10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2007
Commission File No. 0-29359

GoAmerica, Inc.

(Exact Name of Registrant as Specified in Its Charter)

Delaware (State or Other Jurisdiction of
Incorporation or Organization) 22-3693371 (I.R.S. Employer Identification No.)

433 Hackensack Avenue, Hackensack, New Jersey	07601
(Address of Principal Executive Offices)	(Zip Code)

(201) 996-1717

(Registrant’s Telephone Number,
Including Area Code)

        Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes: |X|           No: |_|

        Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer |_| Accelerated Filer |_| Non-accelerated filer |X|

        Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes: |_|           No: |X|

        Indicate the number of shares outstanding of each of the Registrant’s classes of common stock, as October 31, 2007:

Class	Number of Shares
Common Stock, $.01 par value	2,462,605

 

GOAMERICA, INC.

TABLE OF CONTENTS

			Page
PART I. FINANCIAL INFORMATION			1
	Item 1.	Financial Statements (September 30, 2007 and 2006 are unaudited)	1
		Condensed Consolidated Balance Sheets as of September 30, 2007 and December 31, 2006	2
		Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2007 and 2006	3
		Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2007 and 2006	4
		Notes to Condensed Consolidated Financial Statements	5
	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations
		General	13
		Critical Accounting Policies and Estimates	13
		Results of Operations	14
		Liquidity and Capital Resources	18
	Item 3.	Quantitative and Qualitative Disclosures About Market Risk	19
	Item 4.	Controls and Procedures	20
PART II. OTHER INFORMATION
	Item 1.	Legal Proceedings	21
	Item 6.	Exhibits	21
SIGNATURES			22

 

- -i-

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

 

- -1-

GOAMERICA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

	September 30, 2007			December 31, 2006
	(Unaudited)
Assets
Current assets:
Cash and cash equivalents	$	3,082		$	3,870
Accounts receivable, net		1,865			1,891
Other receivable, net		20			48
Merchandise inventories, net		284			329
Other current assets		162			185
Total current assets		5,413			6,323
Property, equipment and leasehold improvements, net		863			755
Goodwill, net		6,000			6,000
Deferred acquisition costs		3,571			—
Deferred financing costs		1,162			—
Other assets		239			801
	$	17,248		$	13,879
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	967		$	559
Accrued expenses		2,631			1,982
Accrued preferred dividends		20			—
Deferred revenue		98			100
Loan payable, net of discount of $35 and $0, respectively		2,719			—
Other current liabilities		87			65
Total current liabilities		6,522			2,706
Other long term liabilities		68			112
Commitments and contingencies
Stockholders’ equity:
Convertible Preferred stock, $.01 par value, authorized: 4,351,943 shares
in 2007 and 2006; issued and outstanding: 290,135 in 2007 and none in
2006; $1,500 liquidation preference		3			—
Common stock, $.01 par value, authorized: 200,000,000 shares in
2007 and 2006; issued: 2,486,668 in 2007 and 2006		25			25
Additional paid-in capital		288,455			286,429
Accumulated deficit		(277,639	)		(275,207	)
Treasury stock, at cost, 24,063 shares in 2007 and 2006		(186	)		(186	)
Total stockholders’ equity		10,658			11,061
	$	17,248		$	13,879

The accompanying notes are an integral part of these financial statements.

 

- -2-

GOAMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2007			2006			2007			2006
Revenues:
Relay services	$	4,293		$	3,497		$	11,787		$	5,325
Subscriber		267			328			867			934
Commissions		190			559			451			2,045
Equipment		83			165			300			266
Other		3			2			43			5
		4,836			4,551			13,448			8,575
Costs and expenses:
Cost of relay services		2,999			2,342			8,074			3,034
Cost of subscriber airtime		244			265			811			569
Cost of equipment revenue		171			178			495			380
Cost of network operations		29			27			87			81
Sales and marketing		612			689			1,615			1,709
General and administrative		1,479			1,105			4,092			3,267
Research and development		59			38			316			271
Depreciation and amortization		94			104			257			374
		5,687			4,748			15,747			9,685
Loss from operations		(851	)		(197	)		(2,299	)		(1,110	)
Other income (expense):
Settlement losses		—			—			(162	)		—
Terminated merger costs		—			—			—			(431	)
Interest income (expense), net		(10	)		46			49			146
Total other income (expense), net		(10	)		46			(113	)		(285	)
Loss from continuing operations		(861	)		(151	)		(2,412	)		(1,395	)
Loss from discontinued operations		—			(371	)		—			(571	)
Net loss		(861	)		(522	)		(2,412	)		(1,966	)
Preferred dividends		20			—			20			—
Net loss applicable to common stockholders	$	(881	)	$	(522	)	$	(2,432	)	$	(1,966	)
Loss per share-Basic and Diluted:
Loss from continuing operations	$	(0.39	)		(0.07	)	$	(1.10	)		(0.66	)
Loss from discontinued operations		—			(0.18	)		—			(0.27	)
Basic and Diluted net loss per share	$	(0.39	)	$	(0.25	)	$	(1.10	)	$	(0.93	)
Weighted average shares used in computation of
basic and diluted net loss per share		2,239,966			2,093,451			2,216,349			2,093,451

The accompanying notes are an integral part of these financial statements.

 

- -3-

GOAMERICA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)

	Nine Months Ended September 30,
	2007			2006
Operating activities
Net loss	$	(2,412	)	$	(1,966	)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization of fixed assets		257			374
Settlement losses		162			—
Provision for losses on accounts receivable		132			196
Non cash employee compensation		569			321
Write off of capitalized terminated merger costs		—			431
Changes in operating assets and liabilities:
Increase in accounts receivable		(106	)		(791	)
Decrease in other receivables		28			—
Decrease (increase) in merchandise inventories		45			(251	)
Decrease (increase) in other current assets		23			(145	)
Increase in accounts payable		408			278
Increase in accrued expenses and other liabilities		696			519
Decrease in deferred revenue		(2	)		(16	)
Net cash used in operating activities		(200	)		(1,050	)
Investing activities
Change in other assets and restricted cash		400			83
Deferred acquisition costs		(1,544	)		—
Purchase of property, equipment and leasehold improvements		(365	)		(147	)
Net cash used in investing activities		(1,509	)		(64	)
Financing activities
Proceeds from sale of preferred stock		427			—
Proceeds from the issuance of debt		563			—
Payments made on capital lease obligations		(69	)		(44	)
Net cash provided by (used in) financing activities		921			(44	)
Net decrease in cash and cash equivalents		(788	)		(1,158	)
Cash and cash equivalents at beginning of period		3,870			4,804
Cash and cash equivalents at end of period	$	3,082		$	3,646
Supplemental Disclosure of Cash Flow Information:
Cash paid for Interest	$	20		$	7
Supplemental Disclosure of Non-Cash Investing and Financing Activities:
Acquisition of equipment through capital leases	$	—		$	161
Deferred financing costs withheld from proceeds from the sale of	$	498		$	—
preferred stock
Deferred financing costs withheld from proceeds from the issuance of	$	664		$	—
debt
Deferred acquisition costs withheld from proceeds from the sale of	$	500		$	—
preferred stock
Deferred acquisition costs withheld from proceeds from the issuance of	$	1,523		$	—
debt
Cost associated with sale of preferred stock withheld from proceeds	$	40		$	—
Cost associated with issuance of debt withheld from proceeds from the sale of	$	35		$	—
preferred stock
Accrued preferred stock dividend	$	20		$	—
Interest Paid in Kind	$	4		$	—

The accompanying notes are an integral part of these financial statements.

 

- -4-

GOAMERICA, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except share and per share data)

Note 1 - Basis of Presentation:

        The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and include the results of GoAmerica, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). Accordingly, certain information and footnote disclosures required in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted. In the opinion of the Company’s management, the accompanying unaudited financial statements contain all adjustments (consisting only of normal recurring adjustments except as otherwise disclosed herein) which the Company considers necessary for the fair presentation of its financial position as of September 30, 2007 and the results of its operations and its cash flows for the three and nine month periods ended September 30, 2007 and 2006. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto included in the Company’s Annual Report on Form 10-K (as amended) for the year ended December 31, 2006.

        On September 1, 2006, the Company entered into an agreement to sell GoAmerica Marketing, Inc. dba GA Prepaid (“GA Prepaid”), its prepaid calling card division, effective August 31, 2006, at which time the Company ceased offering prepaid calling cards. The sale closed on October 2, 2006. (see note 10)

        The Company operates in a highly competitive environment subject to rapid technological change and emergence of new technology. Although management believes its services are transferable to emerging technologies, rapid changes in technology could have an adverse financial impact on the Company. In addition, as of September 30, 2007, the Company had 71% of its accounts receivable with the National Exchange Carriers Association (“NECA”). For the three and nine months ended September 30, 2007, the Company generated 89% and 88%, respectively, of its total revenue with NECA.

        The Company has incurred significant operating losses since its inception and, as of September 30, 2007, has an accumulated deficit of $277,619. During the nine months ended September 30, 2007, the Company incurred a net loss of $2,412 and used $200 of cash to fund operating activities. As of September 30, 2007, the Company had $3,082 in cash and cash equivalents.

        Results for the interim period are not necessarily indicative of results that may be expected for the entire year or for any other interim period.

Note 2 - Significant Accounting Policies:

Revenue Recognition-Relay Services

        The Company derives revenue from relay services which is recognized as revenue when services are provided or earned.

        In June 2006, the Federal Communications Commission certified the Company as an Internet Protocol Relay and Video Relay Service Provider. As a result, the Company became eligible to be compensated directly from the Interstate Telecommunications Relay Services Fund for reimbursement of its i711.com^TM minutes and began recognizing the full revenue from these minutes along with a related cost of revenue for the costs associated with these minutes, which is provided by Nordia, Inc. Previously, the Company relied on Nordia to obtain the reimbursement amounts on the Company’s behalf. This previous practice resulted in the Company recording only a portion of the total revenue from the service provided as the Company was not the primary obligor.

        The Company derives subscriber revenue from the provision of wireless communication services. Subscriber revenue consists of monthly charges for access and usage and is recognized as the service is provided. Equipment revenue is recognized upon shipment and transfer of title to the end user. Revenue from commissions is recognized upon activation of subscribers on behalf of third party wireless network providers.

 

- -5-

Recent Accounting Pronouncements

        In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurements” (“SFAS 157“). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, with earlier application encouraged. Any amounts recognized upon adoption as a cumulative effect adjustment will be recorded to the opening balance of retained earnings in the year of adoption. Management is currently assessing the impact of this statement on its results of operations or financial condition.

        In February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value Option for Financial Assets and Liabilities” to permit all entities to choose to elect to measure eligible financial instruments and certain other items at fair value. The decision whether to elect the fair value option may occur for each eligible item either on a specified election date or according to a preexisting policy for specified types of eligible items. However, that decision must also take place on a date on which criteria under SFAS 159 occurs. Finally, the decision to elect the fair value option shall be made on an instrument-by-instrument basis, except in certain circumstances. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157, Fair Value Measurements. The Company has not yet determined the impact of this statement on its results of operations or financial condition.

Note 3 - Series A Convertible Preferred Stock:

        On August 2, 2007, the Company sold 290,135 shares of Series A Convertible Preferred Stock (“Series A Convertible Preferred Stock”) to Clearlake Capital Group (Clearlake) at a purchase price of $5.17 per share resulting in net proceeds of approximately $1,460,000. The shares of Series A Convertible Preferred Stock will accrue cumulative cash dividends at a rate of 8% per annum, compounded quarterly from the date of issuance. Payment of dividends on the Series A Convertible Preferred Stock will be paid in preference to any dividend on common stock.

        The Series A Convertible Preferred Stock, plus all accrued and unpaid dividends, has a liquidation value of $5.17 per share and is convertible into shares of Common Stock at a conversion price of $5.17, subject to adjustment for stock splits, stock dividends and issuances of additional shares of common stock for no consideration or for consideration that is less than the conversion price that is then in effect.

Note 4 - Credit Agreement:

        On August 1, 2007, the Company entered into a Credit Agreement, (the “Credit Agreement”), with Clearlake as administrative agent and collateral agent, pursuant to which the Company received a $1,000,000 bridge loan, which was increased by another $1,750,000 on September 14, 2007. Interest on the loan is payable on the first business day following the end of each month, at the LIBOR rate of 5.75%, plus 8%. Interest is payable in cash, except that a portion of the interest equal to 4% is payable in kind in the form of additional loans. The loan is secured by substantially all of the assets of the Company and its principal subsidiaries and the stock of such principal subsidiaries. The credit agreements contain customary operating and financial covenants, including restrictions on the Company’s ability to pay dividends to its common stockholders, make investments, undertake affiliate transactions, and incur additional indebtedness, in addition to financial compliance requirements. The loan will be repaid upon the closing of the Verizon transaction described in note 11, and in any event not later than August 2, 2008.

        Subsequent to September 30, 2007, the Company received an additional $750,000 bringing the total borrowed under the Credit Agreement to $3,500,000.

 

- -6-

Note 5 - Earnings (Loss) Per Share:

        The Company computes net loss per share under the provisions of SFAS No. 128, “Earnings per Share” (“SFAS 128”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”).

        Under the provisions of SFAS 128 and SAB 98, basic loss per share is computed by dividing the Company’s net loss for the period by the weighted-average number of shares of common stock outstanding during the period. Diluted net loss per share excludes potential common shares if the effect is anti-dilutive. Diluted loss per share is determined in the same manner as basic loss per share except that the number of shares is increased assuming exercise of dilutive stock options and warrants using the treasury stock method. As the Company had a net loss, the impact of the assumed exercise of the stock options and warrants is anti-dilutive and as such, these amounts have been excluded from the calculation of diluted loss per share. For the nine months ended September 30, 2007 and 2006, 682,645 and 426,428 of common stock equivalent shares, respectively, were excluded from the computation of diluted net loss per share, respectively.

	Three months ended September 30,				Nine months ended September 30,
	2007		2006		2007		2006
Options		83,191		97,108		83,191		97,108
Warrants		84,320		84,320		84,320		84,320
Preferred stock		290,135		—		290,135		—
Non-vested restricted stock		224,999		245,000		224,999		245,000
Total		682,645		426,428		682,645		426,428

Note 6 - Goodwill:

        The Company follows SFAS No. 142, “Goodwill and Other Intangible Assets”. Under SFAS No. 142, goodwill and other intangible assets with indefinite lives are no longer amortized but are reviewed for impairment annually or more frequently if impairment indicators arise. The Company’s goodwill is contained in its Wynd reporting unit. The Company believes there are no such impairment indicators relative to this reporting unit at September 30, 2007.

Note 7 - Stock-based Compensation:

        The Company has a stock-based compensation program that provides our Board of Directors broad discretion in creating employee equity incentives. This program includes incentive and non-statutory stock options and non-vested stock awards (also known as restricted stock) granted under various plans, the majority of which are stockholder approved. As of September 30, 2007, the Company had 272,478 shares of common stock reserved for future issuance under our equity compensation plan and stock purchase plan.

        Effective January 1, 2006, the Company adopted the provisions of SFAS 123R, requiring us to recognize expense related to the fair value of our stock-based compensation awards. The Company elected to use the modified prospective transition method as permitted by SFAS 123R and, therefore, we have not restated our financial results for prior periods. Under this transition method, stock-based compensation expense for the nine months ended September 30, 2007 includes compensation expense for all stock-based compensation awards granted prior to, but not yet vested as of, December 31, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS 123. The Company did not issue any new stock options during the nine month period ended September 30, 2007. The Company recognizes compensation expense for stock option awards on a straight-line basis over the requisite service period of the award. The Company’s adoption of SFAS 123R had no effect on the Company’s basic and diluted loss per share for the three and nine months ended September 30, 2007.

        The following table sets forth the total stock-based compensation expense resulting from stock options and non-vested restricted stock awards included in the Company’s condensed consolidated statements of operations:

	Three months ended September 30,				Nine months ended September 30,
	2007		2006		2007		2006
Selling, general and administrative	$	186	$	108	$	569	$	321
Stock-based compensation expense before income taxes		186		108		569		321
Income tax benefit		—		—		—		—
Total stock-based compensation expense after income taxes	$	186	$	108	$	569	$	321

 

- -7-

        Prior to the adoption of SFAS 123R, the Company’s Board of Directors approved the acceleration of vesting of certain unvested and “out-of-the-money” stock options with exercise prices equal to or greater than $4.19 per share previously awarded to our employees, including our executive officers and directors, under our equity compensation plans. The acceleration of vesting was effective for stock options outstanding as of December 29, 2005. Options to purchase approximately 31,518 shares of common stock or 86% of our outstanding unvested options were subject to the acceleration. The weighted average exercise price of the options that were accelerated was $19.93. The Company believes that because the options that were accelerated had exercise prices in excess of the current market value of our common stock, the options had limited economic value and were not fully achieving their original objective of incentive compensation and employee retention.

        Stock option activity for the nine months ended September 30, 2007, is as follows:

	Number of Options		Weighted-Average Exercise Price			Weighted-Average Remaining Contractual Life		Aggregate Intrinsic Value
Outstanding at January 1, 2007		83,191		75.90
Granted		—			—
Exercised		—			—
Cancelled		—			—
Outstanding at September 30, 2007		83,191	$	75.90			4.1	$	32
Exercisable at September 30, 2007		79,858	$	78.97			4.0	$	26

        The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of our third quarter of 2007 and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on September 30, 2007. This amount changes based on the fair market value of the Company’s stock.

        As of September 30, 2007, approximately $4 of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of two years.

        The following table summarizes the Company’s nonvested restricted stock activity for the nine months ended September 30, 2007:

	Number of Shares		Weighted Average Grant Date Fair Value
Non vested stock at December 31, 2006		285,833	$	4.72
Granted		—		—
Vested		60,834		4.02
Forfeited		—		—
Non vested stock at September 30, 2007		224,999	$	5.00

        As part of the adoption of SFAS 123R, effective January 1, 2006, the Company eliminated $1,230 of deferred employee compensation against paid in capital. As of September 30, 2007, $704 of total unrecognized compensation costs related to non-vested stock is expected to be recognized over the remaining service period of two years. The Company recognized $569 and $213 of expense related to the amortization of these restricted stock awards during the nine months ended September 30, 2007 and 2006, respectively.

 

- -8-

Note 8 - Contingencies:

        On September 22, 2004, Boundless Depot, LLC (“Boundless Depot”) and Scott Johnson, one of two Boundless Depot shareholders, sued GoAmerica and Wynd Communications in the Superior Court of the State of California for the County of Los Angeles, claiming damages of one million dollars for GoAmerica’s refusal to pay Boundless Depot unattained contingent consideration, comprised of cash and/or GoAmerica Common Stock, with respect to the Asset Purchase Agreement dated as of February 8, 2003 (the “Deafwireless Agreement”), pursuant to which GoAmerica and Wynd Communications acquired certain Deafwireless assets. The total value of such contingent consideration, if all contingencies had been fully met and amounts paid immediately thereupon, would not have exceeded $211; however, the Company does not believe any of the contingent consideration is owed to Boundless Depot or either of its shareholders since conditions of the Deafwireless Agreement were not met and the Company incurred costs for which it is entitled to receive reimbursement from Boundless Depot or offset against any amounts that may become payable to Boundless Depot. Upon petition by GoAmerica and Wynd Communications, the Court has ordered this matter into arbitration, which process is now pending. The Company intends to defend this action vigorously and may elect to pursue counterclaims.

Note 9 - Settlement of Hands On Litigation:

        On May 2, 2005, the Company entered into a loan agreement with Hands On Video Relay Services, Inc., a Delaware corporation, and Hands On Sign Language Services, Inc., a California corporation (collectively, the “Hands On Entities”). Pursuant to that agreement, all amounts that the Company advanced to Hands On were secured, initially, by the assets acquired with such funds with interest at a defined prime rate. On July 6, 2005, the Company entered into a merger agreement with the Hands On Entities and their principal shareholders (collectively, “Hands On”).

        On March 1, 2006, the Company announced its receipt of a letter from Hands On in which Hands On purportedly terminated the merger agreement among the parties. Subsequent discussions between the parties did not provide a basis to pursue the merger. Hands On stockholders had approved the proposed merger with GoAmerica at special Hands On stockholder meetings held on February 22, 2006. A Special Meeting of GoAmerica Stockholders relating to the Company’s proposed merger with Hands On was scheduled for March 13, 2006, adjourned from February 27, 2006 in order to allow GoAmerica to achieve a quorum with respect to the Special Meeting. As of March 6, 2006, the Company had achieved a quorum and received votes overwhelmingly in favor of the Hands On merger. On March 7, 2006, the Company announced its cancellation of its Special Meeting of Stockholders and its determination not to pursue its proposed merger with Hands On. As a result of the merger agreement termination, Hands On’s repayment obligations under the loan agreement began July 1, 2006. After the Company received all such payments due through September 30, 2006, Hands On ceased making payments due leaving an outstanding receivable of $562 at December 31, 2006.

        Hands On had indicated that it did not intend to make any more payments to the Company under the existing terms of the loan agreement and that Hands On was attempting to restructure its debts and raise new capital. In December 2006, the Company commenced litigation against Hands On, seeking recovery of its loan receivable.

        In April 2007, the Company executed a settlement agreement and mutual release related to its litigation with Hands On in exchange for an immediate $400 cash payment, termination of litigation, mutual release of all loan- and merger-related claims (asserted and otherwise), and other consideration and recorded a settlement loss of $162.

        As a result of the terminated merger, the Company wrote off a total of $431 of merger related expenses during the nine months ended September 30, 2006 and such write off is included in other income (expense), net.

        On September 12, 2007, the Company entered into a definitive merger agreement with Hands On Video Relay Services, Inc. (Hands On). (see note 11)

 

- -9-

Note 10 - Discontinued Operations:

        On September 1, 2006, the Company entered into an agreement to sell GoAmerica Marketing, Inc., dba GA Prepaid (“GA Prepaid”), its prepaid calling card division, effective August 31, 2006. The sale closed on October 2, 2006 and the Company recognized a gain on sale of $6. The Company received total consideration of $131 which consisted of the purchase price of $75 and working capital reimbursements totaling $56. The Company was paid $20 at closing and $111 was payable under a guaranteed promissory note payable in five monthly installments beginning on October 31, 2006.

        Total revenues related to the discontinued operations were $894 and $3,644 for the three and nine months ended September 30, 2006, respectively.

Note 11 - Acquisitions:

        On August 2, 2007, the Company announced the execution of a definitive agreement under which it will acquire the assets of Verizon’s Telecommunications Relay Services (TRS) division for $50 million in cash and up to an additional $8 million in contingent cash consideration. The transaction will be financed through $35 million of committed equity financing and $30 million of committed senior debt financing, funded in each case by Clearlake. Concurrently with the execution of the Verizon definitive agreement, Clearlake:

n Purchased 290,135 shares of the Company’s newly created Series A convertible preferred stock at a price of $5.17 per share (see Note 3);

n Provided the Company $1.0 million pursuant to a bridge loan commitment that was increased to $3.5 million (see Note 4);

n Agreed to purchase an additional 6,479,691 shares of Series A convertible preferred stock at a price of $5.17 per share, subject to certain conditions, upon consummation of the Verizon transaction; and

n Provided the Company with a commitment letter for $30 million of senior debt financing to be raised for the closing of the Verizon transaction. The loan, which will close upon the closing of the Verizon transaction and mature in five years, will bear interest at the rate of LIBOR plus 7% per annum, payable quarterly in arrears.

        As a result of the commitments and capital infusion made to date, the Company’s Board has appointed Behdad Eghbali, Partner from Clearlake Capital Group to one new seat on the Company’s Board of Directors.

        In the event the Verizon transaction is not approved $2,036 of deferred acquisition costs and $498 of deferred financing costs will be recorded as expense in the statement of operations during the fourth quarter of 2007.

        On September 12, 2007, the Company entered into a definitive merger agreement with Hands On Video Relay Services, Inc. (Hands On) for $35.0 million in cash and 6.7 million shares of the Company’s common stock. The Hands On merger is conditioned on the consummation of the above referenced acquisition of Verizon’s Telecommunications Relay Services division.

        The Hands On transaction will be financed through $5 million of committed equity financing and $40 million of committed senior debt financing, funded in each case by Clearlake bringing the total Clearlake commitment to the Company to $110 million in equity and debt. Concurrently with the execution of the Hands On definitive agreement, but subject to certain closing conditions, Clearlake:

n Agreed to purchase an additional 967,118 shares of the Company’s Series A preferred stock at a previously negotiated price of $5.17 per share; and

n Provided the Company with a commitment letter for $40 million of senior debt financing to be raised for the closing of the Hands On transaction. The loan, which will close upon the closing of the Hands On Transaction and mature in five years, will bear interest at the rate of LIBOR plus 9% per annum, payable quarterly in arrears.

        In the event the Hands On transaction is not approved $1,535 of deferred acquisition costs and $664 of deferred financing costs will be recorded as expense in the statement of operations during the fourth quarter of 2007.

        The issuances of Series A preferred stock, as well as the asset purchase and merger transactions, are subject to stockholder and regulatory approval.

 

- -10-

Note 12 - Income Taxes:

        The Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty in Income Taxes-an interpretation of FASB Statement No. 109” (“FIN 48”), on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with FASB Statement 109, “Accounting for Income Taxes”, and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.

        Based on the Company’s evaluation, we have concluded that there are no significant uncertain tax positions requiring recognition in our financial statements or adjustments to our deferred tax assets and related valuation allowance. The evaluation was performed for the tax years ended December 31, 2003, 2004, 2005 and 2006, the tax years which remain subject to examination by major tax jurisdictions as of September 30, 2007.

        The Company may from time to time be assessed interest or penalties by major tax jurisdictions, although any such assessments historically have been minimal and immaterial to our financial results. In the event the Company may have received an assessment for interest and/or penalties, it has been classified in the financial statements as selling, general and administrative expense.

        The Company had federal and state net operating loss (“NOL”) carryforwards of approximately $181,500 and $129,400, respectively. The federal NOL carryforwards expire beginning in 2011 and state NOL’s beginning in 2007. The Tax Reform Act of 1986 enacted a complex set of rules limiting the potential utilization of net operating loss and tax credit carryforwards in periods following a corporate “ownership change.” In general, for federal income tax purposes, an ownership change is deemed to occur if the percentage of stock of a loss corporation owned (actually, constructively and, in some cases, deemed) by one or more “5% shareholders” has increased by more than 50 percentage points over the lowest percentage of such stock owned during a three-year testing period. The Company believes that an ownership change will occur with respect to the transactions described in note 11. The effect of an ownership change would be the imposition of an annual limitation on the use of net operating loss carryforwards attributable to periods before the change. The Company has not performed a detailed analysis to determine the amount of the potential limitations.

Note 13 - Related Party Transactions:

        The Company entered into certain financing and equity agreements with Clearlake as a result of the pending transactions described in note 11. As a result, the Company paid Clearlake approximately $1,400 of financing fees and expense reimbursements. In addition, the Company paid Clearlake approximately $12 of interest of which $8 was paid in cash and the balance paid in kind. The Company also accrued interest of $22 as of September 30, 2007.

Note 14 - Subsequent Events:

        On October 17, 2007, the Company received a letter from Nasdaq, dated October 16, 2007 stating that it violated Marketplace Rule 4350(i) in connection with the issuance of shares of its Series A Preferred Stock in August 2007, because, while the conversion of the Preferred Stock into Common Stock without shareholder approval was restricted in the Certificate of Designation, the restriction was only applicable while the Company’s Common Stock was listed on Nasdaq or another exchange. The letter also stated that the Company had regained compliance with the Rule by forwarding to Nasdaq a copy of an agreement between the holder of the Series A Preferred Stock and the Company confirming that such restriction on conversion will remain in place until shareholder approval has been obtained.

        Effective November 1, 2007, Wayne D. Smith, Executive Vice President, General Counsel and Secretary, has resigned from all of his positions with the Company. Mr. Smith will receive one year’s severance, continuing medical benefits, and all restrictions remaining on restricted stock grants of the Company’s Common Stock previously made to him will lapse. Mr. Smith will be entitled to receive a bonus, relating to 2007, in an amount equal to any bonus that may be paid to any other executive officer of the Company. If the acquisitions referred to in note 11 are consummated, Mr. Smith will receive a special transaction bonus recognizing his efforts in the amount of $50,000. Effective October 9, 2007, Donald G. Barnhart, the Company’s Chief Financial Officer, was appointed Secretary of the Company.

 

- -11-

        On October 8, 2007, the Company and Hands On entered into a second side letter to amend the Hands On merger agreement to (i) provide for “Common Liquidation Preference” to include the amount of any consideration received by Hands On for the purchase of Hands On common stock, including the exercise price received by Hands On in connection with the exercise of vested options between September 12, 2007, and the business day prior to the closing of the Hands On merger, (ii) remove the role of the exchange agent in receipt of the election forms, and (iii) remove the requirement of a guarantee of delivery from a member of a registered national securities exchange or a commercial bank or trust company.

        On October 11, 2007, the Company and Hands On entered into a third side letter to amend the Hands On merger agreement to provide that Hands On would have through October 18, 2007, to deliver to GoAmerica a copy of the written consent to the Hands On merger executed by each of the Key Hands On Stockholders (as defined).

        On November 6, 2007, the Company and Hands On entered into a fourth side letter to amend the Hands On merger agreement to confirm the agreement and understanding of the parties that (A) the forty-five (45) day period referred to in clause (ii) of Section 8.1(b) of the Hands On merger agreement shall be extended to seventy-two (72) days and (B) such period shall be deemed to have commenced on October 22, 2007.

        On November 6, 2007, the Company’s Board of Directors approved a revised amended and restated investor rights agreement which will be executed upon the closing of the Hands On merger. The amended and restated investors rights agreement provides that if any holder of shares of Series A Convertible Preferred Stock intends to transfer its shares of Series A Convertible Preferred Stock to anyone besides an affiliate of such holder, Clearlake or its affiliates, then all of such holder’s shares of Series A Convertible Preferred Stock would be required to be converted into common stock prior to such transfer. In addition, if Clearlake intends to transfer its shares of Series A Convertible Preferred Stock to any non-affiliate of Clearlake, then all outstanding shares of Series A Convertible Preferred Stock held by all holders of Series A Convertible Preferred Stock would be required to convert into shares of common stock.

        Also on November 6, 2007, the Company’s Board of Directors approved a revised amended and restated certificate of incorporation to be filed with the Delaware Secretary of State upon the closing of the Hands On merger. The amended and restated Hands On certificate of incorporation deletes the provision for automatic conversion of the Series A Convertible Preferred Stock to common stock upon a transfer by the holder of Series A Convertible Preferred Stock. Such transfer and conversion matters are now covered by the amended and restated investor rights agreement to be executed upon the closing of the Hands On merger, as described above.

 

- -12-

        Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

        General

         GoAmerica^® is a communications service provider, offering solutions primarily for consumers who are deaf, hard of hearing and/or speech impaired, including wireless subscription and value added services, Internet relay services and wireless devices and accessories. Our i711.com^TM telecommunications relay service was launched in March 2005 and enables people who are deaf or hard of hearing to call and “converse” with hearing parties by using a computer, wireless handheld device or similar unit, through an operator that interprets text to voice and vice versa. In addition, during December 2006, we began offering our i711 Video Relay Service (VRS), the newest member of the i711.com^TM family of relay services. i711 VRS enables people who are deaf to use sign language to communicate with hearing people using a Windows computer, a web camera, and a broadband Internet connection. Wynd Communications Corporation, a wholly owned subsidiary of GoAmerica, offers wireless subscription services that operate over the T-Mobile wireless data network and consist primarily of two offerings: 1) the resale of recurring monthly data-only services for deaf or hard of hearing customers; and 2) our value added services called Wireless Toolkit^TM , which consists of a collection of services, including AAA Roadside Assistance, TTY/TDD messaging, and access to Insight Cinema’s captioned movie information. We sell wireless devices directly to customers and indirectly through sub-dealers. We have a dealer agreement with T-Mobile whereby we sell devices and earn a commission, also called a bounty, upon activation of the device with an associated service rate plan. GoAmerica continues to support customers who use our proprietary software technology called Go.Web^TM . GoWeb is designed for use mainly by enterprise customers to enable secure wireless access to corporate data and the Internet on numerous wireless computing devices. We continue to engineer our technology to operate with new versions of wireless devices as they emerge.

        Critical Accounting Policies and Estimates

        Management’s Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and the related disclosure of contingent assets and liabilities. On an on-going basis, management evaluates its estimates and judgments, including those related to revenue recognition, allowance for doubtful accounts and note receivable and recoverability of our goodwill and other intangible assets. Management bases its estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

        Management believes the following critical accounting policies, among others, affect its more significant judgments and estimates used in the preparation of its consolidated financial statements. Historically, we have derived our revenue primarily from the sale of basic and value-added wireless data services and the sale of related mobile devices. Subscriber revenue consists primarily of monthly charges for access and usage and is recognized as the services are provided. Equipment revenue is recognized upon shipment to the end user. Revenue from relay services is recognized as revenue when services are provided or earned. Revenue from commissions is recognized upon activation of subscribers on behalf of third party wireless network providers. We estimate the collectibility of our trade and note receivables. Significant changes in required reserves have been recorded in recent periods and may occur in the future due to current market conditions. We write down inventory for estimated excess or obsolete inventory equal to the difference between the cost of inventory and the estimated market value based upon assumptions about future demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be required. In assessing the recoverability of our goodwill, other intangibles and other long-lived assets, we must make assumptions regarding estimated future cash flows. If such assumptions change in the future, we may be required to record impairment charges for these assets not previously recorded.

 

- -13-

Results of Operations

        The following table sets forth, for the three and nine months ended September 30, 2007 and 2006, the percentage relationship to net revenues of certain items included in the Company’s unaudited consolidated statements of operations.

	Three Months Ended September 30,												Nine Months Ended September 30,
	2007						2006						2007						2006
(In thousands)	$			%			$			%			$			%			$			%
Revenues:
Relay services	$	4,293			88.8		$	3,497			76.8		$	11,787			87.8		$	5,325			62.1
Subscriber		267			5.5			328			7.2			867			6.4			934			10.9
Commissions		190			3.9			559			12.3			451			3.3			2,045			23.8
Equipment		83			1.7			165			3.6			300			2.2			266			3.1
Other		3			0.1			2			0.1			43			0.3			5			0.1
		4,836			100.0			4,551			100.0			13,448			100.0			8,575			100.0
Costs and expenses:
Cost of relay services		2,999			62.0			2,342			51.4			8,074			60.1			3,034			35.4
Cost of subscriber airtime		244			5.0			265			5.8			811			6.0			569			6.6
Cost of equipment revenue		171			3.5			178			3.9			495			3.7			380			4.4
Cost of network operations		29			0.6			27			0.6			87			0.6			81			0.9
Sales and marketing		612			12.7			689			15.1			1,615			12.0			1,709			19.9
General and administrative		1,479			30.7			1,105			24.3			4,092			30.5			3,267			38.1
Research and development		59			1.2			38			0.8			316			2.3			271			3.2
Depreciation and amortization		94			1.9			104			2.4			257			1.9			374			4.4
		5,687			117.6			4,748			104.3			15,747			117.1			9,685			112.9
Loss from operations		(851	)		(17.6	)		(197	)		(4.3	)		(2,299	)		(17.1	)		(1,110	)		(12.9	)
Other income (expense):
Settlement losses		—			—			—			—			(162	)		(1.2	)		—			—
Terminated merger costs		—			—			—			—			—			—			(431	)		(5.0	)
Interest income (expense), net		(10	)		(0.2	)		46			1.0			49			0.4			146			1.7
Total other income (expense), net		(10	)		(0.2	)		46			1.0			(113	)		(0.8	)		(285	)		(3.3	)
Loss from continuing operations		(861	)		(17.8	)		(151	)		(3.3	)		(2,412	)		(17.9	)		(1,395	)		(16.2	)
Loss from discontinued operations		—			—			(371	)		(8.2	)		—			—			(571	)		(6.7	)
Net loss	$	(861	)		(17.8	)	$	(522	)		(11.5	)	$	(2,412	)		(17.9	)	$	(1,966	)		(22.9	)

 

- -14-

        The following table sets forth the period over period percentage increases or decreases of certain items included in the Company’s unaudited consolidated statements of operations.

	Three Months Ended September 30,												Nine Months Ended September 30,
(In thousands)							Change												Change
	2007			2006			$			%			2007			2006			$			%
Revenues:
Relay services	$	4,293		$	3,497		$	796			22.8		$	11,787		$	5,325		$	6,462			121.4
Subscriber		267			328			(61	)		(18.6	)		867			934			(67	)		(7.2	)
Commissions		190			559			(369	)		(66.0	)		451			2,045			(1,594	)		(78.0	)
Equipment		83			165			(82	)		(49.7	)		300			266			34			12.8
Other		3			2			1			50.0			43			5			38			760.0
		4,836			4,551			285			6..3			13,448			8,575			4,873			56.8
Costs and expenses:
Cost of relay services		2,999			2,342			657			28.1			8,074			3,034			5,040			166.1
Cost of subscriber airtime		244			265			(21	)		(7.9	)		811			569			242			42.5
Cost of equipment revenue		171			178			(7	)		(3.9	)		495			380			115			30.3
Cost of network operations		29			27			2			7.4			87			81			6			7.4
Sales and marketing		612			689			(77	)		(11.2	)		1,615			1,709			(94	)		(5.5	)
General and administrative		1,479			1,105			374			33.8			4,092			3,267			825			25.2
Research and development		59			38			21			55.3			316			271			45			16.6
Depreciation and amortization		94			104			(10	)		(9.6	)		257			374			(117	)		(31.3	)
		5,687			4,748			939			19.8			15,747			9,685			6,062			62.6
Loss from operations		(851	)		(197	)		(654	)		(333.7	)		(2,299	)		(1,110	)		(1,189	)		(107.1	)
Other income (expense):
Settlement losses		—			—			—			—			(162	)		—			(162	)		—
Terminated merger costs		—			—			—			—			—			(431	)		431			(100.0	)
Interest income (expense), net		(10	)		46			(56	)		(121.7	)		49			146			(97	)		(66.4	)
Total other income (expense), net		(10	)		46			(56	)		(121.7	)		(113	)		(285	)		172			(60.4	)
Loss from continuing operations		(861	)		(151	)		(710	)		(473.3	)		(2,412	)		(1,395	)		(1,017	)		72.9
Loss from discontinued operations		—			(371	)		371			100.0			—			(571	)		571			100.0	)
Net loss	$	(861	)	$	(522	)	$	(339	)		(64.9	)	$	(2,412	)	$	(1,966	)	$	(446	)		(22.7	)

Three months ended September 30, 2007 Compared to Three months ended September 30, 2006

        Relay services revenue. Relay services revenue increased 23%, to $4,293,000 for the three months ended September 30, 2007 from $3,497,000 for the three months ended September 30, 2006. This increase was primarily due to increased usage of our i711.com^TM telecommunications relay service which was launched in March 2005. In addition, during December 2006, we began offering our i711^® Video Relay Service (VRS). Video Relay Service revenue was $403,000 for the three months ended September 30, 2007. We expect relay services revenue to increase as we expand our user base for both our video and telecommunication relay services.

        Subscriber revenue. Subscriber revenue decreased 19%, to $267,000 for the three months ended September 30, 2007 from $328,000 for the three months ended September 30, 2006. This decrease was primarily due to decreases in our full service offering subscriber base. We expect subscriber revenue to continue to decline as subscribers to our full service offerings decline.

        Commission revenue. Commission revenue decreased to $190,000 for the three months ended September 30, 2007 from $559,000 for the three months ended September 30, 2006. This decrease primarily was due to decreased acquisition of subscribers on behalf of wireless network providers through our indirect distribution channel. We expect commission revenue to increase as we expand our indirect distribution channel and, accordingly, increase our acquisition of subscribers on behalf of various wireless network providers.

        Equipment revenue. Equipment revenue decreased to $83,000 for the three months ended September 30, 2007 from $165,000 for the three months ended September 30, 2006. This decrease was primarily due to lower sales of mobile devices. We expect equipment revenue to increase as we continue to provide devices to new subscribers of our Wynd services and from our sales of equipment to subscribers on behalf of various wireless network providers.

 

- -15-

        Other revenue. Other revenue, comprised primarily of consulting fees, increased to $3,000 for the three months ended September 30, 2007 from $2,000 for the three months ended September 30, 2006. We expect other revenue to vary slightly as we do not intend to pursue consulting projects and consulting services to third parties in the near future.

        Cost of relay services revenue. Cost of relay services revenue increased 28%, to $3.0 million for the three months ended September 30, 2007 from $2.3 million for the three months ended September 30, 2006. This increase was due to increased third party service fees related to our i711.com^TM telecommunications relay service and our i711^® Video Relay Service (VRS). We began offering VRS during December 2006. Cost of Video Relay Service revenue was $403,000 for the three months ended September 30, 2007. We expect cost of relay services revenue to increase as we expand our user base for both our video and telecommunication relay services.

        Cost of subscriber airtime. Cost of subscriber airtime decreased 8%, to $244,000 for the three months ended September 30, 2007 from $265,000 for the three months ended September 30, 2006. This decrease was primarily due to decreased costs in our text based wireless services. We expect cost of subscriber airtime to continue to decline as subscribers to our full service offerings decline.

        Cost of network operations. Cost of network operations increased to $29,000 for the three months ended September 30, 2007 from $27,000 for the three months ended September 30, 2006 due to increased salaries and benefits for personnel performing network operations activities. We expect our cost of network operations to remain relatively constant with current levels.

        Cost of equipment revenue. Cost of equipment revenue decreased 4%, to $171,000 for the three months ended September 30, 2007 from $178,000 for the three months ended September 30, 2006. This decrease was primarily due to lower sales of mobile devices. We expect cost of equipment revenue to increase as we continue to provide devices to new subscribers of our Wynd services and from the cost of equipment provided to subscribers on behalf of various wireless network providers.

        Sales and marketing. Sales and marketing expenses decreased to $612,000 for the three months ended September 30, 2007 from $689,000 for the three months ended September 30, 2006. This decrease primarily was due to decreased payments to third parties as compensation for marketing our products. We expect sales and marketing expenses to increase as a percentage of sales as we continue to introduce new products and services to the consumer marketplace.

        General and administrative. General and administrative expenses increased to $1.5 million for the three months ended September 30, 2007 from $1.1 million for the three months ended September 30, 2006. This increase was primarily due to increased salaries and benefits for personnel performing general corporate activities, including $186,000 in stock-based compensation. We expect general and administrative expenses to decline as a percentage of revenue as our revenues incrrease.

        Research and development. Research and development expense increased to $59,000 for the three months ended September 30, 2007 from $38,000 for the three months ended September 30, 2006. This increase was primarily due to increased salaries and benefits for personnel performing development activities. We expect research and development expenses to increase as we continue to develop and maintain our relay technologies.

        Interest income (expense), net. We incurred interest expense of $10,000 for the three months ended September 30, 2007 compared to interest income of $46,000 for the three months ended September 30, 2006. This resulted from our incurring interest expense of $34,000 from our issuance of debt during the three months ended September 30, 2007. Interest income for the three months ended September 30, 2007 was $24,000.

        Discontinued operations. The Company recorded a loss from discontinued operations of $372,000 for the three months ended September 30, 2006. This relates to our prepaid calling card division which was sold in 2006.

Nine months ended September 30, 2007 Compared to Nine months ended September 30, 2006

        Relay services revenue. Relay services revenue increased 121%, to $11,787,000 for the nine months ended September 30, 2007 from $5,325,000 for the nine months ended September 30, 2006. This increase was primarily due to our obtaining FCC certification in June 2006, allowing us to bill directly for service usage as opposed to submitting through a third party provider as in prior periods, as well as increased usage of our i711.com^TM telecommunications relay service which was launched in March 2005. In addition, during December 2006, we began offering our i711^® Video Relay Service (VRS). Video Relay Service revenue was $1,224,000 for the nine months ended September 30, 2007.

        Subscriber revenue. Subscriber revenue decreased to $867,000 for the nine months ended September 30, 2007 from $934,000 for the nine months ended September 30, 2006. This was primarily due to decreases in our full service offering subscriber base.

 

- -16-

        Commission revenue. Commission revenue decreased to $451,000 for the nine months ended September 30, 2007 from $2.0 million for the nine months ended September 30, 2006. This decrease primarily was due to decreased acquisition of subscribers on behalf of wireless network providers through our indirect distribution channel.

        Equipment revenue. Equipment revenue increased to $300,000 for the nine months ended September 30, 2007 from $266,000 for the nine months ended September 30, 2006. This increase was primarily due to higher sales of mobile devices.

        Other revenue. Other revenue increased to $43,000 for the nine months ended September 30, 2007 from $5,000 for the nine months ended September 30, 2006.

        Cost of relay services revenue. Cost of relay services revenue increased 166%, to $8.1 million for the nine months ended September 30, 2007 from $3.0 million for the nine months ended September 30, 2006. This increase was due to third party service fees related to our i711.com^TM telecommunications relay service and our i711^® Video Relay Service (VRS), primarily as a result of our obtaining FCC certification in June 2006, allowing us to bill directly for service usage as opposed to submitting through a third party provider, on a net basis, as in prior periods. In addition, during December 2006, we began offering our i711^® Video Relay Service (VRS). Cost of Video Relay Service revenue was $792,000 for the nine months ended September 30, 2007.

        Cost of subscriber airtime. Cost of subscriber airtime increased 43%, to $811,000 for the nine months ended September 30, 2007 from $569,000 for the nine months ended September 30, 2006. This increase was primarily due to increased costs in our text based wireless services.

        Cost of network operations. Cost of network operations increased to $87,000 for the nine months ended September 30, 2007 from $81,000 for the nine months ended September 30, 2006 due to increased salaries and benefits for personnel performing network operations activities.

        Cost of equipment revenue. Cost of equipment revenue increased 30%, to $495,000 for the nine months ended September 30, 2007 from $380,000 for the nine months ended September 30, 2006. This increase was primarily due to higher sales of mobile devices.

        Sales and marketing. Sales and marketing expenses decreased to $1.6 million for the nine months ended September 30, 2007 from $1.7 million for the nine months ended September 30, 2006. This decrease primarily was due to decreased payments to third parties as compensation for marketing our products.

        General and administrative. General and administrative expenses increased to $4.1 million for the nine months ended September 30, 2007 from $3.3 million for the nine months ended September 30, 2006. This increase was primarily due to increased salaries and benefits for personnel performing general corporate activities, including $569,000 in stock-based compensation.

        Research and development. Research and development expense increased to $316,000 for the nine months ended September 30, 2007 from $271,000 for the nine months ended September 30, 2006. This increase was primarily due to increased salaries and benefits for personnel performing development activities.

        Settlement Loss, net. The Company recorded a settlement loss totaling $162,000 for the nine months ended September 30, 2007 as a result of its settlement with Hands On.

        Terminated merger costs. The Company recorded terminated merger costs of $431,000 for the nine months ended September 30, 2006 related to the termination of the Hands On merger.

        Interest income (expense), net. Interest income decreased to $49,000 for the nine months ended September 30, 2007 from $146,000 for the nine months ended September 30, 2006. This decrease was partially due to our incurring interest expense of $34,000 from our issuance of debt during the three months ended September 30, 2007.

        Discontinued operations. The Company recorded a loss from discontinued operations of $571,000 for the nine months ended September 30, 2006. This relates to our prepaid calling card division which was sold in 2006.

 

- -17-

Liquidity and Capital Resources

        We have incurred significant operating losses since our inception and as of September 30, 2007 have an accumulated deficit of $277.6 million. During the nine months ended September 30, 2007, we incurred a net loss of $2.4 million, used $200,000 of cash to fund operating activities and overall experienced a decline of $788,000 in our cash and cash equivalents. We currently anticipate that our available cash resources will be sufficient to fund our operating needs for at least the next 12 months. At this time, we do not have any bank credit facility or other working capital credit line under which we may borrow funds for working capital or other general corporate purposes.

        On August 2, 2007, we announced the execution of a definitive agreement under which we will acquire the assets of Verizon’s Telecommunications Relay Services (TRS) division for $50 million in cash and up to an additional $8 million in contingent cash consideration. The transaction will be financed through $35 million of committed equity financing and $30 million of committed senior debt financing with a five year term, funded in each case by Clearlake Capital Group.

        On September 12, 2007, we announced entry into a definitive merger agreement with Hands On Video Relay Services, Inc. (Hands On) for $35.0 million in cash and 6.7 million shares of our common stock. The Hands On merger is conditioned on the consummation of the above referenced acquisition of Verizon’s Telecommunications Relay Services division. The Hands On transaction will be financed through $5 million of committed equity financing and $40 million of committed senior debt financing with a five year term, funded in each case by Clearlake bringing the total Clearlake commitment to the Company to $110 million in equity and debt.

        Net cash used in operating activities amounted to $200,000 for the nine months ended September 30, 2007, principally reflecting our loss from operations offset by non-cash depreciation and stock based compensation and increases in accrued expenses.

        We used $1,509,000 in cash from investing activities during the nine months ended September 30, 2007, which primarily resulted from increased other assets from deferred acquisition costs related to our agreement under which we will acquire the assets of Verizon’s Telecommunications Relay Services (TRS) division and the merger with Hands On, as well as, funds related to purchases of equipment and capitalized costs associated with the development of our i711.com^TM branded Internet service.

        Net cash provided by financing activities was $921,000 for the nine months ended September 30, 2007, which resulted from the issuance of preferred stock and debt.

        As of September 30, 2007, our principal commitments consisted of obligations outstanding under operating leases. As of September 30, 2007, future minimum payments for non-cancelable operating leases having terms in excess of one year amounted to $460,000, of which approximately $97,000 is payable in the next twelve months.

        The following table summarizes GoAmerica’s contractual obligations at September 30, 2007, and the effect such obligations are expected to have on its liquidity and cash flow in future periods.

September 30, 2007 (In thousands)	Total		Less than 1 Year		1-3 Years		4-5 Years		After 5 Years
Contractual Obligations:
Capital Lease Obligations	$	155	$	85	$	70	$	—	$	—
Operating Lease		460		97		203		160		—
Obligations
Loan payable		2,719		2,719		—		—		—
Total	$	3,334	$	2,901	$	273	$	160	$	—

        Effective November 1, 2007, Wayne D. Smith, Executive Vice President, General Counsel and Secretary, has resigned from all of his positions at the Registrant. Mr. Smith will receive one year’s severance, continuing medical benefits, and all restrictions remaining on restricted stock grants of the Company’s Common Stock previously made to him will lapse. Mr. Smith will be entitled to receive a bonus, relating to 2007, in an amount equal to any bonus that may be paid to any other executive officer of the Company. If the acquisitions referred to in note 11 are consummated, Mr. Smith will receive a special transaction bonus recognizing his efforts in the amount of $50,000. Donald G. Barnhart, the Company’s Chief Financial Officer, was appointed Secretary of the Company on October 9, 2007.

 

- -18-

Forward Looking Statements

        The statements contained in this Quarterly Report on Form 10-Q that are not historical facts are forward-looking statements (within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended). Such forward-looking statements may be identified by the use of forward-looking terminology such as “may”, “will”, “expect”, “estimate”, “anticipate”, “continue”, or similar terms, variations of such terms or the negative of those terms. Such forward-looking statements involve risks and uncertainties, including, but not limited to: (i) our limited operating history; (ii) our ability to respond to the rapid technological change of the wireless data industry and offer new services; (iii) our dependence on wireless carrier networks; (iv) our ability to respond to increased competition in the wireless data industry; (v) our ability to integrate acquired businesses and technologies, including Verizon’s TRS division and Hands On assuming those transactions close; (vi) our ability to generate revenue growth; (vii) our ability to increase or maintain gross margins, profitability, liquidity and capital resources; and (viii) difficulties inherent in predicting the outcome of regulatory processes. Many of such risks and others are more fully described in our Annual Report on Form 10-K for the year ended December 31, 2006. Our actual results could differ materially from the results expressed in, or implied by, such forward-looking statements.

Recent Accounting Pronouncements

        In September 2006, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the United States, and expands disclosures about fair value measurements. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, with earlier application encouraged. Any amounts recognized upon adoption as a cumulative effect adjustment will be recorded to the opening balance of retained earnings in the year of adoption. The Company has not yet determined the impact of this statement on its results of operations or financial condition.

        In February 2007, the FASB issued SFAS No. 159, “Establishing the Fair Value Option for Financial Assets and Liabilities” to permit all entities to choose to elect to measure eligible financial instruments and certain other items at fair value. The decision whether to elect the fair value option may occur for each eligible item either on a specified election date or according to a preexisting policy for specified types of eligible items. However, that decision must also take place on a date on which criteria under SFAS 159 occurs. Finally, the decision to elect the fair value option shall be made on an instrument-by-instrument basis, except in certain circumstances. An entity shall report unrealized gains and losses on items for which the fair value option has been elected in earnings at each subsequent reporting date. SFAS No. 159 applies to fiscal years beginning after November 15, 2007, with early adoption permitted for an entity that has also elected to apply the provisions of SFAS No. 157, Fair Value Measurements. We have not yet determined the impact of this statement on our results of operations or financial condition.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

        We believe that we have limited exposure to financial market risks, including changes in interest rates. At September 30, 2007, all of our available excess funds are cash or cash equivalents. The value of our cash and cash equivalents is not materially affected by changes in interest rates. A hypothetical change in interest rates of 1.0% would result in an annual change in our net loss of approximately $31,000 based on cash and cash equivalent balances at September 30, 2007. We currently hold no derivative instruments and do not earn foreign-source income.

 

- -19-

Item 4. Controls and Procedures

Evaluation of disclosure controls and procedures.

        As of the end of the Company’s most recently completed fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) covered by this report, the Company carried out an evaluation, with the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures pursuant to Securities Exchange Act Rule 13a-15. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms.

Changes in internal controls.

        There have been no changes in the Company’s internal controls over financial reporting that occurred during the Company’s last fiscal quarter to which this report relates that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

 

- -20-

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

        On September 22, 2004, Boundless Depot, LLC (“Boundless Depot”) and Scott Johnson, one of two Boundless Depot shareholders, sued GoAmerica and Wynd Communications in the Superior Court of the State of California for the County of Los Angeles, claiming damages of one million dollars for GoAmerica’s refusal to pay Boundless Depot unattained contingent consideration, consisting of cash and/or GoAmerica Common Stock, with respect to the Asset Purchase Agreement dated as of February 8, 2003 (the “Deafwireless Agreement”), pursuant to which GoAmerica and Wynd Communications acquired certain Deafwireless assets. The total value of such contingent consideration, if all contingencies had been fully met and amounts paid immediately thereupon, would not have exceeded $211,000; however, we do not believe any of the contingent consideration is owed to Boundless Depot or either of its shareholders since conditions of the Deafwireless Agreement were not met and we incurred costs for which we are entitled to receive reimbursement from Boundless Depot or offset against any amounts that may become payable to Boundless Depot. Upon petition by GoAmerica and Wynd Communications, the Court has ordered this matter into arbitration, which process is now pending. We intend to defend this action vigorously and may elect to pursue counterclaims.

        On May 2, 2005, the Company entered into a loan agreement with Hands On Video Relay Services, Inc., a Delaware corporation, and Hands On Sign Language Services, Inc., a California corporation (collectively, the “Hands On Entities”). Pursuant to that agreement, all amounts that the Company advanced to Hands On were secured, initially, by the assets acquired with such funds with interest at a defined prime rate. On July 6, 2005, the Company entered into a merger agreement with the Hands On Entities and their principal shareholders (collectively, “Hands On”). On March 7, 2006, the Company announced its determination not to pursue its proposed merger with Hands On. As a result of the merger agreement termination, Hands On’s repayment obligations under the loan agreement began July 1, 2006. After the Company received all such payments due through September 30, 2006, Hands On ceased making payments due. In December 2006, the Company commenced litigation against Hands On, seeking recovery of approximately $562,000. In April 2007, the Company executed a settlement agreement and mutual release related to its litigation with Hands On in exchange for an immediate $400,000 cash payment, termination of litigation, mutual release of all loan- and merger-related claims (asserted and otherwise), and other consideration.

Item 6. Exhibits.

10.1 Second Amendment to Services Agreement Among the Company, Nordia, Inc. and Stellar Nordia Services LLC.
(Portions of the Second Amendment have been omitted pursuant to an application for confidential treatment of certain terms of such Second Amendment filed separately with the SEC.)

10.2 Second, Third and Fourth Side Letters to the Agreement and Plan of Merger by and among GoAmerica, Inc., HOVRS Acquisition Corporation, Hands On Video Relay Services, Inc. and Bill M. McDonagh, as Stockholder’s Agent, are incorporated by reference to Annex D to the Registrant’s definitive proxy statement filed with the Securities and Exchange Commission on November 9.

31.1 Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2 Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

99.1 Form of Amended and Restated Investor Rights Agreement (to be executed upon the closing of the merger with Hands On Video Relay Services, Inc.).

 

- -21-

SIGNATURES

        Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	GOAMERICA, INC.
DATE: November 14, 2007	By:	/s/ Daniel R. Luis Daniel R. Luis Chief Executive Officer (Principal Executive Officer)
DATE: November 14, 2007	By:	/s/ Donald G. Barnhart Donald G. Barnhart Chief Financial Officer (Principal Financial and Accounting

 

- -22-

EX-10.1

                                                                        Ex. 10.1

     The redacted information herein has been omitted pursuant to a request
          for confidential treatment and the complete Second Amendment
                 to Services Agreement has been filed separately

                     SECOND AMENDMENT TO SERVICES AGREEMENT

This Second Amendment to Services  Agreement (this  "Amendment") is entered into
as  of  September  1st,  2007,  by  and  among  GoAmerica  Communications  Corp.
("GoAmerica"),  with its principal  place of business at 433 Hackensack  Avenue,
Hackensack,  New Jersey, USA 07601, Nordia Inc.  ("Nordia"),  with its principal
place of business at 3100 Cote-Vertu  Boulevard,  Suite 280, St-Laurent (Quebec)
Canada H4R 2J8, and Stellar Nordia Services LLC ("Stellar"),  with its principal
place of business at 130 East John  Carpenter  Freeway,  Irving,  TX, USA 75062.
GoAmerica,  Nordia  and  Stellar  are  collectively  referred  to  herein as the
"Parties".

WHEREAS,  GoAmerica and Nordia have entered into that certain Services Agreement
dated  January  1,  2005,  as  amended by that  certain  Amendment  to  Services
Agreement dated as of February 1, 2006 (such amendment,  the "First  Amendment",
and such services agreement, as amended, the "Services Agreement");

WHEREAS, GoAmerica Relay Services Corp. (formerly known as Acquisition 1 Corp.),
a wholly  owned  subsidiary  of  GoAmerica,  and Stellar  have entered into that
certain Managed Services Agreement dated August 1, 2007 (the "MSA");

WHEREAS,  Nordia  desires to assign all of its  rights,  obligations  and duties
under the Services  Agreement to Stellar,  and Stellar  desires to assume all of
the rights,  obligations,  duties and  liabilities  of Nordia under the Services
Agreement; and

WHEREAS,  the  Parties  desire  to  amend  certain  provisions  of the  Services
Agreement to conform to certain of the provisions of the MSA;

NOW  THEREFORE,   in  consideration  of  the  mutual  covenants  and  agreements
hereinafter set forth and other good and valuable consideration, the receipt and
sufficiency  of which are  hereby  acknowledged,  the  Parties  hereby  agree as
follows:

A. Definitions.

      1. "Session Minutes" means  Conversation  Minutes plus the additional time
spent:  (a) in queue  (call is  ringing,  waiting  for a live  answer) or (b) by
Stellar setting up inbound or outbound calls.

      2. All  capitalized  terms  used but not  defined  herein  shall  have the
meanings ascribed to such terms in the Services Agreement.

B. Assignment,  Assumption and Release. Nordia hereby assigns all of its rights,
obligations and duties under the Services  Agreement to Stellar.  Stellar hereby
accepts and assumes all of Nordia's rights, obligations,  duties and liabilities
under the Services Agreement. GoAmerica hereby consents to the assignment to and
assumption  by  Stellar  of all of  Nordia's



rights,  obligations,  duties and liabilities under the Services Agreement,  and
GoAmerica  hereby  releases and discharges  Nordia from all of its  obligations,
duties and liabilities under the Services Agreement.

C. Term:  Section 1.a of the First Amendment is hereby replaced  entirely by the
following provision:

      The term of the Services  Agreement  shall  continue  until the earlier to
      occur  of (i)  February  1,  2009 or (ii) the  date  that the MSA  becomes
      effective. On November 1, 2008, if the Parties reasonably believe that the
      MSA will not become  effective  on or before  February  1, 2009,  then the
      Parties will use good faith efforts to renegotiate and extend the Services
      Agreement based on then prevailing market conditions.

D.  Consideration.  Sections  a., b., c., d. and e. of Exhibit B to the Services
Agreement are hereby replaced by the following Sections 1 and 2:

      1.  Consideration:  The  Consideration  due Stellar for each  Conversation
      Minute for each month after August 2007 shall be as follows:

            (a)   In September 2007,

                  (i)   if the total number of Session  Minutes for the month is
                        [***] or less, then the Per Minute Consideration for (A)
                        the Conversation  Minutes converted from the first 6% of
                        the Session  Minutes  shall be $[***] U.S.,  and (B) the
                        Conversation Minutes converted from the remaining 94% of
                        Session  Minutes  shall  be  $[***]  U.S.   (subject  to
                        existing exchange rate calculations); and

                  (ii)  if the total number of Session  Minutes for the month is
                        greater  than [***],  then the Per Minute  Consideration
                        for (A) the  Conversation  Minutes  converted  from  the
                        first [***] of the Session Minutes shall be $[***] U.S.,
                        and (B) the  Conversation  Minutes  converted  from  the
                        remaining  Session Minutes shall be $[***] U.S. (subject
                        to existing exchange rate calculations);

            (b)   In October 2007,

                  (i)   if the total number of Session  Minutes for the month is
                        [***] or less, then the Per Minute Consideration for (A)
                        the Conversation Minutes converted from the first 47% of
                        the Session  Minutes  shall be $[***] U.S.,  and (B) the
                        Conversation Minutes converted from the remaining 53% of
                        Session  Minutes  shall  be  $[***]  U.S.   (subject  to
                        existing exchange rate calculations); and

                  (ii)  if the total number of Session  Minutes for the month is
                        greater  than [***],  then the Per Minute  Consideration
                        for (A) the  Conversation  Minutes  converted  from  the
                        first [***] of the Session Minutes shall be $[***] U.S.,
                        and (B) the Conversation Minutes converted from

                                      -2-


                        the  remaining  Session  Minutes  shall be  $[***]  U.S.
                        (subject to existing exchange rate calculations);

            (c)   In November 2007,

                  (i)   if the total number of Session  Minutes for the month is
                        [***] or less, then the Per Minute Consideration for (A)
                        the Conversation Minutes converted from the first 70% of
                        the Session  Minutes  shall be $[***] U.S.,  and (B) the
                        Conversation Minutes converted from the remaining 30% of
                        Session  Minutes  shall  be  $[***]  U.S.   (subject  to
                        existing exchange rate calculations); and

                  (ii)  if the total number of Session  Minutes for the month is
                        greater  than [***],  then the Per Minute  Consideration
                        for (A) the  Conversation  Minutes  converted  from  the
                        first [***] of the Session Minutes shall be $[***] U.S.,
                        and (B) the  Conversation  Minutes  converted  from  the
                        remaining  Session Minutes shall be $[***] U.S. (subject
                        to existing exchange rate calculations);

            (d)   In December 2007,

                  (i)   if the total number of Session  Minutes for the month is
                        [***] or less, then the Per Minute Consideration for (A)
                        the Conversation Minutes converted from the first 88% of
                        the Session  Minutes  shall be $[***] U.S.,  and (B) the
                        Conversation Minutes converted from the remaining 12% of
                        Session  Minutes  shall  be  $[***]  U.S.   (subject  to
                        existing exchange rate calculations); and

                  (ii)  if the total number of Session  Minutes for the month is
                        greater  than [***],  then the Per Minute  Consideration
                        for (A) the  Conversation  Minutes  converted  from  the
                        first [***] of the Session Minutes shall be $[***] U.S.,
                        and (B) the  Conversation  Minutes  converted  from  the
                        remaining  Session Minutes shall be $[***] U.S. (subject
                        to existing exchange rate calculations);

            (e)   For each month from January 2008 to August 2008,

                  (i)   if the total number of Session  Minutes for the month is
                        [***] or less, then the Per Minute Consideration for the
                        Conversation  Minutes converted from the Session Minutes
                        shall be $[***] U.S.; and

                  (ii)  if the total number of Session  Minutes for the month is
                        greater  than [***],  then the Per Minute  Consideration
                        for (A) the  Conversation  Minutes  converted  from  the
                        first [***] of the Session Minutes shall be $[***] U.S.,
                        and (B) the  Conversation  Minutes  converted  from  the
                        remaining  Session Minutes shall be $[***] U.S. (subject
                        to existing exchange rate calculations); and

                                      -3-


            (f)   For each month from September 2008 until  otherwise  agreed by
                  GoAmerica and Stellar,

                  (i)   if the total number of Session  Minutes for the month is
                        [***] or less, then the Per Minute Consideration for the
                        Conversation  Minutes converted from the Session Minutes
                        shall be $[***] U.S.; and

                  (ii)  if the total number of Session  Minutes for the month is
                        greater  than [***],  then the Per Minute  Consideration
                        for (A) the  Conversation  Minutes  converted  from  the
                        first [***] of the Session Minutes shall be $[***] U.S.,
                        and (B) the  Conversation  Minutes  converted  from  the
                        remaining  Session Minutes shall be $[***] U.S. (subject
                        to existing exchange rate calculations).

      2.    Payment Terms:

            a. Stellar will invoice GoAmerica for the Consideration  each month.
      The  Consideration  is to be paid to Stellar  monthly by GoAmerica no more
      than five (5) days after the date  GoAmerica  is in receipt of the monthly
      reimbursement  from  NECA  for the  Conversation  Minutes  covered  by the
      Consideration,   provided,   however,   that  GoAmerica  shall  be  solely
      responsible each month for timely seeking  reimbursement  for NECA for the
      Conversation Minutes processed by Stellar.

            b. The existing  exchange  rate  adjustment  calculation  remains in
      place.

E.  Termination  of Payment of Marketing  Development  Funds.  GoAmerica  hereby
releases and discharges Nordia (and Stellar, as assignee of Nordia's obligations
under  the  Services  Agreement)  of its  obligation  to make  the  payments  to
GoAmerica  described  in  Section  6 of  the  First  Amendment  for  any  market
development expenses incurred by GoAmerica after September 1, 2007. Section 6 of
the  First  Amendment  is  hereby  deleted,  and  Sections  7 and 8 of the First
Amendment shall remain unaltered.

F.  Certain  CA  Qualifications.  Stellar  shall  cooperate  with  GoAmerica  in
developing standards for employing communication assistants ("CAs") that provide
Services under this Amendment and the Services Agreement. All CAs supporting the
Services,  irrespective of which Stellar location employed, shall meet or exceed
agreed  upon  quality  of  service  standards,   which  shall  include,  without
limitation, the ability of each CA to type at least sixty (60) words per minute.
GoAmerica  shall  have the  right,  but not the  obligation,  to listen to audio
samples of every CA  supporting  or  proposed  to support  the  Services  and to
request the removal of any CA  providing  Services  under this  Amendment or the
Services  Agreement that GoAmerica,  in its sole  discretion,  believes does not
meet agreed upon quality of service standards.

G. Further Assurances. Each Party shall execute,  acknowledge and deliver to the
other Parties any and all documents or  instruments,  and shall take any and all
actions,  reasonably  required  by any other  Party,  to  confirm  or effect the
matters set forth herein.

                                      -4-


H. Counterparts.  This Amendment may be executed in counterparts,  each of which
shall be deemed to be an original,  but all of which together shall constitute a
single agreement.

I.  Headings.  The headings of the Sections of this Amendment have been inserted
for  convenience of reference only and shall in no way modify or restrict any of
the terms or provisions hereof.

J. No Other  Modifications.  Except as  expressly  amended or  modified  by this
Amendment, all other terms and provisions of the Services Agreement shall remain
unaltered,  are hereby reaffirmed,  and shall continue in full force and effect.
To the extent  there is a  conflict  between  this  Amendment  and the  Services
Agreement, the terms of this Amendment shall control.

                            [Signature Page Follows]

                                      -5-


IN WITNESS WHEREOF,  the Parties have entered into this Amendment as of the date
written above.

      GoAmerica Communications Corp.      Nordia Inc.

      /s/ Daniel R. Luis, CEO             /s/ Bernard Durocher
      -----------------------------       --------------------------------
      Authorized Signature                Authorized Signature
      Name: Daniel R. Luis                Name: Bernard Durocher
      Title: CEO                          Title:  CEO

                                          Stellar Nordia Services LLC

                                          /s/ Bernard Durocher
                                          --------------------------------
                                          Authorized Signature
                                          Name: Bernard Durocher
                                          Title:  CEO

EX-31.1

                                                                    Exhibit 31.1

                                  CERTIFICATION

I, Daniel R. Luis, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of GoAmerica, Inc.;

2.    Based on my knowledge,  this report does not contain any untrue  statement
of a  material  fact or omit to  state a  material  fact  necessary  to make the
statements made, in light of the circumstances  under which such statements were
made, not misleading with respect to the period covered by this report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer  and I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      (a)  Designed  such  disclosure  controls and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

      (b) Evaluated the  effectiveness of the registrant's  disclosure  controls
and  procedures  and  presented  in  this  report  our  conclusions   about  the
effectiveness  of the disclosure  controls and procedures,  as of the end of the
period covered by this report based on such evaluation; and

      (c)  Disclosed  in this  report  any change in the  registrant's  internal
control over financial  reporting  that occurred  during the  registrant's  most
recent fiscal quarter (the registrant's  fourth fiscal quarter in the case of an
annual  report)  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5.    The registrant's other certifying  officer and I have disclosed,  based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

      (a) All significant  deficiencies and material weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

      (b) Any fraud, whether or not material,  that involves management or other
employees who have a significant role in the registrant's  internal control over
financial reporting.

Date: November 14, 2007

                                         /s/ Daniel R. Luis
                                         ------------------------
                                         Daniel R. Luis
                                         Chief Executive Officer


                                      -23-

EX-31.2

                                                                    Exhibit 31.2

                                  CERTIFICATION

I, Donald G. Barnhart, certify that:

1.    I have reviewed this Quarterly Report on Form 10-Q of GoAmerica, Inc.;

2.    Based on my knowledge,  this report does not contain any untrue  statement
of a  material  fact or omit to  state a  material  fact  necessary  to make the
statements made, in light of the circumstances  under which such statements were
made, not misleading with respect to the period covered by this report;

3.    Based on my  knowledge,  the  financial  statements,  and other  financial
information included in this report, fairly present in all material respects the
financial  condition,  results of operations and cash flows of the registrant as
of, and for, the periods presented in this report;

4.    The  registrant's  other  certifying  officer  and I are  responsible  for
establishing and maintaining  disclosure  controls and procedures (as defined in
Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

      (a)  Designed  such  disclosure  controls and  procedures,  or caused such
disclosure  controls and  procedures to be designed  under our  supervision,  to
ensure that  material  information  relating to the  registrant,  including  its
consolidated subsidiaries,  is made known to us by others within those entities,
particularly during the period in which this report is being prepared;

      (b) Evaluated the  effectiveness of the registrant's  disclosure  controls
and  procedures  and  presented  in  this  report  our  conclusions   about  the
effectiveness  of the disclosure  controls and procedures,  as of the end of the
period covered by this report based on such evaluation; and

      (c)  Disclosed  in this  report  any change in the  registrant's  internal
control over financial  reporting  that occurred  during the  registrant's  most
recent fiscal quarter (the registrant's  fourth fiscal quarter in the case of an
annual  report)  that  has  materially  affected,  or is  reasonably  likely  to
materially affect, the registrant's  internal control over financial  reporting;
and

5.    The registrant's other certifying  officer and I have disclosed,  based on
our most recent evaluation of internal control over financial reporting,  to the
registrant's  auditors  and the audit  committee  of the  registrant's  board of
directors (or persons performing the equivalent functions):

      (a) All significant  deficiencies and material weaknesses in the design or
operation of internal  control over  financial  reporting  which are  reasonably
likely  to  adversely  affect  the  registrant's  ability  to  record,  process,
summarize and report financial information; and

      (b) Any fraud, whether or not material,  that involves management or other
employees who have a significant role in the registrant's  internal control over
financial reporting.

Date: November 14, 2007

                                               /s/ Donald G. Barnhart
                                               --------------------------
                                               Donald G. Barnhart
                                               Chief Financial Officer


                                      -24-

EX-32.1

                                                                    Exhibit 32.1

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the quarterly report of GoAmerica, Inc. (the "Company")
on Form 10-Q for the quarter ended  September 30, 2007 filed with the Securities
and Exchange  Commission  (the  "Report"),  I, Daniel R. Luis,  Chief  Executive
Officer of the Company,  certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully  complies  with the  requirements  of Section  13(a) of the
Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material
respects,  the consolidated  financial  condition of the Company as of the dates
presented and consolidated  results of operations of the Company for the periods
presented.

Dated: November 14, 2007

                                                  /s/ Daniel R. Luis
                                              --------------------------
                                                Daniel R. Luis
                                                Chief Executive Officer

This  certification  has been  furnished  solely  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.


                                      -25-

EX-32.2

                                                                    Exhibit 32.2

                            CERTIFICATION PURSUANT TO
                             18 U.S.C. SECTION 1350,
                             AS ADOPTED PURSUANT TO
                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

      In connection with the quarterly report of GoAmerica, Inc. (the "Company")
on Form 10-Q for the quarter ended  September 30, 2007 filed with the Securities
and Exchange Commission (the "Report"),  I, Donald G. Barnhart,  Chief Financial
Officer of the Company,  certify, pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully  complies  with the  requirements  of Section  13(a) of the
Securities Exchange Act of 1934; and

(2) The  information  contained in the Report fairly  presents,  in all material
respects,  the consolidated  financial  condition of the Company as of the dates
presented and consolidated  results of operations of the Company for the periods
presented.

Dated: November 14, 2007

                                        /s/ Donald G. Barnhart
                                      ---------------------------
                                       Donald G. Barnhart
                                       Chief Financial Officer

This  certification  has been  furnished  solely  pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002.


                                      026-

EX-99.1

                                                                        Ex. 99.1

                     [FORM OF] SECOND AMENDED AND RESTATED
                           INVESTOR RIGHTS AGREEMENT

                                GOAMERICA, INC.

                       Dated as of ______________, 200__



                               TABLE OF CONTENTS

                                                                            Page

1.    DEMAND REGISTRATIONS.....................................................1
      1.1.   Requests for Registration.........................................1
      1.2.   Demand Notice.....................................................2
      1.3.   Demand Registration Expenses......................................2
      1.4.   Short-Form Registrations..........................................2
      1.5.   Priority on Demand Registrations..................................3
      1.6.   Restrictions on Demand Registrations..............................3
      1.7.   Selection of Underwriters.........................................4
      1.8.   Other Registration Rights.........................................4

2.    PIGGYBACK REGISTRATIONS..................................................4
      2.1.   Right to Piggyback................................................4
      2.2.   Piggyback Expenses................................................4
      2.3.   Priority on Primary Registrations.................................5
      2.4.   Priority on Secondary Registrations...............................5

3.    REGISTRATION GENERALLY...................................................6
      3.1.   Registration Procedures...........................................6
      3.2.   Registration Expenses............................................10
      3.3.   Participation in Underwritten Offerings..........................11
      3.4.   Holdback Agreements..............................................11
             3.4.1.      Securityholder Holdback..............................11
             3.4.2.      Company Holdback.....................................12
      3.5.   Current Public Information.......................................12

4.    REGISTRATION INDEMNIFICATION............................................13
      4.1.   Indemnification by the Company...................................13
      4.2.   Indemnification by Holders of Registrable Securities.............13
      4.3.   Procedure........................................................14
      4.4.   Entry of Judgment; Settlement....................................14
      4.5.   Contribution.....................................................14
      4.6.   Other Rights.....................................................15

5.    TRANSFER RESTRICTiONS...................................................15
      5.1.   General Transfer Restrictions....................................15
      5.2.   Restrictions on Transfer.........................................16
             5.2.1.      Private Transfers....................................16
             5.2.2.      Public Transfers.....................................16
             5.2.3.      Pledge of Shares.....................................16
      5.3.   Automatic Conversion Upon Certain Transfers......................16
             5.3.1.      Transfers by Holders of Series A Preferred
                         Stock other than Clearlake Investors.................16
             5.3.2.      Transfers by Clearlake Investors.....................16

                                       i


             5.3.3.      No Additional Action Required........................17
      5.4.   Stop Transfer Instructions.......................................17

6.    PREEMPTIVE RIGHTS.......................................................17
      6.1.   Offering.........................................................17
      6.2.   Expiration of Subscription Period................................18
      6.3.   New Securities...................................................18

7.    INFORMATION RIGHTS......................................................19

8.    STOCKHOLDER AGREEMENTS..................................................19
      8.1.   Board Composition................................................19
      8.2.   Amendment to the Certificate of Incorporation....................20
      8.3.   No Company Obligations...........................................20

9.    EXPENSES................................................................20

10.   DEFINITIONS.............................................................20

11.   MISCELLANEOUS...........................................................24
      11.1.  No Inconsistent Agreements.......................................24
      11.2.  Remedies.........................................................24
      11.3.  Amendment and Waiver.............................................24
      11.4.  Successors and Assigns; Transferees..............................25
      11.5.  Severability.....................................................26
      11.6.  Counterparts.....................................................26
      11.7.  Descriptive Headings.............................................26
      11.8.  Notices..........................................................26
      11.9.  Delivery by Facsimile............................................27
      11.10. Governing Law....................................................27
      11.11. Jurisdiction; Submission to Jurisdiction; Waivers................27
      11.12. Waiver of Jury Trial.............................................27
      11.13. Termination......................................................28

                                       ii


              SECOND AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

      This  Second  Amended  and  Restated   Investor  Rights   Agreement  (this
"Agreement") is made as of  ____________,  200__ (the  "Effective  Date") by and
among:

      (i)   GoAmerica,   Inc.,  a  Delaware   corporation   (together  with  its
            successors and permitted assigns, the "Company");

      (ii)  Each of the shareholders of the Company listed on Schedule A to this
            Agreement and their Permitted Transferees under this Agreement (each
            a "Clearlake Investor" and, collectively the "Clearlake Investors");

      (iii) Each of the shareholders of the Company listed on Schedule B to this
            Agreement  (each  a  "HOVRS  Party"  and,  collectively  the  "HOVRS
            Parties"); and

      (iv)  such other  Persons,  if any, that from time to time become  parties
            hereto pursuant to Section 11.4 hereof (collectively,  together with
            the Clearlake Investors, the "Investors").

                                    RECITALS

      WHEREAS,  the  Company  and the  Clearlake  Investors  are parties to that
certain Stock Purchase  Agreement dated as of August 1, 2007 (the "Initial Stock
Purchase  Agreement"),  pursuant  to which the Company  issued to the  Clearlake
Investors  290,135 shares of Series A Preferred Stock of the Company,  par value
$.01 per share.

      WHEREAS,  the  Company  and the  Clearlake  Investors  are parties to that
certain Amended and Restated Stock Purchase  Agreement dated as of September 12,
2007 (the  "Acquisition  Stock Purchase  Agreement" and,  collectively  with the
Initial Stock Purchase  Agreement,  the "Clearlake Stock Purchase  Agreements"),
pursuant  to which the Company  has agreed to sell to the  Clearlake  Investors,
subject  to the  satisfaction  or waiver of the  conditions  specified  therein,
7,446,809 additional shares of Series A Preferred Stock of the Company.

      WHEREAS, the parties hereto desire to enter into this Agreement to provide
for the investor and governance rights set forth herein.  Unless otherwise noted
in this  Agreement,  capitalized  terms used herein  shall have the meanings set
forth in Section 10.

                                    AGREEMENT

      NOW, THEREFORE, the parties to this Agreement hereby agree as follows:

1. DEMAND REGISTRATIONS.

      1.1.  Requests  for  Registration.  At any time a Clearlake  Investor  may
initiate the  registration  of Common  Stock to be sold in a Public  Offering (a
"Demand  Registration").  Subject to the other  provisions  of this Section 1, a
Clearlake  Investor may initiate (on behalf of itself, any of its Affiliates and
other holders of Registrable  Securities) three (3) registrations of all or part
of  their  Registrable  Securities  on  Form  S-1 or any  similar  or  successor
long-form


                                       1


registration  ("Long-Form  Registrations"),  and,  if the Company is eligible to
utilize  a   registration   statement   on  Form  S-3  for  resales  by  selling
stockholders,  an  unlimited  (but no more  than two such  registrations  in any
twelve month period) number of registrations of all or part of their Registrable
Securities  on Form S-3 or any  similar  or  successor  short-form  registration
("Short-Form  Registrations");  provided in each case that the  aggregate  gross
offering price of the Registrable  Securities  requested to be registered in any
Long Form  Registration  pursuant to this  Section  must be at least  $5,000,000
unless the Registrable  Securities requested to be registered  constitute all of
the  Registrable  Securities  then  held  by  such  Clearlake  Investor  and its
Affiliates;  and provided,  further, that the Company shall have no liability to
any Investor or HOVRS Party with respect to any  conditions  that the Securities
and  Exchange  Commission  may impose  with  respect  to any such  registration,
including any conditions that the Securities and Exchange  Commission may impose
upon the utilization of Rule 415 in connection with any such registration.

      1.2. Demand Notice. All requests for Demand Registrations shall be made by
giving  written  notice to the Company (a "Demand  Notice").  Each Demand Notice
shall specify the approximate number of Registrable  Securities  requested to be
registered.  Within ten (10) days after receipt of any such Demand  Notice,  the
Company will give written notice of such requested registration to (i) all other
holders of  Registrable  Securities and (ii) to all Holders under and as defined
in that certain Lock-Up and Registration Rights Agreement, dated as of ________,
200_,  by and among the  Company and  certain of the HOVRS  Parties  (the "HOVRS
Registration  Rights  Agreement" and each such Holder, a "HOVRS  Holder"),  and,
subject to Section 1.5, the Company will use its commercially reasonable efforts
to  include  in  such  registration  (and  in  all  related   registrations  and
qualifications  under blue sky laws or in  compliance  with  other  registration
requirements and in any related underwriting) all Registrable Securities and all
Registrable  Securities  under and as defined in the HOVRS  Registration  Rights
Agreement ("HOVRS Registrable Securities") with respect to which the Company has
received  written  requests  for  inclusion  therein  within  15 days  after the
delivery of the Company's notice.

      1.3. Demand Registration  Expenses.  The Company will pay all Registration
Expenses in connection with any registration initiated as a Demand Registration,
whether or not it has become effective.

      1.4.  Short-Form  Registrations.  Subject to the  qualifications set forth
herein  and  subject  to  any  limitations  that  the  Securities  and  Exchange
Commission may impose, (i) Demand Registrations will be Short-Form Registrations
whenever the Company is permitted to use any applicable  short-form  (unless the
managing underwriter(s) of such offering requests the Company to use a Long-Form
Registration  in order  to sell  all of the  Registrable  Securities  and  HOVRS
Registrable  Securities  requested to be sold) and (ii) the Clearlake  Investors
may, in connection with any Demand  Registration  requested by such holders that
is a  Short-Form  Registration,  require  the  Company  to use its  commercially
reasonable efforts to file such Short-Form  Registration with the Securities and
Exchange  Commission  in  accordance  with and  pursuant  to Rule 415  under the
Securities Act (or any successor rule then in effect) including,  if the Company
is then  eligible,  as an  automatic  shelf  registration  statement  (any  such
Short-Form  Registration,  a "Shelf Registration").  Notwithstanding anything in
this  Agreement to the  contrary,  if the  Securities  and  Exchange  Commission
refuses to declare a  registration  statement  filed  pursuant to this Agreement
effective  as a valid  secondary  offering  under  Rule 415 due to

                                       2


the number of Registrable  Securities and HOVRS Registrable  Securities included
in such registration  statement relative to the number of shares of Common Stock
outstanding  or the  number  of  outstanding  shares  of  Common  Stock  held by
non-affiliates or for any other reason,  then,  without any liability under this
Agreement  or  any  further  obligation  to  register  such  excess  Registrable
Securities and HOVRS Registrable  Securities,  the Company shall be permitted to
reduce the number of  Registrable  Securities and HOVRS  Registrable  Securities
included in such registration statement (pro rata, based on the number of shares
requested to be registered, among the holders of such Registrable Securities and
HOVRS  Registrable  Securities) to an amount that does not exceed an amount that
the Securities  and Exchange  Commission  allows for the offering  thereunder to
qualify as a valid  secondary  offering under Rule 415. The Company shall not be
liable for damages  under this  Agreement as to any  Registrable  Securities  or
HOVRS  Registrable  Securities  which are not  permitted by the  Securities  and
Exchange Commission to be included in a registration statement due to Securities
and Exchange Commission guidance relating to Rule 415.

      1.5.  Priority on Demand  Registrations.  The Company shall not include in
any Demand  Registration any securities which are not Registrable  Securities or
HOVRS  Registrable  Securities  without the prior receipt of Majority  Clearlake
Investor Approval.  If a Demand Registration is an underwritten offering and the
managing  underwriter(s)  advises the Company  that in its opinion the number of
Registrable  Securities  and HOVRS  Registrable  Securities  and,  if  permitted
hereunder,  other securities,  requested to be included in such offering exceeds
the number of Registrable Securities and other securities,  if any, which can be
sold therein without adversely affecting the marketability of the offering, then
the Company  shall include in such  registration,  (a) prior to the inclusion of
any  securities  that  are  not  Registrable  Securities  or  HOVRS  Registrable
Securities,   the  number  of  Registrable   Securities  and  HOVRS  Registrable
Securities  requested to be included in such  offering  that,  in the opinion of
such  managing  underwriter,   can  be  sold  without  adversely  affecting  the
marketability of the offering, pro rata (based on the number of shares requested
to be registered)  among the respective  holders  thereof,  provided that if the
number of  securities  that are  Registrable  Securities  and HOVRS  Registrable
Securities that are included in such offering are less than 75% of the number of
securities  that are  Registrable  Securities and HOVRS  Registrable  Securities
requested to be included in such  offering,  such  offering  shall not count for
purposes of  calculating  the number of Long-Form  Registrations  initiated by a
Majority  Clearlake  Investor,  and  (b)  only  then  securities  that  are  not
Registrable  Securities  or  HOVRS  Registrable  Securities,   if  the  managing
underwriter(s) has advised that such securities may be included.

      1.6.  Restrictions  on  Demand  Registrations.  The  Company  will  not be
obligated to effect any Demand  Registration within 90 days after the closing of
a  Public  Offering  (other  than on Form S-4 or Form  S-8 or any  successor  or
similar form, but including the closing of an underwritten distribution pursuant
to a Shelf Registration), except that if such Public Offering is an underwritten
offering and the managing  underwriter of such Public Offering determines that a
longer period,  not to exceed 180 days, is reasonably  necessary in its opinion,
then such  restricted  period shall  continue for the period  designated  by the
managing underwriter, provided that such period shall not extend beyond 180 days
after the closing of such Public Offering. The Company may postpone for up to 45
days  (from  the date of the  request)  the  filing  or the  effectiveness  of a
registration  statement for a Demand  Registration if and so long as the Company
determines that such Demand Registration would reasonably be expected to have an
adverse effect on any

                                       3


proposal  or plan by the  Company  or any of the  Subsidiaries  to engage in any
acquisition  or  disposition  of assets  (other than in the  ordinary  course of
business) or any merger,  consolidation,  tender offer, registration or issuance
of  securities,  financing or other  material  transaction.  The Company may not
postpone  a Demand  Registration  more  than two (2)  times in any  twelve-month
period.

      1.7.  Selection  of  Underwriters.  The  Clearlake  Investor(s)  selling a
majority of the Registrable  Securities to be sold by all Clearlake Investors in
a  Demand  Registration  will  have the  right  to  select  the  underwriter  or
underwriters  to administer  the offering,  provided that such selection will be
subject to the approval of the board of directors of the Company (the  "Board"),
which approval will not be unreasonably withheld.

      1.8. Other  Registration  Rights. The Company represents and warrants that
it is not a party to, or  otherwise  subject  to, any other  agreement  granting
registration rights to any other Person with respect to any equity securities of
the  Company,  other  than  this  Agreement  and the HOVRS  Registration  Rights
Agreement.  Except as provided in this Agreement, the Company shall not grant to
any Person the right to request the Company to register any equity securities of
the Company,  or any securities  convertible or exchangeable into or exercisable
for such securities,  without Majority Clearlake Investor Approval approving the
grant of  registration  rights for such  securities;  provided that without such
approval,  subject  to  Section  6, (a) the  Company  may grant  rights to other
Persons to participate in Demand  Registrations  and Piggyback  Registrations so
long as such rights are  subordinate to the rights of the holders of Registrable
Securities   with   respect  to  such   Demand   Registrations   and   Piggyback
Registrations;  (b) the  Company  may grant  rights to other  Persons to request
registrations  so long as the holders of Registrable  Securities are entitled to
participate in any such registrations with such Persons pro rata on the basis of
the number of Common  Stock owned by each such  holder;  and (c) the Company may
enter into the HOVRS Registration Rights Agreement.

2. PIGGYBACK REGISTRATIONS.

      2.1. Right to Piggyback.  Whenever the Company proposes to register any of
its equity  securities  under the  Securities  Act (other than (a) pursuant to a
Demand Registration, (b) in connection with registration on Form S-4 or Form S-8
or any successor or similar form or (c) in connection  with the  registration of
shares  on Form  S-3 with  respect  to a  dividend  reinvestment  plan)  and the
registration  form to be used may be used for the  registration  of  Registrable
Securities (a "Piggyback  Registration"),  the Company will give prompt  written
notice to all holders of Registrable  Securities of its intention to effect such
a registration  and, subject to Sections 2.3 and 2.4 below, will include in such
registration  all  Registrable  Securities with respect to which the Company has
received  written  requests  for  inclusion  therein  within  15 days  after the
delivery of the  Company's  notice.  Each such Company  notice shall specify the
approximate  number  of  Company  equity  securities  to be  registered  and the
anticipated per share price range for such offering.

      2.2. Piggyback Expenses. The Company will pay all Registration Expenses in
connection   with  all  Piggyback   Registrations,   whether  or  not  any  such
registration becomes effective.

                                       4


      2.3. Priority on Primary Registrations.  If a Piggyback Registration is an
underwritten  primary  registration  on behalf of the Company  and the  managing
underwriter(s)  advises the Company that in its opinion the number of securities
requested  to be included in such  registration  exceeds the number which can be
sold in such offering  without  adversely  affecting the  marketability  of such
offering,  the  Company  will  include  in such  registration:  (a)  first,  the
securities the Company proposes to sell, (b) second, the Registrable  Securities
and HOVRS Registrable  Securities requested to be included in such registration,
pro rata (based on the number of shares  requested to be  registered)  among the
holders of such Registrable Securities and HOVRS Registrable Securities, and (c)
third,  but only if all of the  Registrable  Securities  and  HOVRS  Registrable
Securities  requested to be included in such  registration  are included in such
registration,  the  other  securities  requested  to be  included  in  the  such
registration in the manner determined by the Company and such shareholders.

      2.4. Priority on Secondary Registrations.

      (a) If a Piggyback  Registration is an underwritten secondary registration
on  behalf  of  holders  of  HOVRS  Registrable  Securities,  and  the  managing
underwriter(s)  advises the Company that in its opinion the number of securities
requested  to be included in such  registration  exceeds the number which can be
sold in such  offering  without  adversely  affecting the  marketability  of the
offering,  the  Company  will  include  in such  registration:  (a)  first,  the
Registrable Securities and HOVRS Registrable Securities requested to be included
therein by the holders  requesting  registration,  pro rata among the holders of
such  Registrable  Securities  and HOVRS  Registrable  Securities  (based on the
number of shares requested to be registered), (b) second, but only if all of the
Registrable Securities and HOVRS Registrable Securities requested to be included
in such registration are included in such registration,  securities requested by
the  Company to be  included  in such  registration  to the extent the  managing
underwriter(s) advises the Company that such inclusion will not adversely affect
the  marketability  of the  offering,  and  (c)  third,  but  only if all of the
Registrable Securities and HOVRS Registrable Securities requested to be included
in such registration and all securities  requested by the Company to be included
in such  registration  are  included  in  such  registration,  other  securities
requested  to be  included in such  registration,  pro rata among the holders of
such other  securities  permitted  to have  their  securities  included  in such
registration on the basis of the number of shares owned by each such holder,  to
the extent the managing  underwriter(s)  advises the Company that such inclusion
will not adversely affect the marketability of the offering.

      (b) If a Piggyback  Registration is an underwritten secondary registration
on  behalf  of  holders  of  Company  securities  (other  than  the  holders  of
Registrable Securities or the holders of HOVRS Registrable Securities),  and the
managing  underwriter(s)  advises the Company  that in its opinion the number of
securities  requested  to be  included in such  registration  exceeds the number
which can be sold in such offering without adversely affecting the marketability
of the offering,  the Company will include in such registration:  (a) first, the
securities   requested  to  be  included  therein  by  the  holders   requesting
registration,  (b) second, but only if all of the securities described in clause
(a) are included in such registration, securities requested by the Company to be
included in such registration, to the extent the managing underwriter(s) advises
the Company that such inclusion will not adversely  affect the  marketability of
the  offering,  and (c) third,  but only if all of the  securities  described in
clauses (a) and (b) are included in such registration,  Registrable  Securities,
HOVRS  Registrable  Securities and other securities  requested to be

                                       5


included in such  registration,  pro rata among the holders of such  Registrable
Securities,  the holders of such HOVRS Registrable Securities and the holders of
such other  securities  permitted  to have  their  securities  included  in such
registration on the basis of the number of shares owned by each such holder,  to
the extent the managing  underwriter(s)  advises the Company that such inclusion
will not adversely affect the marketability of the offering.

3. REGISTRATION GENERALLY.

      3.1.  Registration   Procedures.   Whenever  the  holders  of  Registrable
Securities have requested that any Registrable Securities be registered pursuant
to this  Agreement,  the  Company  will  use its  best  efforts  to  effect  the
registration and the sale of such Registrable  Securities in accordance with the
intended method of disposition  thereof and pursuant thereto the Company will as
expeditiously as reasonably practicable:

                  (a)  prepare  and  (within 60 days after the end of the period
            within which  requests for  inclusion  in such  registration  may be
            given  to  the  Company)  file  with  the  Securities  and  Exchange
            Commission a registration statement with respect to such Registrable
            Securities  and thereafter use  commercially  reasonable  efforts to
            cause such registration statement to become effective (provided that
            before  filing  a  registration   statement  or  prospectus  or  any
            amendments  or  supplements  thereto,  the Company  will  furnish to
            counsel  selected by the Clearlake  Investors owning the Registrable
            Securities to be included in any Demand  Registration  copies of all
            such documents proposed to be filed, which documents will be subject
            to review by such counsel);

                  (b)  prepare  and  file  with  the   Securities  and  Exchange
            Commission  such  amendments and  supplements  to such  registration
            statement and the prospectus used in connection  therewith as may be
            necessary (i) to keep such  registration  statement  effective for a
            period (A) of not less than 180 days (subject to extension  pursuant
            to Section 3.3(b)) or, if such registration  statement relates to an
            underwritten  offering,  such  longer  period as in the  opinion  of
            counsel for the  underwriters  a prospectus is required by law to be
            delivered in connection  with sales of Registrable  Securities by an
            underwriter or dealer,  or (B) in the case of a Shelf  Registration,
            ending  on the  earliest  of (I) the date on which  all  Registrable
            Securities have been sold pursuant to the Shelf Registration or have
            otherwise  ceased  to be  Registrable  Securities,  (II) the  second
            anniversary of the effective date of such Shelf Registration,  (III)
            such other date determined by the Majority  Clearlake  Investors and
            (IV) when all such Registrable  Securities are freely saleable under
            Rule 144(k)  under the  Securities  Act, and (ii) to comply with the
            provisions of the Securities Act with respect to the  disposition of
            all securities  covered by such  registration  statement  until such
            time as all of such  securities  have been disposed of in accordance
            with the intended  methods of  disposition  by the seller or sellers
            thereof set forth in such registration statement;

                  (c) cause (i) any issuer  free  writing  prospectus  to comply
            with the information and legending  requirements under paragraph (c)
            of  Rule  433  and to be  accompanied  or  preceded  by a  statutory
            prospectus to the extent  required under

                                       6


            Rule 433, and (ii) any free writing prospectus or issuer information
            contained in a free writing  prospectus  required to be filed by the
            Company with the Securities and Exchange  Commission under paragraph
            (d)  under  Rule  433  to  be  so  filed  in  accordance  with  such
            requirements;

                  (d)  furnish to each  seller of  Registrable  Securities  such
            number of copies of such registration statement,  each amendment and
            supplement  thereto,  in each case,  to the extent not  available on
            EDGAR,  the  prospectus  included  in  such  registration  statement
            (including   each   preliminary   prospectus),   each  free  writing
            prospectus used in connection with such registration, and such other
            documents  as  such  seller  may  reasonably  request  in  order  to
            facilitate the  disposition of the Registrable  Securities  owned by
            such  seller,  but in all  cases  only  if  such  documents  are not
            available on EDGAR;

                  (e)  use  its  best   efforts  to  register  or  qualify  such
            Registrable  Securities under such other securities or blue sky laws
            of such States as any seller reasonably  requests and do any and all
            other acts and things which may be reasonably necessary or advisable
            to  enable  such  seller  to  consummate  the  disposition  in  such
            jurisdictions  of the  Registrable  Securities  owned by such seller
            (provided  that the  Company  will not be  required  to (i)  qualify
            generally  to do  business  in any  jurisdiction  where it would not
            otherwise  be  required  to qualify  but for this  subsection,  (ii)
            subject  itself to taxation in respect of doing business in any such
            jurisdiction  or (iii) consent to general  service of process in any
            such jurisdiction);

                  (f)   promptly   notify  each   seller  of  such   Registrable
            Securities,  at any  time  when a  prospectus  relating  thereto  is
            required to be delivered  under the  Securities  Act, upon discovery
            that,  or upon the  discovery  of the  happening  of any  event as a
            result  of  which,  the  prospectus  included  in such  registration
            statement  contains an untrue  statement of a material fact or omits
            any fact necessary to make the statements  therein not misleading in
            the light of the  circumstances  under which they were made, and, at
            the request of any such seller, the Company will prepare and furnish
            to such  seller a  reasonable  number of copies of a  supplement  or
            amendment to such prospectus so that, as thereafter delivered to the
            prospective   purchasers  of  such  Registrable   Securities,   such
            prospectus  will not contain an untrue  statement of a material fact
            or omit to state any fact necessary to make the  statements  therein
            not  misleading in the light of the  circumstances  under which they
            were made;

                  (g) use best efforts to cause all such Registrable  Securities
            to be listed on each  securities  exchange or market system on which
            similar securities issued by the Company are then listed and, if not
            so listed, to be listed on the NASD automated  quotation system and,
            if listed on the NASD automated  quotation system,  use commercially
            reasonable  efforts to secure  designation  of all such  Registrable
            Securities  covered  by  such  registration   statement  as  a  "NMS
            Security" within the meaning of Rule 600(b)(46) of Regulation NMS of
            the

                                       7


            Securities  and Exchange  Commission  or,  failing  that,  to secure
            NASDAQ authorization for such Registrable Securities;

                  (h)  provide  a  transfer  agent  and  registrar  for all such
            Registrable  Securities  not later than the  effective  date of such
            registration statement;

                  (i)  enter   into   such   customary   agreements   (including
            underwriting  agreements in customary  form) and take all such other
            actions  as  the  Clearlake  Investors  owning  a  majority  of  the
            Registrable  Securities  to be included in the  registration  or the
            underwriters,  if any,  reasonably  request in order to  expedite or
            facilitate the  disposition of such  Registrable  Securities  (which
            might include effecting a share split or a combination of shares);

                  (j) make available for inspection by any seller of Registrable
            Securities,   any  underwriter   participating  in  any  disposition
            pursuant to such registration statement and any attorney, accountant
            or other  agent  retained  by any such  seller or  underwriter,  all
            financial  and other  records,  pertinent  corporate  documents  and
            properties  of  the  Company,  and  cause  the  Company's  officers,
            directors,  employees  and  independent  accountants  to supply  all
            information  reasonably  requested by any such seller,  underwriter,
            attorney,  accountant or agent in connection with such  registration
            statement,  and to cooperate and participate as reasonably requested
            by any such seller in road show presentations, in the preparation of
            the registration  statement,  each amendment and supplement thereto,
            the prospectus included therein, and other activities as such seller
            may reasonably request in order to facilitate the disposition of the
            Registrable Securities owned by such seller;

                  (k) otherwise use  commercially  reasonable  efforts to comply
            with all  applicable  rules and  regulations  of the  Securities and
            Exchange Commission,  and make available to its security holders, as
            soon as reasonably  practicable,  but not later than 18 months after
            the  effective  date  of the  registration  statement,  an  earnings
            statement  covering the period of at least twelve  months  beginning
            with the first day of the  Company's  first  full  calendar  quarter
            after  the  effective  date  of the  registration  statement,  which
            earnings  statement shall satisfy the provisions of Section 11(a) of
            the Securities Act and Rule 158 thereunder;

                  (l) in the event of the issuance of any stop order  suspending
            the  effectiveness  of a  registration  statement,  or of any  order
            suspending  or  preventing  the  use of any  related  prospectus  or
            suspending  the  qualification  of any  Securities  included in such
            registration  statement  for sale in any  jurisdiction,  the Company
            will use  commercially  reasonable  efforts  promptly  to obtain the
            withdrawal of such order;

                  (m) obtain one or more comfort  letters,  dated the  effective
            date of  such  registration  statement  (and,  if such  registration
            includes  an  underwritten  public  offering,  dated the date of the
            closing under the underwriting  agreement),  signed by the Company's
            independent  registered  public  accounting firm in the

                                       8


            then-current  customary  form and covering  such matters of the type
            customarily  covered  from time to time by  comfort  letters  as the
            holders  of a  majority  of the  Registrable  Securities  being sold
            reasonably request;

                  (n) provide a legal opinion of the Company's  outside counsel,
            dated the effective  date of such  registration  statement  (and, if
            such registration  includes an underwritten  public offering,  dated
            the date of the  closing  under the  underwriting  agreement),  with
            respect to the registration statement, each amendment and supplement
            thereto,  the prospectus included therein (including the preliminary
            prospectus)  and  such  other  documents  relating  thereto  in  the
            then-current  customary  form and covering  such matters of the type
            customarily  covered  from  time to time by legal  opinions  of such
            nature (in a form reasonably acceptable to the holders of a majority
            of the Registrable Securities included in the registration);

                  (o)  cooperate  with the  sellers  of  Registrable  Securities
            covered by the registration  statement and the managing  underwriter
            or agent, if any, to facilitate the timely  preparation and delivery
            of certificates (not bearing any restrictive  legends)  representing
            securities to be sold under the registration  statement,  and enable
            such securities to be in such  denominations  and registered in such
            names as the managing  underwriter or agent, if any, or such holders
            may request;

                  (p) notify counsel for the sellers of  Registrable  Securities
            included in such registration statement and the managing underwriter
            or agent,  immediately,  and  confirm the notice in writing (i) when
            the registration statement,  or any post-effective  amendment to the
            registration   statement,   shall  have  become  effective,  or  any
            supplement to the prospectus or any amendment  prospectus shall have
            been filed,  (ii) of the receipt of any comments from the Securities
            and Exchange Commission,  (iii) of any request of the Securities and
            Exchange Commission to amend the registration  statement or amend or
            supplement the prospectus or for additional information, and (iv) of
            the issuance by the Securities  and Exchange  Commission of any stop
            order suspending the effectiveness of the registration  statement or
            of any order  preventing  or suspending  the use of any  preliminary
            prospectus,  or of  the  suspension  of  the  qualification  of  the
            registration statement for offering or sale in any jurisdiction,  or
            of the institution or threatening of any proceedings for any of such
            purposes;

                  (q) use its  reasonable  effort to prevent the issuance of any
            stop  order   suspending  the   effectiveness  of  the  registration
            statement or of any order  preventing or  suspending  the use of any
            preliminary  prospectus and, if any such order is issued,  to obtain
            the withdrawal of any such order at the earliest possible moment;

                  (r) if requested by the managing  underwriter  or agent or any
            holder  of  Registrable   Securities  covered  by  the  registration
            statement,  promptly  incorporate  in  a  prospectus  supplement  or
            post-effective   amendment   such

                                       9


            information  as the  managing  underwriter  or agent or such  holder
            reasonably  requests  to be  included  therein,  including,  without
            limitation,  with  respect to the number of  Registrable  Securities
            being sold by such holder to such underwriter or agent, the purchase
            price  being paid  therefor  by such  underwriter  or agent and with
            respect  to any  other  terms of the  underwritten  offering  of the
            Registrable  Securities  to be sold in such  offering;  and make all
            required  filings of such  prospectus  supplement or  post-effective
            amendment as soon as practicable after being notified of the matters
            incorporated  in  such  prospectus   supplement  or   post-effective
            amendment;

                  (s) cooperate with each seller of  Registrable  Securities and
            each  underwriter or agent  participating in the disposition of such
            Registrable  Securities and their  respective  counsel in connection
            with any filings  required to be made with the National  Association
            of Securities Dealers, Inc.; and

                  (t) cause its  appropriate  officers to attend and participate
            in presentations to and meetings with prospective  purchasers of the
            Registrable Securities,  or a "roadshow", as reasonably requested by
            the underwriters, if any.

The Company may require each seller of  Registrable  Securities  as to which any
registration is being effected to furnish the Company such information  relating
to the sale or  registration  of such  Securities  regarding such seller and the
distribution  of such securities as the Company may from time to time reasonably
request in writing,  prior to including such seller's Registrable  Securities in
such registration.

3.2.  Registration Expenses.

                  (a) All expenses  incident to the Company's  performance of or
            compliance with this Agreement,  including,  without limitation, all
            registration,  qualification  and filing fees,  fees and expenses of
            compliance  with  securities  or blue sky laws,  printing  expenses,
            messenger  and  delivery  expenses,  and fees and  disbursements  of
            counsel  for  the  Company  and  all  independent  certified  public
            accountants,  underwriters (excluding discounts and commissions) and
            other  Persons  retained by the  Company  (all such  expenses  being
            herein called "Registration Expenses"),  will be paid by the Company
            in  respect  of  each  Demand   Registration   and  each   Piggyback
            Registration, whether or not it has become effective, including that
            the  Company  will pay its  internal  expenses  (including,  without
            limitation,  all salaries and expenses of its officers and employees
            performing legal or accounting duties), the expense of any liability
            insurance and the expenses and fees for listing the securities to be
            registered on each securities  exchange on which similar  securities
            issued  by the  Company  are then  listed  or on the NASD  automated
            quotation system or any other quotation system.

                  (b) In  connection  with  each  Demand  Registration  and each
            Piggyback Registration,  whether or not it has become effective, the
            Company  will  pay,  and  reimburse   the  holders  of   Registrable
            Securities  covered by such

                                       10


            registration   for  the   payment  of,  the   reasonable   fees  and
            disbursements  of one counsel chosen by the holders of a majority of
            the  Registrable  Securities  included  in such  registration,  such
            amount  not to  exceed  $25,000  for  each  registration,  and  such
            expenses shall be considered Registration Expenses hereunder.

3.3.  Participation in Underwritten Offerings.

                  (a) No Person may  participate in any  registration  hereunder
            which is  underwritten  unless  such  Person (i) agrees to sell such
            Person's  securities  on the  basis  provided  in  any  underwriting
            arrangements approved by the Person or Persons entitled hereunder to
            approve such arrangements (including,  without limitation,  pursuant
            to the terms of any  over-allotment or "green shoe" option requested
            by  the  managing   underwriter(s),   provided  that  no  holder  of
            Registrable Securities will be required to sell more than the number
            of Registrable Securities that such holder has requested the Company
            to include in any  registration) and (ii) completes and executes all
            questionnaires,   powers  of  attorney,  indemnities,   underwriting
            agreements and other documents  reasonably  required under the terms
            of such underwriting arrangements.

                  (b) Each  Person  that is  participating  in any  registration
            hereunder  agrees that,  upon receipt of any notice from the Company
            of the  happening  of any  event of the kind  described  in  Section
            3.1(f) above, such Person will forthwith discontinue the disposition
            of its Registrable Securities pursuant to the registration statement
            until  such  Person's  receipt of the  copies of a  supplemented  or
            amended  prospectus as contemplated  by such Section 3.1(f).  In the
            event the Company shall give any such notice,  the  applicable  time
            period  mentioned  in Section  3.1(b)  during  which a  Registration
            Statement is to remain  effective shall be extended by the number of
            days during the period from and  including the date of the giving of
            such notice  pursuant to this  paragraph to and  including  the date
            when  each  seller  of  a  Registrable   Security  covered  by  such
            registration  statement  shall  have  received  the  copies  of  the
            supplemented or amended prospectus contemplated by Section 3.1(f).

      3.4. Holdback Agreements.

            3.4.1.  Securityholder Holdback. To the extent not inconsistent with
      applicable  law, each holder of  Registrable  Securities  shall not offer,
      sell,  contract to sell,  pledge,  grant any option to purchase,  make any
      short sale or  otherwise  dispose of any Common  Stock,  or any options or
      warrants to purchase any Common Stock, or any securities convertible into,
      exchangeable  for or that  represent  the right to receive  Common  Stock,
      whether now owned or  hereinafter  acquired,  owned directly by the holder
      (including holding as a custodian) or with respect to which the holder has
      beneficial  ownership  within the rules and  regulations of the Securities
      and Exchange Commission, during (a) with respect to any other underwritten
      Demand  Registration or any underwritten  Piggyback  Registration in which
      Registrable  Securities  are  included,  the seven  days  prior to and the
      90-day  period (or such longer period not to exceed 180 days if reasonably
      necessary in the opinion of such  underwriter)  beginning on the effective
      date of such

                                       11


      registration,  and (b) upon notice from the Company of the commencement of
      an underwritten  distribution  in connection with any Shelf  Registration,
      the seven days prior to and the 90-day  period (or such longer  period not
      to  exceed  180  days  if  reasonably  necessary  in the  opinion  of such
      underwriter)  beginning on the date of commencement of such  distribution,
      in each case except as part of such underwritten registration, and in each
      case unless the  underwriters  managing  the  registered  public  offering
      otherwise  agree  (in each  case,  such  period,  the  "Lock-Up  Period");
      provided,  however,  if (i) during the period that begins on the date that
      is 15 calendar  days plus three  Business  Days before the last day of the
      Lock-Up Period and ends on the last day of the Lock-Up Period, the Company
      issues an earnings  release or material news or a material  event relating
      to the  Company  occurs,  or (ii) prior to the  expiration  of the Lock-Up
      Period, the Company announces that it will release earnings results during
      the 16 day period  beginning  on the last day of the Lock-Up  Period,  the
      restrictions  imposed shall  continue to apply until the expiration of the
      date that is 15 calendar  days plus three  Business Days after the date on
      which  the  issuance  of the  earnings  release  or the  material  news or
      material  event occurs.  Any waiver by the  underwriters  of the foregoing
      restrictions  on transfers by the holders  shall be granted to all holders
      on equal terms.

            3.4.2. Company Holdback. The Company shall not offer, sell, contract
      to sell or  otherwise  dispose of any  securities  of the Company that are
      substantially  similar to the Common  Stock,  including but not limited to
      any securities  that are  convertible  into or  exchangeable  for, or that
      represent  the right to receive,  Common  Stock or any such  substantially
      similar  securities,  during (a) with  respect  to any other  underwritten
      Demand  Registration or any underwritten  Piggyback  Registration in which
      Registrable  Securities  are  included,  the seven  days  prior to and the
      90-day period  beginning on the effective date of such  registration,  and
      (b) upon notice from any holder(s) of Registrable  Securities subject to a
      Shelf  Registration  that such holder(s)  intend to effect an underwritten
      distribution of Registrable Securities pursuant to such Shelf Registration
      (upon receipt of which, the Company will promptly notify all other holders
      of  Registrable  Securities  of the  date  of  the  commencement  of  such
      distribution),  the seven days prior to and the 90-day period beginning on
      the date of the commencement of such distribution,  in each case except as
      part of such  underwritten  registration or pursuant to  registrations  on
      Form S-4 or Form S-8,  and in each case unless the  underwriters  managing
      the registered public offering otherwise agree.

      3.5. Current Public Information.  At all times after the Company has filed
a registration statement with the Securities and Exchange Commission pursuant to
the  requirements  of either the Securities Act or the Securities  Exchange Act,
the  Company  will use its  commercially  reasonable  efforts to timely file all
reports  required to be filed by it under the  Securities Act and the Securities
Exchange  Act and the  rules  and  regulations  adopted  by the  Securities  and
Exchange Commission thereunder,  and will take such further action as any holder
or holders of Registrable  Securities may reasonably request,  all to the extent
required to enable such holders to sell Registrable  Securities pursuant to Rule
144 adopted by the Securities and Exchange  Commission  under the Securities Act
(as  such  rule  may be  amended  from  time to  time)  or any  similar  rule or
regulation hereafter adopted by the Securities and Exchange Commission.

                                       12


4. REGISTRATION INDEMNIFICATION.

      4.1.  Indemnification by the Company.  The Company agrees to indemnify and
hold  harmless,  to  the  fullest  extent  permitted  by  law,  each  holder  of
Registrable Securities and, as applicable,  its officers,  directors,  trustees,
employees,  shareholders,  holders of beneficial interests, members, and general
and limited partners (collectively, such holder's "Indemnitees") and each Person
who controls such holder (within the meaning of the Securities  Act) against any
and all losses, claims,  damages,  liabilities,  joint or several, to which such
holder or any such  Indemnitee  may become  subject  under the  Securities  Act,
equivalent foreign securities laws or otherwise, insofar as such losses, claims,
damages  or  liabilities  (or  actions  or  proceedings,  whether  commenced  or
threatened, in respect thereof) arise out of or are based upon (a) any untrue or
alleged  untrue  statement  of  material  fact  contained  in  any  registration
statement, prospectus,  preliminary prospectus or free writing prospectus or any
amendment   thereof  or   supplement   thereto,   together  with  any  documents
incorporated  therein by reference or, (b) any omission or alleged omission of a
material fact required to be stated  therein or necessary to make the statements
therein not  misleading,  and the Company will reimburse such holder and each of
its Indemnitees for any legal or any other expenses,  including any amounts paid
in any settlement  effected with the consent of the Company,  which consent will
not be  unreasonably  withheld or delayed,  incurred by them in connection  with
investigating  or  defending  any  such  loss,  claim,   liability,   action  or
proceeding;  provided, however, that the Company shall not be liable in any such
case to the extent that any such loss,  claim,  damage,  liability (or action or
proceeding  in respect  thereof)  or  expense  arises out of or is based upon an
untrue statement or alleged untrue  statement,  or omission or alleged omission,
made in such registration statement, any such prospectus, preliminary prospectus
or free writing  prospectus or any amendment or  supplement  thereto,  or in any
application,  in reliance  upon,  and in conformity  with,  written  information
prepared and furnished to the Company by such holder  expressly for use therein.
In connection  with an  underwritten  offering,  the Company will indemnify such
underwriters,  their  officers and  directors  and each Person who controls such
underwriters  (within the meaning of the  Securities  Act) to the same extent as
provided above with respect to the indemnification of the holders of Registrable
Securities.

      4.2.  Indemnification by Holders of Registrable Securities.  In connection
with any registration  statement in which a holder of Registrable  Securities is
participating,  each such  holder will  furnish to the  Company in writing  such
information  and  affidavits  as the  Company  reasonably  requests  for  use in
connection  with any such  registration  statement,  prospectus  or free writing
prospectus,  and,  to the  extent  permitted  by law,  will  indemnify  and hold
harmless the Company and its Indemnitees against any losses,  claims, damages or
liabilities,  joint or several,  to which the Company or any such Indemnitee may
become subject under the Securities Act,  equivalent  foreign securities laws or
otherwise, insofar as such losses, claims, damages or liabilities (or actions or
proceedings,  whether commenced or threatened,  in respect thereof) arise out of
or are based upon (a) any untrue or alleged  untrue  statement of material  fact
contained in the registration statement,  prospectus,  preliminary prospectus or
free writing prospectus or any amendment thereof or supplement thereto or in any
application,  together with any documents  incorporated  therein by reference or
(b) any omission or alleged  omission of a material  fact  required to be stated
therein or necessary to make the statements therein not misleading,  but only to
the extent that such untrue statement (or alleged untrue  statement) or omission
(or  alleged  omission)  is  made  in  such  registration  statement,  any  such
prospectus,  preliminary  prospectus or

                                       13


free writing  prospectus  or any  amendment  or  supplement  thereto,  or in any
application,  in  reliance  upon  and in  conformity  with  written  information
prepared and furnished to the Company by such holder  expressly for use therein,
and such holder will  reimburse  the  Company and each such  Indemnitee  for any
legal  or any  other  expenses  including  any  amounts  paid in any  settlement
effected with the consent of such holder, which consent will not be unreasonably
withheld  or delayed,  incurred  by them in  connection  with  investigating  or
defending  any such loss,  claim,  liability,  action or  proceeding;  provided,
however,  that the obligation to indemnify will be individual (and not joint and
several)  to each  holder  and will be  limited  to the net  amount of  proceeds
received by such holder from the sale of Registrable Securities pursuant to such
registration statement, less any other amounts paid by such holder in respect of
such untrue statement, alleged untrue statement, omission or alleged omission.

      4.3. Procedure. Any Person entitled to indemnification  hereunder will (a)
give prompt written notice to the  indemnifying  party of any claim with respect
to which it seeks  indemnification  (provided,  however, that the failure of any
indemnified  party to give such notice shall not relieve the indemnifying  party
of its obligations  hereunder,  except to the extent that the indemnifying party
is actually  prejudiced by such failure to give such notice),  and (b) unless in
such indemnified party's reasonable judgment a conflict of interest between such
indemnified  and  indemnifying  parties  may exist with  respect to such  claim,
permit such indemnifying  party to assume the defense of such claim with counsel
reasonably  satisfactory to the  indemnified  party. If such defense is assumed,
the  indemnifying  party will not be subject to any liability for any settlement
made by the indemnified  party without its consent (but such consent will not be
unreasonably  withheld). An indemnifying party who is not entitled to, or elects
not to,  assume the defense of a claim will not be obligated to pay the fees and
expenses  of  more  than  one  counsel  for  all  parties  indemnified  by  such
indemnifying party with respect to such claim, unless in the reasonable judgment
of any  indemnified  party  a  conflict  of  interest  may  exist  between  such
indemnified party and any other of such indemnified parties with respect to such
claim.

      4.4.  Entry of Judgment;  Settlement.  The  indemnifying  party shall not,
except with the  approval  of each  indemnified  party,  consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to each  indemnified  party
of a release from all liability in respect to such claim or  litigation  without
any payment or consideration provided by such indemnified party.

      4.5. Contribution.  If the indemnification  provided for in this Section 4
is,  other  than  expressly  pursuant  to  its  terms,   unavailable  to  or  is
insufficient to hold harmless an indemnified party under the provisions above in
respect of any losses,  claims, damages or liabilities referred to therein, then
each  indemnifying  party shall contribute to the amount paid or payable by such
indemnified party as a result of such losses, claims, damages or liabilities (a)
in such proportion as is appropriate to reflect the relative  benefits  received
by the Company on the one hand and the sellers of Registrable Securities and any
other sellers participating in the registration statement on the other hand from
the sale of  Registrable  Securities  pursuant  to the  registered  offering  of
securities as to which indemnity is sought or (b) if the allocation  provided by
clause (a) above is not  permitted by applicable  law, in such  proportion as is
appropriate to reflect the relative benefits referred to in clause (a) above but
also the  relative  fault of the  Company on the one hand and of the  sellers of
Registrable  Securities and any other sellers  participating in the registration
statement on the other hand in connection  with the statement or omissions which
resulted in such

                                       14


losses, claims, damages or liabilities,  as well as any other relevant equitable
considerations.  The relative  benefits  received by the Company on the one hand
and the sellers of Registrable Securities and any other sellers participating in
the  registration  statement on the other hand shall be deemed to be in the same
proportion  as the  total  net  proceeds  from the  offering  (before  deducting
expenses)  to the  Company  bear to the total  net  proceeds  from the  offering
(before  deducting  expenses) to the sellers of  Registrable  Securities and any
other sellers participating in the registration statement. The relative fault of
the Company on the one hand and of the sellers of Registrable Securities and any
other  sellers  participating  in the  registration  statement on the other hand
shall be determined  by reference to, among other things,  whether the untrue or
alleged omission to state a material fact relates to information supplied by the
Company  or  by  the  sellers  of   Registrable   Securities  or  other  sellers
participating  in the registration  statement and the parties'  relative intent,
knowledge,  access to  information  and  opportunity  to correct or prevent such
statement or omission. The obligation to provide contribution will be individual
(and not joint and several) to each holder and will be limited to the net amount
of proceeds  received by such  holder  from the sale of  Registrable  Securities
pursuant to such  registration  statement,  less any other  amounts paid by such
holder,  including  pursuant to Section  4.2  hereof,  in respect of such untrue
statement, alleged untrue statement, omission or alleged omission.

The Company and the sellers of Registrable Securities agree that it would not be
just and equitable if contribution pursuant to this Section 4 were determined by
pro rata allocation (even if the sellers of Registrable  Securities were treated
as one entity for such purpose) or by any other method of allocation  which does
not take account of the equitable  considerations referred to in the immediately
preceding  paragraph.  The amount paid or payable by an  indemnified  party as a
result  of the  losses,  claims,  damages  and  liabilities  referred  to in the
immediately  preceding  paragraph  shall be deemed to  include,  subject  to the
limitations set forth above, any legal or other expenses  reasonably incurred by
such  indemnified  party in connection with  investigating or defending any such
action or claim.  Notwithstanding the provisions of this Section 4, no seller of
Registrable  Securities  shall be required to contribute any amount in excess of
the net proceeds received by such Seller from the sale of Registrable Securities
covered by the  registration  statement  filed pursuant  hereto,  less any other
amounts paid by such holder in respect of such untrue statement,  alleged untrue
statement,  omission  or  alleged  omission.  No  person  guilty  of  fraudulent
misrepresentation  (within the meaning of Section 11(f) of the  Securities  Act)
shall be  entitled  to  contribution  from any person who was not guilty of such
fraudulent misrepresentation.

      4.6. Other Rights. The  indemnification and contribution by any such party
provided  for under this  Agreement  shall be in addition to any other rights to
indemnification or contribution which any indemnified party may have pursuant to
law or  contract  and will  remain in full  force and effect  regardless  of any
investigation  made or omitted by or on behalf of the  indemnified  party or any
officer,  director  or  controlling  Person of such  indemnified  party and will
survive the transfer of securities.

5. TRANSFER RESTRICTIONS

      5.1. General Transfer  Restrictions.  Each Investor understands and agrees
that  the  Shares  held by such  Investor  on the  date  hereof  have  not  been
registered  under the Securities Act or registered or qualified  under any state
law. No Investors shall Transfer Shares (or solicit any

                                       15


offers in respect of any Transfer of such Shares), except in compliance with the
Securities  Act,  any  applicable  state law or in  accordance  with  agreements
applicable to such Transfer.

      5.2.  Restrictions  on Transfer.  No Investor  shall  Transfer any of such
Investor's Shares to any other Person except as follows:

            5.2.1. Private Transfers. Any Clearlake Investor may Transfer any or
      all of such  Clearlake  Investor's  Shares  to such  Clearlake  Investor's
      Permitted  Transferees  and  such  transferee  shall  be  deemed  to  be a
      Clearlake  Investor  hereunder and shall  deliver a signature  page hereto
      agreeing  to be bound  hereby,  simultaneously  with the  Transfer of such
      Shares.  Any  transferring  Clearlake  Investor  under this Section  shall
      provide  prompt  written  notice  to the  Company  of any  such  Transfer,
      indicating  its  reliance on this  provision  and the identity and contact
      information of the Permitted Transferee.

            5.2.2. Public Transfers.

                  (a) Any Investor  may  Transfer any or all of such  Investor's
            Shares,  to the extent they  constitute  Common  Stock,  in a Public
            Offering  undertaken in accordance  with this Agreement  without the
            consent of the Company or the other Investors.

                  (b) Any Investor  may  Transfer any or all of such  Investor's
            Shares pursuant to Rule 144 of the Securities Act.

            5.2.3.  Pledge of Shares.  Any  Investor  may Transfer any or all of
      such  Investor's  Shares to a lender to such  Investor  pursuant to a bona
      fide pledge of all of such Investor's assets.

      5.3. Automatic Conversion Upon Certain Transfers.

            5.3.1.  Transfers by Holders of Series A Preferred  Stock other than
      Clearlake  Investors.  Unless the Company determines otherwise in writing,
      if,  at any  time,  a holder of Series A  Preferred  Stock  (other  than a
      Clearlake  Investor) desires to sell, transfer or otherwise dispose of any
      of the  shares  of Series A  Preferred  Stock  held by such  holder to any
      Person other than an Affiliate of such holder of Series A Preferred  Stock
      or to a Clearlake Investor,  then such holder agrees to convert,  prior to
      such sale, transfer or disposition, all shares of Series A Preferred Stock
      that are held by such  holder.  If such holder fails to so convert all its
      shares of Series A Preferred Stock, the sale, transfer,  or disposition of
      such  shares  shall  be  prohibited  unless  the  Company  has  determined
      otherwise in writing.

            5.3.2.  Transfers  by  Clearlake  Investors.  Unless the Company and
      HOVRS  Parties  holding  a  majority  of  Common  Stock  then held by them
      determine  otherwise,  if, at any time,  a Clearlake  Investor  desires to
      sell,  transfer  or  otherwise  dispose  of any of the  shares of Series A
      Preferred  Stock held by such Clearlake  Investor to any person other than
      an Affiliate of such  Clearlake  Investor,  then such  Clearlake  Investor
      agrees to convert and each other Investor holding Series A Preferred Stock
      agrees to convert each

                                       16


      share of Series A Preferred Stock then  outstanding held by all holders of
      Series A Preferred  Stock.  If any Clearlake  Investor fails to so convert
      all its  shares  of  Series A  Preferred  Stock,  the  sale,  transfer  or
      disposition  of such  shares  shall be  prohibited  unless the Company and
      HOVRS  Parties  holding a majority of Common  Stock then held by them have
      determined otherwise in writing.

            5.3.3.  No Additional  Action  Required.  Upon the occurrence of the
      events  specified  Sections  5.3.1 or 5.3.2 hereof,  (x) the  transferring
      Investor or Clearlake Investor shall provide written notice to the Company
      not less than 10 business days in advance of such proposed transfer,  sale
      or disposition of Series A Preferred Stock, (y) the Company shall promptly
      notify (the  "Conversion  Notice") each holder of Series A Preferred Stock
      who is shown to be such a holder  on the  books of the  Company  as of the
      time  immediately  prior to such  conversion of the fact that they are now
      required  to convert  (if so  required),  and (z) all  holders of Series A
      Preferred Stock so converted shall surrender the certificates representing
      such shares at the office of the Company. Thereupon, there shall be issued
      and  delivered  to such holder  promptly at such office and in its name as
      shown on such surrendered  certificate or  certificates,  a certificate or
      certificates  representing the number of shares of Common Stock into which
      the shares of Series A Preferred Stock surrendered were convertible on the
      date on which such automatic conversion occurred.

      5.4.  Stop  Transfer  Instructions.  In order  to  enforce  the  foregoing
covenants, the Company may (a) impose stop-transfer instructions with respect to
the Shares of each  Investor  and (b) refuse to reflect such  transfer,  sale or
disposition of such Shares on the books of the Company.

6. PREEMPTIVE RIGHTS

      6.1. Offering.

                  (a) If the Company  issues or sells or authorizes the issuance
            or sale of any New  Securities  (as  defined in  Section  6.3 below)
            after the date  hereof,  the Company  shall offer to each  Clearlake
            Investor by written notice (a "Subscription Notice") a percentage of
            such New Securities pro rata based on the relative  number of Shares
            held by such Clearlake  Investor as compared to the number of Shares
            and then-exercisable  stock options and warrants outstanding held by
            all holders of the  Company's  Shares,  stock  options and warrants.
            Each such Clearlake  Investor shall be entitled to purchase such New
            Securities  at the most  favorable  price and on the most  favorable
            terms as such New Securities are to be sold or issued; provided that
            if a Person  participating  in such  purchase of New  Securities  is
            required in connection  therewith also to purchase other  securities
            of the Company,  the  Clearlake  Investors  exercising  their rights
            pursuant to this Section 6.1 shall also be required to purchase such
            other  securities  on  substantially  the same  economic  terms  and
            conditions  as those on which the offeree of the New  Securities  is
            required to purchase such other securities.  Each Clearlake Investor
            participating  in such  purchase  shall also be obligated to execute
            agreements in the form presented to such  Clearlake  Investor by the
            Company,  so long as such  agreements are  substantially  similar to
            those to be

                                       17


            executed by the  purchasers of New Securities  (without  taking into
            consideration  any rights which do not entitle such a purchaser to a
            higher  economic  return  on the New  Securities  than the  economic
            return to which  other  Clearlake  Investors  participating  in such
            transaction  will  be  entitled  with  respect  to New  Securities).
            Notwithstanding  anything  to the  contrary  contained  herein,  the
            Company shall not have any obligation to issue equity  securities or
            to offer to issue any equity  securities under this Section 6 to any
            Clearlake Investor who is not an "accredited  investor" as such term
            is defined in Regulation D of the Securities Act.

                  (b) Each  Subscription  Notice  delivered  by the Company to a
            Clearlake  Investor in respect of any  proposed  issuance or sale of
            New Securities  shall describe in reasonable  detail the type, class
            and number of New  Securities  being  offered,  the  purchase  price
            thereof,  the payment  terms  therefor  and the  percentage  thereof
            offered  to such  holder  pursuant  to this  Section  6. In order to
            exercise its purchase rights hereunder in respect of any issuance or
            sale  of  New  Securities  described  in a  Subscription  Notice,  a
            Clearlake  Investor  must deliver to the Company  during the fifteen
            (15) day  period  commencing  upon  such  holder's  receipt  of such
            Subscription   Notice  (the   "Subscription   Period"),   a  written
            commitment describing its election hereunder (an "Election Notice").
            If a Clearlake  Investor fails for any reason to deliver an Election
            Notice to the Company during the Subscription Period with respect to
            a  proposed  issuance  or sale  of New  Securities,  such  Clearlake
            Investor shall be deemed to have waived its rights  pursuant to this
            Section 6 in respect of such issuance or sale of New Securities.

      6.2.  Expiration  of  Subscription  Period.   Within  the  180-day  period
immediately  following the Subscription Period, the Company shall be entitled to
sell,  or enter  into  any  agreement  to sell,  any New  Securities  which  any
Clearlake Investor has not elected to purchase,  on terms and conditions no more
favorable  to the  offeree  of such New  Securities  than  those  offered to the
Clearlake  Investors pursuant to Section 6.1. Any New Securities offered or sold
by the Company  after such 180-day  period must be  reoffered to each  Clearlake
Investor pursuant to the terms of this Section 6.

      6.3. New  Securities.  For purposes  hereof,  "New  Securities"  means any
shares of the Company's Capital Stock, or any options, convertible securities or
other rights to acquire shares of the Company's  Capital  Stock,  other than (a)
the  issuance  and sale of  Series A  Preferred  Stock  in  connection  with the
Clearlake  Stock  Purchase  Agreements,  (b) Common Stock (or options to acquire
Common Stock) issued or issuable to any employee,  director or consultant of the
Company or any of its  subsidiaries  pursuant  to any equity  incentive  plan or
other  arrangement  approved by the Company's  Board,  (c) Common Stock or other
securities  issued  directly  or  indirectly  upon the  conversion,  exchange or
exercise of any securities previously subjected to this Section 6 or outstanding
on the date hereof,  (d) Common Stock or other  securities  issued in connection
with or in furtherance of the acquisition of or investment in another company or
business  (whether  through a purchase of securities,  a merger,  consolidation,
purchase of assets or otherwise), including, without limitation, Common Stock or
other  securities  issued  pursuant to the Merger  Agreement  (as defined in the
Acquisition  Stock  Purchase  Agreement),  (e) Common Stock or other  securities
issued  in  connection   with  or  in  furtherance  of  the  incurrence  of  any

                                       18


indebtedness for borrowed money or for equipment lease financings by the Company
or its subsidiaries,  (f) Common Stock or other securities issued or issuable in
a Public  Offering,  (g) Common Stock or other  securities  issued in connection
with  any  stock  split,  dividend,  combination,  recapitalization  or  similar
transaction,  (h) Common Stock issued or issuable  upon the exercise of warrants
or other  securities or rights to persons or entities with which the Company has
or is entering into a technology  or other  strategic  relationship  not for the
purpose of raising  money or  providing  financing,  (i) Common  Stock issued or
issuable  upon  conversion  of  Series  A  Preferred  Stock or as  dividends  or
distributions  on the Series A  Preferred  Stock and (j)  Common  Stock or other
securities  issued  directly  or  indirectly  upon the  conversion,  exchange or
exercise of any securities issued pursuant to any of the clauses of this Section
6.3.

7. INFORMATION RIGHTS.

      (a) The books and records of the Company shall be available for inspection
by the Clearlake  Investors at the principal office and place of business of the
Company.  The Clearlake Investors shall have the right to receive,  upon request
therefor,  (a) audited annual consolidated  financial  statements of the Company
promptly  following  such  statements  becoming  available to the  Company,  (b)
unaudited quarterly  consolidated  financial  statements of the Company promptly
following  such  statements  becoming  available to the  Company,  (c) an annual
budget of the Company with  respect to each fiscal year within  thirty (30) days
following  presentation  thereof  to the Board or,  if the Board  approves  such
budget,  approval thereof, (d) unaudited monthly consolidated income statements,
balance sheets,  and cashflow  statements of the Company promptly  following the
preparation  thereof  and  (e)  such  other  information  as may  be  reasonably
requested by a Clearlake  Investor  relating to the Company which the Company is
permitted to disclose; provided, however, that any such Person gaining access to
information  regarding the Company  pursuant to this Section 7(a) shall agree to
hold in strict confidence, and shall not make any disclosure of, any information
regarding  the  Company  which  the  Company  determines  in  good  faith  to be
confidential, and of which determination such Person is notified, unless (w) the
release  of  such   information   is  requested  or  required  (by   deposition,
interrogatory,  requests for information or documents by a governmental  entity,
subpoena or similar process),  (x) such information is or becomes publicly known
without a breach of this Agreement, (y) such information is or becomes available
to such Person on a non-confidential  basis from a source other than the Company
or (z) such information is independently developed by such Person.

      (b) The rights of the Clearlake  Investors under Section 7(a) hereof shall
terminate  at such  time  that  the  Clearlake  Investors  cease to own at least
145,067  shares  of Common  Stock (as  adjusted  for  stock  dividends,  splits,
combinations or similar events and including all shares of Common Stock issuable
to the Clearlake Investors upon the conversion and/or exercise of all securities
held by the Clearlake  Investors that are convertible  and/or  exerciseable  for
shares of Common Stock).

8. STOCKHOLDER AGREEMENTS

      8.1.  Board  Composition.  The  Clearlake  Investors and the HOVRS Parties
hereby agree as follows:

                                       19


                  (a) The  Clearlake  Investors and the HOVRS Parties shall take
            all  Necessary  Action to cause the Board to be  comprised  of up to
            eight (8)  directors,  two (2) of whom  shall be  designated  by the
            Clearlake  Investors;  provided that, if the Clearlake  Investors at
            any time cease to own at least 1,600,000  shares of Common Stock (as
            adjusted  for  stock  dividends,  splits,  combinations  or  similar
            events),  then the  Clearlake  Investors  shall only be  entitled to
            designate  one (1) director,  and if the Clearlake  Investors at any
            time cease to own any Common  Stock,  then the  Clearlake  Investors
            shall cease to be entitled to designate a director.

                  (b) If the number of directors  that the  Clearlake  Investors
            have the right to designate  to the Board is  decreased  pursuant to
            Section  8.1(a),  then the  designees  appointed by such party shall
            resign or, if such person fails to resign,  the Clearlake  Investors
            and HOVRS  Parties shall take all  Necessary  Action to  immediately
            remove  such  director  or  directors,  as the case may be, from the
            Board.

                  (c) Except as provided  above,  the Clearlake  Investors shall
            have the  exclusive  right to appoint and remove their  designees to
            the Board, as well as the exclusive right to fill vacancies  created
            by reason of death,  removal or resignation of such  designees,  and
            the  Clearlake  Investors  and the  HOVRS  Parties  shall  take  all
            Necessary Action to cause the Board to be so constituted.

                  (d) For  purposes of this Section 8.1, the number of shares of
            Common Stock held by any Person  shall  include all shares of Common
            Stock issuable to such Person upon the conversion and/or exercise of
            all  securities  held by such  Person  that are  convertible  and/or
            exerciseable for shares of Common Stock.

      8.2.  Amendment to the  Certificate  of  Incorporation.  Each of the HOVRS
Parties and the Clearlake  Investors agree to use all Necessary  Action to cause
the Company's  Amended and Restated  Certificate of Incorporation to be amended,
within  one year of the date  hereof,  to  delete  the  provisions  set forth in
Article VII of the Amended and Restated Certificate of Incorporation filed on or
about the date hereof..

      8.3. No Company Obligations.  Notwithstanding anything to the contrary set
forth herein,  the Company shall have no rights or  obligations  with respect to
any provision in this Section 8.

9.  EXPENSES.  The Company shall  reimburse  the  directors  for all  reasonable
out-of-pocket  expenses incurred in connection with their attendance at meetings
of the Board, including without limitation, travel, lodging and meal expenses.

10. DEFINITIONS.

      "Acquisition Stock Purchase Agreement" shall have the meaning set forth in
the Recitals.

                                       20


      "Affiliate"  means, with respect to any Person, (i) any other Person which
directly  or  indirectly  through  one or more  intermediaries  controls,  or is
controlled by, or is under common control with, such Person (for the purposes of
this definition,  "control"  (including,  with correlative  meanings,  the terms
"controlling,"  "controlled by" and "under common control  with"),  as used with
respect to any Person,  means the  possession,  directly or  indirectly,  of the
power to direct or cause the  direction  of the  management  or policies of such
Person,  whether  through the  ownership of voting  securities,  by agreement or
otherwise);  provided,  however,  that  neither  the  Company  nor  any  of  its
Subsidiaries  shall be deemed an  Affiliate  of any of the  Investors  (and vice
versa) and none of the Investors shall be deemed Affiliates of each other solely
as a result of their relationship with respect to the Company.

      "Agreement" shall have the meaning set forth in the Preamble.

      "Amendment" shall have the meaning set forth in Section 6.3.

      "automatic shelf registration statement" has the meaning set forth in Rule
405 under the Securities Act.

      "Board" shall have the meaning set forth in Section 1.7.

      "Business  Day"  shall  mean any day that is not a  Saturday,  a Sunday or
other day on which banks are required or  authorized  by law to be closed in the
states of Delaware or New York.

      "Capital   Stock"  means  (i)  with  respect  to  any  Person  that  is  a
corporation,  any and all  shares,  interests,  participations,  rights or other
equivalents  (however  designated) of corporate  stock; and (ii) with respect to
any other Person, any and all partnership,  membership or other equity interests
of such Person.

      "Clearlake Investor" has the meaning set forth in the Preamble.

      "Clearlake  Investor  Registrable   Securities"  shall  mean  all  of  the
Registrable Securities held by any Clearlake Investor from time to time.

      "Clearlake Stock Purchase  Agreements" shall have the meaning set forth in
the Recitals.

      "Common Stock" shall mean the common stock of the Company,  par value $.01
per share.

      "Company" shall have the meaning set forth in the Preamble.

      "Demand Notice" shall have the meaning set forth in Section 1.2.

      "Demand  Registrations"  means  Long-Form   Registrations  and  Short-Form
Registrations requested pursuant to Section 1.1.

      "EDGAR"  means  the  Security   Exchange   Commission's   Electronic  Data
Gathering, Analysis and Retrieval system.

                                       21


      "Election Notice" shall have the meaning set forth in Section 6.1(b).

      "Effective Date" shall have the meaning set forth in the Preamble.

      "Family Member" means,  with respect to any natural Person,  such Person's
spouse and  descendants  (whether or not adopted) and any trust,  family limited
partnership or limited liability company that is and remains at all times solely
for the benefit of such Person's spouse and/or descendants.

      "free writing prospectus" has the meaning ascribed to such term under Rule
405 under the Securities Act.

      "HOVRS Holder" shall have the meaning set forth in Section 1.2.

      "HOVRS  Registration Rights Agreement" shall have the meaning set forth in
Section 1.2.

      "HOVRS Registrable Securities" shall have the meaning set forth in Section
1.2.

      "Indemnitees" shall have the meaning set forth in Section 4.1.

      "Initial Stock Purchase Agreement" shall have the meaning set forth in the
Recitals.

      "Investors" shall have the meaning set forth in the Preamble.

      "issuer free  writing  prospectus"  has the meaning  ascribed to such term
under Rule 433(h) under the Securities Act.

      "Lock-Up Period" shall have the meaning set forth in Section 3.4.1.

      "Long-Form Registrations" shall have the meaning set forth in Section 1.1.

      "Majority  Clearlake  Investor  Approval"  means the  written  approval of
Persons holding a majority of Clearlake Investor Registrable Securities.

      "Necessary  Action" shall mean,  with respect to a specified  result,  all
actions (to the extent such  actions are  permitted  by law)  necessary to cause
such result,  including (i) voting or providing a written  consent or proxy with
respect to the  Capital  Stock of the  Company,  (ii)  causing  the  adoption of
shareholders'  resolutions  or proxy with  respect to the  Capital  Stock of the
Company,  (iii)  causing  members of the Board (to the extent such  members were
nominated or designated by the Person  obligated to take such Necessary  Action,
and subject to any  fiduciary  duties that such members may have as directors of
the  Company)  to act in a certain  manner or causing  them to be removed in the
event  that they fail to act in such a manner,  (iv)  executing  agreements  and
instruments  to effect such result and (v) making,  or causing to be made,  with
governmental,   administrative   or   regulatory   authorities,   all   filings,
registrations  or similar  actions  that are  required to achieve  such  result;
provided that an  obligation to take all Necessary  Action shall not include any
obligation  to acquire or dispose of Capital  Stock or other  securities  of the
Company or any other Person.

                                       22


      "New Securities" shall have the meaning set forth in Section 6.3.

      "Person"  means  an  individual,   a  partnership,   a  joint  venture,  a
corporation,   a  limited   liability   company,   a  trust,  an  unincorporated
organization and a government or any department or agency thereof.

      "Permitted Transferee" shall mean, with respect to any Clearlake Investor,
(a) if any Transfer involves less than all of a Clearlake Investor's Registrable
Securities,  any Affiliate of a Clearlake Investor or Reservoir Capital Group or
its Affiliates,  or (b) if any Transfer  involves all of a Clearlake  Investor's
Registrable  Securities,  to any Person  other than a direct  competitor  of the
Company.

      "Piggyback Registration" shall have the meaning set forth in Section 2.1.

      "Public  Offering"  means a  public  offering  and  sale of  Common  Stock
pursuant to an effective registration statement under the Securities Act.

      "Registrable Securities" means (i) any share of Common Stock issued to any
Investor  (or any  Affiliate  thereof) as of the  Effective  Date or  thereafter
acquired,  including upon conversion of the Company's  Series A Preferred Stock,
by any Investor,  and (ii) any equity  securities issued or issuable directly or
indirectly with respect to any of the foregoing securities referred to in clause
(i) by way of share dividend or share split or in connection  with a combination
of shares, recapitalization,  merger, consolidation or other reorganization.  As
to any particular shares constituting  Registrable Securities,  such shares will
cease  to  be  Registrable  Securities  when  they  have  been  (x)  effectively
registered  under the  Securities  Act and  disposed of in  accordance  with the
registration statement covering them, or (y) sold to the public pursuant to Rule
144 under the Securities Act or sold in a block sale to a financial  institution
in the ordinary course of its trading business.  For purposes of this Agreement,
a Person will be deemed to be a holder of Registrable  Securities  whenever such
Person  has the  right  to  acquire  directly  or  indirectly  such  Registrable
Securities  (upon  conversion  or  exercise  in  connection  with a transfer  of
securities or otherwise,  but  disregarding any restrictions or limitations upon
the exercise of such right),  whether or not such  acquisition has actually been
effected.

      "Registration Expenses" shall have the meaning set forth in Section 3.2.

      "Rule  433"  means  Rule 433 under  the  Securities  Act or any  successor
federal law then in force.

      "Series A  Preferred  Stock"  means the  Series A  Preferred  Stock of the
Company, par value $.01 per share.

      "Securities  Act"  means the  United  States  Securities  Act of 1933,  as
amended, or any successor federal law then in force.

      "Securities and Exchange  Commission"  means the United States  Securities
and Exchange  Commission and any governmental  body or agency  succeeding to the
functions thereof.

                                       23


      "Securities  Exchange Act" means the United States Securities Exchange Act
of 1934, as amended, or any successor federal law then in force.

      "Shares"  shall  mean  collectively  any  shares of the  Company's  equity
securities  outstanding  from time to time,  including,  but not  limited to the
Common Stock and the Series A Preferred Stock.

      "Shelf Registration" shall have the meaning set forth in Section 1.4.

      "Short-Form  Registrations"  shall have the  meaning  set forth in Section
1.1.

      "Subscription Notice" shall have the meaning set forth in Section 6.1(a).

      "Subscription Period" shall have the meaning set forth in Section 6.1(b).

      "Transfer" shall mean any sale, pledge,  assignment,  encumbrance or other
transfer or  disposition  of any shares of  Registrable  Securities to any other
Person, whether directly, indirectly,  voluntarily,  involuntarily, by operation
of law, pursuant to judicial process or otherwise.

11. MISCELLANEOUS.

      11.1. No  Inconsistent  Agreements.  The Company will not hereafter  enter
into any agreement with respect to its securities which is inconsistent  with or
violates the rights  granted to the holders of  Registrable  Securities  in this
Agreement.

      11.2.  Remedies.  The  parties  hereto  agree and  acknowledge  that money
damages may not be an adequate  remedy for any breach of the  provisions of this
Agreement  and that,  in addition to any other  rights and remedies at law or in
equity  existing in its favor,  any party  shall be  entitled  to seek  specific
performance  and/or other  injunctive  relief from any court of law or equity of
competent  jurisdiction (without posting any bond or other security) in order to
enforce or prevent violation of the provisions of this Agreement.

      11.3. Amendment and Waiver.

      (a) Except as otherwise  provided  herein,  this Agreement may be amended,
modified,  extended or terminated, and the provisions hereof may be waived, only
by an agreement in writing signed by the Company and Persons  holding a majority
of Clearlake Investor Registrable  Securities,  provided,  that the admission of
new  parties  pursuant  to the terms of  Section  11.4 shall not  constitute  an
amendment of this  Agreement for purposes of this Section 11.3.  Notwithstanding
the foregoing (A) if any  amendment,  modification,  extension,  termination  or
waiver (an  "Amendment")  would treat any  Investor or group of  Investors  in a
manner  different  from,  and  materially  adverse  relative  to, the  Clearlake
Investors  voting in favor of such  Amendment,  then such Amendment will require
the consent of the Investor or Investors  holding a majority of the  Registrable
Securities of such group  adversely  treated,  (B) any Amendment of Section 8 or
11.4(b)  hereof  shall  require  the  consent of Persons  holding a majority  of
Clearlake Investor Registrable Securities,  and HOVRS Parties holding a majority
of the Common Stock held by all HOVRS  Parties  (except that any such  Amendment
that  purports to impose any

                                       24


obligation on the Company  shall also require the consent of the  Company),  (C)
any  Amendment  of  Sections  1, 2 or 3 hereof that would (x) have the effect of
treating the HOVRS Parties in a manner  different  from, and materially  adverse
relative to, the Clearlake  Investors  voting in favor of such  Amendment or (y)
cause this Agreement to conflict with the HOVRS Registration Rights Agreement as
in effect on the date hereof, shall require the consent of the Company,  Persons
holding a majority  of  Clearlake  Investor  Registrable  Securities,  and HOVRS
Parties holding a majority of the Common Stock held by all HOVRS Parties and (D)
any  Amendment of clause (B), (C) or (D) of this Section  11.3(a)  shall require
the consent of the Company,  Persons  holding a majority of  Clearlake  Investor
Registrable Securities, and HOVRS Parties holding a majority of the Common Stock
held by all HOVRS Parties.

      (b) Each such  Amendment  shall be binding upon each party hereto and each
Investor  subject  hereto.  In  addition,  each party  hereto and each  Investor
subject hereto may waive any right hereunder,  as to itself, by an instrument in
writing  signed by such party or  Investor.  The failure of any party to enforce
any  provisions  of this  Agreement  shall in no way be construed as a waiver of
such  provisions  and shall not  affect the right of such  party  thereafter  to
enforce each and every provision of this Agreement in accordance with its terms.
To the extent the  Amendment of any Section of this  Agreement  would  require a
specific  consent pursuant to this Section 11.3, any Amendment to definitions to
the extent used in such Section shall also require such specified consent.

      (c) It is  acknowledged  that this  Agreement  amends and  restates in its
entirety that certain [Amended and Restated]  Investor Rights Agreement dated as
of  [________,  200_][August  1, 2007]  between the  Company  and the  Clearlake
Investors, as the same may have been amended, supplemented or otherwise modified
from time to time prior to the date hereof.

      11.4. Successors and Assigns; Transferees.

      (a) This  Agreement  shall be binding upon and inure to the benefit of and
be  enforceable  by the  parties  hereto  and their  respective  successors  and
assigns.  Registrable  Securities  shall continue to be  Registrable  Securities
after any Transfer (except if such securities were effectively  registered under
the Securities Act and disposed of in accordance with the registration statement
covering them,  sold to the public pursuant to Rule 144 under the Securities Act
or sold in a block sale to a financial institution in the ordinary course of its
trading business).  Any transferee receiving shares of Registrable Securities in
a Transfer  effected in compliance with the terms of this Agreement shall become
an  Investor  party to this  Agreement  and  shall be  subject  to the terms and
conditions  of, and be entitled to enforce,  this  Agreement to the same extent,
and in the  same  capacity,  as  the  Person  that  Transfers  such  Registrable
Securities to such  transferee;  provided that only a Permitted  Transferee of a
Clearlake  Investor  will be deemed to be a Clearlake  Investor  for purposes of
this Agreement. For the avoidance of doubt, any transferee receiving Registrable
Securities  in a  Transfer  that  is not a  Clearlake  Investor  or a  Permitted
Transferee of a Clearlake Investor or its Affiliates will become a party to this
Agreement  without the benefit of the right to initiate Demand  Registrations or
other rights  afforded to the  Clearlake  Investors  hereunder.  Other than with
respect to a pledge  permitted  pursuant to Section 5.2.3  hereof,  prior to the
Transfer of any  Registrable  Securities to any  transferee,  and as a condition
thereto,  each Investor  effecting such Transfer shall (a) cause such transferee
to deliver to the Company and each of the  Investors its written  agreement,  in
form and

                                       25


substance  reasonably  satisfactory to the Company, to be bound by the terms and
conditions of this Agreement to the extent  described in the preceding  sentence
and (b) if such Transfer is to a Permitted  Transferee,  remain  directly liable
for the  performance  by such  Permitted  Transferee of all  obligations of such
transferee under this Agreement.

      (b)  Prior to the  Transfer  by any  HOVRS  Party of any of the  Company's
Capital Stock to any transferee,  and as a condition  thereto,  such HOVRS Party
shall cause such  transferee to deliver to the Company and each of the Investors
its written  agreement,  in form and substance  reasonably  satisfactory  to the
Company, to be subject to the terms and conditions of this Agreement to the same
extent, and in the same capacity, as the HOVRS Party that Transfers such Capital
Stock to such transferee;  provided that this Section 11.4(b) shall not apply to
Transfers  of  Capital  Stock  that (x) are  effectively  registered  under  the
Securities  Act and  disposed of in  accordance  with a  registration  statement
covering such Capital Stock,  or (y) constitute  sales to the public pursuant to
Rule 144 under the  Securities Act or block sales to financial  institutions  in
the ordinary course of their trading business.

      11.5.  Severability.  Whenever possible,  each provision of this Agreement
shall  be  interpreted  in  such  manner  as to be  effective  and  valid  under
applicable  law, but if any  provision of this  Agreement is held to be invalid,
illegal or  unenforceable in any respect under any applicable law or rule in any
jurisdiction,  such invalidity,  illegality or unenforceability shall not affect
any other  provision or the  effectiveness  or validity of any  provision in any
other jurisdiction, and this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid,  illegal or unenforceable provision had
never been contained herein.

      11.6.   Counterparts.   This   Agreement   may  be  executed  in  separate
counterparts, each of which shall be an original and all of which taken together
shall constitute one and the same Agreement.

      11.7. Descriptive Headings. The descriptive headings of this Agreement are
inserted for convenience only and do not constitute a part of this Agreement.

      11.8. Notices.  Any and all notices or other  communications or deliveries
required or permitted to be provided  hereunder shall be in writing and shall be
deemed  given,  delivered  and  effective  on the  earliest  of (i) the  date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified  in this Section 11.8 prior to 5:00 p.m.
(Eastern  time) on a  Business  Day,  (ii) the  Business  Day  after the date of
transmission,  if such notice or communication is delivered via facsimile at the
facsimile  telephone  number  specified in this  Agreement  later than 5:00 p.m.
(Eastern time) on any Business Day and earlier than 11:59 p.m. (Eastern time) on
the day  preceding  the next  Business  Day, or (iii) one (1) Business Day after
when sent, if sent by nationally  recognized  overnight courier service (charges
prepaid). The address for such notices and communications shall be as follows:

                                       26


      If to the Company:

            GoAmerica, Inc.
            433 Hackensack Avenue
            Hackensack, NJ  07601
            Facsimile:  (201) 527-1081
            Attention:  General Counsel and Chief Financial Officer

      with a copy to:

            Lowenstein Sandler PC
            65 Livingston Avenue
            Roseland, NJ  07068
            Facsimile:  (973) 587-2351
            Attention:  Peter H. Ehrenberg

      If to any Clearlake  Investor:  to the addressee specified on Schedule A
hereto.

      If to any HOVRS Party: to the addressee specified on Schedule B hereto.

      11.9.  Delivery by Facsimile.  This Agreement and any signed  agreement or
instrument entered into in connection  herewith or contemplated  hereby, and any
amendments  hereto or thereto,  to the extent signed and delivered by means of a
facsimile  machine,  shall be treated in all manner and  respects as an original
agreement or  instrument  and shall be considered to have the same binding legal
effect as if it were the original signed version thereof delivered in person. At
the request of any party  hereto or to any such  agreement or  instrument,  each
other  party  hereto or thereto  shall  re-execute  original  forms  thereof and
deliver them to all other  parties.  No party hereto or to any such agreement or
instrument shall raise the use of a facsimile  machine to deliver a signature or
the fact that any  signature or  agreement  or  instrument  was  transmitted  or
communicated  through  the  use  of a  facsimile  machine  as a  defense  to the
formation of a contract and each such party forever waives any such defense.

      11.10. Governing Law. This Agreement shall be governed by and construed in
accordance  with the laws of the  State of New  York  applicable  to a  contract
executed and performed in such state,  without giving effect to the conflicts of
laws principles thereof.

      11.11.  Jurisdiction;  Submission  to  Jurisdiction;  Waivers.  Each party
hereto  irrevocably agrees that any proceeding with respect to this Agreement or
for  recognition  and  enforcement of any judgment in respect thereof brought by
the  other  party  hereto or its  successors  or  assigns,  may be  brought  and
determined  in the Supreme  Court of the State of New York in New York County or
in the United States  District Court for the Southern  District of New York, and
each party hereto hereby irrevocably  submits with regard to any such proceeding
for itself and in respect to its properties, generally and unconditionally,  for
all purposes of this Agreement.

      11.12.  Waiver of Jury Trial.  To the extent not  prohibited by applicable
law that cannot be waived,  each party hereto  waives,  and covenants  that such
party will not assert (whether as plaintiff,  defendant or otherwise), any right
to trail by jury in any  forum in

                                       27


respect of any issue,  claim or proceeding  arising out of this Agreement or the
subject  matter  hereof or in any way  connected  with the dealings of any party
hereto in connection with any of the above, in each case whether now existing or
hereafter arising and whether in contract, tort or otherwise.  Any party to this
Agreement  may  file a copy of this  Section  11.12  with any  court as  written
evidence of the consent of the parties  hereto to the waiver of their  rights to
trial by jury.

      11.13.  Termination.  The provisions of Section 11 of this Agreement shall
terminate  as to any  Investor at such time as such  Investor  ceases to own any
Series A Preferred Stock or shares issued upon conversion thereof or in exchange
therefor.

                         * * Signature pages follow * *

                                       28


            IN WITNESS  WHEREOF,  the parties have executed this Investor Rights
Agreement on the day and year first above written.

                                    COMPANY:


                                    GOAMERICA, INC.




                                    By:   ___________________________
                                    Name: ___________________________
                                    Title:___________________________








                                    INVESTORS


                                      CCP A, L.P.

                                      By:  CLEARLAKE CAPITAL PARTNERS, LLC
                                      Its:   General Partner

                                      By:  CCG Operations, LLC
                                      Its:   Managing Member

                                      By:  ______________________________
                                           Name:
                                           Title:  Manager








                                    HOVRS PARTIES




                                      _______________________________
                                      Name: Ronald Obray


                                      _______________________________
                                      Name: Denise Obray


                                      _______________________________
                                      Name: Edmond Routhier

                                      CAYMUS INVESTMENT GROUP II, LLC

                                      By: __________________________
                                      Name:
                                      Title:

                                      CAYMUS OBRAY, LLC

                                      By: __________________________
                                      Name:
                                      Title:


                                      _______________________________
                                      Name: [                 ]

            [To be updated  immediately  prior to execution to include all HOVRS
      stockholders (including option holders who exercise prior to closing)]




                         Schedule A: Clearlake Investors

CCP A, L.P.

Address for Notice:
Clearlake Capital Group, LP
650 Madison Ave.
23rd Floor
New York, NY 10022
Attention:  Behdad Eghbali
Facsimile: (212) 610-9121

With a copy to:

Milbank, Tweed, Hadley & McCloy LLP
601 S. Figueroa, 30th Floor
Los Angeles, CA  90017
Attention:  Melainie K. Mansfield, Esq.
Facsimile:  (213) 892-4711





                           Schedule B: HOVRS Parties

            [To be updated  immediately  prior to execution to include all HOVRS
      stockholders (including option holders who exercise prior to closing)]

[         ]

Address for Notice:
[         ]
[         ]
[         ]
Attention:  [             ]
Facsimile: [              ]