deems relevant, such as a candidate’s personal integrity and sound judgment, business and professional skills and experience, independence, knowledge of the industry in which we operate, possible conflicts of interest, diversity of experience, qualifications, skills and backgrounds, the extent to which the candidate would fill a present need in the Board, and concern for the long-term interests of our stockholders. In addition, although the Company does not have a formal policy regarding the consideration of diversity in identifying and evaluating potential director candidates, the Board will consider diversity in the context of the Board as a whole and takes into account the personal characteristics (gender, ethnicity and age), skills and experience, qualifications and background of current and prospective directors’ diversity as one factor in identifying and evaluating potential director candidates. In general, persons recommended by stockholders will be considered on the same basis as candidates from other sources. If a stockholder wishes to nominate a candidate to be considered for election as a director at our 2011 Annual Meeting of Stockholders using the procedures set forth in the Company’s bylaws, it must follow the procedures described under “Stockholder Proposals for 2011 Annual Meeting” and as set forth in our bylaws. If a stockholder wishes simply to propose a candidate for consideration as a nominee by our Board, it should submit any pertinent information regarding the candidate to the Chairman of the Board by mail care of our Corporate Secretary at 3190 Tremont Avenue, Trevose, Pennsylvania 19053.

The Compensation and Stock Option Committee had 6 meetings during 2009. The Compensation and Stock Option Committee has a charter, a copy of which is available to our stockholders in the “Investor Relations” section of our website located at www.wgate.com. From January 1, 2009 through April 6, 2009 (the date of their resignation from the Board), Jeff Morris and Clarence L. Irving, Jr. served on the Compensation and Stock Option Committee. From April 10, 2009 through April 29, 2009, Richard Nespola served on the Compensation and Stock Option Committee. From April 29, 2009 through December 31, 2009, Anthony Cassara, Brian Fink, Richard Nespola and Robert Stevanovski served on the Compensation and Stock Option Committee, with Mr. Nespola as Chairman. The Board suspended the independence requirements in the charter of the Compensation and Stock Option Committee. Pursuant to its charter, the Compensation and Stock Option Committee has the authority to delegate any of its responsibilities to subcommittees or individual(s) as the Compensation and Stock Option Committee may deem appropriate. The Compensation and Stock Option Committee has delegated its responsibility for overseeing the administration of the Company’s compensation programs and reviewing and approving the employees who receive awards and the nature of awards under such programs to a subcommittee of the Compensation and Stock Option Committee comprised of Messrs. Cassara, Fink and Nespola. Each of Messrs. Fink and Nespola meet the independence requirements in the charter of the Compensation and Stock Option Committee.

	·	Approving the appointment of our independent registered public accounting firm and monitoring the performance of such firm;
	·	reviewing and approving the scope of the annual audit and evaluating with the independent registered public accounting firm our annual audit and annual financial statements;
	·	reviewing and approving all fees to be paid to the independent registered public accounting firm;
	·	reviewing with management the status of internal accounting controls;
	·	evaluating issues having a potential financial impact on us which may be brought to the Audit Committee’s attention by management, the independent registered public accounting firm or the Board;
	·	evaluating our public financial reporting documents; and
	·	reviewing and approving the non-audit services to be performed by the independent registered public accounting firm, if any, and considering the effect of such performance on the auditor’s independence.

The Audit Committee had 6 meetings during 2009. The Audit Committee has a charter, a copy of which is available to our stockholders in the “Investor Relations” section of our website located at www.wgate.com. From January 1, 2009 through April 6, 2009 (the date of their resignation from the Board), Dr. Tarshis, Mr. Davidson and Mr. Jaffe served on the Audit Committee, with Mr. Jaffe as Chairman. On April 10, 2009, Geoffrey Boyd was appointed to serve on the Audit Committee. From April 29, 2009 through December 31, 2009, Geoffrey Boyd, Anthony Cassara and Brian Fink served on the Audit Committee, with Mr. Boyd as Chairman. In connection with his appointment to the Audit Committee, the Board waived the independence requirements in the charter of the Audit Committee with respect to Mr. Cassara. The Board of Directors has determined that each of Messrs. Boyd and Fink meet the requirements of the applicable Securities and Exchange Commission rules for membership on the Audit Committee, including Rule 10A-3(b) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is “independent” as defined in Rule 5605(a)(2) of the Nasdaq Listing Rules, and qualifies as a “Non-employee Director” for purposes of Rule 16b-3 under the Exchange Act. The Board has determined that Mr. Boyd qualified as an “audit committee financial expert” as defined in Item 407 of Regulation S-K. As discussed below under “Director Independence,” we are not currently subject to the Nasdaq continued listing requirements or the requirements of any other national securities exchange, including the independence requirements for audit committees. The Board has not reached an affirmative conclusion that Mr. Cassara is “independent” as such term is described in the Nasdaq Marketplace Rules. However, the Board determined that his membership on the Audit Committee was in the best interest of the Company and its stockholders in light of his experience in financial and related matters in our industry and the fact that the Audit Committee was composed of only two other members. On March 4, 2010, the Board replaced Mr. Cassara on the Audit Committee with Mr. Nespola. The Board of Directors has determined that Mr. Nespola meets the requirements of the applicable Securities and Exchange Commission rules for membership on the Audit Committee, including Rule 10A-3(b) under the Exchange Act, is “independent” as defined in Rule 5605(a)(2) of the Nasdaq Listing Rules, and qualifies as “Non-employee Director” for purposes of Rule 16b-3 under the Exchange Act.

The Board does not have a policy on whether or not the role of the Chief Executive Officer and Chairman of the Board should be separate or, if it is to be separate, whether the Chairman should be selected from the non-employee directors or be an employee. The Board determined that the role of Chairman of the Board (held by Mr. Robert Stevanovski) should be separated from the role of Chief Executive Officer (held by Mr. Daddis) because it believes that this currently provides the most efficient and effective leadership model for the Company. The Company believes this leadership structure is appropriate at this time because it allows the Company to fully benefit from the leadership ability, industry experience and technical expertise that each of these individuals possesses. We believe that separating these positions allows the Chairman of the Board to lead the Board in its fundamental role of providing direction and guidance to management while allowing our Chief Executive Officer to focus on our day-to-day business. In addition, we believe that the current separation provides a more effective monitoring and objective evaluation of the CEO’s performance. In accordance with the Rights Agreement, WGI has the right to nominate a total of four of the seven members of our Board, and, as the majority stockholder of the Company, WGI has the power to elect all of the members of our Board. The Board currently has three independent directors, namely Messrs. Boyd, Fink and Nespola, who fulfill the independent Board functions to be performed by independent directors as described elsewhere in this Proxy Statement.

The Board as a whole has ultimate responsibility for the Company’s risk oversight function. The Board and its committees regularly review material strategic, operational, financial, compensation and compliance risks with senior management. Certain risks are overseen by committees of the Board of Directors and these committees make reports to the full Board of Directors, including reports on noteworthy risk-management issues. Financial risks are overseen by the Audit Committee, which meets with management to review the Company’s major financial risk exposure and the steps management has taken to monitor and control such exposures. Compensation risks are overseen by the Compensation and Stock Option Committee. Members of the Company’s senior management team regularly report to the full Board regarding their areas of responsibility and a component of these reports is risk within the area of responsibility and the steps management has taken to monitor and control such exposures. Additional review or reporting on risks is conducted as needed or as requested by the Board or its committees.

The Board of Directors recommends that stockholders initiate any communications with the Board in writing and send them care of our Corporate Secretary at WorldGate Communications, Inc., 3190 Tremont Avenue, Trevose, Pennsylvania 19053. This centralized process will assist the Board in reviewing and responding to stockholder communications in an appropriate manner. The name of any specific intended Board recipient should be noted in the communication. The Board has instructed our Secretary to forward such correspondence only to the intended recipients; however, the Board has also instructed our Secretary, prior to forwarding any correspondence, to review such correspondence and, in his or her discretion, not to forward certain items if they are deemed of a commercial or frivolous nature or otherwise inappropriate for the Board’s consideration. In such cases, some of that correspondence may be forwarded elsewhere in the Company for review and possible response.

The Audit Committee assists the Board in overseeing and monitoring the integrity of the Company’s financial reporting process, its compliance with legal and regulatory requirements and the quality of its internal and external audit processes. The roles and responsibilities of the Audit Committee are set forth in a written charter that was adopted by the Board. The Audit Committee is responsible for overseeing the Company’s overall financial reporting process and for the appointment, compensation, retention and oversight of the work of the Company’s independent registered public accounting firm. [In fulfilling its responsibilities for the financial statements for the fiscal year ended December 31, 2009, the Audit Committee, among other activities, reviewed and discussed the Company’s audited financial statements for such fiscal year with management and with Marcum LLP, the Company’s independent registered public accounting firm. The Audit Committee has discussed with Marcum LLP the matters required to be discussed by the statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1, AU section 380), as adopted by the Public Company Accounting Oversight Board in Rule 3200T. The Audit Committee has received the written disclosures and the letter from Marcum LLP required by applicable requirements of the Public Company Accounting Oversight Board regarding Marcum LLP’s communications with the audit committee concerning independence, and has discussed with Marcum LLP its independence.] The Audit Committee has considered the compatibility of the provision of non-audit services with maintaining the auditor’s independence.

The Company seeks directors with established strong professional reputations and experience in areas relevant to the strategy and operations of the Company’s businesses, particularly industries, end-markets and growth segments that the Company serves as well as key geographic markets where we operate and intend to operate. Each of the nominees for election as a director at the Meeting holds or has held senior executive positions in large, complex organizations and has operating experience that meets this objective, as described below. In these positions, they have also gained experience in core management skills, such as strategic and financial planning, public company financial reporting, compliance, risk management and leadership development. Each of our directors also has experience serving on boards of directors and board committees of other public companies and has an understanding of corporate governance practices and trends. The Board also believes that each of the nominees has other key attributes that are important to an effective board: integrity, candor, analytical skills, the willingness to engage management and each other in a constructive and collaborative fashion, diversity of experience, qualifications, skills and backgrounds, and the ability and commitment to devote significant time and energy to service on the Board and its committees. In addition to the above, the Board also considered the specific experience described in the biographical details that follow in determining to nominate the individuals set forth below for election as directors.

Robert Stevanovski, 46. Mr. Robert Stevanovski was appointed as a director and Chairman of the Board on April 6, 2009. He is one of the co-founders of ACN, Inc. (“ACN”), and has served as Chairman of ACN since its founding in 1993. Mr. Robert Stevanovski has served as Chairman of the Board of deltathree, Inc. (“D3”), a publicly-held provider of voice over internet protocol services, since February 2009. Mr. Robert Stevanoski served as the Interim Chief Executive Officer and President of the Company from April 10, 2009 through August 3, 2009. He is the brother of David Stevanovski, also a member of the Board. Mr. Robert Stevanovski’s areas of relevant experience, qualifications, attributes or skills include sales and marketing expertise generally, extensive knowledge of the telecommunications and multi-level marketing industries, outside board experience with D3 and extensive business and management experience as co-founder and Chairman of ACN.

Anthony Cassara, 55. Mr. Cassara was appointed as a director on April 9, 2009. Since October 2000, Mr. Cassara founded and has served as President of Cassara Management Group, Inc., a privately held business counseling practice focused on the telecommunications industry. Prior to founding Cassara Management Group, Mr. Cassara was President of the Carrier Services division at Global Crossing Ltd. from October 1999 to December 2000. In 2002, Global Crossing Ltd. and certain of its direct and indirect subsidiaries filed voluntary petitions for relief under Chapter 11 of title 11 of the U.S. Code in the U.S. Bankruptcy Court for the Southern District of New York. Mr. Cassara served as a member of the board of directors of MPower Holding Corporation from May 2002 to August 2006; Teleglobe International Holdings Ltd. from February 2004 to February 2006; Eschelon Telecom Inc. from November 2002 to December 2004; and has served as a director of D3 since February 2009. Mr. Cassara’s areas of relevant experience, qualifications, attributes or skills include telecommunications and information services; senior leadership roles in global telecommunications companies; public company board experience, corporate finance, and financial reporting.

Brian Fink, 47. Mr. Fink was appointed as a director on April 29, 2009. Mr. Fink currently serves as Chairman and Managing Director for IntegraTouch, LLC, a company he founded in 2002 and has grown to over 28 employees providing technology, computer, development and integration products and services. From 2007-2009, Mr. Fink served as Chief Information Officer and Executive Vice President for One Communications with responsibility for crafting the technology strategy and for driving the key technology and product initiatives affecting the entire organization. His responsibilities included developing the strategic vision for the next generation operational support systems and the deployment of new technologies and products in support of One Communications business’ requirements. Prior to founding IntegraTouch, from 1994 to 2002, Mr. Fink held several executive positions with Frontier and Global Crossing, including to Senior Vice President of Systems and Product Development. He was responsible for defining and implementing the company’s systems and product strategy to support the carrier, business services, local, and conferencing business units. Further, he pioneered the company’s IP convergence and VoIP strategy and led the successful deployment of network, systems, and services to support this strategy. Mr. Fink also served on the board of Frontier Ventures from 1998 through 2001 and advised several successful start up companies which he spear headed. Mr. Fink’s areas of relevant experience, qualifications, attributes or skills include extensive knowledge of the telecommunications industry, senior leadership roles in global telecommunications companies, extensive telecommunications technical expertise, and extensive business experience as Chairman and Managing Director for IntegraTouch.

Richard Nespola, 65. Mr. Nespola was appointed as a director on April 10, 2009. Since 1990, Mr. Nespola has been Chairman and CEO of The Management Network Group Inc. (TMNG), a NASDAQ listed company founded by Mr. Nespola, which provides strategic, management and operations consulting services to the telecom, media and entertainment industries. Prior to the business combination forming One Communications, he served on the board of Choice One Communications and currently serves on the board of directors of One Communications. Prior thereto he held executive management positions at MCI and Sprint where he had responsibility for strategy, carrier operations, product development, and regulatory processes. Mr. Nespola’s areas of relevant experience, qualifications, attributes or skills include extensive knowledge of the telecommunications industry, senior leadership roles in global telecommunications companies, outside board experience with One Communications, extensive experience with public company corporate governance, and extensive business experience as Chairman and CEO of TMNG.

The Board determined that it was advisable and in the best interests of the Company to increase the maximum number of shares available under the 2003 Plan and to increase the maximum number of shares of Common Stock subject to options that can be awarded to any eligible individual under the 2003 Plan to enable the Company to be able to provide meaningful equity incentives to eligible participants in light of the significant increase (from 118,906,345 on March 16, 2009 to 321,368,500 on May 5, 2009) in the number of shares of Common Stock that were outstanding as a result of the completion of the private placement to WGI Investor LLC on April 6, 2009. The Amendment increases the total number of shares authorized for issuance or transfer under the 2003 Plan by 15,674,960 shares of Common Stock, so that the total number of shares authorized and reserved for issuance or transfer under the 2003 Plan is 26,500,000 shares of Common Stock and changes the limit on the maximum number of shares of Common Stock subject to options that can be awarded to any eligible individual under the 2003 Plan from 1,000,000 to 2,000,000 shares per calendar year, subject to adjustments for changes in the Company’s capital structure.

In reviewing the 2003 Plan, it was determined that technical amendments were appropriate to avoid any award being considered “deferred compensation” as that term is defined for purposes of the federal tax rules governing nonqualified deferred compensation arrangements (Section 409A of the IRS Code). If an award includes deferred compensation, and its terms do not comply with the requirements of the legislation, then any deferred compensation component of the award will be taxable when it is earned and vested (even if not then payable) and the recipient will be subject to a 20% additional tax. To address these concerns, the Amendment rounds down to the nearest whole number any fractional shares resulting from adjustments due to changes in the Company’s capital structure under the 2003 Plan and requires that all options be issued at an exercise price per share no less than one hundred percent of the fair market value of a share of Common Stock on the effective date of grant of the option.

In order to preserve the Company's ability to deduct compensation related to awards granted under the 2003 Plan, the 2003 Plan provides that prior to the beginning of the applicable performance period or such later date as permitted under Section 162(m) of the IRS Code, the Compensation and Stock Option Committee will establish one or more performance goals applicable to the award. Performance goals will be based on the attainment of specified target levels with respect to one or more measures of business or financial performance of the Company and each parent and subsidiary corporation consolidated therewith for financial reporting purposes, or such division or business unit of the Company as may be selected by the Compensation and Stock Option Committee. The Compensation and Stock Option Committee, in its discretion, may base performance goals on one or more of the following measures such as: revenue, gross margin, operating margin, operating income, pre-tax profit, earnings before interest, taxes, depreciation and/or amortization, net income, cash flow, expenses, stock price, earnings per share, return on stockholder equity, return on capital, return on net assets, economic value added and market share. The target levels with respect to these performance measures may be expressed on an absolute basis or relative to a standard specified by the Compensation and Stock Option Committee. The degree of attainment of performance measures will, according to criteria established by the Compensation and Stock Option Committee, be computed before the effect of changes in accounting standards, restructuring charges and similar extraordinary items occurring after the establishment of the performance goals applicable to a performance award.

The 2003 Plan provides for the grant of non-statutory stock options, incentive stock options within the meaning of Section 422 of the IRS Code, or any combination of these. Each option granted under the 2003 Plan must be evidenced by a written agreement between the Company and the optionee specifying the number of shares subject to the option and the other terms and conditions of the option, consistent with the requirements of the 2003 Plan. The exercise price of each option is determined by the Compensation and Stock Option Committee and is generally the closing price of our Common Stock of the day of the grant. However, any incentive stock option granted to a person who at the time of grant owns stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any parent or subsidiary corporation of the Company (a "Ten Percent Stockholder") must have an exercise price equal to at least 110% of the fair market value of a share of Common Stock on the date of grant.

The 2003 Plan provides that the option exercise price may be paid in cash, by check, or in cash equivalent, by the assignment of the proceeds of a sale with respect to some or all of the shares being acquired upon the exercise of the option, to the extent legally permitted, by tender of shares of Common Stock owned by the optionee having a fair market value not less than the exercise price, by such other lawful consideration as approved by the Compensation and Stock Option Committee, or by any combination of these. Nevertheless, the Compensation and Stock Option Committee may restrict the forms of payment permitted in connection with any option grant. No option may be exercised unless the optionee has made adequate provision for federal, state, local and foreign taxes, if any, relating to the exercise of the option, including, if permitted or required by the Company, through the optionee's surrender of a portion of the option shares to the Company.

The 2003 Plan also provides for automatic grants of stock options to non-employee directors in order to provide them with additional incentives and, therefore, to promote the success of our business. The 2003 Plan provides for an initial, automatic grant of an option to purchase 30,000 shares of our Common Stock to each non-employee director who first becomes a non-employee director after the date the 2003 Plan is effective. The 2003 Plan also provides for an annual grant of an option to purchase 10,000 shares of our Common Stock to each non-employee director on July 1 of each year that occurs on or after the date the 2003 Plan is effective. Notwithstanding the foregoing, a non-employee director granted an initial option on, or within a period of twelve months prior to, the date of annual grant will not be granted an annual option with respect to that year. Each initial and annual option will have an exercise price per share equal to the fair market value of a share of our Common Stock on the date of grant and will have a term of ten years. Both the initial options and the annual options granted to newly elected or appointed non-employee directors will vest and become exercisable ratably over four years after the date of grant of the option. All automatic non-employee director options granted under the 2003 Plan will be non-statutory stock options.

A stock appreciation right gives a participant the right to receive the appreciation in the fair market value of our Common Stock between the date of grant of the award and the date of its exercise. The Company may pay the appreciation either in cash or in shares of Common Stock. The Compensation and Stock Option Committee may grant stock appreciation rights under the 2003 Plan in tandem with a related stock option or as a freestanding award. A tandem stock appreciation right is exercisable only at the time and to the same extent that the related option is exercisable, and its exercise causes the related option to be canceled. Freestanding stock appreciation rights vest and become exercisable at the times and on the terms established by the Compensation and Stock Option Committee. The maximum term of any stock appreciation right granted under the 2003 Plan is ten years. Stock appreciation rights are generally nontransferable by the participant other than by will or by the laws of descent and distribution, and are generally exercisable during the participant's lifetime only by the participant.

The 2003 Plan provides for the grant of restricted stock awards either in the form of a restricted stock purchase right, giving a participant an immediate right to purchase Common Stock, or in the form of a restricted stock bonus, for which the participant furnishes consideration in the form of services to the Company. The Compensation and Stock Option Committee determines the purchase price payable under restricted stock purchase awards, which may be less than the then current fair market value of our Common Stock. Restricted stock awards may be subject to vesting conditions based on such service or performance criteria as the Compensation and Stock Option Committee specifies, and the shares acquired may not be transferred by the participant until vested. Unless otherwise provided by the Compensation and Stock Option Committee, a participant will forfeit any shares of restricted stock as to which the restrictions have not lapsed prior to the participant's termination of service. Participants holding restricted stock will have the right to vote the shares and to receive any dividends paid, except that dividends or other distributions paid in shares will be subject to the same restrictions as the original award.

The 2003 Plan also provides for the grant of restricted stock units which represent a right to receive shares of our Common Stock at a future date determined in accordance with the participant's award agreement. No monetary payment is required for receipt of restricted stock units or the shares issued in settlement of the award, the consideration for which is furnished in the form of the participant's services to the Company. The Compensation and Stock Option Committee may grant restricted stock unit awards subject to the attainment of performance goals similar to those described below in connection with performance shares and performance units, or may make the awards subject to vesting conditions similar to those applicable to restricted stock awards. Participants have no voting rights or rights to receive cash dividends with respect to restricted stock unit awards until shares of Common Stock are issued in settlement of such awards. However, the Compensation and Stock Option Committee may grant restricted stock units that entitle their holders to receive dividend equivalents, which are rights to receive additional restricted stock units for a number of shares whose value is equal to any cash dividends we pay.

The 2003 Plan provides for the grant of performance awards subject to such conditions and the attainment of such performance goals over such periods as the Compensation and Stock Option Committee determines in writing and sets forth in a written agreement between the Company and the participant. These awards may be designated as performance shares or performance units. Performance shares and performance units are unfunded bookkeeping entries generally having initial values, respectively, equal to the fair market value determined on the grant date of a share of Common Stock and $100 per unit. Performance awards will specify a predetermined amount of performance shares or performance units that may be earned by the participant to the extent that one or more predetermined performance goals are attained within a predetermined performance period. To the extent earned, performance awards may be settled in cash, shares of Common Stock (including shares of restricted stock) or any combination thereof.

Following completion of the applicable performance period, the Compensation and Stock Option Committee will certify in writing the extent to which the applicable performance goals have been attained and the resulting value to be paid to the participant. The Compensation and Stock Option Committee retains the discretion to eliminate or reduce, but not increase, the amount that would otherwise be payable to the participant on the basis of the performance goals attained. However, no such reduction may increase the amount paid to any other participant. In its discretion, the Compensation and Stock Option Committee may provide for the payment to a participant awarded performance shares of dividend equivalents with respect to cash dividends paid on our Common Stock. Performance award payments may be made in lump sum or in installments. If any payment is to be made on a deferred basis, the Compensation and Stock Option Committee may provide for the payment of dividend equivalents or interest during the deferral period.

Name and Position of Individual	Securities underlying options granted (#)		Weighted average exercise price per share ($/sh)

George E. Daddis Jr., Chief Executive Officer and President (principal executive officer)		2,000,000	$	0.34
Joel Boyarski, Chief Financial Officer, Treasurer and Senior Vice President, Finance and Administration (principal financial officer and principal accounting officer)		900,000	$	0.28
Allan Van Buhler Senior Vice President of Sales, Marketing and Business Development		1,500,000	$	0.28
Robert Stevanovski, Chairman of the Board of Directors, Former Interim Chief Executive Officer and President (former principal executive officer)		-		-
Harold M. Krisbergh, Former Chairman of the Board of Directors and Chief Executive Officer (former principal executive officer)		-		-
All current executive officers as a group		5,400,000	$	0.30

All current directors (including nominees, who are not executive officers) as a group (7 directors)		400,000	$	0.28

All other employees (including all current officers who are not executive officers) as a group (42) employees)		11,159,000	$	0.34

For purposes of this summary, we assumed that no award will be considered “deferred compensation” as that term is defined for purposes of the federal tax rules governing nonqualified deferred compensation arrangements (Section 409A of the IRS Code). We also assumed that if any award were considered to any extent to constitute deferred compensation, its terms would comply with the requirements of that legislation (in general, by limiting any flexibility in the time of payment). For example, the award of a nonstatutory option with an exercise price which is less than the fair market value of the stock covered by the option would constitute deferred compensation. If an award includes deferred compensation, and its terms do not comply with the requirements of the legislation, then any deferred compensation component of the award will be taxable when it is earned and vested (even if not then payable) and the recipient will be subject to a 20% additional tax.

	·	provide that outstanding options shall be assumed, or substituted with substantially equivalent rights, by the acquiring or succeeding entity;
	·	provide that unexercised options shall terminate immediately prior to the transaction unless exercised within a specified period following notice to the holder of the transaction;
	·	provide that outstanding options shall become exercisable in whole or in part prior to or upon the transaction;
	·	provide for cash payments (net of applicable tax withholdings) to be made to holders equal to the excess, if any, of the per share acquisition price over the exercise price of the option, upon which the option shall terminate;
	·	provide that, in connection with a liquidation or dissolution of the Company, options shall convert into the right to receive liquidation proceeds net of the exercise price thereof and any applicable tax withholdings;
	·	provide for the release of the repurchase rights or other risk of forfeiture with respect to some or all restricted stock awards prior to or upon consummation of the transaction; and
	·	provide that, with respect to restricted stock awards, the repurchase and other rights of the Company shall inure to the benefit of the successor company and shall, unless the Committee determines otherwise, apply to the cash, securities or other property which the stock was converted into or exchanged in the same manner and to the same extent as they applied to the Award.

Incentive Stock Options. An optionee recognizes no taxable income for regular income tax purposes as a result of the grant or exercise of an incentive stock option qualifying under Section 422 of the IRS Code. Optionees who neither dispose of their shares within two years following the date the option was granted nor within one year following the exercise of the option will normally recognize a capital gain or loss upon a sale of the shares equal to the difference, if any, between the sale price and the purchase price of the shares. If an optionee satisfies such holding periods upon a sale of the shares, the Company will not be entitled to any deduction for federal income tax purposes. If an optionee disposes of shares within two years after the date of grant or within one year after the date of exercise (a “disqualifying disposition”), the difference between the fair market value of the shares on the exercise date and the option exercise price (not to exceed the gain realized on the sale if the disposition is a transaction with respect to which a loss, if sustained, would be recognized) will be taxed as ordinary income at the time of disposition. Any gain in excess of that amount will be a capital gain. If a loss is recognized, there will be no ordinary income, and such loss will be a capital loss. Any ordinary income recognized by the optionee upon the disqualifying disposition of the shares generally should be deductible by the Company for federal income tax purposes, except to the extent such deduction is limited by applicable provisions of the IRS Code.

Nonstatutory Stock Options. Options not designated or qualifying as incentive stock options will be nonstatutory stock options having no special tax status. An optionee generally recognizes no taxable income as the result of the grant of such an option. Upon exercise of a nonstatutory stock option, the optionee normally recognizes ordinary income in the amount of the difference between the option exercise price and the fair market value of the shares on the exercise date. If the optionee is an employee, such ordinary income generally is subject to withholding of income and employment taxes. Upon the sale of stock acquired by the exercise of a nonstatutory stock option, any gain or loss, based on the difference between the sale price and the fair market value on the exercise date, will be taxed as capital gain or loss. No tax deduction is available to the Company with respect to the grant of a nonstatutory stock option or the sale of the stock acquired pursuant to such grant. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the optionee as a result of the exercise of a nonstatutory stock option, except to the extent such deduction is limited by applicable provisions of the IRS Code.

Restricted Stock. A participant acquiring restricted stock generally will recognize ordinary income equal to the difference between the price the participant paid for the shares (if any) and the fair market value of the shares on the “determination date.” The “determination date” is the date on which the shares vest and any restrictions on the shares lapse. These restrictions generally include a prohibition on transfer and substantial risks of forfeiture (for example, where the restricted stock award is subject to vesting conditions such as service requirements or performance criteria prior to the satisfaction of which the shares remain subject to forfeiture). If the participant is an employee, such ordinary income generally is subject to withholding of income and employment taxes. If the determination date is after the date on which the participant acquires the shares, the participant may elect, pursuant to Section 83(b) of the Code, to have the date of acquisition be the determination date by filing an election with the Internal Revenue Service no later than 30 days after the date the shares are acquired. Upon the sale of shares acquired pursuant to a restricted stock award, any gain or loss, based on the difference between the sale price and the fair market value on the determination date, will be taxed as capital gain or loss. The Company generally should be entitled to a deduction equal to the amount of ordinary income recognized by the participant on the determination date, except to the extent such deduction is limited by applicable provisions of the Code.

The proposed Third Amended and Restated Certificate of Incorporation would amend our existing Amended and Restated Certificate of Incorporation to, among other things, effect a reverse stock split of the Company’s Common Stock, at a ratio not less than one-for-five and not greater than one-for-twenty five, with the exact ratio to be set within such range in the discretion of the Board, without further approval or authorization of the Company’s stockholders, provided that the Board determines to effect the reverse stock split and such amendment is filed with the Delaware Secretary of State prior to the first anniversary of its approval by the stockholders. If the reverse stock split is implemented, the Third Amended and Restated Certificate of Incorporation would also reduce the number of our authorized shares of Common Stock from 700 million to between approximately 140 million and 28 million shares (depending on the reverse stock split ratio selected by the Board) and would change the number of our authorized shares of Preferred Stock from 13.5 million to between approximately 2.7 million and 540 thousand shares (depending on the reverse stock split ratio selected by the Board), but would not change the par value per share of our Common Stock or Preferred Stock. The number of authorized shares of Common Stock and Preferred Stock will be rounded down to the nearest whole number. We currently have no shares of Series A Preferred Stock outstanding and have no current plans to issue preferred stock.

The Third Amended and Restated Certificate of Incorporation would also add a standard provision relating to indemnification of officers, directors and agent, consistent with the current provisions of our bylaws. We believe that the inclusion of this indemnification provision in our proposed Third Amended and Restated Certificate of Incorporation in addition to our bylaws provides our officers, directors and agents with more certainty as to their ability to rely on the indemnification protection available to them under our charter documents. We are not asking for separate approval of these additional changes to our Third Amended and Restated Certificate of Incorporation because these changes do not represent material changes in the rights of the Company’s stockholders. However, these changes are part of the proposed Third Amended and Restated Certificate of Incorporation under Proposal No. 4, attached hereto as Appendix C, and you are encouraged to review the proposed Third Amended and Restated Certificate of Incorporation before voting on this proposal.

Purpose. The Company’s Common Stock is quoted on the Over-the-Counter (“OTC”) Bulletin Board under the symbol “WGAT.OB”. The shares of Common Stock of the Company have traded at very low prices for some time. As of March 24, 2010, the last reported closing price of the Common Stock was $0.52. The reverse stock split is intended to increase the per share stock price to better enable the Company to list the Common Stock on the NASDAQ Global Market or the NASDAQ Capital Market. We believe that if we are successful in maintaining a higher stock price following the reverse stock split, the stock will generate greater interest among professional investors and institutions. If we are successful in generating interest among such entities, we anticipate that our Common Stock would have greater liquidity and a stronger investor base. Alternative markets like the OTC Bulletin Board or the “pink sheets” maintained by the Pink OTC Markets, Inc. are generally considered to be less efficient and not as widely followed as other exchanges, such as those operated by NASDAQ or the New York Stock Exchange.

We believe that the reverse stock split may help us satisfy the minimum bid price listing standards of the NASDAQ Global Market or the NASDAQ Capital Market. However, the effect of the reverse stock split upon the market price of our Common Stock cannot be predicted with any certainty, and the history of similar reverse stock splits for companies in like circumstances is varied. It is possible that the per share price of our Common Stock after the reverse stock split will not rise in proportion to the reduction in the number of shares of our Common Stock outstanding resulting from the reverse stock split, and even if it does rise in proportion there can be no assurance that the market price per post-reverse stock split share will remain at that level for a sustained period of time. In addition, the stock price of some companies that have effected reverse stock splits has subsequently declined back to pre-reverse stock split levels. The market price of our Common Stock may be based also on other factors that may be unrelated to the number of shares outstanding, including investors’ perceptions of our future performance. Notwithstanding the foregoing, our ability to list our stock on the NASDAQ Global Market or the NASDAQ Capital Market is subject to numerous requirements other than a minimum share price, including income and market capitalization requirements and certain corporate governance requirements. Accordingly, even if our share price were to rise as a result of the reverse stock split, there can be no assurance that we would be able to list our stock on the NASDAQ Global Market or the NASDAQ Capital Market.

We also believe that any increase in the market price of our Common Stock as a result of implementing the reverse stock split may improve the marketability and liquidity of our Common Stock. Because of the trading volatility often associated with low-priced stocks, many brokerage houses and institutional investors have internal policies and practices that either prohibit them from investing in low-priced stocks or tend to discourage individual brokers from recommending low-priced stocks to their customers. Some of those policies and practices may function to make the processing of trades in low-priced stocks economically unattractive to brokers. Additionally, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our Common Stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher. It should be noted that the liquidity of our Common Stock may be adversely affected by the proposed reverse stock split given the reduced number of shares that would be outstanding after the reverse stock split. We believe, however, that any higher market price may reduce, to some extent, the negative effects on the liquidity and marketability of our Common Stock that may result from some of the policies and practices of institutional investors and brokerage houses described above.

If the Third Amended and Restated Certificate of Incorporation of the Company is approved by the Company’s stockholders, the Board will have the discretion to determine, as it deems to be in the best interest of the Company’s stockholders, the specific ratio to be used within the range described above and the actual time of filing of the Third Amended and Restated Certificate of Incorporation of the Company, which must occur at any time prior to the first anniversary of its approval by the stockholders. The Board may also, in its discretion, notwithstanding stockholder approval and without further action by stockholders, elect not to proceed with the reverse stock split if the Board determines that the reverse stock split is no longer in the best interests of the Company and its stockholders. The reverse stock split will be effective upon the filing of the Third Amended and Restated Certificate of Incorporation of the Company with the Secretary of State of the State of Delaware (the “Effective Date”).

The Board of Directors believes that stockholder approval of an exchange ratio range (rather than an exact exchange ratio) provides the Board with maximum flexibility to react to changing market conditions and achieve the purposes of the reverse stock split. If stockholders approve Proposal No. 4, the reverse stock split will be effected, if at all, only upon a determination by the Board that the reverse stock split is in the best interests of the Company and its stockholders at that time. In connection with any determination to effect the reverse stock split, the Board will set the time for such a split and select a specific ratio within the range, which ratio will be applicable both to the reverse stock split and the reduction in the number of authorized shares of Common Stock and Preferred Stock. In determining whether to effect the reverse stock split and, if so, the ratio to be used, the Board will consider various factors, including but not limited to, (i) the potential impact and anticipated benefits to the Company and its stockholders, (ii) the market price of the Common Stock at such time, (iii) the number of shares that will be outstanding after the reverse stock split, (iv) the stockholders’ equity at such time, (v) the number of shares of Common Stock available for future issuance after the reverse stock split, and (vi) the trading volume of the Common Stock at such time.

Risks. Stockholders should recognize that once the reverse stock split is effected, they will own a fewer number of shares than they currently own (a number equal to the number of shares owned immediately prior to the reverse stock split divided by a number between five and twenty-five). While we expect that the reverse stock split will result in an increase in the per share price of our Common Stock, the reverse stock split may not increase the per share price of our Common Stock in proportion to the reduction in the number of shares of our Common Stock outstanding. It also may not result in a permanent increase in the per share price, which depends on many factors, including our performance, prospects and other factors that may be unrelated to the number of shares outstanding. The history of similar reverse stock splits for companies in similar circumstances is varied. Furthermore, the liquidity of our Common Stock could be adversely affected by the reduced number of shares that would be outstanding after the reverse stock split. Consequently, there can be no assurance that the reverse stock split will achieve the desired results that have been outlined above.

We believe that the failure to effect the reverse stock split could impede any future efforts by the Company to raise capital. The Company may need to raise additional capital from time to time and may elect to do so through the issuance of equity securities. If our shares are not listed on the NASDAQ Global Market or the NASDAQ Capital Market, we may find it more difficult to raise capital, even if the shares trade on the OTC Bulletin Board or pink sheets. Further, if our Common Stock is not listed on NASDAQ, the Company will be ineligible to use the Securities and Exchange Commission’s (“SEC”) Form S-3 to register additional shares of Common Stock either for issuance by the Company in certain circumstances (or subject to additional limitations on the use of Form S-3) or for resale by others. This will make it more difficult and more expensive for us to register any additional securities, which may adversely affect our ability to raise additional funds.

Fractional Shares and Effect on Outstanding Shares and Other Company Securities. The reverse stock split will be realized simultaneously and in the same ratio for all shares of the Common Stock and outstanding rights to acquire Common Stock. All holders of Common Stock will be affected uniformly by the reverse stock split, which will have no effect on the proportionate holdings of any of our stockholders, except for possible changes due to the treatment of fractional shares resulting from the reverse stock split. No fractional shares of Common Stock will be issued as a result of any reverse stock split. Instead, stockholders who otherwise would be entitled to receive fractional shares of Common Stock because they hold a number of shares not evenly divisible by the applicable ratio, upon surrender to the Exchange Agent (defined below) of the certificates representing such fractional shares, shall be entitled to receive cash in an amount equal to the fair market value of any such fractional shares as described below. In lieu of issuing fractional shares, our transfer agent will aggregate all fractional shares that would have been issued and sell them in the market. The total proceeds of the sale will be paid to the holders of the fractional shares (without interest and after deduction of customary brokerage commissions and other expenses) in lieu of such fractional shares in an amount equal to the stockholder’s pro rata share of the proceeds received by the transfer agent from the sale. The number of shares which will result in fractional interests cannot be precisely predicted as the Company cannot determine in advance the number of stockholders whose total holdings are not evenly divisible by the exchange ratio. In addition, the reverse stock split will not affect any holder of Common Stock’s proportionate voting power (other than to the extent of fractional shares as described above), and all shares of Common Stock will remain fully paid and non-assessable. The reverse stock split is a complete transaction rather than the first step in a series of transactions intended to cause our common stock to be held of record by fewer than 300 persons. However, the Company cannot at this time determine whether the reverse stock split will result in our Common Stock being held of record by less than 300 persons, which would allow the Company to terminate the registration of its Common Stock under the Exchange Act.

Issuance of New Certificates. We will obtain a new CUSIP number for the new Common Stock effective at the time of the reverse stock split on the Effective Date. Stockholders who held shares of the Common Stock as of the close of business on the Effective Date (“Record Holders”) will be notified as soon as practicable after the Effective Date that the reverse stock split has been effected. We expect that the Company’s transfer agent will act as its exchange agent (the “Exchange Agent”) to act for the Record Holders in implementing the exchange of their certificates. As soon as practicable after the Effective Date, Record Holders will be notified and requested to surrender their certificates representing shares of pre-split Common Stock (“Old Common Stock”) to the Exchange Agent in exchange for certificates representing post-split Common Stock (“New Common Stock”). Any fractional shares of Common Stock resulting from the reverse stock split will be rounded down to the nearest whole number, with the stockholders who otherwise would be entitled to receive fractional shares of Common Stock because they hold a number of shares not evenly divisible by the applicable ratio, upon surrender to the Exchange Agent of the certificates representing such fractional shares, shall be entitled to receive cash in an amount equal to the fair market value of any such fractional shares as described above under “Fractional Shares and Effect on Outstanding Shares”. At the Effective Date, each lot of between 5 and 25 shares, as determined by the Board, of Old Common Stock issued and outstanding immediately prior to the Effective Date will, automatically and without any further action on the part of our stockholders, be combined into and become one share of New Common Stock, subject to the treatment for fractional shares described above, and each certificate which, immediately prior to the Effective Date represented Old Common Stock, will be deemed cancelled and, for all corporate purposes, will be deemed to evidence ownership of New Common Stock. The ownership of a fractional share interest will not give the holder thereof any voting, dividend or other rights except to receive payment therefor as described herein.

As soon as practicable after the Effective Date, a letter of transmittal will be sent to Record Holders for purposes of surrendering to the Exchange Agent certificates representing Old Common Stock in exchange for certificates representing New Common Stock shares in accordance with the procedures set forth in the letter of transmittal. No new certificates will be issued to a stockholder until such stockholder has surrendered such stockholder’s outstanding certificate(s), together with the properly completed and executed letter of transmittal, to the Exchange Agent. From and after the Effective Date, any certificates representing Old Common Stock which are submitted for transfer, whether pursuant to a sale, other disposition or otherwise, will be exchanged for certificates representing New Common Stock. No stockholder will be required to pay a transfer or other fee to exchange his, her or its certificates representing Old Common Stock for certificates representing New Common Stock registered in the same name.

Federal Income Tax Consequences. Each stockholder is urged to consult with such stockholder’s tax advisor with respect to any potential tax consequences of the reverse stock split. The following summary of the U.S. federal income tax consequences of a reverse stock split is based on current law, including the IRS Code, does not purport to be a complete discussion of all of the possible federal income tax consequences of the reverse stock split and is for general information only. Further, it does not address any state, local or foreign income or other tax consequences. The tax treatment of a stockholder may vary depending upon the particular facts and circumstances of such stockholder, and the discussion below may not address all the tax consequences for a particular stockholder. The summary does not address the tax consequences to stockholders that are subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, nonresident alien individuals, broker-dealers and tax-exempt entities. The discussion is based on the provisions of the United States federal income tax law as of the date hereof, which is subject to change retroactively as well as prospectively. Accordingly, notwithstanding anything to the contrary, each stockholder should consult his, her or its tax advisor to determine the particular tax consequences to him, her or it of a reverse stock split, including the application and effect of federal, state, local and/or foreign income tax and other laws. This summary also assumes that the shares of Old Common Stock were, and the shares of New Common Stock will be, held as a “capital asset,” as defined in the IRS Code (i.e., generally, property held for investment).

The Third Amended and Restated Certificate of Incorporation also provides, to the extent permitted by applicable law, that the Company is also authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees and agents (and any other persons to which Delaware law permits this Corporation to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the Delaware General Corporation Law (the “DGCL”), subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the Company, its stockholders, and others. Any modification or repeal of the foregoing provisions shall not adversely affect any right or protection of any director, officer, agent or other person in respect of any act or omission occurring prior to the time of such modification or repeal.

Currently, the Company’s Amended and Restated Certificate of Incorporation, as amended, does not provide for indemnification of our directors and officers. Our Amended and Restated Bylaws, however, provide for the indemnification of any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the Company, or is or was serving while a director or officer of the Company at the request of the Company as a director, officer, employee, agent, fiduciary or other representative of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against expenses (including attorneys fees), judgments, fines, excise taxes and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding to the full extent permissible under Delaware law.

The DGCL provides that a corporation may indemnify any person who is made a party to any third-party action, suit or proceeding on account of being a director, officer, employee or agent of the corporation (or is or was serving at the request of the corporation in such capacity for another corporation, partnership, joint venture, trust or other enterprise) against expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him or her in connection with the action, suit or proceeding through, among other things, a majority vote of a quorum consisting of directors who were not parties to the suit or proceeding or by a committee of such directors designated by majority vote of such directors, even though less than a quorum, if the person: (i) acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, and (ii) in a criminal proceeding, had reasonable cause to believe his or her conduct was lawful.

Summary Compensation Table
Name and Principal Position	Year	Salary ($)		Bonus ($)		Option Awards ($)(1)		All Other Compensation ($)			Total ($)
George E. Daddis Jr.
Chief Executive Officer and President (principal executive officer)(2)	2009	$	83,346		–	$	670,462	$	13,842	(3)	$	767,650

Joel Boyarski
Chief Financial Officer, Treasurer and Senior Vice President, Finance and Administration (principal financial officer and principal accounting officer)	2009	$	200,350	$	25,630	$	248,478		–		$	474,458
	2008	$	215,451		–	$	50,914		–		$	266,365

Allan Van Buhler
Senior Vice President of Sales, Marketing and Business Development (4)	2009	$	58,346		–	$	414,130		–		$	472,476

FORMER OFFICERS:
Robert Stevanovski
Chairman of the Board of Directors, Former Interim Chief Executive Officer and President (former principal executive officer)(5)	2009		–		–		–		–			–

Harold M. Krisbergh
Former Chairman of the Board of Directors and Chief Executive Officer (former principal executive officer)(6)	2009	$	100,651	$	3,316		–	$	350,446	(7)	$	485,626
	2008	$	307,171		–	$	26,102		–		$	333,273

We are party to a letter agreement with George E. Daddis Jr., our Chief Executive Officer and President. The agreement became effective on August 3, 2009. Pursuant to the letter agreement, Mr. Daddis receives a base salary of $220,000 per year. Under the terms of the letter agreement, Mr. Daddis received an award of a non-qualified stock option to purchase 2,000,000 shares of Common Stock under our 2003 Plan, as set forth in the option agreement to be entered into between him and us. In the event of termination of Mr. Daddis’s employment without cause by the Company or by Mr. Daddis for good reason, the Company agreed to pay Mr. Daddis severance in the amount of six months’ salary and benefits continuation. Pursuant to the letter agreement, “cause” means Mr. Daddis’s (i) willful or continued misconduct, breach of fiduciary duty or gross negligence in the performance (or failure thereof) of his duties; (ii) intentional failure or refusal to perform lawfully assigned duties consistent with his position; (iii) material breach of this Agreement; or (iv) conviction of or entering a plea of nolo contendere to any felony or any crime (whether or not a felony) involving dishonesty or fraud, subject to certain cure periods; and “good reason” means a termination of employment with the Company by Mr. Daddis because of (a) a material reduction in his base salary, (b) a change in his title with the Company resulting in a material diminution in his duties, responsibilities or authority or (c) a material breach of the offer letter by the Company.

We are party to an employment agreement with Joel Boyarski, our Chief Financial Officer, Treasurer and Senior Vice President, Finance and Administration. The agreement became effective on April 6, 2009. The employment period is for a term of one year (unless terminated earlier by either party) and provided for the execution by the employee of a non-compete and confidentiality agreement with the Company. The employment agreement sets an annual base salary of $195,276 for Mr. Boyarski. The agreement also provides for the payment of quarterly bonuses in the amount of $17,087 during the period of employment, based on individual performance objectives to be set by the Company’s Compensation and Stock Option Committee, with 100% of the target quarterly bonus amounts guaranteed for the quarter ended June 30, 2009 and 50% guaranteed for the quarter ended September 30, 2009, with the remaining amounts for the quarters ended September 30, 2009 and December 31, 2009 earned to the extent that the individual performance objectives have been met.

The employment agreement also provided for a future grant of an option for 900,000 shares of Common Stock, which grant was made on May 26, 2009. While the employment arrangements under this agreement are “at-will,” the agreement provides that in the event the Mr. Boyarski is terminated by the Company without cause, upon the execution by Mr. Boyarski of a general release in a form acceptable to the Company, Mr. Boyarski will be entitled to certain continued health benefits as well as severance in the amount equal to the greater of (i) Mr. Boyarski’s monthly base salary amount, plus any cash bonus amounts (including guaranteed amounts earned or accrued through the termination date), multiplied by the number of months remaining under the agreement until April 6, 2010 or (ii) Mr. Boyarski’s monthly base salary amount, plus any cash bonus amounts (including guaranteed amounts earned or accrued through the termination date), multiplied by six. Pursuant to the employment agreement, “cause” means (a) Mr. Boyarski has been convicted of or pled guilty or no contest to (i) any criminal offense which is classified as a felony (or its equivalent under the laws or regulations of any country or political subdivision thereof), or (ii) any other criminal offense which involves a violation of federal or state securities laws or regulations (or equivalent laws or regulations of any country or political subdivision thereof), embezzlement, fraud, material wrongful taking or material misappropriation of property or theft; (b) persistent and willful failure to perform in a manner consistent with Mr. Boyarski’s past performance a substantial portion of the Employee’s duties and responsibilities, which failure continues more than ten (10) days after written notice is given to Mr. Boyarski by the Company; (c) gross negligence or willful misconduct of Mr. Boyarski in the performance of his or her duties to the material detriment of the Company or any affiliate or shareholder of the Company; (d) breach of any of the covenants, terms and provisions of the employment agreement; and (e) breach of trust or breach of fiduciary duty owed to the Company, its shareholders, directors, customers, affiliates, subsidiaries or members.

We are party to a letter agreement with Allan Van Buhler, our Senior Vice President of Sales, Marketing and Business Development. The agreement became effective on July 1, 2009. Pursuant to the letter agreement, Mr. Van Buhler receives a base salary of $205,000 per year. In the event of termination of Mr. Van Buhler’s employment without cause by the Company, the Company agreed to pay Mr. Van Buhler severance in the amount of six months’ salary and benefits continuation. Pursuant to the letter agreement, “cause” means Mr. Van Buhler’s (i) willful or continued misconduct, breach of fiduciary duty or gross negligence in the performance (or failure thereof) of his duties; (ii) intentional failure or refusal to perform lawfully assigned duties consistent with his position; (iii) material breach of this Agreement; or (iv) your conviction of or entering a plea of nolo contendere to any felony or any crime (whether or not a felony) involving dishonesty or fraud, subject to certain cure periods.

Outstanding Equity Awards as of December 31, 2009
	Option Awards								Stock Awards
Name	Number of Securities Underlying Unexercised Options (#) Exercisable		Number of Securities Underlying Unexercised Options (#) Unexercisable (1)			Option Exercise Price ($)		Option Expiration Date	Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#)			Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)

George E. Daddis Jr.		–		2,000,000	(2)	$	0.34	7/31/2019		–			–

Joel Boyarski		–		900,000	(3)	$	0.28	5/26/2019		–			–
		18,284				$	0.108	7/26/2010		–			–
		5,738				$	0.108	12/8/2010		–			–
		26,716				$	0.108	1/31/2012		–			–
		20,000				$	0.108	2/27/2012		–			–
		10,000				$	0.108	4/25/2012		–			–
		57,000				$	0.108	2/27/2013		–			–
		143,000				$	0.108	9/30/2013		–			–
		175,000				$	0.108	1/2/2014		–			–
		20,000				$	0.108	12/23/2014		–			–
		20,000				$	0.108	11/9/2015		–			–
		15,000		5,000	(4)	$	0.108	11/13/2016
		71,500		71,500	(5)	$	0.108	10/3/2017
										250,000	(6)	$	187,500	(7)

Allan Van Buhler		–		1,500,000	(3)	$	0.28	5/26/2019		–			–

Robert Stevanovski		–		–			–	–		–			–

Harold M. Krisbergh		20,000		–		$	0.108	5/5/2010		–			–
		160,000		–		$	0.108	5/19/2011		–			–
		80,000		–		$	0.108	5/21/2012		–			–
		50,000		–		$	0.108	3/9/2015		–			–
		33,750		–		$	0.108	4/25/2016		–			–

(6)

This is a performance share grant of restricted shares of Common Stock under the WorldGate Communications, Inc. 2003 Equity Incentive Plan, which are bookkeeping entries representing a right to receive a payment in cash, shares of Common Stock, or a combination thereof as determined by the Compensation and Stock Option Committee equal to the value of the shares of Common Stock on achievement of performance criteria. These awards vest pursuant to the following performance criteria: (a) 10% of the shares vest upon achieving each of a 10%, 20%, 30% 40% and 50% increase in our total gross revenue in a quarter over its third quarter 2007 total gross revenue shown on its statement of operations as reported in its SEC filings, (b) 25% of the shares vest upon our achievement of a quarterly operating cash break even (defined as zero or positive “net cash provided by operations” consistent with or as reported on the “Consolidated Statement of Cash Flows” in the financial statements filed with SEC) and (c) 25% of the shares vest upon our achievement of 10% net income as a percent of revenue.

Robert Stevanovski, Anthony Cassara, Gregory Provenzano and David Stevanovski were each appointed to serve on our Board pursuant to the terms of the Securities Purchase Agreement. Each of these directors is a principal of WGI, have an ownership interest in ACN and have a director, officer and/or advisory position with ACN. Robert Stevanovski also serves as manager of Praescient, LLC, the sole manager of WGI. As a result of their relationship with WGI and ACN, each of these individuals may be deemed to have a direct or indirect interest in the transactions involving WGI, ACN and their respective affiliates. As described above under “Security Ownership of Certain Beneficial Owners and Management”, WGI beneficially owns an aggregate of 63.1% of our Common Stock (which includes 202,462,155 shares of Common Stock, 23,960,194 shares of Common Stock issuable under the Anti-Dilution Warrant as of March 24, 2010 and 6,000,000 shares of Common Stock issuable under the March 2010 WGI Warrant).

Securities Purchase Agreement. On April 6, 2009, we completed a private placement of securities to WGI, pursuant to the terms of the Securities Purchase Agreement. In connection with the closing on April 6, 2009 of the transactions contemplated by the Securities Purchase Agreement, we issued to WGI an aggregate of 202,462,155 shares of our Common Stock, representing approximately 63% of the total number of the then issued and outstanding shares of our Common Stock, as well as a warrant to purchase up to 140,009,750 shares of our Common Stock in certain circumstances (the “Anti-Dilution Warrant”) in exchange for (i) cash consideration of $1,450,000, (ii) the cancellation of convertible debentures held by WGI under which approximately $5,100,000 in principal and accrued interest was outstanding, and (iii) the cancellation of certain outstanding warrants held by WGI. WGI is a private investment fund whose ownership includes owners of ACN, a direct seller of telecommunications services and a distributor of video phones.

Anti-Dilution Warrant. As described in the section above under the heading “Change in Control,” the Anti-Dilution Warrant entitles WGI to purchase up to 140,009,750 shares of Common Stock at an exercise price of $0.01 per share to the extent we issue any capital stock upon the exercise or conversion of (i) any Existing Contingent Equity, (ii) any Future Contingent Equity, or (iii) the ACN Warrant described below. The Anti-Dilution Warrant is designed to ensure that WGI may maintain 63% of our issued and outstanding shares of capital stock in the event that any of our capital stock is issued in respect to the Existing Contingent Equity, the Future Contingent Equity or the ACN Warrant (i.e., upon each issuance of a share pursuant to Existing Contingent Equity, Future Contingent Equity or the ACN Warrant, the Anti-Dilution Warrant may be exercised for 1.7027027 shares). The term of the Anti-Dilution Warrant is ten years from the date of issuance, and the shares subject to the Anti-Dilution Warrant will be decreased proportionally upon the expiration of Existing Contingent Equity, Future Contingent Equity and the ACN Warrant.

Registration Rights and Governance. Concurrently with the closing on April 6, 2009 of the transactions contemplated by the Securities Purchase Agreement, we entered into the Rights Agreement with WGI and ACN granting them certain rights with respect to the shares purchased pursuant to the Securities Purchase Agreement and the securities underlying the Anti-Dilution Warrant and the ACN Warrant. Under the terms of the Rights Agreement, we agreed to file a registration statement on Form S-3 covering the resale of any shares held by WGI and ACN and to maintain its effectiveness for a minimum period of time. In addition, WGI and ACN have the right to require us to file additional registration statements covering the resale of such securities to the extent they are not covered by an effective registration statement and will be entitled to “piggy-back” registration rights on all of our future registrations (with certain limitations) and on any demand registrations of any other investors, subject to customary underwriters’ cutbacks to reduce the number of shares to be registered in view of market conditions.

Pursuant to the terms of the Rights Agreement, we granted WGI and ACN preemptive rights to purchase a pro rata portion of any of our Common Stock or other securities convertible into our Common Stock issued by us, except for shares issued under board-approved employee benefit plans, conversions of Existing Contingent Equity or upon exercise of the Anti-Dilution Warrant or the ACN Warrant. The Rights Agreement also gives WGI the right to nominate a total of four of the seven members of our Board. This nomination right will be reduced by one director for each reduction in WGI’s beneficial ownership of our Common Stock (including any warrants or other purchase rights) below thresholds of 50%, 43%, 29% and 14% of our voting stock. To the extent that such nomination right decreases, the corresponding number of WGI nominees will offer to tender their resignation for acceptance by the Board. To the extent the number of members of the Board is changed, the number of directors WGI is entitled to appoint will be increased or decreased (as applicable) to provide WGI with the right to nominate no less than the same proportion of directors as otherwise provided in the Rights Agreement.

Commercial Relationship with ACN. Concurrently with the closing on April 6, 2009 of the transactions contemplated by the Securities Purchase Agreement, we entered into a commercial relationship with ACN pursuant to which we agreed to design and sell video phones to ACN (the “Commercial Relationship”). As part of the Commercial Relationship, we entered into two agreements with ACN: a Master Purchase Agreement pursuant to which a subsidiary of ACN committed to purchase 300,000 videophones over a two-year period (the “Master Purchase Agreement”) and a Software Development and Integration and Manufacturing Assistance Agreement pursuant to which ACN committed to provide us with $1.2 million to fund associated software development costs. In connection with the Commercial Relationship, we granted ACN a warrant to purchase up to approximately 38.2 million shares of Common Stock at an exercise price of $0.0425 per share (the “ACN Warrant”). The ACN Warrant vests incrementally based on ACN’s purchases of video phones under the Commercial Relationship. .

Service Agreement with deltathree, Inc. On October 9, 2009, we entered into a Master Service Agreement (the “D3 Agreement”) with D3. Pursuant to the D3 Agreement, D3 will provide us, and we will purchase from D3, wholesale VoIP telephony and video services and operational support systems. These services provide us one of the tools necessary to provide our digital voice and video phone services directly to end users customers. We will pay D3 an activation fee, usage charges and a monthly subscriber-based fee for each customer that subscribes for the services provided to us under the D3 Agreement. The initial term of the D3 Agreement is for a period of five years from the date we begin offering VoIP telephony and video services to customers. The term will renew automatically for successive terms of one year each unless either party provides the other party written notice of termination at least 180 days prior to the expiration of the then-current term. The D3 Agreement can be terminated by either party for cause or upon 180 days notice for convenience. If we do not incur charges payable to D3 pursuant to the D3 Agreement of at least $300,000 during the six month period following the date that our first customer is provided VoIP telephony and video services pursuant to the D3 Agreement, we will be obligated to pay D3 an amount equal to 33.0% multiplied by the difference between $300,000 and the actual amount of such charges during such six month period. D3 is majority owned by D4 Holdings, LLC and we are majority owned by WGI. D4 Holdings, LLC and WGI have common majority ownership and a common manager. We believe that this related party transaction was made on terms comparable to terms we could have received in a negotiated transaction with an unrelated third party.

Increase of WGI Credit Line. On March 9, 2010, the WGAT Entities entered into the First Amendment to the Revolving Loan with WGI (the Revolving Loan as amended by the First Amendment, the “Amended Revolving Loan”), pursuant to which WGI will provide to the WGAT Entities, a line of credit for an additional $2,000,000 resulting in an aggregate principal amount available for borrowing under the Amended Revolving Loan of $5,000,000. In addition, on March 9, 2010, pursuant to the Amended Revolving Loan, the WGAT Entities issued a revised Revolving Promissory Note, dated October 29, 2009, in a principal amount of $5,000,000, to WGI. Other than amending the maximum principal amount available under the Amended Revolving Loan from $3,000,000 to $5,000,000, the terms of the Amended Revolving Loan and the New Revolving Promissory Note are the same as the Revolving Loan described above. As of December 31, 2009, we had drawn down $1,400,000 in principal amount under the Revolving Loan and as of March 24, 2010, we had drawn down $2,400,000 in principal amount under the Amended Revolving Loan.

Except in the case of proposals made in accordance with Rule 14a-8, our Amended and Restated Bylaws require that stockholders desiring to bring any business before our 2011 Annual Meeting of Stockholders deliver written notice thereof to us not less than 90 days nor more than 120 days prior to May 20, 2011 (the anniversary date of the Meeting) and comply with all other applicable requirements of our Amended and Restated Bylaws. However, in the event that our 2011 Annual Meeting is called for a date that is not within 30 days before the anniversary date of the Meeting or 60 days after the anniversary date of the Meeting, the notice must be received by not earlier than the close of business on the 120th day prior to such annual meeting and not later than the close of business on the later of the 90th day prior to such annual meeting or the 10th calendar day following the calendar day on which public announcement of the date of such meeting is first made by the Company. Proposals or nominations not meeting these requirements will not be entertained at our 2011 Annual Meeting. Stockholders recommending candidates for consideration by the Board must provide the candidate’s name, biographical data and qualifications. Any such recommendation should be accompanied by a written statement from the individual of his or her consent to be named as a candidate and, if nominated and elected, to serve as a director. These requirements are separate from, and in addition to, the SEC’s requirements that a stockholder must meet in order to have a stockholder proposal included in the proxy statement. A copy of the full text of these bylaw provisions may be obtained on our website at www.wgate.com or by writing to our Corporate Secretary at the address above.

(ff) “Service” means a Participant’s employment or service with the Participating Company Group as an Employee, Consultant or a member of the Board, whichever such capacity the Participant held on the date of grant of an Award or, if later, the date on which the Participant commenced Service. Unless otherwise determined by the Committee, a Participant’s Service shall be deemed to have terminated if the Participant ceases to render service to the Participating Company Group in such initial capacity. However, a Participant’s Service shall not be deemed to have terminated merely because of a change in the Participating Company for which the Participant renders such Service in such initial capacity, provided that there is no interruption or termination of the Participant’s Service. Furthermore, a Participant’s Service shall not be deemed to have terminated if the Participant takes any bona fide leave of absence approved by the Company of ninety (90) days or less. In the event of a leave in excess of ninety (90) days, the Participant’s Service shall be deemed to terminate on the ninety-first (91st) day of the leave unless the Participant’s right to return to Service is guaranteed by statute or contract. Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, a leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the corporation for which the Participant performs Service ceasing to be a Participating Company. Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of such termination.

3.2 Authority of Certain Officers. The Committee may, in its discretion, and subject to the prevailing and applicable rules and regulations of any exchange upon which the Stock is traded, delegate to a sub-committee comprised of one or more Officers the authority to grant one or more Options, without further approval of the Board or the Committee, to any Employee, other than to a person who, at the time of such grant, is an Insider; provided, however, that (i) such Awards shall not be granted for shares in excess of the maximum aggregate number of shares of Stock authorized for issuance pursuant to Section 4.1, (ii) the exercise price per share of each Option shall be not less than the Fair Market Value per share of the Stock on the effective date of grant (or, if the Stock has not traded on such date, on the last day preceding the effective date of grant on which the Stock was traded), and (iii) each such Award shall be subject to the terms and conditions of the Plan and such other guidelines as shall be established from time to time by the Board or the Committee. Any such committee of Officers shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election which is the responsibility of or which is allocated to the Company herein, provided the committee of Officers has been duly delegated the authority with respect to such matter, right, obligation, determination or election.

(d) to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares purchased pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of the expiration of any Award, (vii) the effect of the Participant’s termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;

3.6 Indemnification. In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as Officers or employees of the Participating Company Group, members of the Board or the Committee and any Officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.

4.1 Maximum Number of Shares Issuable. Subject to adjustment as provided in Section 4.2, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equivalent to 26,500,000 shares. Such shares shall consist of authorized but unissued or reacquired shares (and the Company may purchase shares reacquired for this purpose) of Stock or any combination thereof. If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company at the Participant’s purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan. Shares of Stock shall not be deemed to have been issued pursuant to the Plan (i) with respect to any portion of an Award that is settled in cash or (ii) to the extent such shares are withheld in satisfaction of tax withholding obligations pursuant to Section 13.2. Upon payment in shares of Stock pursuant to the exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced only by the number of shares actually issued in such payment. If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised.

4.2 Adjustments for Changes in Capital Structure. In the event of any change in the Stock through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the stockholders of the Company in a form other than Stock (excepting normal cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate adjustments shall be made in the number and class of shares subject to the Plan, in the ISO Share Limit set forth in Section 5.3(b), the Award limits set forth in Section 5.4 and to any outstanding Awards, and in the exercise or purchase price per share under any outstanding Award. Notwithstanding the foregoing, any fractional share resulting from an adjustment pursuant to this Section 4.2 shall be rounded down to the nearest whole number, and in no event may the exercise or purchase price under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award. The adjustments determined by the Committee pursuant to this Section 4.2 shall be final, binding and conclusive.

(a) Persons Eligible. An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying Corporation”). Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option. An Incentive Stock Option granted to a prospective Employee upon the condition that such person become an Employee of an ISO-Qualifying Corporation shall be deemed granted effective on the date such person commences Service with an ISO-Qualifying Corporation, with an exercise price determined as of such date in accordance with Section 6.1. Notwithstanding the foregoing provisions, failure to exercise an Incentive Stock Option within the periods of time prescribed under sections 421 and 422(a) of the Code shall cause the Incentive Stock Option to cease to be treated as an “incentive stock option” for purposes of sections 421 and 422 of the Code.

(b) Fair Market Value Limitation. To the extent that options designated as Incentive Stock Options (granted under all stock option plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options. For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted. If the Code is amended to provide for a different limitation from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code. If an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising. In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first. Upon exercise, each portion shall be separately identified.

6.3 Exercisability and Term of Options. Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option, (c) no Option granted to a prospective Employee or prospective Consultant may become exercisable prior to the date on which such person commences Service, and (d) no option shall be exercisable during any period which the Committee has designated in writing as a prohibited exercise period. Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, any Option granted hereunder shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions. The Committee may at any time and from time to time accelerate the time at which all or any part of the Option may be exercised. Any exercise of an Option must be in writing, signed by the proper person, and delivered or mailed to the Company, accompanied by (i) any other documents required by the Committee and (ii) payment in full in accordance with subsection (6.4) below for the number of shares for which the Option is exercised (except that, in the case of an exercise arrangement approved by the Committee and described in subsection (6.4)(a)(iii) below, payment may be made as soon as practicable after the exercise). Only full shares shall be issued under the Plan, and any fractional share that might otherwise be issuable upon exercise of an Option granted hereunder shall be forfeited. All obligations of the Company hereunder shall be subject to the rights of the Company as set forth in the Plan to withhold or otherwise require the payment of amounts required to be withheld for any taxes. If the Participant fails to accept delivery of, or to pay for, any of the shares of Stock specified in the Participant’s notice of exercise upon tender or delivery of the shares, the Participant’s right to purchase such shares may be terminated at the sole discretion of the Committee. The date that the notice of exercise, in compliance with the terms and conditions hereof, is received by the Company shall be deemed the date of exercise hereunder.

(a) Forms of Consideration Authorized. Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or cash equivalent, (ii) by tender to the Company of shares of Stock owned by the Participant having a Fair Market Value not less than the exercise price, (iii) by delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System) (a “Cashless Exercise”), or (iv) by any combination thereof. The Committee may at any time or from time to time grant Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.

(a) Tandem SARs. Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option. The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not given, then the Option shall nevertheless remain exercisable in accordance with its terms. A Tandem SAR shall terminate and cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled. Upon the exercise of a Tandem SAR with respect to some or all of the shares subject to such SAR, the related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised. Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised.

7.4 Exercise of SARs. Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the value of a share of Stock on the date of grant of the SAR. Payment of such amount shall be made in cash, shares of Stock, or any combination thereof as determined by the Committee. Unless otherwise provided in the Award Agreement evidencing such SAR, payment shall be made in a lump sum as soon as practicable following the date of exercise of the SAR. The Award Agreement evidencing any SAR may provide for deferred payment in a lump sum or in installments. When payment is to be made in shares of Stock, the number of shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR. For purposes of Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant.

8.5 Vesting and Restrictions on Transfer. Shares issued pursuant to any Stock or Performance Award may or may not be made subject to vesting conditioned upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 9.4 (the “Vesting Conditions”), as shall be established by the Committee and set forth in the Award Agreement evidencing such Award. During any period (the “Restriction Period”) in which shares acquired pursuant to a Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event, as defined in Section 11.1, or as provided in Section 8.8. Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

8.6 Voting Rights; Dividends and Distributions. Except as provided in this Section, Section 8.5 and any Award Agreement, during the Restriction Period applicable to shares acquired pursuant to a Stock Award, the Participant shall have all of the rights of a stockholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares. Participants who have been granted Stock Units shall possess no incidents of ownership with respect to shares of Stock underlying such Stock Units; provided, however, that a Stock Unit Agreement may provide for payments in lieu of dividends in a manner identical to that specified in Section 10.6 of the Plan. However, in the event of a dividend or distribution paid in shares of Stock or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.2, then any and all new, substituted or additional securities or other property (other than normal cash dividends) to which the Participant is entitled by reason of the Participant’s Stock Award shall be immediately subject to the same Vesting Conditions as the shares subject to the Stock Award with respect to which such dividends or distributions were paid or adjustments were made.

9.3 Establishment of Performance Period, Performance Goals and Performance Award Formula. In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant. Unless otherwise permitted in compliance with the requirements under Section 162(m) with respect to “performance-based compensation,” the Committee shall establish the Performance Goal(s) and Performance Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable Performance Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any event, at a time when the outcome of the Performance Goals remains substantially uncertain. Once established, the Performance Goals and Performance Award Formula shall not be changed during the Performance Period. The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.

(a) Performance Measures. Performance Measures shall have the same meanings as used in the Company’s financial statements, or, if such terms are not used in the Company’s financial statements, they shall have the meaning applied pursuant to generally accepted accounting principles, or as used generally in the Company’s industry. Performance Measures shall be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes or such division or other business unit as may be selected by the Committee. For purposes of the Plan, the Performance Measures applicable to a Performance Award shall be calculated in accordance with generally accepted accounting principles, but prior to the accrual or payment of any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award. Performance Measures may be one or more of the following, as determined by the Committee:

(b) Discretionary Adjustment of Award Formula. In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award granted to any Participant who is not a “covered employee” within the meaning of Section 162(m) (a “Covered Employee”) to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine. If permitted under a Covered Employee’s Award Agreement, the Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to reduce some or all of the value of the Performance Award that would otherwise be paid to the Covered Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula. No such reduction may result in an increase in the amount payable upon settlement of another Participant’s Performance Award.

11.2 Effect of Change in Control on Options and SARs. In the event of a Change in Control, the surviving, continuing, successor, or purchasing entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Participant, either assume the Company’s rights and obligations under outstanding Options and SARs or substitute for outstanding Options and SARs substantially equivalent options and SARs (as the case may be) for the Acquiror’s stock. In the event the Acquiror elects not to assume or substitute for outstanding Options or SARs in connection with a Change in Control, the Committee shall provide that any unvested portions of outstanding Options and SARs shall be immediately exercisable and vested in full as of the date thirty (30) days prior to the date of the Change in Control. The vesting of any Option or SAR that was permissible solely by reason of this paragraph 11.2 shall be conditioned upon the consummation of the Change in Control. Any Options or SARs which are not assumed by the Acquiror in connection with the Change in Control nor exercised as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.

The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities, as well as all applicable requirements of any stock exchange or market system upon which the Stock may then be listed, and such approvals by governmental agencies, shareholders, etc., as may be deemed appropriate by the Committee, including, among other things, such steps as the Company legal counsel shall deem necessary or appropriate to comply with these requirements and approvals. Awards hereunder may be canceled or amended by the Committee, in whole or in part, at any time if the Committee determines, in its sole discretion, that cancellation or amendment is necessary or advisable in light of any change after the Award was granted, in (a) the Code or (b) any federal or state securities law or other law or regulation, which change by its term is effective retroactively to a date on or before the grant date; provided, however, that no such cancellation or amendment shall, without the Participant’s consent, apply to or affect installments that vested on or before the date on which the Committee makes such determination. In addition, no Award may be exercised or shares issued pursuant to an Award unless (i) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award or (ii) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act. The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares hereunder shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained. As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.

The Committee may terminate or amend the Plan at any time. However, without the approval of the Company’s stockholders, to the extent required by prevailing law and/or exchange listing requirements, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Section 4), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s stockholders under any applicable law, regulation or rule. No termination or amendment of the Plan shall affect any then outstanding Award unless expressly provided by the Committee. In any event, no termination or amendment of the Plan may adversely affect any then outstanding Award without the consent of the Participant, unless such termination or amendment is necessary to comply with any applicable law, regulation or rule.

(b) any person or group of persons (within the meaning of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended and in effect from time to time) directly or indirectly acquires during a twelve-month period, including but not limited to by means of a merger or consolidation, beneficial ownership (determined pursuant to Securities and Exchange Commission Rule 13d-3 promulgated under the said Exchange Act) of securities possessing more than 30% of the total combined voting power of the Company's outstanding securities pursuant to a tender or exchange offer made directly to the Company's stockholders that the Board does not recommend such stockholders accept, other than (i) the Company or an Affiliate, (ii) an employee benefit plan of the Company or any of its Affiliates, (iii) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or any of its Affiliates, or (iv) an underwriter temporarily holding securities pursuant to an offering of such securities, or

2.26. Service means that the provision of services to the Company or an Affiliate in any capacity of employee, director or consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an employee, director or consultant, Service shall be deemed terminated upon the actual cessation of providing services to the Company or an Affiliate notwithstanding any required notice period that must be fulfilled before a termination as an employee, director or consultant can be effective under applicable laws. A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the entity for which the Participant provides services ceasing to be an Affiliate. Service shall not be considered interrupted in the case of (i) any approved leave of absence, (ii) transfers among the Company, any Affiliate, or any successor, in any capacity of employee, director or consultant, or (iii) any change in status as long as the individual remains in the service of the Company or an Affiliate in any capacity of employee, director or consultant (except as otherwise provided in the Award Agreement). An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Option granted under the Plan, if such leave exceeds three (3) months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Option shall be treated as a Nonstatutory Option on the day three (3) months and one (1) day following the expiration of such three (3) month period.

At no time shall the number of shares of Stock issued pursuant to or subject to outstanding Awards granted under the Plan (including pursuant to Incentive Options), nor the number of shares of Stock issued pursuant to Incentive Options, exceed 12,000,000 shares of Stock, subject, however, to the provisions of Section 8 of the Plan. For purposes of applying the foregoing limitation, (a) if any Option expires, terminates, or is cancelled for any reason without having been exercised in full, or if any other Award is forfeited by the recipient or repurchased at less than its Market Value, the shares not purchased by the Optionee or which are forfeited by the recipient or repurchased shall again be available for Awards to be granted under the Plan and (b) if any Option is exercised by delivering previously owned shares in payment of the exercise price therefor, only the net number of shares, that is, the number of shares issued minus the number received by the Company in payment of the exercise price, shall be considered to have been issued pursuant to an Award granted under the Plan. In addition, settlement of any Award shall not count against the foregoing limitations except to the extent settled in the form of Stock. Shares of Stock issued pursuant to the Plan may be either authorized but unissued shares or shares held by the Company in its treasury.

The Plan shall be administered by the Committee; provided, however, that at any time and on any one or more occasions the Board may itself exercise any of the powers and responsibilities assigned the Committee under the Plan and when so acting shall have the benefit of all of the provisions of the Plan pertaining to the Committee’s exercise of its authorities hereunder. Subject to the provisions of the Plan, the Committee shall have complete authority, in its discretion, to make or to select the manner of making all determinations with respect to each Award to be granted by the Company under the Plan including the employee, consultant or director to receive the Award and the form of Award. In making such determinations, the Committee may take into account the nature of the services rendered by the respective employees, consultants, and directors, their present and potential contributions to the success of the Company and its Affiliates, and such other factors as the Committee in its discretion shall deem relevant. Subject to the provisions of the Plan, the Committee shall also have complete authority to interpret the Plan, to prescribe, amend and rescind rules and regulations relating to it, to determine the terms and provisions of the respective Award Agreements (which need not be identical), and to make all other determinations necessary or advisable for the administration of the Plan. The Committee’s determinations made in good faith on matters referred to in the Plan shall be final, binding and conclusive on all persons having or claiming any interest under the Plan or an Award made pursuant hereto. Subject to the provisions of the Plan, each of the Board and the Committee shall have the power and authority to approve, adopt and institute an Exchange Program.

6.3. Effect of Termination of Service, Etc. Unless the Committee shall provide otherwise with respect to any Award, if the Participant’s Service ends for any reason, including because of the Participant’s employer ceasing to be an Affiliate, (a) any outstanding Option of the Participant shall cease to be exercisable in any respect not later than 90 days following that event and, for the period it remains exercisable following that event, shall be exercisable only to the extent exercisable at the date of that event, and (b) any other outstanding Award of the Participant shall be forfeited or otherwise subject to return to or repurchase by the Company on the terms specified in the applicable Award Agreement. The Participant's Award Agreement may provide that upon the termination of the Participant's Service for Cause, the Participant's right to exercise the Award shall terminate concurrently with any such termination. Any payment to a Specified Employee that would constitute “deferred compensation” within the meaning of Section 409A of the Code shall be paid in a manner and at a time that shall comply with Treas. Reg. Section 409A-3(i)(2).

6.4. Non-Transferability of Awards. Except as otherwise provided in this Section 6.4, Awards shall not be transferable, and no Award or interest therein may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than by will or by the laws of descent and distribution. All of a Participant’s rights in any Award may be exercised during the life of the Participant only by the Participant or the Participant’s legal representative. However, the Committee may, at or after the grant of an Award of a Nonstatutory Option, or shares of Restricted Stock, provide that such Award may be transferred by the recipient to a family member; provided, however, that any such transfer is without payment of any consideration whatsoever and that no transfer shall be valid unless first approved by the Committee, acting in its sole discretion. For this purpose, “family member” means any child, stepchild, grandchild, parent, stepparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the employee’s household (other than a tenant or employee), a trust in which the foregoing persons have more than fifty (50) percent of the beneficial interests, a foundation in which the foregoing persons (or the Participant) control the management of assets, and any other entity in which these persons (or the Participant) own more than fifty (50) percent of the voting interests.

(f) Limit on Incentive Option Characterization. An Incentive Option shall be considered to be an Incentive Option only to the extent that the number of shares of Stock for which the Option first becomes exercisable in a calendar year does not have an aggregate Market Value (as of the date of the grant of the Option) in excess of the “current limit”. The current limit for any Optionee for any calendar year shall be $100,000 minus the aggregate Market Value at the date of grant of the number of shares of Stock available for purchase for the first time in the same year under each other Incentive Option previously granted to the Optionee under the Plan, and under each other incentive stock option previously granted to the Optionee under any other incentive stock option plan of the Company and its Affiliates. Any shares of Stock which would cause the foregoing limit to be violated shall be deemed to have been granted under a separate Nonstatutory Option, otherwise identical in its terms to those of the Incentive Option.

7.3. Awards to Participants Outside the United States. The Committee may modify the terms of any Award under the Plan granted to a Participant who is, at the time of grant or during the term of the Award, resident or primarily employed outside of the United States in any manner deemed by the Committee to be necessary or appropriate in order that the Award shall conform to laws, regulations, and customs of the country in which the Participant is then resident or primarily employed, or so that the value and other benefits of the Award to the Participant, as affected by foreign tax laws and other restrictions applicable as a result of the Participant’s residence or employment abroad, shall be comparable to the value of such an Award to a Participant who is resident or primarily employed in the United States. The Committee may establish supplements to, or amendments, restatements, or alternative versions of the Plan for the purpose of granting and administrating any such modified Award. No such modification, supplement, amendment, restatement or alternative version may increase the limit in the number of shares set forth in Section 4.

8.1. Adjustment for Corporate Actions. All of the share numbers set forth in the Plan reflect the capital structure of the Company as of the effective date of this Plan. If subsequent to that date the outstanding shares of Stock (or any other securities covered by the Plan by reason of the prior application of this Section) are increased, decreased, or exchanged for a different number or kind of shares or other securities, or if additional shares or new or different shares or other securities are distributed with respect to shares of Stock, as a result of a reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split, or other similar distribution with respect to such shares of Stock, an appropriate and proportionate adjustment will be made in (i) the maximum numbers and kinds of shares provided in Section 4, (ii) the numbers and kinds of shares or other securities subject to the then-outstanding Awards, (iii) the exercise price for each share or other unit of any other securities subject to then-outstanding Options (without change in the aggregate purchase price as to which such Options remain exercisable), and (iv) the repurchase price of each share of Restricted Stock then subject to a Risk of Forfeiture in the form of a Company repurchase right.

8.2. Adjustment of Awards Upon the Occurrence of Certain Unusual or Nonrecurring Events. In the event of any corporate action not specifically covered by the preceding Section, including but not limited to an extraordinary cash distribution on Stock, a corporate separation (such as, but not limited to, a corporate spin-off) or other reorganization or liquidation, the Committee shall make such adjustment of outstanding Awards and their terms, if any, as it, in its sole discretion, may deem equitable and appropriate in the circumstances. The Committee shall make adjustments in the terms and conditions of, and the criteria included in, Awards in recognition of unusual or nonrecurring events (including, without limitation, the events described in this Section) affecting the Company or the financial statements of the Company or of changes in applicable laws, regulations, or accounting principles, whenever the Committee determines that such adjustments are appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan.

8.3. Related Matters. Any adjustment in Awards made pursuant to Section 8.1 or 8.2 shall be determined and made, if at all, by the Committee, acting in its sole discretion, and shall include any correlative modification of terms, including of Option exercise prices, rates of vesting or exercisability, Risks of Forfeiture, applicable repurchase prices for Restricted Stock, and other objectives or criteria which the Committee may deem necessary or appropriate so as to ensure the rights of the Participants in their respective Awards are not substantially diminished nor enlarged as a result of the adjustment and corporate action other than as expressly contemplated in this Section 8. No fraction of a share shall be purchasable or deliverable upon exercise, but in the event any adjustment hereunder of the number of shares covered by an Award shall cause such number to include a fraction of a share, such number of shares shall be adjusted to the nearest smaller whole number of shares. No adjustment of an Option exercise price per share pursuant to this Section 8 shall result in an exercise price which is less than the par value of the Stock.

For purposes of paragraph (1) above, an Option shall be considered Assumed, or a substantially equivalent right shall be considered to have been provided in substitution therefore, if following consummation of the Transaction the Option confers the right to purchase or receive the value of, for each share of Stock subject to the Option immediately prior to the consummation of the Transaction, the consideration (whether cash, securities or other property) received as a result of the Transaction by holders of Stock for each share of Stock held immediately prior to the consummation of the Transaction (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if the consideration received as a result of the Transaction is not solely common stock (or its equivalent) of the acquiring or succeeding entity (or an affiliate thereof), the Committee may provide for the consideration to be received upon the exercise of the Option to consist of or be based on solely common stock (or its equivalent) of the acquiring or succeeding entity (or an affiliate thereof) equivalent in value to the per share consideration received by holders of outstanding shares of Stock as a result of the Transaction.

(d) Treatment of Restricted Stock. As to outstanding Restricted Stock Awards, upon the occurrence of a Transaction other than a liquidation or dissolution of the Company which is not part of another form of Transaction, the Committee may provide that the repurchase and other rights of the Company under each such Award shall inure to the benefit of the Company’s successor and shall apply to the cash, securities or other property which the Stock was converted into or exchanged for pursuant to such Transaction in the same manner and to the same extent as they applied to the Award. Upon the occurrence of a Transaction involving a liquidation or dissolution of the Company which is not part of another form of Transaction, the Committee may provide that all Risks of Forfeiture, where otherwise applicable to any such Awards, shall automatically be deemed terminated or satisfied, as applicable. With respect to any Restricted Stock Awards subject to a Risk of Forfeiture, the Committee may provide for the full or partial Acceleration of such Restricted Stock Awards prior to or upon the consummation of the Transaction.

The Committee shall have the authority, exercisable either in advance of any actual or anticipated Change of Control or at the time of an actual Change of Control and exercisable at the time of the grant of an Award under the Plan or any time while an Award remains outstanding, to provide for the full or partial Acceleration of vesting of one or more outstanding unvested Awards under the Plan in connection with a Change of Control, on such terms and conditions as the Committee may specify. The Committee also shall have the authority to condition any such Acceleration of vesting upon the subsequent termination of the Participant's Service to the Company or an Affiliate or successor entity within a specified period following the effective date of the Change of Control. The Committee may provide that any Awards so Accelerated in connection with a Change of Control, shall remain fully exercisable until the expiration or sooner termination of the Award.

10.5. Registration. If the Company shall deem it necessary or desirable to register under the Securities Act of 1933, as amended or other applicable statutes any shares of Stock issued or to be issued pursuant to Awards granted under the Plan, or to qualify any such shares of Stock for exemption from the Securities Act of 1933, as amended or other applicable statutes, then the Company shall take such action at its own expense. The Company may require from each recipient of an Award, or each holder of shares of Stock acquired pursuant to the Plan, such information in writing for use in any registration statement, prospectus, preliminary prospectus or offering circular as is reasonably necessary for that purpose and may require reasonable indemnity to the Company and its officers and directors from that holder against all losses, claims, damage and liabilities arising from use of the information so furnished and caused by any untrue statement of any material fact therein or caused by the omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances under which they were made.

10.7. Tax Withholding. Whenever shares of Stock are issued or to be issued pursuant to Awards granted under the Plan, the Company shall have the right to require the recipient to remit to the Company an amount sufficient to satisfy federal, state, local or other withholding tax requirements if, when, and to the extent required by law (whether so required to secure for the Company an otherwise available tax deduction or otherwise) prior to the delivery of any certificate or certificates for such shares. The obligations of the Company under the Plan shall be conditional on satisfaction of all such withholding obligations and the Company shall, to the extent permitted by law, have the right to deduct any such taxes from any payment of any kind otherwise due to the recipient of an Award. However, in such cases Participants may elect, subject to the approval of the Committee, acting in its sole discretion, to satisfy an applicable withholding requirement, in whole or in part, by having the Company withhold shares to satisfy their tax obligations. Participants may only elect to have Shares withheld having a Market Value on the date the tax is to be determined equal to the minimum statutory total tax which could be imposed on the transaction. All elections shall be irrevocable, made in writing, signed by the Participant, and shall be subject to any restrictions or limitations that the Committee deems appropriate.

A Participant shall not be deemed for any purpose to be a stockholder of the Company with respect to any of the shares of Stock subject to an Award, unless and until a certificate shall have been issued therefor and delivered to the Participant or his agent. Any Stock to be issued pursuant to Awards granted under the Plan shall be subject to all restrictions upon the transfer thereof which may be now or hereafter imposed by the Amended and Restated Certificate of Incorporation and the Amended and Restated By-laws of the Company. Nothing contained in the Plan or in any Award Agreement shall confer upon any recipient of an Award any right with respect to the continuation of his or her employment or other association with the Company (or any Affiliate), or interfere in any way with the right of the Company (or any Affiliate), subject to the terms of any separate employment or consulting agreement or provision of law or corporate articles or by-laws to the contrary, at any time to terminate such employment or consulting agreement or to increase or decrease, or otherwise adjust, the other terms and conditions of the recipient’s employment or other association with the Company and its Affiliates.

15.2. Termination or Amendment of Outstanding Awards. The Committee may amend the terms of any Award theretofore granted, prospectively or retroactively, provided that the Award as amended is consistent with the terms of the Plan. Also within the limitations of the Plan, the Committee may modify, extend or assume outstanding Awards or may accept the cancellation of outstanding Awards or of outstanding stock options or other equity-based compensation awards granted by another issuer in return for the grant of new Awards for the same or a different number of shares and on the same or different terms and conditions (including but not limited to the exercise price of any Option). Furthermore, the Committee may, at any time an Award is otherwise eligible for exercise, waive any condition to payment and (a) offer to purchase for a payment in cash or cash equivalents an Award previously granted or (b) authorize the recipient of an Award to elect to cash out an Award previously granted, in either case at such time and based upon such terms and conditions as the Committee shall establish. Notwithstanding anything to the contrary in this Section 15.2, any terminations or amendments affecting any outstanding Awards shall be permissible only to the extent that such termination or amendment does not cause any Award under this Plan to constitute “deferred compensation” for purposes of Section 409A of the Code.

15.3. Limitations on Amendments, Etc. No amendment or modification of the Plan by the Board, or of an outstanding Award by the Committee, shall impair the rights of the recipient of any Award outstanding on the date of such amendment or modification or such Award, as the case may be, without the Participant’s consent; provided, however, that no such consent shall be required if (i) the Board or Committee, as the case may be, determines in its sole discretion and prior to the date of any Change of Control that such amendment or alteration either is required or advisable in order for the Company, the Plan or the Award to satisfy any law or regulation, including without limitation the provisions of Section 409A of the Code, or to meet the requirements of or avoid adverse financial accounting consequences under any accounting standard, or (ii) the Board or Committee, as the case may be, determines in its sole discretion and prior to the date of any Change of Control that such amendment or alteration is not reasonably likely to significantly diminish the benefits provided under the Award, or that any such diminution has been adequately compensated.

Any notice, demand, request or other communication hereunder to any party shall be deemed to be sufficient if contained in a written instrument delivered in person or duly sent by first class registered, certified or overnight mail, postage prepaid, or faxed with a confirmation copy by regular, certified or overnight mail, addressed or faxed, as the case may be, (i) if to the recipient of an Award, at his or her residence address last filed with the Company and (ii) if to the Company, at its principal place of business, addressed to the attention of its Treasurer, or to such other address or fax number, as the case may be, as the addressee may have designated by notice to the addressor. All such notices, requests, demands and other communications shall be deemed to have been received: (i) in the case of personal delivery, on the date of such delivery; (ii) in the case of mailing, when received by the addressee; and (iii) in the case of facsimile transmission, when confirmed by facsimile machine report.

B. Effective as of ___ on _____________, 2010 (the “Effective Time”), the shares of Common Stock issued and outstanding immediately prior to the Effective Time shall be combined and reclassified into a smaller number of shares such that each ______ shares of issued and outstanding Common Stock immediately prior to the Effective Time are reclassified into one share of Common Stock. Notwithstanding the immediately preceding sentence, no fractional shares shall be issued and, in lieu thereof, upon surrender after the Effective Time of a certificate which formerly represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time, any stockholder who would otherwise be entitled to a fractional share of Common Stock as a result of the reclassification, shall be entitled to receive a cash payment (without interest) from the Corporation’s transfer agent in lieu of such fractional shares in an amount equal to the stockholder’s pro rata share of the proceeds received by the transfer agent from the sale of the aggregate of all the fractional shares that otherwise would have been issued.

Each stock certificate that, immediately prior to the Effective Time, represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent that number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified (as well as the right to receive cash in lieu of a fractional share of Common Stock after the Effective Time), provided, however, that each stockholder of record holding a certificate that represented shares of Common Stock that were issued and outstanding immediately prior to the Effective Time shall receive, upon surrender of such certificate, a new certificate evidencing and representing the number of whole shares of Common Stock after the Effective Time into which the shares of Common Stock formerly represented by such certificate shall have been reclassified.

C. The Board of Directors is authorized, subject to any limitations prescribed by law, to provide for the issuance of shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware (such certificate being hereinafter referred to as a “Preferred Stock Designation”), to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences, and rights of each such series and any qualifications, limitations or restrictions thereof. The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any Preferred Stock Designation.

EIGHTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this Corporation under § 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under § 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three fourths in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors, and/or on all the stockholders or class of stockholders, of this Corporation, as the case may be, and also on this Corporation.

A. To the fullest extent permitted by the DGCL, as it presently exists or may hereafter be amended from time to time, a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the corporation shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended. Any repeal or amendment of this Article NINTH by the stockholders of the corporation or by changes in law, or the adoption of any other provision of this Third Amended and Restated Certificate of Incorporation inconsistent with this Section A will, unless otherwise required by law, be prospective only (except to the extent such amendment or change in law permits the corporation to further limit or eliminate the liability of directors) and shall not adversely affect any right or protection of a director of the corporation existing at the time of such repeal or amendment or adoption of such inconsistent provision with respect to acts or omissions occurring prior to such repeal or amendment or adoption of such inconsistent provision.

B. To the extent permitted by applicable law, this Corporation is also authorized to provide indemnification of (and advancement of expenses to) directors, officers, employees and agents (and any other persons to which Delaware law permits this Corporation to provide indemnification) through bylaw provisions, agreements with such agents or other persons, vote of stockholders or disinterested directors or otherwise, in excess of the indemnification and advancement otherwise permitted by Section 145 of the DGCL, subject only to limits created by applicable Delaware law (statutory or non-statutory), with respect to actions for breach of duty to the Corporation, its stockholders, and others. Any modification or repeal of the foregoing provisions of this Section B shall not adversely affect any right or protection hereunder of any director, officer, agent or other person in respect of any act or omission occurring prior to the time of such modification or repeal.

	x	Preliminary Proxy Statement
	¨	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
	¨	Definitive Proxy Statement
	¨	Definitive Additional Materials
	¨	Soliciting Material Under Rule 14a-12

	Number		Percentage(1)
	Shares of WorldGate Common Stock Beneficially Owned
Principal Stockholders:
WGI Investor, LLC (2)		232,422,349		63.1	%
349-L Copperfield Blvd., #407
Concord, NC 28025

Executive Officers and Directors:
George E. Daddis Jr.		0		0	%
Joel Boyarski (3)		591,609		*
Allan Van Buhler (4)		1,975,590		*
Christopher V. Vitale		0		0	%
Robert Stevanovski (2)		232,422,349		63.1
David Stevanovski (5)		232,422,349		63.1	%
Gregory Provenzano (5)		232,422,349		63.1	%
Anthony Cassara (5)(6)		232,447,349		63.1	%
Geoff Boyd (6)		25,000		*	%
Brian Fink (6)		25,000		*	%
Richard Nespola (6)		25,000		*	%
All current directors and executive officers as a group (11 persons) (7)		233,113,958		63.1	%

Reverse Stock Split Ratio	Authorized Common Stock		Authorized Preferred Stock		Outstanding Common Stock (approximate)
Pre-Split		700,000,000		13,500,000		338,627,636
1-for-5		140,000,000		2,700,000		67,725,527
1-for-10		70,000,000		1,350,000		33,862,764
1-for-15		46,666,667		900,000		22,575,176
1-for-20		35,000,000		675,000		16,931,382
1-for-25		28,000,000		540,000		13,545,105

	Fiscal Year Ended December 31,
	2009		2008
Audit fees	$	206,000	$	220,000
Audit-related fees		35,000		13,000
Tax fees		32,000		23,000
All other fees		0		0
Total	$	273,000	$	256,000

Director Compensation for the Year Ended December 31, 2009
Name (1) (2)	Fees Earned or Paid in Cash ($)		Option Awards (3)(4) ($)		Total ($)
Geoff Boyd	$	40,000	$	27,604	$	67,604
Anthony Cassara	$	22,500	$	27,604	$	50,104
Brian Fink	$	32,500	$	27,604	$	60,104
Richard Nespola	$	37,000	$	27,604	$	64,604

	Sincerely,

	George E. Daddis Jr.
	Chief Executive Officer and President

	·	to vote by proxy on the Internet, go to www.proxyvote.com to complete an electronic proxy card; or
	·	to vote by proxy using the enclosed proxy card or voting instruction form (if you received a printed copy of these proxy materials by mail), complete, date, sign and return your proxy card or voting instruction form promptly in the envelope provided.

	·	each person whom we know beneficially owns more than 5% of the Common Stock;
	·	each of our directors and director nominees individually;
	·	each of our named executive officers (as defined below) individually; and
	·	all of our current directors and executive officers as a group.

	·	reviewing and evaluating the Company’s compensation practices and policies;
	·	annually evaluating CEO performance;
	·	annually reviewing and approving the compensation for the CEO and other senior executives; and
	·	overseeing the administration of the Company’s compensation programs, and reviewing and approving the employees who receive awards and the nature of awards under such programs

	·	a majority of independent directors;
	·	a compensation committee composed solely of independent directors;
	·	compensation of our executive officers determined by a majority of independent directors;
	·	a nominating committee composed solely of independent directors; and
	·	director nominees selected, or recommended for the Board’s selection, either by a majority of the independent directors or a nominating committee composed solely of independent directors.

	The Audit Committee

	Geoffrey Boyd (Chairman) Brian Fink Richard Nespola

	·	338,627,636 shares of our Common Stock;

	·	308,000 restricted shares of our Common Stock pursuant to performance share grants which vest upon the Company achieving certain performance criteria, which can be paid in cash, shares of Common Stock, or a combination thereof as determined by the Compensation and Stock Option Committee;

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in first column)
Equity compensation plans approved by security holders (1)		10,085,730	$	0.22		0
Equity compensation plans not approved by security holders (2)		11,735,774	$	0.34		3,064,041
Total		21,821,504	$	0.28		3,064,041

	By Order of the Board of Directors,

	Christopher V. Vitale
	Senior Vice President, Legal and Regulatory, General Counsel and Secretary

1.	Purpose	B-2
2.	Definitions	B-2
3.	Term of the Plan	B-5
4.	Stock Subject to the Plan	B-5
5.	Administration	B-5
6.	Authorization of Grants	B-6
7.	Specific Terms of Awards	B-6
8.	Adjustment Provisions	B-9
9.	Change of Control	B-11
10.	Settlement of Awards	B-11
11.	Reservation of Stock	B-12
12.	Limitation of Rights in Stock; No Special Service Rights	B-12
13.	Unfunded Status of Plan	B-13
14.	Nonexclusivity of the Plan	B-13
15.	Termination and Amendment of the Plan	B-13
16.	Notices and Other Communications	B-13
17.	Governing Law	B-14