-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JsbThx6L/OLEXVQU5zxjswV5HXxb75QM31KrNDqCrrsWKx1qJwCxc3mXwZGyITHF NGWqXO6lLPfwVrlsa3y6TQ== 0000940180-00-000281.txt : 20000315 0000940180-00-000281.hdr.sgml : 20000315 ACCESSION NUMBER: 0000940180-00-000281 CONFORMED SUBMISSION TYPE: S-1/A PUBLIC DOCUMENT COUNT: 6 FILED AS OF DATE: 20000314 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GOAMERICA INC CENTRAL INDEX KEY: 0001101268 STANDARD INDUSTRIAL CLASSIFICATION: RADIO TELEPHONE COMMUNICATIONS [4812] IRS NUMBER: 223693371 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-1/A SEC ACT: SEC FILE NUMBER: 333-94801 FILM NUMBER: 568450 BUSINESS ADDRESS: STREET 1: C/O GOAMERICA, INC. STREET 2: 401 HACKENSACK AVENUE CITY: HACKENSACK STATE: NJ ZIP: 07601 BUSINESS PHONE: 2019967310 MAIL ADDRESS: STREET 1: C/O GOAMERICA STREET 2: 401 HACKENSACK AVENUE CITY: HACKENSACK STATE: NJ ZIP: 07601 S-1/A 1 AMENDMENT NO. 2 TO FORM S-1 As filed with the Securities and Exchange Commission on March 14, 2000 Registration No. 333-94801 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------- AMENDMENT NO. 2 TO FORM S-1 REGISTRATION STATEMENT Under The Securities Act of 1933 -------------- GoAmerica, Inc. (Exact name of registrant as specified in its charter) -------------- Delaware 4812 22-3693371 (State or other (Primary Standard (I.R.S. Employer jurisdiction of Industrial Identification Number) incorporation or Classification Code organization) Number) 401 Hackensack Avenue, Hackensack, New Jersey 07601 201-996-1717 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) -------------- Aaron Dobrinsky President and Chief Executive Officer GoAmerica, Inc. 401 Hackensack Avenue Hackensack, New Jersey 07601 201-996-1717 (Name, address, including zip code, and telephone number, including area code, of agent for service) -------------- Copies to: David J. Sorin Scott M. Freeman Andrew P. Gilbert Sidley & Austin Buchanan Ingersoll Professional 875 Third Avenue Corporation New York, New York 10022 650 College Road East (212) 906-2000 Princeton, New Jersey 08540 (609) 987-6800 -------------- Approximate date of commencement of the proposed sale to the public: As soon as practicable after this Registration Statement becomes effective. If any of the securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] -------------- The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this preliminary prospectus is not complete and may be + +changed. We may not sell these securities until the registration statement + +filed with the Securities and Exchange Commission is effective. This + +preliminary prospectus is not an offer to sell these securities and it is not + +soliciting an offer to buy these securities in any state where the offer or + +sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED MARCH 14, 2000 PROSPECTUS 10,000,000 Shares [LOGO OF GoAmerica] Common Stock ----------- This is an initial public offering of shares of common stock of GoAmerica, Inc. We are selling the 10,000,000 shares of common stock offered under this prospectus. There is currently no public market for our shares. We currently estimate that the initial public offering price will be between $14.00 and $16.00 per share. We have applied to have our common stock approved for listing on the Nasdaq National Market under the symbol "GOAM." See "Risk Factors" beginning on page 6 to read about risks that you should consider before buying shares of our common stock. Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. -----------
Per Share Total ----- ----- Public offering price............................................... $ $ Underwriting discount............................................... $ $ Proceeds, before expenses, to us.................................... $ $
----------- The underwriters may purchase up to an additional 1,500,000 shares of common stock from us at the initial public offering price less the underwriting discount to cover over-allotments. The underwriters expect to deliver the shares against payment in New York, New York on , 2000. ----------- Bear, Stearns & Co. Inc. Chase H&Q U.S. Bancorp Piper Jaffray Wit SoundView ----------- DLJdirect Inc. ----------- The date of this prospectus is , 2000 GOAMERICA, INC. [Graphic appears here. The graphic depicts a businessman working on a wirelessly enabled personal computer. The Company's logo appears across the top of the graphic. The word "go" appears in the upper lefthand section and the words "innovation" and "connectivity" appear in the foreground.] [Description of Artwork] [Graphic appears here. This graphic is a two page gatefold with the Company's logo appearing across the top. The words "Goamerica provides wireless access..." appear under the logo followed by four boxes aligned from left to right. The first box includes the text "Email, the Web and corporate intranets" and has an accompanying photograph of the globe. The second box includes the text "Secure, reliable network operations center" and has an accompanying photograph of computer technology. The third box contains the text "Allows use on various network carriers" and has an accompanying photograph of various networks. The fourth box contains the text "Using GoAmerica software, enables use of a variety of mobile devices" and has an accompanying photograph of various mobile devices. In the background are various pictures of business persons and certain wording including the words "independent access," "internet architecture," "devices," "corporate intranets," "wireless connectivity" and "networks."] PROSPECTUS SUMMARY This summary highlights information contained elsewhere in this prospectus. This summary does not contain all the information that you should consider before investing in our common stock. You should read the entire prospectus carefully, especially "Risk Factors" beginning on page 6 and our financial statements and related notes. GoAmerica, Inc. Our Company We are a nationwide wireless Internet services provider. We enable our individual and business subscribers to access remotely the Internet, email and corporate intranets in real time through a wide variety of mobile computing and communications devices. Through our Wireless Internet Connectivity Center, we offer our subscribers comprehensive and flexible mobile data solutions for wireless Internet access by providing wireless network services, mobile devices, software and subscriber service and support. We have a limited operating history and have incurred operating losses since our inception. We expect to continue to incur increasing operating and net losses for at least the next several quarters. Our Go.Web technology and Wireless Internet Connectivity Center enable our subscribers to access a wide variety of Internet content, such as business and financial data, news, sports, travel, entertainment, personal contact and other information. Our subscribers can conduct ecommerce transactions, such as shopping, reservations and stock trading, to the extent permitted by their mobile device of choice. Our subscribers can also customize their personal Web site or "personal portal," www.mygoweb.com, to access their favorite Web sites quickly. In addition, we offer a variety of email solutions which allow our subscribers to access their email at their existing Internet and business email accounts as well as a GoAmerica email address. We provide our subscribers with flexible and reliable wireless Internet services across a number of wireless networks and mobile device platforms. To provide our subscribers with nationwide access, we have established strategic relationships with many leading wireless network carriers. Our subscribers are able to use our wireless Internet services with their choice of a wide variety of leading mobile devices, including Palm operating system-based computing devices, Research In Motion's interactive pagers, laptop computers, Microsoft Windows CE-based computers and wirelessly-enabled smart phones. We also have engineered our wireless Internet services to operate with new versions of many wireless devices. We seek to enhance our offerings with value-added services and additional functionality to expand our subscriber base and increase our recurring revenues. Our Opportunity We believe that the growth of the Internet, email and mobile wireless communications has created a significant market opportunity for service providers capable of efficiently delivering wireless Internet and email services over wireless communication networks. While the wireless data services market is developing rapidly, widespread adoption of wireless data services has been hindered by a number of challenges, including limited wireless data service coverage areas, incompatible mobile devices and wireless networks, and slow wireless data transmission speeds. We believe that adoption of wireless data applications that serve specific industries, such as financial services, or enterprise solutions, such as sales force automation, have shown the greatest penetration to date. However, the rapid development of the Internet, with the resulting nearly unlimited access to content and to corporate intranets, has created the opportunity for rapid adoption of wireless devices for large scale applications, including messaging, email connectivity, personal information management (address and calendar) connectivity, and access to the Internet. As a result, we believe that a significant opportunity exists for wireless Internet service providers that are capable of offering individuals and businesses easy-to-use, cost-effective and reliable wireless data service. The Offering Common Stock offered by us.............. 10,000,000 shares Common Stock to be outstanding after this offering.......................... 47,136,760 shares Use of proceeds......................... We expect to use the net proceeds from this offering to expand sales and marketing initiatives, expand customer service and support systems and capabilities, build a redundant network operating center, acquire and implement new operational and financial systems, increase working capital and for possible future acquisitions. Proposed Nasdaq National Market symbol.. GOAM
The number of shares of common stock to be outstanding after this offering include 13,222,760 shares of common stock to be issued upon automatic conversion of all outstanding shares of our preferred stock upon completion of this offering. The shares of common stock to be outstanding after this offering exclude: . 10,716,000 shares of common stock authorized for issuance under our stock option plans and employee stock purchase plan, of which 2,440,008 shares were subject to outstanding options as of December 31, 1999 at a weighted average exercise price of $0.92; and . 1,276,800 shares of common stock issuable upon exercise of outstanding warrants as of December 31, 1999 at a weighted average exercise price of $1.17. ---------------- Except as otherwise noted, the information in this prospectus reflects a 2,000-for-one split of our outstanding shares of common stock on May 28, 1998 and an eight-for-one split of our outstanding shares of common stock on February 25, 2000 and assumes (1) the conversion of all outstanding shares of preferred stock into shares of common stock prior to the closing of this offering and (2) no exercise of the underwriters' overallotment option. GoAmerica Communications Corp. was incorporated in Delaware in 1996. In December 1999, GoAmerica, Inc. was incorporated in Delaware and each of the security holders of GoAmerica Communications Corp. exchanged all their outstanding securities for newly issued securities of GoAmerica, Inc. with equivalent rights and preferences. As a result, GoAmerica Communications Corp. became a wholly-owned subsidiary of GoAmerica, Inc. See "Description of Capital Stock." Our principal offices are located at 401 Hackensack Avenue, Hackensack, New Jersey 07601, and our telephone number is (201) 996-1717. We maintain a Web site at http://www.goamerica.net. The information contained at our Web site is not incorporated into and does not constitute part of this prospectus, and the only information that you should rely on in making your decision whether to invest in our common stock is the information contained in this prospectus. 2 SUMMARY FINANCIAL DATA The following summary statement of operations data for the period from August 6, 1996, our date of inception, to December 31, 1996 and for the years ended December 31, 1997, 1998 and 1999 are derived from our audited financial statements. The pro forma statement of operations data presented below give effect to the conversion of all of our Series A Preferred Stock into an aggregate of 8,038,304 shares of common stock upon the closing of this offering, as if such conversion had occurred at the dates of issuance. The pro forma balance sheet data reflects the conversion of our Series A Preferred Stock described above and the issuance and sale of 648,057 shares of our Series B Preferred Stock after December 31, 1999 for total net proceeds of approximately $25.2 million; the issuance of 226,816 shares of common stock in connection with the Series B Preferred Stock financing; and the conversion of all of our Series B Preferred Stock into an aggregate of 5,184,456 shares of common stock. The pro forma as adjusted balance sheet data further reflects the sale of the 10,000,000 shares of common stock offered by us in this offering at an assumed initial public offering price of $15.00 per share, after deducting the underwriting discount and estimated offering expenses payable by us. You should read the selected financial data together with our financial statements and the sections of this prospectus entitled "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 3
Period from August 6, 1996 (date of Years Ended inception) to December 31, December 31, -------------------------- 1996 1997 1998 1999 ------------- ------- ------- -------- (in thousands, except per share data) Statement of Operations Data: Revenue: Subscriber......................... $ -- $ 115 $ 360 $ 1,183 Equipment.......................... -- 33 449 1,341 Other.............................. -- 25 18 207 ------ ------- ------- -------- Total revenue........................ -- 173 827 2,731 Costs and expenses: Cost of subscriber revenue......... -- 88 304 4,051 Cost of equipment revenue.......... -- 15 532 1,648 Sales and marketing................ 43 243 909 3,283 General and administrative......... 175 841 1,549 4,810 Depreciation and amortization...... 3 32 124 275 Settlement costs................... -- -- -- 297 Interest income.................... -- -- (14) (165) ------ ------- ------- -------- Net loss............................. $ (221) $(1,046) $(2,577) $(11,468) Beneficial conversion feature and accretion of redemption value of mandatorily redeemable convertible preferred stock..................... -- -- -- (10,464) ------ ------- ------- -------- Net loss applicable to common stockholders........................ $ (221) $(1,046) $(2,577) $(21,932) ====== ======= ======= ======== Basic net loss per share applicable to common stockholders.............. $(0.02) $ (0.07) $ (0.14) $(1.02) Diluted net loss per share applicable to common stockholders.............. $(0.02) $ (0.06) $ (0.14) $(1.00) ====== ======= ======= ======== Weighted average shares used in computation of basic net loss per share applicable to common stockholders........................ 13,947 16,083 18,391 21,590 Weighted average shares used in computation of diluted net loss per share applicable to common stockholders........................ 14,382 16,518 18,826 22,025 Pro forma basic net loss per share... $ (0.45) Pro forma diluted net loss per share............................... $ (0.45) ======== Weighted average shares used in computation of pro forma basic net loss per share...................... 25,258 Weighted average shares used in computation of pro forma diluted net loss per share...................... 25,693
As of December 31, 1999 ------------------------------- Pro Forma As Actual Pro Forma Adjusted ------- --------- ------------ (in thousands) Balance Sheet Data: Cash and cash equivalents.................... $ 6,344 $31,534 $169,684 Working capital.............................. 2,426 27,616 165,766 Total assets................................. 9,757 34,947 173,097 Series A redeemable convertible preferred stock....................................... 20,755 -- -- Series B redeemable convertible preferred stock....................................... -- -- -- Stockholders' equity (deficit)............... (16,658) 29,287 167,437
4
Period from August 6, 1996 (date of inception) to Years Ended December 31, December 31, -------------------------- 1996 1997 1998 1999 ------------- ---------------- -------- (in thousands) Other Financial Data: Cash provided by (used in): Operating activities............. $ (338) $ (803) $ (2,215) $ (6,745) Investing activities............. (74) (180) (498) (643) Financing activities............. 1,000 415 4,654 11,771
Recent Developments On January 17, 2000, we executed a binding stock purchase agreement with Dell USA L.P., Impact Venture Partners, L.P., Carousel Capital Partners, L.P. and Forstmann Little & Co. Equity Partnership-VI, L.P. On January 28, 2000, we completed this transaction and issued and sold an aggregate of 648,057 shares of Series B Preferred Stock and issued 226,816 shares of common stock for net proceeds of approximately $25.2 million. Each share of Series B Preferred Stock will convert into eight shares of common stock upon completion of this offering, or an aggregate of 5,184,456 shares. In connection with the issuance and sale of the Series B Preferred Stock in January 2000, assuming an initial public offering price of $15.00 per share, we would expect to incur a non-cash, non-recurring charge to net loss applicable to common stockholders in the amount of approximately $22 million in the first quarter of 2000. 5 RISK FACTORS Investing in our common stock involves a high degree of risk. You should carefully consider the following risks together with the other information contained in this prospectus before deciding to buy our common stock. If any of the following risks or uncertainties actually occur, our business, financial condition and operating results could be significantly and adversely affected. If that happens, the price of our common stock could decline, and you could lose all or part of your investment. Risks Particular To GoAmerica We have historically incurred losses and these losses will increase in the foreseeable future. We have never earned a profit. We had net losses of $1.0 million, $2.6 million and $11.5 million for the years ended December 31, 1997, 1998 and 1999, respectively. Since our inception, we have invested significant capital to build our wireless network operations and customer support centers as well as our customized billing system. Recently, we have invested additional capital in the development of our software application Go.Web. We plan to acquire and implement new operational and financial systems, continue to invest in our network operations and customer support centers, and expand our sales and marketing efforts. We also provide and expect to continue to provide mobile devices made by third parties to our customers at prices below our costs for such devices. In addition, our costs of subscriber revenue, consisting principally of our purchase of wireless airtime from network carriers, have historically exceeded our subscriber revenue and we expect such negative margins to continue until at least March 2000. Further, we have experienced and expect to continue to experience negative overall gross margins, which consist of margins on our subscriber revenues, equipment sales and other revenue. As a result, we have incurred operating losses since our inception and expect to continue to incur increasing operating losses for at least the next several quarters. Therefore, we will need to generate significant revenue to become profitable and sustain profitability on a quarterly or annual basis. We may not achieve or sustain our revenue or profit goals, and our ability to do so depends on the factors specified elsewhere in "Risk Factors" as well as on a number of factors outside of our control, including the extent to which: . our competitors announce and develop, or lower the prices of, competing services; . wireless network carriers, data providers and manufacturers of mobile devices dedicate resources to selling our services; and . prices for our services decrease as a result of reduced demand or competitive pressures. As a result, we may not be able to increase revenue or achieve profitability on a quarterly or annual basis. We have only a limited operating history, which makes it difficult to evaluate an investment in our common stock. We have only a limited operating history on which you can evaluate our business, financial condition and operating results. We face a number of risks encountered by early stage technology companies that participate in new technology markets, including our ability to: . manage our dependence on wireless data services which have only limited market acceptance to date; . expand our marketing, sales, engineering and support organizations, as well as our distribution channels; . negotiate and maintain favorable usage rates with telecommunications carriers; . retain and expand our subscriber base at profitable rates; . recoup our expenses associated with the wireless devices we resell to subscribers; 6 . manage expanding operations, including our ability to expand our systems if our subscriber base grows substantially; . attract and retain management and technical personnel; and . anticipate and respond to market competition and changes in technologies such as wireless data protocols and wireless devices. We may not be successful in addressing or mitigating these risks and uncertainties, and if we are not successful our business could be significantly and adversely affected. To generate increased revenue we will have to increase substantially the number of our subscribers, which may be difficult to accomplish. We will have to increase substantially the number of our subscribers in order to achieve our business plan. In addition to increasing our subscriber base, we will have to limit our churn, or the number of subscribers who deactivate our service. Adding new subscribers will depend to a large extent on the success of our direct and indirect marketing campaigns, and there can be no assurance that they will be successful. Limiting our churn rate will require that we provide our subscribers with a favorable experience in using our wireless service. Our subscribers' experience may be unsatisfactory to the extent that our service malfunctions or our customer care efforts, including our Web site and 800 number customer service efforts, do not meet or exceed subscriber expectations. In addition, factors beyond our control, such as technological limitations of certain of the current generation of wireless devices, which may cause our subscribers' experience with our service to not meet their expectations, could increase our churn rate and adversely affect our revenues. Because a significant minority of our subscribers have low or no usage rates for our services, our churn rates could increase in the future. We need to improve our systems to monitor our wireless airtime costs more effectively. We seek to reduce our wireless airtime costs by periodically matching our subscribers airtime usage needs to the most appropriate, lowest cost wireless carrier plans. It is possible for a small number of subscribers, if we do not assign them to the proper airtime pricing plan, to significantly increase our costs. The current systems that we use to monitor the airtime charges that we incur from our wireless carriers do not permit us to timely and effectively respond to changes in volume and geographic location of subscriber usage, which directly impact our costs of subscriber revenue. We currently use a manual system to track such costs and monitor wireless plan usage. We cannot assure you that we will be able to acquire or develop automated control systems or, if implemented, that our systems will be able to monitor all subscriber usage or improve our gross margins. We have experienced and may continue to experience negative gross margins on our subscriber revenue. We intend to pass through to our subscribers all the airtime charges that we incur from our wireless carriers; however, we have not always been and will not always be able to pass through such charges because the pricing plans offered to us by our wireless carriers and to which we assign our subscribers may not allow us to always cover our subscriber costs. For example, many of our subscribers have contracted for our Go.Unlimited Plan, which provides for unlimited nationwide wireless Internet service for a fixed monthly fee. If we assign those subscribers to a carrier plan that charges us an increasing fee as subscriber usage increases, then as subscriber usage and our related airtime costs increase, our margins on subscriber revenues would decrease and may become negative. Our airtime costs also increase substantially when subscribers use our services outside of their pre-determined geographic area, which results in roaming charges to us by the carriers that we do not pass on to our subscribers. We do not have and may not be able to develop the automated systems necessary to monitor our subscribers' usage and roaming patterns and quickly switch our subscribers to a more appropriate, lower cost airtime plan. In addition, while we continually seek to negotiate better pricing of wireless airtime plans with our carriers, we cannot assure you that we will be successful in that regard. 7 We subsidize the mobile devices that we resell which results in negative gross margins on our equipment revenue. In order to facilitate the sale of our wireless Internet services, the sales prices of the mobile devices manufactured by third parties that we sell to our subscribers are generally below our costs for such devices. Additionally, we have also provided many of our resellers and marketing partners with complimentary mobile devices and GoAmerica service during a trial period in order to facilitate additional sales of our services. As a result, we have experienced, and expect to continue to experience, negative gross margins on the mobile devices that we resell. We have limited resources and we may be unable to support effectively our anticipated growth in operations. We have begun aggressively expanding our operations in anticipation of an increase in the number of our subscribers. The number of our employees increased from 23 on December 31, 1998 to 49 on December 31, 1999. We intend to use a portion of the net proceeds of this offering to hire a significant number of additional employees. We also intend to use a portion of the net proceeds from this offering to acquire a state-of-the-art accounting and business process software package to replace our current manual systems which must be updated. Additionally, we must continue to develop and expand our systems and operations as the number of subscribers and the amount of information they wish to receive, as well as the number of services we offer, increases. This development and expansion has placed, and we expect it to continue to place, significant strain on our managerial, operational and financial resources. We may be unable to develop and expand our systems and operations for one or more of the following reasons: . we may not be able to locate or hire at reasonable compensation rates qualified engineers and other employees necessary to expand our capacity on a timely basis; . we may not be able to obtain the hardware necessary to expand the subscriber capacity of our systems on a timely basis; . we may not be able to expand our customer service, billing and other related support systems; and . we may not be able to obtain sufficient additional capacity from wireless carriers on a timely basis. If we cannot manage our growth effectively, our business and operating results will suffer. Additionally, any failure on our part to develop and maintain our wireless data services if we experience rapid growth could significantly adversely affect our reputation and brand name which could reduce demand for our services and adversely affect our business, financial condition and operating results. Our business prospects depend in part on our ability to maintain and improve our services as well as to develop new services. We believe that our business prospects depend in part on our ability to maintain and improve our current services and to develop new services on a timely basis. Our services will have to achieve market acceptance, maintain technological competitiveness and meet an expanding range of customer requirements. As a result of the complexities inherent in our service offerings, major new wireless data services and service enhancements require long development and testing periods. We may experience difficulties that could delay or prevent the successful development, introduction or marketing of new services and service enhancements. Additionally, our new services and service enhancements may not achieve market acceptance. If we do not respond effectively and on a timely basis to rapid technological change, our business could suffer. The wireless and data communications industries are characterized by rapidly changing technologies, industry standards, customer needs and competition, as well as by frequent new product and service 8 introductions. Our services are integrated with wireless handheld devices and the computer systems of our corporate customers. Our services must also be compatible with the data networks of wireless carriers. We must respond to technological changes affecting both our customers and suppliers. We may not be successful in developing and marketing, on a timely and cost-effective basis, new services that respond to technological changes, evolving industry standards or changing customer requirements. Our success will depend, in part, on our ability to accomplish all the following in a timely and cost-effective manner: . effectively use and integrate new technologies; . continue to develop our technical expertise; . enhance our wireless data, engineering and system design services; . develop applications for new wireless networks and services; . develop services that meet changing customer needs; . advertise and market our services; and . influence and respond to emerging industry standards and other changes. We depend upon wireless carriers' networks. If we do not have continued access to sufficient capacity on reliable networks, our business will suffer. Our success partly depends on our ability to buy sufficient capacity on the networks of wireless carriers such as AT&T Wireless Services, American Mobile, Bell Atlantic Mobile and BellSouth Mobile Data and on the reliability and security of their systems. We depend on these companies to provide uninterrupted and "bug free" service and would be adversely affected if they failed to provide the required capacity or needed level of service. In addition, although we have some forward price protection in our existing agreements with certain carriers, we could be adversely affected if wireless carriers were to increase the prices of their services. Our existing agreements with the wireless carriers generally have one-to-three year terms. Some of these wireless carriers are, or could become, our competitors. We depend on third parties for sales of our services which could result in variable and unpredictable revenues. We rely substantially on the efforts of others to sell many of our wireless data communications services. While we monitor the activities of our resellers, we cannot control how those who sell and market our service perform and we cannot be certain that their performance will be satisfactory. If the number of customers we obtain through these efforts is substantially lower than we expect for any reason, this would have an adverse effect on our business, operating results and financial condition. Our goal of building the GoAmerica brand is likely to be difficult and expensive and our inability to do so could adversely affect our business. We believe that a quality brand identity will be essential if we are to increase our number of subscribers and our revenues. We intend to use a significant portion of the proceeds of the offering to increase substantially our marketing budget as part of our efforts to build the GoAmerica brand. Our sales and marketing expenses were approximately $909,000 and $3.3 million for the years ended December 31, 1998 and 1999, respectively. In 2000, we expect our sales and marketing expenses to substantially exceed our 2000 revenues. If our marketing efforts cost more than anticipated, if we cannot increase our brand awareness or if the GoAmerica brand is not well received by our existing and potential subscribers, our losses will increase and our business will be adversely affected. 9 We depend on our key management and on recruiting and retaining key personnel. The loss of our key employees could adversely affect our business. We are particularly dependent on Aaron Dobrinsky and Joseph Korb, our chairman, chief executive officer and president, and our executive vice president, respectively, for most of our strategic, managerial and marketing initiatives. The unexpected loss of such officers would likely have an adverse effect on our business. In addition, because of the technical nature of our services and the dynamic market in which we compete, our performance depends on attracting and retaining other key employees. Competition for qualified personnel in the wireless data, communications and software industries is intense and finding and retaining such qualified personnel with experience in such industries is even more difficult. We believe there are only a limited number of individuals with the requisite skills to serve in many of our key positions, and it is becoming increasingly difficult to hire and retain these persons. Competitors and others may attempt to recruit our employees. A major part of our compensation to our key employees is in the form of stock option grants. A prolonged depression in our stock price could make it difficult for us to retain our employees and recruit additional qualified personnel. We currently maintain and are the beneficiary of key person life insurance policies on the lives of Aaron Dobrinsky and Joseph Korb. We do not maintain insurance policies for any of our other employees. Wireless data systems failures could harm our business by injuring our reputation or lead to claims of liability for delayed, improper or unsecured transmission of data. A significant barrier to the growth of ecommerce and wireless data services has been the need for secure and reliable transmission of confidential information. Our existing wireless data services are dependent on real-time, continuous feeds from various sources. The ability of our subscribers to access data in real-time requires timely and uninterrupted connections with our wireless network carriers. Any significant disruption from our backup landline feeds could result in delays in our subscribers' ability to receive such information. In addition, our systems could be disrupted by unauthorized access, computer viruses and other accidental or intentional actions. We may incur significant costs to protect against the threat of security breaches or to alleviate problems caused by such breaches. If a third party were able to misappropriate our subscribers' personal or proprietary information or credit card information, we could be subject to claims, litigation or other potential liabilities that could adversely impact our business. There can be no assurance that our systems will operate appropriately if we experience a hardware or software failure. A failure in our systems could cause delays in transmitting data, and as a result we may lose customers or face litigation that could adversely affect our business. An interruption in the supply of products and services that we obtain from third parties could cause a decline in sales of our services. In designing, developing and supporting our wireless data services, we rely on wireless carriers, mobile device manufacturers, content providers and software providers. These suppliers may experience difficulty in supplying us products or services sufficient to meet our needs or they may terminate or fail to renew contracts for supplying us these products or services on terms we find acceptable. Any significant interruption in the supply of any of these products or services could cause a decline in sales of our services, unless and until we are able to replace the functionality provided by these products and services. We also depend on third parties to deliver and support reliable products, enhance their current products, develop new products on a timely and cost- effective basis and respond to emerging industry standards and other technological changes. We may face increased competition which may negatively impact our prices for our services or cause us to lose business opportunities. The market for our services is expected to become increasingly competitive. The widespread adoption of industry standards in the wireless data communications market may make it easier for new market entrants and existing competitors to introduce services that compete against ours. We developed our solutions using standard industry development tools. Many of our agreements with wireless carriers, wireless handheld device manufacturers and data providers are non-exclusive. Our competitors may use the same products and services 10 in competition with us. With time and capital, it would be possible for competitors to replicate our services and offer similar services at a lower price. We expect that we will compete primarily on the basis of the functionality, breadth, quality and price of our services. Our current and potential competitors include: . Emerging wireless Internet services providers, including OmniSky, Wireless Knowledge, a joint venture of Microsoft and Qualcomm, Incorporated, and Infospace.com which recently acquired Saraide.com and those, such as Aether Systems, Inc., focusing on specific industries such as on-line financial trading; . Wireless device manufacturers, such as 3Com, Motorola and Research in Motion; . Wireless network carriers, such as AT&T Wireless Services, Bell Atlantic Mobile, BellSouth Wireless Data, Sprint PCS and Nextel Communications, Inc.; and . Wireline internet service providers and portals, such as America Online and Yahoo!. Many of our existing and potential competitors have substantially greater financial, technical, marketing and distribution resources than we do. Additionally, many of these companies have greater name recognition and more established relationships with our target customers. Furthermore, these competitors may be able to adopt more aggressive pricing policies and offer customers more attractive terms than we can. In addition, we have established strategic relationships with many of our potential competitors. In the event such companies decide to compete directly with us, such relationships would likely be terminated, which might have an adverse effect on our business and reduce our market share or force us to lower prices to unprofitable levels. We may not have adequately protected our intellectual property rights. Our success substantially depends on our ability to sell services for which we may not have intellectual property rights. We currently do not have patents on any of our intellectual property. We have filed for a patent on certain aspects of our Go.Web technology. We cannot assure you we will be successful in protecting our intellectual property through patent law. In addition, although we have applied for U.S. federal trademark protection, we do not have any U.S. federal trademark registrations for the marks "GoAmerica", "Go.Web", "Law on the Go" or certain of our other marks and we may not be able to obtain such registrations due to conflicting marks or otherwise. We rely primarily on trade secret laws, patent law, copyright law, unfair competition law and confidentiality agreements to protect our intellectual property. To the extent that our technology is not adequately protected by intellectual property law, other companies could develop and market similar products or services which could adversely affect our business. We may be sued by third parties for infringement of their proprietary rights and we may incur defense costs and possibly royalty obligations or lose the right to use technology important to our business. The telecommunications and software industries are characterized by the existence of a large number of patents and frequent litigation based on allegations of patent infringement or other violations of intellectual property rights. As the number of participants in our market increases, the possibility of an intellectual property claim against us could increase. Any intellectual property claims, with or without merit, could be time consuming and expensive to litigate or settle and could divert management attention from administering our business. A third party asserting infringement claims against us or our customers with respect to our current or future products may adversely affect us by, for example, causing us to enter into costly royalty arrangements or forcing us to incur settlement or litigation costs. Please refer to "Business-- Intellectual Property Rights" for information relating to claims we have received. We may be subject to liability for transmitting information, and our insurance coverage may be inadequate to protect us from this liability. We may be subject to claims relating to information transmitted over systems we develop or operate. These claims could take the form of lawsuits for defamation, negligence, copyright or trademark infringement or other actions based on the nature and content of the materials. Although we carry general liability insurance, 11 our insurance may not cover potential claims of this type or may not be adequate to cover all costs incurred in defense of potential claims or to indemnify us for all liability that may be imposed. We may acquire or make investments in companies or technologies that could cause loss of value to our stockholders and disruption of our business. We intend to explore opportunities to acquire companies or technologies in the future. Entering into an acquisition entails many risks, any of which could adversely affect our business, including: . failure to integrate the acquired assets and/or companies with our current business; . the price we pay may exceed the value we eventually realize; . loss of share value to our existing stockholders as a result of issuing equity securities as part or all of the purchase price; . potential loss of key employees from either our current business or the acquired business; . entering into markets in which we have little or no prior experience; . diversion of management's attention from other business concerns; . assumption of unanticipated liabilities related to the acquired assets; and . the business or technologies we acquire or in which we invest may have limited operating histories and may be subject to many of the same risks we are. Our quarterly operating results are subject to significant fluctuations and, as a result, period-to-period comparisons of our results of operations are not necessarily meaningful. Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors. These factors include: . the demand for and market acceptance of our services; . downward price adjustments by our competitors on services they offer that are similar to ours; . changes in the mix of services sold by our competitors; . technical difficulties or network downtime affecting wireless communications generally; . the ability to meet any increased technological demands of our customers; and . economic conditions specific to our industry. Therefore, our operating results for any particular quarter may differ materially from our expectations or those of security analysts and may not be indicative of future operating results. The failure to meet expectations may cause the price of our common stock to decline substantially. We may need additional funds which, if available, could result in an increase in our interest expense or additional dilution to stockholders. If additional funds are needed and are not available, our business could be negatively impacted. We currently anticipate that our available cash resources combined with the net proceeds from this offering will be sufficient to fund our operating needs for at least the next 24 months, including the expansion of our sales and marketing program. Thereafter, we may require additional financing. 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. If our plans or assumptions change or are inaccurate, we may be required to seek additional capital sooner than anticipated. We may need to raise such capital through public or private debt or equity financing. 12 If funds are raised through the issuance of equity securities, the percentage ownership of our then-current stockholders will be reduced and the holders of new equity securities may have rights, preferences or privileges senior to those of the holders of our common stock. If additional funds are raised through a bank credit facility or the issuance of debt securities, the holder of such indebtedness would have rights senior to your rights and the terms of such indebtedness could impose restrictions on our operations. If we need to raise additional funds, we may not be able to do so on terms favorable to us, or at all. If we cannot raise adequate funds on acceptable terms, we may not be able to continue to fund our operations. Risks Particular To Our Industry The market for our services is new and highly uncertain. The market for wireless data services is still emerging and continued growth in demand for and acceptance of these services remains uncertain. Current barriers to market acceptance of these services include cost, reliability, functionality and ease of use. We cannot be certain that these barriers will be overcome. If the market for our services does not grow or grows slower than we currently anticipate, our business, financial condition and operating results could be adversely affected. New laws and regulations that impact our industry could adversely affect our business. We are not currently subject to direct regulation by the Federal Communications Commission or any other governmental agency, other than regulations applicable to businesses in general. However, in the future, we may become subject to regulation by the FCC or another regulatory agency. In addition, the wireless carriers who supply us airtime are subject to regulation by the FCC and regulations that affect them could adversely affect our business. Our business could suffer depending on the extent to which our activities or those of our customers or suppliers are regulated. Risks Particular To The Offering Our stock price, like that of many technology companies, may be volatile and it is difficult to predict whether a market for our common stock will develop. We expect that the market price of our common stock will fluctuate as a result of variations in our quarterly operating results. These fluctuations may be exaggerated if the trading volume of our common stock is low. In addition, due to the technology-intensive and emerging nature of our business, the market price of our common stock may rise and fall in response to a variety of factors, including: . announcements of technological or competitive developments; . acquisitions or strategic alliances by us or our competitors; . the gain or loss of a significant customer or order; . changes in estimates of our financial performance or changes in recommendations by securities analysts regarding us or our industry; or . general market or economic conditions. This risk may be heightened because our industry is new and evolving, characterized by rapid technological change and susceptible to the introduction of new competing technologies or competitors. In addition, equity securities of many technology companies have experienced significant price and volume fluctuations. These price and volume fluctuations often have been unrelated to the operating performance of the affected companies. Volatility in the market price of our common stock could result in securities class action litigation. This type of litigation, regardless of the outcome, could result in substantial costs and a diversion of management's attention and resources. 13 We cannot predict the extent to which investor interest in our common stock will lead to the development of a trading market or how liquid that market might become. As discussed earlier, our financial results are difficult to predict and could fluctuate significantly. Upon completion of this offering, you will experience dilution. Our tangible assets are readily identified assets like property, equipment, cash, securities and accounts receivable. The value of these assets on a pro forma as adjusted basis minus the value of our liabilities equals $3.55 per share, assuming the offering is completed. The offering price exceeds this amount by $11.45 per share, assuming an initial public offering price of $15.00 per share. Therefore, you will be paying more for a share of stock than the value reflected in our accounts of tangible assets for that share. If we were forced to sell all our assets and distribute all the proceeds, you would not recover the amount you paid for shares unless we can sell the assets for more than the value we report for our tangible assets. We also have outstanding a large number of stock options and warrants to purchase common stock with exercise prices significantly below the price of shares in this offering. You will experience further dilution to the extent these options or warrants are exercised. We have anti-takeover defenses that could delay or prevent an acquisition and could adversely affect the price of our common stock. Provisions of our certificate of incorporation and bylaws and provisions of Delaware law could delay or prevent an acquisition or change of control of GoAmerica or otherwise adversely affect the price of our common stock. For example, our certificate of incorporation authorizes 4,351,943 shares of undesignated preferred stock which our board of directors can designate and issue without further action by our stockholders, establishes a classified board of directors, eliminates the rights of stockholders to call a special meeting of stockholders, eliminates the ability of stockholders to take action by written consent, and requires stockholders to comply with advance notice requirements before raising a matter at a stockholders' meeting. As a Delaware corporation, we are also subject to the Delaware anti-takeover statute contained in Section 203 of the Delaware General Corporation Law. Please refer to "Description of Capital Stock" for a more detailed discussion of these provisions. Future sales of our common stock may negatively affect our stock price. All the shares sold by us in this offering will be freely tradable. Following this offering, a large number of other outstanding shares of our common stock will be available for resale beginning at various points in time in the future. The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market following this offering, or the perception that such sales could occur. These sales also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. For more information, see "Shares Eligible for Future Sale." Our directors, executive officers, and other stockholders, who collectively hold a total of 37,204,808 shares of common stock, have agreed not to dispose of any shares of common stock, subject to limited exceptions, for a period of 180 days after the date of this prospectus, without the prior written consent of Bear, Stearns & Co. Inc., on behalf of the underwriters. We will retain broad discretion in using the net proceeds from this offering and may spend a substantial portion in ways in which you do not agree. Our management will retain broad discretion to allocate the proceeds of this offering. The proceeds may be spent in ways with which you and other stockholders may not agree. Management's failure to spend the proceeds effectively could have an adverse affect on our business, results of operation and financial condition. Because we do not intend to pay any cash dividends on our shares of common stock, our stockholders will not be able to receive a return on their shares unless they sell them. We have never paid or declared any cash dividends on our common stock or other securities and intend to retain any future earnings to finance the development and expansion of our business. We do not anticipate 14 paying any cash dividends on our common stock in the foreseeable future. Unless we pay dividends, our stockholders will not be able to receive a return on their shares unless they sell them. See "Dividend Policy." We make certain forward-looking statements in this prospectus that are not based on historical facts, but discuss our future expectations. The words "may," "would," "could," "will," "expect," "anticipate," "believe," "intend," "plan," "estimate" and similar expressions are meant to identify such forward- looking statements. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, those set forth above. Readers are cautioned not to place undue reliance on these forward- looking statements which reflect our views only as of the date of this prospectus. 15 USE OF PROCEEDS We estimate that our net proceeds from the sale of the 10,000,000 shares of common stock that we are offering will be approximately $138.2 million, assuming an initial public offering price of $15.00 per share, after deducting the underwriting discount and estimated offering expenses. The net proceeds are estimated to be approximately $159.1 million if the underwriters fully exercise their right to purchase additional shares of common stock to cover over- allotments. Our primary uses of the proceeds of this offering will be to: . expand our sales and marketing initiatives (approximately $40.0 million); . expand our customer service and support systems and capabilities (approximately $5.0 million); . build our planned redundant network operating center (approximately $5.0 million); . acquire and implement new automated subscriber airtime monitoring systems and new accounting and financial software (approximately $10.0 million); and . increase our working capital. We may also use a portion of the net proceeds to finance acquisitions that complement our business. Although we have discussions in the ordinary course of our business with potential acquisition targets, we currently do not have any binding commitments or agreements with respect to any acquisitions. Pending application of the net proceeds for the purposes described above, we intend to invest such funds in short-term, investment-grade, interest bearing securities. See "Risk Factors--We may acquire or make investments in companies or technologies that could cause loss of value to our stockholders and disruption of our business." and "--We will retain broad discretion in using the net proceeds from this offering and may spend a substantial portion in ways in which you do not agree." DIVIDEND POLICY We have never declared or paid any cash dividends on our common stock. We currently anticipate that we will retain any future earnings to fund the growth and development of our business and, therefore, do not anticipate paying any cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the discretion of our board of directors after taking into account various factors, including our earnings, financial condition, operating results and current and anticipated cash needs, as well as any economic conditions the board of directors may deem relevant. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources." 16 CAPITALIZATION The following table sets forth our cash and cash equivalents and capitalization as of December 31, 1999. This unaudited information is presented: . on an actual basis; . on a pro forma basis to give effect to: the issuance and sale of 648,057 shares of our Series B Preferred Stock in January 2000 for net proceeds of approximately $25.2 million and 226,816 shares of common stock issued in connection therewith; the increase in authorized shares of common stock to 200,000,000 shares; and the conversion of our Series A and Series B Preferred Stock into an aggregate of 13,222,760 shares of common stock; and . on a pro forma as adjusted basis to give further effect to the sale by us of 10,000,000 shares of common stock offered by this prospectus, assuming an initial public offering price of $15.00 per share, after deducting the underwriting discount and estimated offering expenses payable by us. You should read this information together with "Selected Financial Data," our historical financial statements, and the notes relating to those financial statements, and "Management's Discussion and Analysis of Financial Condition and Results of Operations" which appear elsewhere in this prospectus.
As of December 31, 1999 ------------------------------- Pro Pro Forma as Actual Forma Adjusted ------- -------- ------------ (in thousands, except share and per share data) Cash and cash equivalents..................... $ 6,344 $ 31,534 $169,684 ======= ======== ======== Series A redeemable convertible preferred stock, $.01 par value, authorized: 10,500 shares actual, none pro forma and pro forma as adjusted; issued and outstanding: 10,500 shares actual and none pro forma and pro forma as adjusted; $10,500,000 liquidation preference................................... $20,755 $ -- $ -- Series B redeemable convertible preferred stock, $.01 par value, authorized: none actual, pro forma and pro forma as adjusted; issued and outstanding: none actual, pro forma and pro forma as adjusted; $26,000,000 liquidation preference....................... -- -- -- Stockholders' equity (deficit): Preferred Stock, $.01 par value, authorized; 5,000,000 shares actual, 4,351,943 pro forma and pro forma as adjusted; issued and outstanding: none actual, pro forma and pro forma as adjusted.......................... -- -- -- Common Stock, $.01 par value, authorized: 100,000,000 shares actual, 200,000,000 pro forma and pro forma as adjusted; issued and outstanding: 23,687,184 actual, 37,136,760 pro forma and 47,136,760 shares pro forma as adjusted, respectively ................. 237 371 471 Additional paid-in capital.................. 5,484 51,295 189,345 Deferred employee compensation.............. (7,067) (7,067) (7,067) Accumulated deficit......................... (15,312) (15,312) (15,312) ------- -------- -------- Total stockholders' equity (deficit)...... (16,658) 29,287 167,437 ------- -------- -------- Total capitalization...................... $ 4,097 $ 29,287 $167,437 ======= ======== ========
The number of shares as adjusted for this offering excludes: . 10,716,000 shares of common stock authorized for issuance under our stock option plans and employee stock purchase plan, of which 2,440,008 shares were subject to outstanding options as of December 31, 1999 at a weighted average exercise price of $0.92; and . 1,276,800 shares of common stock issuable upon exercise of outstanding warrants as of December 31, 1999 at a weighted average exercise price of $1.17. 17 DILUTION You will experience immediate and substantial dilution in the net tangible book value per share of your common stock. Our pro forma net tangible book value as of December 31, 1999, was $29.3 million, or $0.79 per share of common stock. Pro forma net tangible book value per share is determined by dividing our tangible net worth (tangible assets less liabilities), by the number of shares of common stock outstanding, after giving effect to the conversion of our Series A and Series B Preferred Stock into shares of common stock. After giving effect to the sale of the shares of common stock offered by us hereby, at an assumed initial public offering price of $15.00 per share, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma net tangible book value as of December 31, 1999 was $3.55 per share of common stock. This represents an immediate increase in such net tangible book value of $2.76 per share to our existing investors and immediate dilution of $11.45 per share to new investors purchasing shares in this offering. The following table illustrates the per share dilution. Assumed initial public offering price per share............... $15.00 Pro forma net tangible book value per share as of December 31, 1999................................................... $0.79 Increase per share attributable to this offering............ 2.76 ----- Pro forma net tangible book value per share after this offering..................................................... 3.55 ------ Dilution per share to new investors in this offering.......... $11.45 ======
The following table summarizes, on a pro forma basis as of December 31, 1999, the total number of shares of common stock purchased from us, the total consideration paid and the average consideration per share paid by existing investors and by new investors purchasing shares offered by us hereby, at an assumed initial public offering price of $15.00 per share. Underwriting discounts and commissions and offering expenses have not been deducted.
Shares Purchased Total Consideration ------------------ -------------------- Average Price Number Percent Amount Percent Per Share ---------- ------- ------------ ------- ------------- Existing investors.... 37,136,760 78.8% $ 44,731,595 23.0% $ 1.20 New investors......... 10,000,000 21.2 150,000,000 77.0 15.00 ---------- ----- ------------ ----- Total............... 47,136,760 100.0% $194,731,595 100.0% ========== ===== ============ =====
The calculations above exclude from the number of outstanding shares of common stock: . 10,716,000 shares of common stock authorized for issuance under our stock option plans and employee stock purchase plan, of which 2,440,008 shares were subject to outstanding options as of December 31, 1999 at a weighted average exercise price of $0.92; and . 1,276,800 shares of common stock issuable upon exercise of outstanding warrants as of December 31, 1999 at a weighted average exercise price of $1.17. To the extent that such options and warrants are exercised, there will be further dilution to new investors. 18 SELECTED FINANCIAL DATA The following selected statement of operations data for the period from August 6, 1996, our date of inception, to December 31, 1996 and for the years ended December 31, 1997, 1998 and 1999 and the following selected balance sheet data as of December 31, 1996, 1997, 1998 and 1999 are derived from our audited financial statements. The pro forma statement of operations data presented below give effect to the conversion of all of our Series A Preferred Stock into an aggregate of 8,038,304 shares of common stock upon the closing of this offering, as if such conversion had occurred at the dates of issuance. The pro forma balance sheet data reflects the conversion of our Series A Preferred Stock discussed above and the issuance and sale of 648,057 shares of our Series B Preferred Stock after December 31, 1999 for total net proceeds of approximately $25.2 million; the issuance of 226,816 shares of common stock in connection with the Series B Preferred Stock financing; and the conversion of all of our Series B Preferred Stock into an aggregate of 5,184,456 shares of common stock. The pro forma as adjusted balance sheet data further reflects the sale of the 10,000,000 shares of common stock offered by us in this offering at an assumed initial public offering price of $15.00 per share, after deducting the underwriting discount and estimated offering expenses payable by us. You should read the selected financial data together with our financial statements and the sections of this prospectus entitled "Capitalization" and "Management's Discussion and Analysis of Financial Condition and Results of Operations." 19
Period from August 6, 1996 Years Ended December 31, (date of inception) -------------------------- to December 31, 1996 1997 1998 1999 -------------------- ------- ------- -------- (in thousands, except per share data) Statement of Operations Data: Revenue: Subscriber.................. $ -- $ 115 $ 360 $ 1,183 Equipment................... -- 33 449 1,341 Other....................... -- 25 18 207 ------ ------- ------- -------- Total revenue................. -- 173 827 2,731 Costs and expenses: Cost of subscriber revenue.. -- 88 304 4,051 Cost of equipment revenue... -- 15 532 1,648 Sales and marketing......... 43 243 909 3,283 General and administrative.. 175 841 1,549 4,810 Depreciation and amortization............... 3 32 124 275 Settlement costs............ -- -- -- 297 ------ ------- ------- -------- Total costs and expenses...... 221 1,219 3,418 14,364 ------ ------- ------- -------- Loss from operations.......... (221) (1,046) (2,591) (11,633) Interest income............... -- -- 14 165 ------ ------- ------- -------- Net loss...................... $ (221) $(1,046) $(2,577) $(11,468) ====== ======= ======= ======== Beneficial conversion feature and accretion of redemption value of mandatorily redeemable convertible preferred stock.............. -- -- -- (10,464) ------ ------- ------- -------- Net loss applicable to common stockholders................. $ (221) $(1,046) $(2,577) $(21,932) ====== ======= ======= ======== Basic net loss per share applicable to common stockholders................. $(0.02) $ (0.07) $ (0.14) $ (1.02) ====== ======= ======= ======== Diluted net loss per share applicable to common stockholders................. $(0.02) $(0.06) $(0.14) $(1.00) ====== ======= ======= ======== Weighted average shares used in computation of basic net loss per share applicable to common stockholders.......... 13,947 16,083 18,391 21,590 Weighted average shares used in computation of diluted net loss per share applicable to common stockholders.......... 14,382 16,518 18,826 22,025 Pro forma basic net loss per share........................ $ (0.45) ======== Pro forma diluted net loss per share........................ -- -- $ (0.45) ======== Weighted average shares used in computation of pro forma basic net loss per share..... -- -- 25,258 Weighted average shares used in computation of pro forma diluted net loss per share... -- -- 25,693
As of December 31, ------------------------------------------------ 1999 ------------------------------ Pro Forma 1996 1997 1998 Actual Pro Forma as Adjusted ---- ---- ------ ------- --------- ----------- (in thousands) Balance Sheet Data: Cash and cash equivalents.... $587 $ 20 $1,961 $ 6,344 $31,534 $169,684 Working capital (deficit).... 700 (143) 1,476 2,426 27,616 165,766 Total assets................. 791 324 3,010 9,757 34,947 173,097 Series A redeemable convertible preferred stock....................... -- -- -- 20,755 -- -- Series B redeemable convertible preferred stock....................... -- -- -- -- -- -- Stockholders' equity (deficit)................... 779 148 2,225 (16,658) 29,287 167,437
Period from Years Ended December August 6, 1996 31, (date of inception) ------------------------ to December 31, 1996 1997 1998 1999 -------------------- ----- ------- -------- (in thousands) Other Financial Data: Cash provided by (used in): Operating activities........... $ (338) $(803) $(2,215) $ (6,745) Investing activities........... (74) (180) (498) (643) Financing activities........... 1,000 415 4,654 11,771
20 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion of our financial condition and results of operations in conjunction with the financial statements and the notes thereto included elsewhere in this prospectus. The results shown in this prospectus are not necessarily indicative of the results we will achieve in any future periods. Overview We provide nationwide wireless Internet services. We derive our revenue primarily from the sale of wireless data services and the sale of related mobile devices to our subscribers. During March 1997, we commenced offering our services to individuals and businesses. Since our inception, we have invested significant capital to build our wireless network operations and customer support centers as well as our customized billing system. Recently, we have invested additional capital in the development of our software application Go.Web and other software applications. Our plan is to continue to invest in our network operations and customer support centers, as well as to expand our sales and marketing efforts. We provide and expect to continue to provide mobile devices made by third parties to our customers at prices below our costs for such devices. We also expect to continue to incur significant sales and marketing, systems development and administrative expenses. We have incurred operating losses since our inception and expect to continue to incur increasing operating losses for at least the next several quarters. Therefore, we will need to generate significant revenue to become profitable and sustain profitability on a quarterly or annual basis. We will have to increase substantially our subscriber base in order to achieve our business plan. Our subscriber revenue primarily consists of monthly service fees, which we recognize as services are provided to the subscriber. Subscriber revenue accounted for approximately 43.5% and 43.3% of our total revenue during 1998 and 1999, respectively. We currently offer two types of mobile data service plans. Our Go.Unlimited Plan provides unlimited data usage on any mobile device for a fixed monthly fee, which is currently $59.95 for retail subscribers. Our Go.Lite Plan provides a fixed amount of data usage on any mobile computing device for a significantly lower base monthly fee, which is currently $9.95 for retail subscribers. Under the Go.Lite Plan, subscribers incur additional charges for data usage in excess of the predetermined volume. However, we do not charge our subscribers any additional amounts for roaming, which is using a mobile device outside of a designated geographical area. We also generally charge a non-refundable activation fee upon initial subscription. We offer new subscribers a 14-day trial period during which they can cancel our service without any penalty, although we do not refund the pro-rated fee for that trial period, which we include in our revenue. Subscribers to our plans are subject to a six-month or one-year contract which provides for an early cancellation fee. We also typically sell third-party mobile devices in conjunction with a service agreement to a new subscriber. Equipment revenue accounted for approximately 54.3% and 49.1% of our total revenue during 1998 and 1999, respectively. We recognize equipment revenue at the time of the shipment of the mobile device to a subscriber. During 1999, approximately 90% of our subscribers purchased a mobile device upon their initial subscription. Over time, we expect that such percentage will decrease as mobile devices for data transmission become more prevalent. In addition to our subscriber and equipment revenue, we historically have generated other revenue which consists of consulting services relating to the development and implementation of wireless data systems for certain corporate customers. We do not intend for consulting services to be a significant element of our business in the future. Such consulting revenue is recognized as the work is performed. We have experienced negative overall gross margins, which consist of margins on our subscriber revenue, equipment revenue and other revenue. We expect to continue to experience negative overall gross margins 21 primarily because of negative margins on our resale of equipment and on our subscriber revenue. We believe that our gross margins on subscriber revenue will improve during 2000. Our cost of subscriber revenue consists primarily of wireless airtime costs. Our airtime costs are determined by agreements we have with several wireless carriers. Typically, we have one to three-year contracts to buy data network capacity either for an agreed amount of kilobytes per subscriber at a flat fee or on a cents-per-kilobyte basis. We intend to pass through to our subscribers all the airtime charges that we incur from our wireless carriers; however, we have not always been and will not always be able to pass through such charges because the pricing plans offered to us by our wireless carriers and to which we assign our subscribers may not allow us to always cover our subscriber costs. For example, if we assign our Go.Unlimited Plan subscribers to a carrier plan that charges us an increasing fee as subscriber usage increases, then as subscriber usage and our related airtime costs increase, our margins on subscriber revenues would decrease and may become negative. Our airtime costs also increase substantially when subscribers use our services outside of their pre-determined geographic area, which results in roaming charges to us by the carriers that we do not pass on to our subscribers. Our cost of subscriber revenue in 1999 was approximately $4.1 million compared to subscriber revenue of $1.2 million for such period. Such negative gross margin, which was a substantial increase over prior periods, was due in part to our placement of subscribers in more expensive carrier plans and to excessive usage by a few subscribers. We do not have and may not be able to develop the automated systems necessary to monitor our subscribers' usage and roaming patterns and quickly switch our subscribers to a more appropriate, lower cost airtime plan. We intend to implement alternative automated systems by mid-2000. In addition, while we continually seek to negotiate better pricing of wireless airtime plans with our carriers, we cannot assure you that we will be successful in that regard. See "Risk Factors" for a discussion of the risks relating to our negative gross margins and our need to improve our systems. We also have experienced, and expect to continue to experience, negative gross margins on the mobile devices that we resell. We currently are exploring an outsourcing arrangement with a third party computer hardware aggregator that will serve as our primary source of mobile devices. We believe that if such arrangement is implemented, we should be able to reduce our equipment costs and inventory risks by taking advantage of such partner's volume discounts and inventory protection programs offered to them by device manufacturers. We cannot assure you that we will be able to consummate such outsourcing arrangement on favorable terms, if at all. Further, such arrangement may not result in positive gross margins on our equipment sales. Our sales and marketing expenses consist primarily of advertising and promotions, cash compensation and related costs for marketing personnel, travel and entertainment and other related costs. In 2000, we expect our sales and marketing expense to increase substantially as a percentage of our annual revenues. Our general and administrative expenses consist primarily of cash compensation and related costs for general corporate, business development and technology development personnel, along with rent and other related costs. Our costs of performing consulting services is recorded as general and administrative expense. We expect general and administrative expenses to decrease as a percentage of our annual revenues. Depreciation and amortization expenses consist primarily of depreciation expenses arising from equipment purchased for our network operations center and other property and equipment purchases. During 1999, we granted options to certain of our employees at exercise prices deemed to be below the fair market value per share of our common stock. Such grants resulted in non-cash employee compensation expenses which have been recorded to account for the difference, on the date of grant, between the fair market value and the exercise price of stock options granted to employees. The resulting deferred employee compensation will be amortized over the vesting periods of the grants. During 2000, we expect to incur an aggregate of $8.2 million in non-cash employee compensation expense as a result of stock option grants during 1999 and the first quarter of 2000 which were granted at prices below the deemed fair market value of our common stock. Net interest income consists primarily of interest earned on cash and cash equivalents. 22 Results of Operations The following table sets forth for the periods indicated certain financial data as a percentage of revenue:
Percentage of Revenue ------------------------- Years Ended December 31, ------------------------- 1997 1998 1999 ------- ------- ------- Revenue: Subscriber......................................... 66.3% 43.5% 43.3% Equipment.......................................... 19.4 54.3 49.1 Other.............................................. 14.3 2.2 7.6 ------- ------- ------- Total revenue.................................... 100.0 100.0 100.0 Costs and expenses: Cost of subscriber revenue......................... 50.7 36.7 148.4 Cost of equipment revenue.......................... 8.7 64.4 60.4 Sales and marketing................................ 140.5 109.9 120.2 General and administrative......................... 486.9 187.4 176.1 Depreciation and amortization...................... 18.7 15.0 10.0 Settlement costs................................... -- -- 10.9 ------- ------- ------- Total costs and expenses......................... 705.5 413.4 526.0 ------- ------- ------- Loss from operations............................. 605.5 313.4 426.0 Interest income...................................... -- 1.7 6.0 ------- ------- ------- Net loss......................................... 605.5% 311.7% 420.0% ======= ======= =======
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998 Subscriber revenue. Subscriber revenue increased from $359,000 for the year ended December 31, 1998 to $1.2 million for the year ended December 31, 1999. The increase primarily was due to having a larger subscriber base in the year ended December 31, 1999 than in the year ended December 31, 1998. Our increase in subscriber revenue was offset in part by lower average revenue per subscriber. Our subscriber base increased from 1,630 subscribers at December 31, 1998 to 5,859 subscribers at December 31, 1999. We expect the number of our subscribers to increase as a result of our expanded sales and marketing efforts. Equipment revenue. Equipment revenue increased from $449,000 for the year ended December 31, 1998 to $1.3 million for the year ended December 31, 1999. This increase primarily was due to an increase in the number of the mobile devices sold during the year ended December 31, 1999 compared to the year ended December 31, 1998. Other revenue. Other revenue increased from $18,000 for the year ended December 31, 1998 to $206,000 for the year ended December 31, 1999. This increase primarily was due to the performance of a single systems integration consulting project for a third party during the year ended December 31, 1999 compared to the year ended December 31, 1998. Consulting services are not expected to be a significant element of our business in the future. Cost of subscriber revenue. Cost of subscriber revenue increased from $303,000 for the year ended December 31, 1998 to $4.1 million for the year ended December 31, 1999. This increase primarily was due to an increase in our subscriber base and a related increase in airtime usage during the year ended December 31, 1999 than in the year ended December 31, 1998. Our cost of subscriber revenue consists primarily of wireless airtime costs. Our negative gross margin for the year ended December 31, 1999 was a substantial increase over prior periods and was due in part to our placement of subscribers in more expensive carrier plans and to extensive usage by a few subscribers. We expect the number of subscribers and related use of our services to increase which will result in an increase in the cost of subscriber revenue. 23 Cost of equipment revenue. Cost of equipment revenue increased from $532,000 for the year ended December 31, 1998 to $1.6 million for the year ended December 31, 1999. This increase was primarily due to an increase in the number of mobile devices sold during the year ended December 31, 1999 compared to the year ended December 31, 1998. Sales and marketing. Sales and marketing expenses increased from $909,000 for the year ended December 31, 1998 to $3.3 million for the year ended December 31, 1999. This increase was primarily due to increased advertising costs paid to third parties and the salaries and benefits, including stock- based compensation, for the additional personnel performing sales and marketing activities. We expect sales and marketing expenses to further increase as we expand our advertising program to increase brand awareness and add personnel to our sales and marketing department. General and administrative. General and administrative expenses increased from $1.5 million for the year ended December 31, 1998 to $4.8 million for the year ended December 31, 1999. This increase was primarily due to the addition of salaries and benefits, including stock-based compensation, for personnel performing business development and general corporate activities. We expect general and administrative expenses to increase as we add personnel and incur additional expenses related to the anticipated growth of our business and costs associated with our operation as a public company. Settlement costs. Settlement costs for the year ended December 31, 1999 represents the non-cash charge resulting from the settlement of our obligations arising from claims by certain stockholders relating to the sale of equity securities. Such settlement costs represent the fair value of options and warrants issued to such stockholders. Interest income. Interest income increased from $14,000 for the year ended December 31, 1998 to $165,000 for the year ended December 31, 1999. Such income was primarily due to increased cash balances as a result of our private placement financings completed in 1999. Year Ended December 31, 1998 Compared to Year Ended December 31, 1997 Subscriber revenue. Subscriber revenue increased from $115,000 for the year ended December 31, 1997 to $359,000 for the year ended December 31, 1998. The increase in subscriber revenue was primarily due to having a larger subscriber base in 1998 than in 1997. Our subscriber base increased from 531 subscribers at December 31, 1997 to 1,630 subscribers at December 31, 1998. Equipment revenue. Equipment revenue increased from $33,000 for the year ended December 31, 1997 to $449,000 for the year ended December 31, 1998. The increase in equipment revenue was primarily due to an increase in the number of mobile devices sold during the year ended December 31, 1998 compared to the year ended December 31, 1997. Other revenue. Other revenue decreased from $25,000 for the year ended December 31, 1997 to $18,000 for the year ended December 31, 1998. Cost of subscriber revenue. Cost of subscriber revenue increased from $88,000 for the year ended December 31, 1997 to $303,000 for the year ended December 31, 1998. We began to incur costs of subscriber revenue in March 1997 as we launched our wireless services. The increase in the cost of subscriber revenue from 1997 to 1998 was primarily due to an increase in our subscriber base and related increase in airtime usage. Cost of equipment revenue. Cost of equipment revenue increased from $15,000 for the year ended December 31, 1997 to $532,000 for the year ended December 31, 1998. We began to sell mobile devices in March 1997 in conjunction with the launch of our wireless services. The increase in the cost of equipment revenue from 1997 to 1998 was primarily due to an increase in the number of mobile devices sold during the year ended December 31, 1998 compared to the year ended December 31, 1997. 24 Sales and marketing. Sales and marketing expenses increased from $243,000 for the year ended December 31, 1997 to $909,000 for the year ended December 31, 1998. This increase was primarily due to increased advertising costs paid to third parties and the salaries and benefits for additional personnel performing sales and marketing activities. We expect sales and marketing expenses to increase as we expand our advertising program to increase brand awareness and add personnel to our sales and marketing department. General and administrative. General and administrative expenses increased from $841,000 for year ended December 31, 1997, to $1.5 million for the year ended December 31, 1998. This increase was primarily due to the salaries and benefits for additional personnel performing business development and general corporate activities. We expect general and administrative expenses to increase as we add personnel and incur additional expenses related to the anticipated growth of our business and costs associated with our operation as a public company. Interest income. There was no interest income earned for the year ended December 31, 1997. Net interest income was $14,000 for the year ended December 31, 1998. The increase for the year ended December 31, 1998 was primarily due to increased cash balances. Liquidity and Capital Resources Since our inception, we have financed our operations primarily through private placements of our equity securities and our redeemable convertible preferred stock, which have resulted in aggregate net proceeds of approximately $18.4 million through December 31, 1999, of which approximately $12.3 million was raised since June 1999. As of December 31, 1999, we had $6.3 million in cash and cash equivalents and $2.4 million of working capital. Subsequent to December 31, 1999, we issued and sold 648,057 shares of Series B Preferred Stock for net proceeds of approximately $25.2 million. Net cash used in operating activities was $803,000, $2.2 million and $6.7 million for the years ended December 31, 1997, 1998 and 1999, respectively. The principal use of cash in each of these periods was to fund our losses from operations. Net cash used in investing activities was $180,000, $498,000 and $643,000 for the years ended December 31, 1997, 1998 and 1999, respectively. Cash used in investing activities for the year ended December 31, 1997 and 1998 was for purchases of property, equipment and leasehold improvements. For the year ended December 31, 1999, we used cash in investment activities for purchases of $387,000 of property, equipment and leasehold improvements and the purchase of $256,000 of preferred stock in DataRover Mobile Systems, Inc. Net cash provided by financing activities was $415,000, $4.7 million and $11.8 million for the years ended December 31, 1997, 1998 and 1999, respectively. Cash provided by financing activities in each of these periods was primarily attributable to proceeds from additional private sales of our equity securities. As of December 31, 1999, our principal commitments consisted of obligations outstanding under operating leases. As of December 31, 1999, future minimum payments for non-cancelable operating leases having terms in excess of one year amounted to $4.9 million, of which $931,000 is payable in 2000. Although we have no material commitments for capital expenditures, we anticipate a substantial increase in our capital expenditures and lease commitments consistent with our anticipated growth in operations, infrastructure and personnel, including the deployment of additional network equipment. We have undertaken several operating initiatives which will require significant use of our cash resources. For example, we intend to use a significant portion of the proceeds of this offering to increase substantially our marketing budget as part of our efforts to build the GoAmerica brand. If our marketing efforts cost more than anticipated, if we cannot increase our brand awareness or if the GoAmerica brand is not well received by our existing and potential subscribers, our losses and cash needs will increase. In addition, we are pursuing the 25 acquisition and development of automated systems to track our airtime usage costs and monitor subscribers' wireless plan usage. We also intend to acquire new accounting and business process software and systems with a portion of the net proceeds from this offering. We expect that the acquisition and implementation of our automated subscriber usage monitoring systems and new accounting and business process software will cost approximately $7.0 to $10.0 million over the next twelve months. We anticipate that our development costs related to improving our service offerings will also increase as we respond to technological changes in the wireless data industry and as new competitors emerge. We expect that our development costs will be approximately $1.0 million to $2.0 million for 2000 which will be funded primarily from our current cash position. We may also use funds to complete any business acquisitions that we may decide to pursue and to integrate such businesses, technologies and personnel upon completion of any such transaction. We currently anticipate that our available cash resources combined with the net proceeds from this offering will be sufficient to fund our operating needs for at least the next 24 months. Thereafter, we may require additional financing. 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. If our plans or assumptions change or are inaccurate, we may be required to seek additional capital or to seek capital sooner than anticipated. We may need to raise funds through public or private debt or equity financing. In the event additional financing is not available, we will be required to significantly reduce our expenses and substantially curtail operations. Recent Accounting Pronouncements In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, "Accounting for Derivatives and Hedging Activities" (SFAS 133), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. SFAS 133, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. As we do not currently intend to engage in derivatives or hedging transactions, we do not anticipate that there will be any impact on our results of operations, financial position or cash flows upon the adoption of SFAS 133. Quantitative and Qualitative Disclosures About Market Risk We have limited exposure to financial market risks, including changes in interest rates. At September 30, 1999, all of our available excess funds are cash or cash equivalents whose value is not subject to changes in interest rates. We currently hold no derivative instruments and do not earn foreign- source income. We expect to invest our cash only in debt obligations issued by the U.S. government or its agencies with maturities of less than one year. Update on Year 2000 Computer Issues We did not experience any computer or systems problems relating to the Year 2000. Upon review of our internal and external systems during 1999, we determined that we did not have any material exposure to such computer problems and that the software and systems required to operate our business and provide our services were Year 2000 compliant. As a result, we did not incur, and do not expect to incur, any material expenditures relating to Year 2000 systems remediation. 26 BUSINESS Overview We are a nationwide wireless Internet services provider. We enable our individual and business subscribers to access remotely the Internet, email and corporate intranets in real time through a wide variety of mobile computing and communications devices. Through our Wireless Internet Connectivity Center, we offer our subscribers comprehensive and flexible mobile data solutions for wireless Internet access by providing wireless network services, mobile devices, software and subscriber service and support. Our Go.Web technology and Wireless Internet Connectivity Center enable our subscribers to access a wide variety of Internet content, such as business and financial data, news, sports, travel, entertainment, personal contact and other information. Our subscribers can also conduct ecommerce transactions, such as shopping, reservations and stock trading, to the extent permitted by their mobile device of choice. Our subscribers can also customize their personal Web site or "personal portal," www.mygoweb.com, to access their favorite Web sites quickly. In addition, we offer a variety of email solutions which allow our subscribers to access their email at their existing Internet and business email accounts as well as a GoAmerica email address. We provide our subscribers with flexible and reliable wireless Internet services across a number of wireless networks and mobile device platforms. To provide our subscribers with nationwide access, we have established strategic relationships with many leading wireless network carriers, such as AT&T Wireless Services, American Mobile, BellSouth Wireless Data and Bell Atlantic Mobile. Our subscribers are able to use our wireless Internet services with their choice of a wide variety of leading mobile devices, including Palm operating system-based computing devices, Research In Motion's interactive pagers, laptop computers, Microsoft Windows CE-based computers and wirelessly- enabled smart phones. We also have engineered our wireless Internet services to operate with new versions of many wireless devices. Market Opportunity We believe that the growth of the Internet, email and mobile wireless communications creates a significant market opportunity for service providers capable of delivering wireless Internet and email services over wireless communication networks. We believe that the following trends contribute to this market opportunity: The Growth of the Internet and Ecommerce. The Internet and corporate intranets are becoming an increasingly important global medium for communications and commerce. The number of Internet users worldwide is projected to increase from approximately 140 million at the end of 1998 to over 500 million by the end of 2003, according to International Data Corporation. In addition, International Data Corporation estimates that the worldwide volume of commerce conducted over the Internet was approximately $50 billion in 1998 and will grow to approximately $1.3 trillion in 2003. Until recently, ecommerce has been dependent upon wired computer access to the Internet, which we believe has limited the overall demand and ability to conduct commercial transactions electronically. The ability to access the Internet remotely through a variety of wireless devices on a nationwide basis will, we believe, fuel the increasing demand for ecommerce. We further believe that the growth of the Internet and ecommerce will also increase the demand for wireless access to these services. The Proliferation of Email. Email is becoming an increasingly important means of communication, with both the number of email users and usage level per individual projected to increase significantly. Forrester Research, Inc. projects that daily Internet email traffic in the United States will increase from 100 million email messages per day in 1996 to 1.5 billion per day in 2002. We believe that as email becomes an increasingly important means of communication, there will be an increasing desire for mobile access to email. The Growth of Mobile Communications. International Data Corporation forecasts that the remote and mobile workforce in the United States, defined as employees spending more than 20% of their time away from the office, will grow from 34 million individuals at the end of 1998 to 47 million at the end of 2003. As a 27 result, we believe that individuals will increasingly use mobile devices for convenience and to enhance productivity when away from their home or office. We further believe that the number of individuals using mobile devices, such as handheld personal organizers, notebook computers, pagers and mobile phones, will grow as these devices become smaller, less expensive, more reliable including longer battery life and have more features than earlier devices. Jupiter Communications estimates that shipments of advanced pagers and personal organizers capable of accessing the Internet will grow from 1.8 million devices in 1998 to 9.4 million in 2002. The Challenge While the wireless data services market is developing rapidly, widespread adoption of wireless data services has been hindered by a number of factors, including: . limited geographic coverage of digital communications services; . incompatible mobile devices and wireless carrier networks; . high costs associated with using wireless data networks; . an inability to access and transmit data over wireless networks at adequate speeds; . data security concerns; . a lack of personnel with the expertise to develop and operate wireless data systems; and . mobile devices with difficult-to-read user interfaces and features. As a result of these challenges, a significant opportunity exists for wireless Internet service providers that are capable of offering an easy-to- use, cost-effective and reliable wireless service. The GoAmerica Wireless Solution We provide our subscribers with easy-to-use wireless access to the Internet, email and corporate intranets. Through our Wireless Internet Connectivity Center, we offer our subscribers comprehensive and flexible mobile data solutions for wireless Internet access by providing wireless network services, mobile devices, software and subscriber service and support. The following are key components of our comprehensive wireless Internet solution: Offer Easy-To-Use Wireless Internet Access, Ecommerce and Email. Through our Go.Web technology, we provide our subscribers with easy-to-use access to the Internet. Our subscribers can access Web sites to obtain a broad variety of content, such as business and financial data, news, sports, travel, entertainment, personal contact and other information. Our subscribers can also conduct ecommerce transactions, such as shopping, reservations and stock trading, to the extent permitted by their mobile device of choice. We also offer our subscribers their own personal Web site, www.mygoweb.com, which each subscriber can customize in order to access their favorite Web sites quickly. In addition, we offer a variety of email solutions, which allow our subscribers to access their email at their existing Internet and business email accounts as well as a GoAmerica email account. Provide Nationwide Services Across Multiple Wireless Networks. We have established relationships with many of the leading wireless network carriers, including AT&T Wireless Services, American Mobile, Bell Atlantic Mobile and BellSouth Wireless Data, which enable our subscribers to access their information on a nationwide basis. Our network carriers operate on a variety of different network technologies, such as Cellular Digital Packet Data, or CDPD, Mobitex, dataTAC, Code Division Multiple Access, or CDMA, and Global System for Mobile telecommunications, or GSM, which allow us to offer our services through a broad range of wireless devices. Our airtime agreements with wireless carriers permit us to offer our subscribers a flat-rate pricing plan and a variable pricing plan with rates which vary depending upon the level of data traffic utilized 28 by a subscriber. In addition, our relationships with wireless network carriers enable us continually to adapt our existing solutions and develop new systems to integrate with new technologies and platforms as they emerge for commercial use. Enable Wireless Services Through a Wide Variety of Mobile Devices. We currently offer our services through a wide variety of wireless access devices including Palm OS-based computing devices, Research-In-Motion's interactive pagers, laptop computers, Windows CE-based computers and WAP-enabled smart phones. We are able to provide service through these devices because we support a range of wireless networks and utilize our own and third-party device software. This capability enables us to offer service through devices that we believe will achieve the greatest market acceptance and penetration. Integrate Various Wireless Technologies and Networks to Provide Seamless Internet Solutions. We deliver content across a broad range of wireless carrier networks to a wide variety of mobile devices. We are able to do so through our Wireless Internet Connectivity Center, which serves as a secure link between broadband networks, such as the Internet, and narrowband wireless communications networks. By using our own and third-party software, we compress content from broadband sources to enable faster and more cost-effective data delivery over wireless networks. We support leading wireless protocols, such as wireless application protocol, or WAP. In addition, our Wireless Internet Connectivity Center has the flexibility to format content automatically to meet the requirements of a subscriber's wireless device. Our Wireless Internet Connectivity Center is also scalable, enabling us to move quickly to meet the demands of increased data traffic and expanding wireless network capabilities. Offer Flexible Wireless Solutions for Corporate Customers. Businesses often require wireless solutions that enable them to provide their customers and employees with access to proprietary information, corporate services, the Internet and email. However, many businesses do not have the financial and administrative resources, internal information technology capabilities and size required to develop and maintain wireless services on a cost-effective basis. We provide corporate customers with a broad range of secure and reliable wireless solutions by outsourcing our Wireless Internet Connectivity Center and wireless networking expertise. Through our services, corporate customers can enable employees and customers to access the Internet, intranets and Internet- based email. Businesses can also enable wireless access to their internal corporate databases and systems by securely interconnecting with our Wireless Internet Connectivity Center. Focus on Subscriber Service and Support. We strive to provide our subscribers with easy-to-use wireless Internet services. This begins with providing customers with flexible wireless solutions that include all the necessary components to enable service. In addition, we provide our customers with advice during their purchase decision process through our direct sales representatives, dealers, resellers and Web site, in order to help them choose the appropriate combination of device, carrier service and pricing plan. Once a subscriber has initiated services, we offer extensive customer service and support. We maintain toll free customer service phone lines Monday through Friday, 8 a.m. to 8 p.m. Eastern time. Existing subscribers can inquire about their accounts or receive technical support through the same toll free service. 29 The following chart illustrates the wide variety of mobile devices and communications networks that we provide to our subscribers to enable them to seamlessly access the Internet and their corporate networks to obtain critical information and conduct electronic transactions: Graphic appears here. The graphic depicts four boxes aligned from left to right. .The first box, which is labelled "Content" includes the text "World Wide Web" and "Corporate Intranets" with an accompanying photograph of the globe. .The second box, which is labelled "GoAmerica Wireless Internet Connectivity Center", includes the text "Go.Web Gateway" and "Go.Web Formatting, Encryption, Authentication, and Compression Architecture" and has an accompanying photograph of computer technology. .The third box, which is labelled "Wireless Networks", includes the text "Cellular Digital Packet Data (CDPD)", "Code Division Multiple Access (CDMA)", "Global System for Mobile Communications (GSM)", "Mobitex" and "Data TAC" and has an accompanying photograph of a communications tower. .The fourth Box, which is labelled "Mobile Devices", includes the text "Palm Operating System", "Interactive Pagers", "Laptops", "Windows CE" and "Wireless Application Protocol (WAP) Phones" The GoAmerica Strategy Our goal is to be the leading provider of nationwide wireless Internet services and mobile data solutions for individuals and businesses. We seek to enhance our offerings with value-added services and additional functionality to expand our subscriber base and increase our recurring revenues. Our strategy includes the following key elements: Offer Comprehensive and Flexible Solutions. We continually improve our subscribers' wireless experience by simplifying user interfaces, expanding the features of the Go.Web services, and improving the ease with which our subscribers can personalize the mygo.web menus. We also intend to complement our Web-based service offerings by providing customized solutions that meet the specific needs of our existing and potential subscribers. For example, we recently entered into strategic arrangements that will provide our subscribers with direct access to Avis Rent-A-Car's rental car reservations system and Lexis-Nexis' legal libraries and related data. We also introduced one-way paging services which we can provide as an added feature for our Internet and email subscribers. Capitalize on Marketing and Branding Initiatives. We market and advertise in order to establish our brand name and create sales opportunities. With a portion of the net proceeds from this offering we intend to expand significantly our presence as a mass market provider of wireless Internet access by making a significant investment in establishing and building the GoAmerica brand. Through a combination of mass media advertising and Web advertising, we seek to expand our subscriber base, strengthen our customer relationships and capture significant market share. We supplement our existing subscriber acquisition programs through value-added reseller and dealer co- marketing programs and partner marketing programs such as our relationship 30 with Lexis-Nexis. We have and will continue to target market segments and geographic markets where we believe there is opportunity for substantial subscriber penetration. Expand Sales and Distribution Channels. We currently sell our services through a combination of direct sales representatives, inbound telemarketers, our Web site and through indirect channels such as value-added resellers and dealers. In addition, we seek to generate sales from joint selling agreements we have with third parties. As of January 31, 2000, we had two full-time direct sales professionals who focus on small to mid-sized corporate subscriber accounts and two full-time telemarketers who focus on our individual customers. We intend to increase our dedicated sales force significantly during the next twelve months. We have a four-tiered channel program that includes resellers, master dealers, dealers and agents. We compensate our resellers and dealers with commissions for each sale generated by them. As of January 31, 2000, we had five channel manager professionals who supervise our four-tiered channel program. We intend to expand significantly our indirect channel activities during the next twelve months. We have partnered and seek to continue to partner for joint selling purposes with other companies that have complementary wireless data products or services such as manufacturers, application partners and cellular and PCS carriers. Provide Superior Customer Service and Technical Support. Because wireless Internet access is an evolving and growing communications channel, subscribers may face a number of potential problems. We believe that even sophisticated subscribers periodically have questions or encounter problems as applications designed for wireless data proliferate. Consequently, we focus on providing high levels of customer service and technical support in an effort to achieve maximum levels of customer satisfaction. We intend to offer our customer service and support 24 hours a day, seven days a week. In addition, through our planned automation system, subscribers will be able to manage their accounts and troubleshoot 24 hours a day at our Web site. We believe that superior customer service will help us minimize subscriber deactivations and promote customer referrals. Continue to Develop Solutions With Leading Wireless Technologies. We focus our technology development efforts on applications and solutions which integrate with and enable leading third-party mobile devices and wireless networks. We also intend to continue to develop solutions that we expect will allow our Go.Web service to operate on next generation protocols, devices and networks. We believe that our relationships with leading device manufacturers and wireless network carriers enhance our ability to continually adapt our existing solutions and develop new systems to integrate with new technologies and platforms as they emerge for commercial use. Pursue Strategic Acquisitions. We intend to pursue acquisitions that we believe will allow us to increase quickly the scale and scope of our resources. In particular, we expect to seek acquisitions that will expand our subscriber base or engineering force, enable us to enter new markets or industry sectors or to provide new services. Service Offerings We offer comprehensive and flexible wireless data solutions that permit subscribers to access their email, corporate intranets, personal Web pages and the Internet anytime on a nationwide basis. Access to the Internet. Our subscribers efficiently and reliably access public Web sites from all our supported devices. Through our Go.Web service, we provide a personal menu of popular Web sites which enable our subscribers to access a wide variety of Internet content, such as business and financial data, news, sports, travel, entertainment, personal contact and other information. Our subscribers can also conduct ecommerce transactions, such as shopping, reservations and stock trading, to the extent permitted by their mobile device of choice. This menu is organized by major content categories and reduces the amount of time and the amount of data input it takes for our customers to access these sites. The dynamic nature of the menu allows us to update it periodically and add valuable wireless Web sites for our subscribers. Our menu also allows our corporate subscribers to pre-determine the choices available to their users. Through business 31 arrangements, we offer streamlined access to public databases such as those from Lexis-Nexis, as well as personal ecommerce access to banking, brokerage and shopping services. Mygo.web allows our subscribers to customize their menus by bookmarking and linking to their Web sites of choice. Access to Corporate Networks. Our business customers often require secure connections to their enterprise systems, but do not want to change the way that their systems are configured. Through our virtual private network and data hosting services, we provide the required secure and reliable wireless access to corporate data. Business users can access their corporate databases through Web servers either inside our firewall or their own security system. Through standard Internet interfaces, our corporate subscribers can access their enterprise messaging systems such as Microsoft Exchange and Lotus Notes or use value-added services such as sales force automation, customer retention management and Web dispatch offerings. Email Services. Our services provide individual and business subscribers access to the wide variety of Internet based email services. We also provide an email address at goamerica.net for all of our subscribers as a free service. Our business subscribers are able to fully manage their email accounts if their corporate networks permit remote access. In such cases, our subscribers can send, receive, read, reply, forward and delete their regular corporate email on a remote basis. Individual subscribers who have accounts at Internet service providers or Web portals, such as Earthlink or Yahoo!, can access those email accounts when they are using their existing wireline service or their GoAmerica wireless Internet service. Instant Messaging, Paging and Operator Services. We currently provide an instant messaging service between GoAmerica subscribers with compatible interactive pagers that generally provides quicker transmission than traditional paging. Our instant messaging service also provides confirmation of message delivery and a read receipt between sender and recipient. In addition, through our business alliances with paging service providers, we also provide traditional paging and operator services that allow our subscribers to migrate from one-way to two-way services without disruption. Customers We sell and market to individual and corporate customers. Our subscriber base has grown from 1,630 subscribers at December 31, 1998 to 5,859 subscribers at December 31, 1999. We generally target our corporate marketing and selling efforts toward decision-makers within communication-intensive small to mid- sized businesses. We focus our individual consumer customer marketing and selling efforts on high-end mobile professionals. These mobile professionals typically have computer and Internet access, use a cellular phone or pager, and have a strong professional or personal need to stay in touch with Web-based information. The majority of our subscribers today are corporate customers, but we expect over time that individual consumers will represent a larger portion of our subscriber base. We continually seek to enhance and expand our service offerings for our customers which we believe is a critical element in growing our subscriber base and maintaining customer satisfaction. We also develop corporate solutions which enable us to expand our subscriber base while allowing our corporate partner to enhance its service offerings to its customers. For example, regional wireless service provider, Frontier Cellular, uses our hosting services for its wireless data products. We host and manage Phone.com WAP servers at our Wireless Internet Connectivity Center for Frontier and provide our content to digital PCS phones on Frontier's network. We also developed a customer management interface to allow Frontier to provision and manage its customers remotely. We connect to Frontier's network over a virtual private network that we engineered jointly with Frontier. This virtual private network connection provides the security required by Frontier and is similar to connections deployed for our other corporate customers. 32 Sales and Marketing Sales We currently sell our services directly through a combination of sales representatives, inbound telemarketers and our Web site and sell indirectly through value-added resellers and dealers. In addition, we seek to generate sales from joint marketing relationships, such as the relationship we have with Sierra Wireless. Direct Sales Representatives. As of January 31, 2000, we had two direct sales professionals who focus primarily on small to mid-sized corporate customers seeking to establish wireless Internet services for their employees or customers. We intend to grow our direct sales force significantly over the next 12 months. Our business development personnel and senior executives, particularly our chief executive officer and executive vice president, also spend a considerable amount of their time developing potential customer relationships and selling and promoting our services. Telemarketing. As of January 31, 2000, we had two telemarketing professionals. Our telemarketing professionals respond to queries generated as a result of Web site visits and our marketing efforts which usually list our toll-free sales telephone number. GoAmerica Web Site. Our Web site seeks to educate and inform potential customers about wireless data networks and devices. When a customer is ready to order, they can order directly through an online subscription form that is automated with our order entry and product fulfillment operations. We receive no advertising or sponsorship revenues from our Web site currently. We will continue to explore ways to gain revenues from our Web site. Value-Added Resellers and Dealers. Through our GoAmerica Alliance Program, we provide commissions to value-added resellers and dealers for each sale they bring to us. As of January 31, 2000, we had five channel manager professionals who supervise our four-tiered program that includes resellers, master dealers, dealers and agents. Resellers buy GoAmerica service at a wholesale price and sell it at a retail price. Resellers are not paid a commission. Resellers are responsible for selling the GoAmerica service and mobile devices, and billing and supporting the customer. GoAmerica is responsible for billing the reseller. We believe that as of December 31, 1999, our resellers had in excess of 200 direct sales professionals. In addition, in January 2000, we added significantly to our reseller network by entering into an agreement with Arch Paging Inc., the second largest paging company in the United States. We intend to leverage Arch's sales force to reach potential new subscribers of our services. We also have a reselling relationship with American Mobile pursuant to which American Mobile resells our Go.Web service as a part of American Mobile's suite of services to its customers through its distribution channels. Master dealers sell GoAmerica service through a network of other dealers and are paid a higher commission than dealers but are assigned a quota. Master dealers are responsible for selling the GoAmerica service, training their dealer network, providing the mobile devices, and supporting the subscriber. Under such arrangements, we are responsible for billing the subscriber. Our master dealers have approximately 500 direct sales professionals. Our dealers and agents sell the GoAmerica service through their own sales efforts, and are not assigned a quota. Dealers are paid a smaller commission than a master dealer. Dealers are responsible for selling the GoAmerica service and providing the mobile devices. We bill and support the subscribers provided by our dealers. Our dealers have approximately 250 direct sales professionals. Agents are paid a smaller commission than dealers because they are only responsible for selling the GoAmerica service. We sell and provide the mobile devices, bill and support the subscribers provided by our agents. Our agents have approximately 50 direct sales professionals. Joint Selling Relationships. We have partnered and seek to continue to partner for joint selling purposes with other companies that have complementary wireless data products or services. For example, we offer 33 wireless data, PCS and cellular carriers a single resource for outsourcing ready-to-market wireless email and Web-based data solutions based on standard platforms from the leading software vendors and device manufacturers. By providing a suite of platform and device-independent services, we position these carriers to be able to address the data needs of their customers today. We then engage in joint selling activities with clearly defined responsibilities. We offer wireless device manufacturers an opportunity to increase their sales because our services increase the usefulness of their devices. We also engage in joint selling activities with the sales professionals of these manufacturers. In addition, we work with application providers and jointly sell into the installed base of customers in the market segment addressed by their application. For example, our relationship with w- Trade, a wireless financial information software company, allows us to approach broker dealers who want to wirelessly enable their customers using software offered by w-Trade and our wireless data access and delivery expertise. Marketing We market and advertise in order to establish our brand name and create sales opportunities. We conduct market awareness tracking research to measure awareness of the GoAmerica brand and related sales. Our efforts have been and will continue to be targeted in market segments and geographic markets where we believe there is opportunity for substantial subscriber penetration. We believe that high concentrations of potential subscribers reduce our subscriber acquisition costs. With a portion of the net proceeds from this offering, we intend to expand our presence as a mass market provider of wireless Internet access by making a significant investment in establishing and building the GoAmerica brand. We continually seek new ways to reach potential subscribers that are learning about wireless Internet communications. We also seek to establish GoAmerica as a strong independent wireless Internet brand. Through a combination of mass media advertising and Web advertising, we seek to expand our subscriber base, strengthen our customer relationships and capture significant market share. We supplement our existing subscriber acquisition programs through value added reseller and dealer co-marketing programs and partner marketing programs. We plan to continue to develop a variety of co- marketing programs that make use of brand loyalties and existing customer relationships. For example, in November 1999, we announced a preferred partnership arrangement with Avis-Rent-a-Car, the second largest car rental company in the United States. Under this arrangement, our customers will be able to access the Avis reservation system through Go.Web. We anticipate that this service will be commercially available in the second quarter of 2000. We also have a marketing agreement with Lexis-Nexis, a leading provider of information to the legal profession, to provide wireless access to Lexis.com services using a co-branded service called "Law On The Go". In January 2000, we entered into a co-marketing agreement with DLJ direct Inc. in which we agreed to market DLJ direct as a featured Web-based online trading company. DLJ direct agreed to market GoAmerica as a featured wireless data services company. We intend to link to each other's website during the second quarter of 2000. GoAmerica subscribers will have the opportunity to open a DLJ direct account and wirelessly trade securities through Go.Web. In addition to service providers, we have also developed joint marketing relationships with several manufacturers of wireless devices which we believe will benefit from being able to market our value-added services. For example, we have a preferred service provider agreement with Novatel Wireless, a leading supplier of wireless modems for the CDPD networks, and a reseller and joint marketing agreement with Sierra Wireless, the manufacturer of Aircard 300, a wireless PC Card for the CDPD networks. Wireless Carrier and Other Relationships We have assembled a strategic combination of relationships with wireless network operators, application developers and mobile device manufacturers. American Mobile. American Mobile's ARDIS network serves approximately 425 metropolitan areas in the United States, encompassing approximately 11,000 cities and towns. We offer our subscribers access to the 34 ARDIS network. American Mobile also resells our Go.Web service, as a part of American Mobile's suite of services, to its customers through its distribution channels. AT&T Wireless Services. AT&T Wireless' cellular digital packet data, CDPD, network is the largest CDPD network in the United States. We offer access to the AT&T nationwide CDPD network to our subscribers. Bell Atlantic Mobile. Bell Atlantic has the largest regional CDPD network covering the New England and Mid Atlantic states. We offer the Bell Atlantic regional CDPD network to our subscribers and receive sales leads from the Bell Atlantic Mobile data sales force. BellSouth Wireless Data. BellSouth's Mobitex network covers approximately 80% of the United States population and approximately 93% of the urban business population. We have been offering the BellSouth nationwide Mobitex network to our subscribers since 1996. We also have a software license to the BellSouth Interactive Paging Service gateway. Phone.com. Phone.com has developed software technology that runs on phones that combine voice and data. We first licensed and deployed their technology in 1997. We were the first non-cellular carrier to license their UPlink software and were the first company in North America to deploy their WAP compliant gateway. Research in Motion. RIM is the manufacturer of the RIM 950 interactive pager, the RIM 850 wireless handheld device and the RIM Blackberry device. We have a distribution agreement with RIM and co-market the Go.Web service on the Blackberry device. Technology and Operations Service Infrastructure Wireless Internet Connectivity Center. We operate a secure network operations center at our headquarters in Hackensack, New Jersey. This Wireless Internet Connectivity Center is connected to multiple Tier-1 Internet backbone providers such as UUNET/MCI Worldcom, Sprint, and AT&T via redundant high- capacity, high-speed leased T-1 telecommunications lines as well as fixed location frame-relay circuits. These circuits connect to our customers' data sources and to the wireless data networks we use. Our Wireless Internet Connectivity Center is supported by a switched fiber optic backbone provided by Cisco Systems. The center is equipped with proven, industry standard equipment, including Cisco and Paradyne networking equipment, Sun Sparc Enterprise UNIX servers, high-end clustered Compaq servers, Network Appliance NFS Servers and Clarion Raid Arrays. We believe our Wireless Internet Connectivity Center is capable of meeting the capacity demands and security standards for services we developed or are developing for our customers. We staff the center from 8:00 a.m. to 11:00 p.m. Eastern time on weekdays. In addition, our technical staff monitor network traffic, service quality, and security 24 hours a day, seven days a week. We intend to continue to invest in improved network monitoring software and hardware systems. In order to provide our subscribers with the highest availability of services we are building a completely redundant data center facility which is expected to be operational during the second quarter of 2000. This facility will become our primary Wireless Internet Connectivity Center. This data center will have a back-up power supply, redundant communications connection and will be monitored 24 hours a day, seven days a week. Wireless Networks. Through our relationships with third-party provider-owned wireless networks, our subscribers are able to wirelessly access the Internet in most major metropolitan areas in the continental United States via a local wireless network. We purchase access to wireless networks through services agreements with a variety of carriers including BellSouth Wireless Data, AT&T Wireless Services, Bell Atlantic Mobile and American Mobile. Using a combination of third-party wireless network providers enables us to provide wireless Internet access and services on a nationwide basis while managing the timing and magnitude of our capital 35 expenditures. We employ a strategy of using different third-party network providers in locations where it is most economical to do so. We periodically reevaluate the economics of this strategy and, if warranted, move subscribers to different networks. Software Technology Our strategy is to develop solutions using existing technologies and industry standards in proprietary ways to continue to deliver customer- friendly wireless Internet services and dynamic applications, as well as allowing our partners to develop wireless applications with standard development tools. Our Software Technology We have developed a proprietary services platform, Go.Web, that we believe is a competitive advantage because it enables our subscribers to access and personalize the Internet from virtually any leading wireless device. Go.Web also allows qualified developers to introduce standard Web-based applications for virtually any wireless device or network. As a result of our Go.Web development efforts, our engineering staff has acquired substantial wireless and Web formatting expertise, which will enable us to develop solutions quickly as new wireless devices are introduced. In addition, our proprietary compression technology and enhanced wireless transport protocol included in our software provides bandwidth efficiency and maximizes data transmission speeds. We also have employed industry standard SSL, or secure sockets layer, and our internally developed encryption technologies to ensure security through our Internet gateway. We developed our software technology to better serve our customers and provide the following features: . simplify installation; . provide a convenient and intuitive starting place for subscribers; . enhance the efficiency of our support services; and . provide state-of-the-art wireless applications. Licensed Software Technology BellSouth Wireless Data--The BellSouth Interactive Paging Service (IPS) is based on server software that has been licensed by GoAmerica. We are one of a limited number of companies that have deployed their own IPS gateway. This service provides two-way messaging on devices such as the RIM interactive pagers. Phone.com--Phone.com has developed software technology that runs on phones that combine voice and data. They have created a page display language, HDML, to show Web content on small screen devices, and now support the WAP standard. We have licensed and deployed this technology and provide services to cellular carriers and individual customers. Telcordia--Telcordia, formerly Bellcore, has developed software technology that supports Microsoft Windows platforms such as laptops and CE devices. We presently use this technology primarily to support our subscribers using Windows platforms to enable access to our GoAmerica services. Customer Service and Billing We provide customer service, billing and product fulfillment at our customer service center. Our customer service program provides our subscribers with the ability to contact us through toll free telephone, Web, or email. Through our goamerica.net Web site, subscribers can access answers to Frequently Asked Questions and information about our services 24 hours a day. Through our Web site and customer service representatives, we verify that a potential subscriber will have wireless network coverage where such customer plans to use the service. For subscribers who order directly from us, we maintain an inventory of mobile devices and wireless 36 modems which we buy from third-party manufacturers and resellers. We load and configure custom software on mobile devices, activate wireless modems and perform quality assurance checks. We then pack, ship and track the product until the subscriber receives it. For customers who already own a mobile device, we provide only the wireless modem and software application. Our subscribers are able to deal directly with us for all repair, replacement and warranty issues for devices we provide to them. As of January 31, 2000, we had 16 customer service and technical support representatives who handle inquiries about our services, device features and wireless communications. Our customer service and technical support personnel are available weekdays from 8:00 a.m. until 11:00 p.m. Eastern time. We expanded our customer service center hours during the first quarter of 2000 and plan further expansion. We also intend to expand our ecommerce Web site capabilities to include self provisioning, on-line billing, and interactive customer care during the second half of 2000. We provide corporate or individual customer billing for all subscription fees, devices and modems, and other fees. Competition The market for our wireless Internet services is becoming increasingly competitive. The widespread adoption of industry standards in the wireless data communications market may make it easier for new market entrants and existing competitors to introduce services that compete against ours. We developed our solutions using standard industry development tools. Many of our agreements with wireless carriers, wireless handheld device manufacturers and data providers are non-exclusive. Our competitors may use the same products and services in competition with us. With time and capital, it would be possible for competitors to replicate our services. We expect that we will compete primarily on the basis of the functionality, breadth, quality and price of our services. Many of our existing and potential competitors have substantially greater financial, technical, marketing and distribution resources than we do. Please refer to "Risk Factors--We may face increased competition which may negatively impact our prices for our services or cause us to lose business opportunities" for a listing of some our current and potential competitors. Additionally, many of these companies have greater name recognition and more established relationships with our target customers. Furthermore, these competitors may be able to adopt more aggressive pricing policies and offer customers more attractive terms than we can. In the event such companies decide to compete directly with us, such relationships will likely be terminated, which may have a material adverse effect on our business and reduce our market share or force us to lower prices to unprofitable levels. Intellectual Property Rights We have not yet obtained patents on our technology that would preclude or inhibit competitors from using our technology. We have, however, recently filed a patent application on certain aspects of our Go.Web technology. The application is presently pending in the United States Patent and Trademark Office. We rely on a combination of patent, copyright, trademark, service mark, trade secret laws, unfair competition law and contractual restrictions to establish and protect certain proprietary rights in our technology and intellectual property. We have applied for registration of our GoAmerica names and marks in the United States Patent and Trademark Office and in trademark offices in jurisdictions throughout the world, including but not limited to, U.S. federal trademark applications for the marks "GoAmerica", "Go.Web" and "Law on the Go". The steps taken by us to protect our intellectual property may not prove sufficient to prevent misappropriation of our technology or to deter independent third-party development of similar technologies. In addition, the laws of certain foreign countries may not protect our technologies or intellectual property rights to the same extent as do the laws of the United States. We also rely on certain technologies that we license from third parties. These third-party technology licenses may not continue to be available to us on commercially attractive terms. The loss of the ability to use such technology could require us to obtain the rights to use substitute technology, which could be more expensive or offer lower quality or performance, and therefore have a material adverse effect on our business, financial condition or results of operations. Third parties could claim infringement by us with respect to current or future technology. We expect that we and other participants in our markets will be 37 increasingly subject to infringement claims as the number of services and competitors in our industry segment grows. Any such claim, whether meritorious or not, could be time consuming, result in costly litigation, cause service or installation interruptions or require us to enter into royalty or licensing agreements. Such royalty or licensing agreements might not be available on terms acceptable to us or at all. As a result, any such claim could have a material adverse effect upon our business, financial condition or results of operations. We received a claim in November 1999, on behalf of ROTIS Technologies Corporation, that our technology relating to the wireless provision of stock quotes infringes a patent relating to a price quotation system, which patent expires on September 25, 2001. We believe that such claim is not material and without merit. We intend to defend such claim vigorously. Such claim is, however, in its preliminary stages and no specific claim for damages has been asserted. Therefore, no assurance can be made that such claim could not become material in the future. We also received in January 2000 an offer from NTP Incorporated to enter into negotiations to obtain a license under one or more of NTP's patent properties relating to wireless email systems. We are in the process of reviewing NTP's patents. Government Regulation We are not currently subject to direct federal, state or local government regulation, other than regulations that apply to businesses generally. The wireless network carriers we contract with to provide airtime are subject to regulation by the Federal Communications Commission. Changes in FCC regulations could affect the availability of wireless coverage these carriers are willing or able to sell to us. We could also be adversely affected by developments in regulations that govern or may in the future govern the Internet, the allocation of radio frequencies or the placement of cellular towers. Also, changes in these regulations could create uncertainty in the marketplace that could reduce demand for our services or increase the cost of doing business as a result of costs of litigation or increased service delivery cost or could in some other manner have a material adverse effect on our business, financial condition or results of operations. We currently do not collect sales or other taxes with respect to the sale of services or products in states and countries where we believe we are not required to do so. We do collect sales and other taxes in the states in which we have offices and are required by law to do so. One or more jurisdictions have sought to impose sales or other tax obligations on companies that engage in online commerce within their jurisdictions. A successful assertion by one or more jurisdictions that we should collect sales or other taxes on our products and services, or remit payment of sales or other taxes for prior periods, could have a material adverse effect on our business, financial condition or results of operations. Any new legislation or regulation, or the application of laws or regulations from jurisdictions whose laws do not currently apply to our business, could have an adverse effect on our business. Facilities Our principal offices are located in Hackensack, New Jersey in a 20,300 square-foot leased facility. Our primary lease on approximately 15,900 square feet of such space expires in May 2007. In addition, in December 1999, we entered into a facilities maintenance agreement with Data General pursuant to which we will operate a network operating center at their facility in New York City. Such facility will initially provide redundant data backup for our current network operating center located at our headquarters in Hackensack. We anticipate that our New York facility will serve as our primary network operating center by mid-2000. We believe that our facilities will be adequate to meet our requirements for the foreseeable future and that suitable additional space will be available if needed. Employees As of January 31, 2000, we had a total of 57 full-time employees. None of our employees is covered by a collective bargaining agreement. We believe that our relations with our employees are good. Legal Proceedings We are not currently subject to any material legal proceedings. However, we may from time to time become a party to various legal proceedings arising in the ordinary course of our business. 38 MANAGEMENT Directors and Executive Officers Our directors and executive officers are as follows:
Name Age Position(s) - ---- --- ----------- Aaron Dobrinsky......... 36 Chairman of the Board, President and Chief Executive Officer and Director Joseph Korb............. 48 Executive Vice President and Director Francis Elenio.......... 34 Chief Financial Officer, Treasurer and Secretary Robi Blumenstein(1)(2).. 43 Director Adam Dell............... 30 Director Alan Docter(2).......... 56 Director Mark Kristoff(1)........ 38 Director Zachary Prensky(1)...... 26 Director Nelson Schwab III....... 55 Director Andrew Seybold(2)....... 53 Director
- -------- (1) Member of Audit Committee. (2) Member of Compensation Committee. All directors currently hold office until the next annual meeting of stockholders or until their successors have been elected and qualified. Our Certificate of Incorporation provides that upon closing of this offering the terms of office of the members of the board of directors will be divided into three classes as set forth below. All executive officers are elected annually by the board of directors and serve at the discretion of the board of directors and until their successors are elected and qualified. There are no family relationships between any of our directors or executive officers. Aaron Dobrinsky founded GoAmerica in 1996 and has served as our Chairman of the Board, President and Chief Executive Officer and as a director since our inception in 1996. Prior to founding the company, from February 1996 to July 1996, Mr. Dobrinsky served as Executive Vice President of Mineral Trading Corp. Prior to that, Mr. Dobrinsky served most recently as Senior Vice President of American International Ore Corporation from 1990 to February 1996. Mr. Dobrinsky also serves on the board of directors of DataRover Mobile Systems, Inc. Joseph Korb joined GoAmerica in 1997 as Executive Vice President and has been a director since October 1996. Prior to joining us, Mr. Korb served in various capacities, including Vice President of Product Management and Business Development at RAM Mobile Data (now BellSouth Wireless Data) from 1992 to 1996. Prior to that, Mr. Korb served as Vice President at Citibank, N.A. where he served as Director of Technology in an electronic products development group. Mr. Korb currently serves as a board member and Vice President of Portable Computing and Communications Association, an industry trade association. Francis Elenio joined GoAmerica in January 1999 as Chief Financial Officer and has also served as our Treasurer and Secretary since December 1999. Prior to joining us, Mr. Elenio served as Corporate Controller of Bogen Communications, Inc. from June 1997 to January 1999. Prior to that, Mr. Elenio served most recently as Vice President of Finance and Administration and Corporate Controller of KTI, Inc. from 1991 to 1997. He previously was a Senior Accountant with Ernst & Young LLP and is a Certified Public Accountant in New Jersey. Robi Blumenstein joined our board of directors in June 1999 as the designee of CIBC WMV Inc. Mr. Blumenstein currently is a principal of Marsh & McLennan Capital Inc. and co-head of the Marsh & McLennan Capital Communications and Information Fund I. From January 1994 to February 2000, Mr. Blumenstein was a Managing Director of CIBC Capital Partners, the merchant banking arm of CIBC World Markets. Mr. Blumenstein joined CIBC World Markets in 1994. Mr. Blumenstein is a member of the board of 39 directors of a number of privately held companies. Prior to joining CIBC Capital Partners, Mr. Blumenstein worked at First City Capital Corporation and as an attorney at Tory, Tory, DesLauriers & Binnington. Adam Dell joined our board of directors in February 2000 as the designee of Dell USA L.P. Mr. Dell is the managing partner of Impact Venture Partners, L.P., which was founded in November 1999. Prior to that, Mr. Dell most recently was a partner with Crosspoint Venture Partners, since October 1998, and a Senior Associate with Enterprise Partners, focused on ecommerce, enterprise software and networking and communication infrastructure. Prior to that, he was a Senior Associate with Winstead, Sechrest and Minick. Mr. Dell is also an adjunct professor at Columbia Business School. Alan Docter joined our board of directors in October 1996 at the time of his initial investment in GoAmerica. Since 1990, Mr. Docter has been an early-stage investor in technology companies, including M.A.I.D. plc (now The Dialog Corporation), ViaWeb (sold to Yahoo!), Butterfly V.L.S.I. Ltd. (sold to Texas Instruments) and Invino Corp. (sold to Youth Stream Media Networks). He has served as Vice Chairman of Considar, Inc., an international metals trading company, since he co-founded such company in 1986. Mr. Docter also serves on the board of directors of a number of privately held companies. Mark Kristoff joined our board of directors in June 1998. Since 1991, Mr. Kristoff has been President and Chief Operating Officer of Considar, Inc., an international metals trading company. Since 1990, Mr. Kristoff also has been an early-stage investor in many technology companies and serves on the board of directors of a number of privately held companies. Zachary Prensky joined our board of directors in June 1998. Since October 1998, Mr. Prensky has been Managing Director of Investment Banking for Wellfleet Partners, an investment banking firm based in New York City. Prior to that, Mr. Prensky served as Chief Executive Officer and Chairman of Zackfoot Investments LLC which he founded in 1997. Zackfoot invested and facilitated a round of private equity financing by GoAmerica in 1998. Mr. Prensky served as Chief Financial Officer of Ram Caterers from October 1995 to May 1997. From July 1993 to October 1995, Mr. Prensky served as President of Zackfoot Software which developed software packages for the footwear industry. Mr. Prensky has been an early-stage investor in technology companies, including Register.com, HomeworkCentral.com, Liveprint.com, Inc., DataRover Mobile Systems, Inc., Livemind, Inc. and Aluminium.com, Inc. Nelson Schwab III joined our board of directors in January 2000, as the designee of Forstmann Little & Co. Equity Partnership-VI, L.P. Mr. Schwab was a co-founder of Carousel Capital, a merchant banking firm, and has been a Managing Director of such firm since its inception in 1996. He was Chairman and Chief Executive Officer of Paramount Parks Inc., owner of amusement theme parks, from 1992 until 1995. He also serves on the board of directors of Burlington Industries, First Union National Bank of North Carolina, Summit Properties, Inc. and several private companies. Andrew Seybold joined our board of directors in December 1999. Mr. Seybold has extensive experience as a consultant, systems designer and product analyst in the communications and computer industries. Since 1983, Mr. Seybold has served as publisher, Editor-in-Chief and in various management positions with Pinecrest Press, Inc. which publishes "Andrew Seybold's Outlook on Communications and Computing." Key Employees Our key employees are as follows:
Name Age Position - ---- --- -------- Ellen Flora.................. 31 Vice President of Operations Jesse Odom................... 34 Vice President of Network Operations and Technology David Gantman................ 58 Vice President of Strategic Marketing Peter Varvara................ 46 Vice President of Marketing Communications Martin May................... 53 Director of Alternate Distribution and Carrier Relations Joshua Rochlin............... 33 Director of Business Development Joseph Strempel.............. 32 Director of Direct Sales and Telemarketing
40 Ellen Flora joined GoAmerica in October 1999 as Vice President of Operations. Prior to joining us, Ms. Flora served in various capacities, including most recently as Business Development Manager for the Communications Industry Group at Electronic Data Systems from October 1993 to October 1999. Jesse Odom joined GoAmerica in 1996 as Vice President of Network Operations. Prior to joining GoAmerica, Mr. Odom served as Vice President of Network Engineering at American International Ore Corporation from 1991 to 1996. David Gantman joined GoAmerica in January 2000 as Vice President of Strategic Marketing of GoAmerica Marketing, Inc., our wholly-owned subsidiary. Mr. Gantman has served as President of Strategem Plus, Inc. since January 1995 and served as Executive Vice President of NW Ayer, Inc. from 1984 until January 1995. Peter Varvara joined GoAmerica in January 2000 as Vice President of Marketing Communications of GoAmerica Marketing, Inc., our wholly-owned subsidiary. Mr. Varvara has served as President of Customer Strategies Worldwide LLC since February 1998 and served as Executive Vice President of NW Ayer, Inc. from 1982 until February 1998. Martin May joined GoAmerica in December 1999 as Director of Alternate Distribution and Carrier Relations. Prior to joining us, Mr. May served as a director of sales for BellSouth Wireless Data from November 1993 to December 1999. Joshua Rochlin joined GoAmerica in December 1999 as Director of Business Development. Prior to joining us, Mr. Rochlin was the founder and Chief Executive Officer of MyCalendar.com LLC from January 1999 to December 1999. Mr. Rochlin previously served as an associate for the law firm of Rubin Baum from February 1995 to December 1998. Mr. Rochlin has served as a director of Hydron Technologies, Inc. since January 2000. Joseph Strempel joined GoAmerica in January 1998 and currently serves as Director of Direct Sales and Telemarketing. Prior to joining us, Mr. Strempel served in various sales positions, and most recently as a Wireless Data Account Executive, with Bell Atlantic Mobile (formerly NYNEX) from January 1993 to December 1997. Board Committees The board of directors has a compensation committee, which approves salaries and incentive compensation for our executive officers and administers our stock option plans and our employee stock purchase plan. The compensation committee is made up of Robi Blumenstein, Alan Docter and Andrew Seybold. The board of directors also has an audit committee, which reviews the results and scope of the audit and other services provided by our independent accountants. The audit committee is made up of Robi Blumenstein, Mark Kristoff and Zachary Prensky. Board Composition We currently have nine directors. Our certificate of incorporation provides that, effective upon the closing of this offering, the terms of office of the members of the board of directors will be divided into three classes: Class A, whose term will expire at the annual meeting of stockholders to be held in 2001; Class B, whose term will expire at the annual meeting of stockholders to be held in 2002; and Class C, whose term will expire at the annual meeting of stockholders to be held in 2003. The Class A directors are Messrs. Kristoff, Prensky and 41 Seybold, the Class B directors are Messrs. Blumenstein, Korb and Schwab and the Class C directors are Messrs. Dobrinsky, Dell and Docter. At each annual meeting of stockholders after this initial classification, the successors to directors whose term will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our bylaws permit the board of directors to increase or decrease the size of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors. This classification of the board of directors may have the effect of delaying or preventing changes in control or management of GoAmerica. Directors' Compensation Each non-employee, non-investor director serving on our board of directors will receive annual compensation of $20,000. In addition, each independent director, upon election to the board of directors, will receive options to purchase up to 64,000 shares of our common stock. On December 31, 1999, Mr. Seybold was granted options to purchase 64,000 shares at $1.31 per share, subject to vesting. Each director who is a stockholder of the Company and who serves on the board of directors as a representative of another individual, entity or group of stockholders will receive options to purchase up to 32,000 shares of our common stock. On December 31, 1999, Messrs. Blumenstein, Docter, Kristoff and Prensky each received options to purchase 32,000 shares at $1.31 per share, subject to vesting. All future option grants shall have an exercise price equal to the fair market value of our common stock on the date of grant and shall vest at a rate of one-third per year, from the date of grant. Each director will be reimbursed by us for his or her reasonable expenses incurred in connection with his or her participation in our board of directors meetings. Mr. Schwab and Mr. Dell each received options to purchase 32,000 shares of common stock in February 2000 at an exercise price of $15.00 per share. Executive Compensation The following table sets forth certain information concerning compensation that we paid for services in all capacities awarded to, earned by or paid to our chief executive officer and each of our other executive officers whose aggregate compensation exceeded $100,000 during the three years ended December 31, 1999 (collectively, the "Named Executive Officers"). Summary Compensation Table
Long-Term Compensation Annual Compensation Awards -------------------- ------------- Name and Principal Position(s) Salary Bonus Stock Options ------------------------------ ---------- --------- ------------- Aaron Dobrinsky, Chairman of the Board, President and Chief Executive Officer.............................. 1999 $ 150,000 $ 50,000 80,000 1998 93,750 -- -- 1997 105,000 -- -- Joseph Korb, Executive Vice President............................ 1999 $ 150,000 $ 50,000 80,000 1998 93,750 -- -- 1997 -- -- -- Francis Elenio, Chief Financial Officer, Treasurer and Secretary..... 1999 $ 95,833 $ 20,000 240,000 1998 -- -- -- 1997 -- -- --
42 Option Grants in Last Fiscal Year The following table sets forth information for the fiscal year ended December 31, 1999 with respect to each grant of stock options to the Named Executive Officers: Option Grants During Year Ended December 31, 1999
Individual Grants(/1/) Potential Realizable -------------------------------- Value at Assumed % of Total Potential Realizable Annual Rates of Stock Shares Options Exercise Value at Assumed Price Appreciation for Underlying Granted to Price Initial Offering Option Term(/3/) Options Employees in Per Expiration Price of $15.00 ----------------------- Name Granted 1999(/2/) Share Date Per Share 5% 10% - ---- ---------- ------------ -------- ---------- -------------------- ----------- ----------- Aaron Dobrinsky......... 80,000 3.6% $0.56 08/02/04 $1,155,200 $ 1,486,538 $1,887,612 Joseph Korb............. 80,000 3.6% $0.56 08/02/04 $1,155,200 $ 1,486,538 $1,887,612 Francis Elenio.......... 240,000 10.8% $0.56 08/02/09 $3,465,600 $5,729,021 $9,202,473
- -------- (1) Each of these options was granted pursuant to the 1999 Stock Option Plan of GoAmerica Communications Corp. and is subject to the terms of such plan. In connection with our reorganization, such options are exercisable into shares of our common stock. All these options vested immediately. (2) In 1999, we granted options to purchase an aggregate of 2,216,008 shares of common stock to our employees. The percentage calculation excludes options to purchase 192,000 shares of common stock granted to our non-employee directors during 1999. (3) Amounts represent hypothetical values that could be achieved for the respective options if exercised at the end of the option term. These values are based on assumed rates of stock price appreciation of 5% and 10% compounded annually from the date the respective options were granted to their expiration date based on the initial offering price of $15.00 per share. These assumptions are not intended to forecast future appreciation of our stock price. The potential realizable value computation does not take into account federal or state income tax consequences of option exercises or sales of appreciated stock. 1999 Year-End Option Values
Number of Options at Value of In-the- December 31, Money 1999 Options(/1/) ------------------------ ------------------- Name Vested Unvested Vested Unvested - ---- ------------ ----------- ---------- -------- Aaron Dobrinsky..................... 80,000 -- $1,155,200 $ -- Joseph Korb......................... 80,000 -- 1,155,200 -- Francis Elenio...................... 240,000 -- 3,465,600 --
- -------- (1) The value of the options is determined by subtracting the exercise price per share from the proposed initial public offering price per share offered hereby, multiplied by the number of shares underlying the options. There were no options exercised during the year ended December 31, 1999. GoAmerica Communications Corp. 1999 Stock Option Plan The GoAmerica Communications Corp. 1999 Stock Option Plan was adopted by the board of directors of GoAmerica Communications Corp. and became effective on August 3, 1999. Such plan was approved by the stockholders of GoAmerica Communications Corp. effective on such date. On December 9, 1999 the board of directors of GoAmerica Communications Corp. determined that, upon the closing of our reorganization, no additional awards would be issued under the 1999 Stock Option Plan. As of the closing of our reorganization, the outstanding options to purchase 1,916,000 shares of common stock of GoAmerica Communications Corp. became, by their terms, options to purchase 1,916,000 shares of GoAmerica, Inc. common stock, otherwise in accordance with the terms and conditions of the 1999 Stock Option Plan. Accordingly, our board of directors has reserved 1,916,000 shares of our common stock for issuance upon exercise of these options. The 43 outstanding option under the 1999 Stock Option Plan are governed by the compensation committee of our board of directors subject to the terms of the 1999 Stock Option Plan. All the options granted under the 1999 Stock Option Plan were made to employees of GoAmerica Communications Corp. and are non-qualified stock options. All such options terminate not more than ten years from the date of grant, subject to earlier termination upon or after a fixed period following each optionee's death, disability or termination of employment with us. The vesting provisions of each outstanding option was determined by the board of directors of GoAmerica Communications Corp. and such options are not generally assignable or otherwise transferable except by will or as per the laws of descent and distribution. In the event of certain changes in control, and in such other circumstances as set forth in the 1999 Stock Option Plan, the administrator shall, in its equitable discretion, make adjustments in the terms and conditions of any then outstanding stock options. GoAmerica, Inc. 1999 Stock Plan The 1999 Stock Plan was adopted by our board of directors on December 9, 1999 and approved by our stockholders on December 31, 1999. The 1999 Stock Plan was effective as of December 9, 1999 and shall remain in effect until terminated by our board of directors. The total number of shares of common stock with respect to which awards may be granted under this plan is 4,800,000, which amount shall be adjusted in accordance with the terms of the plan and to an amount equal to twenty percent of the shares of our common stock outstanding on December 31, 2000, and each December 31 thereafter. In no event shall such annual adjustment decrease the shares available for issuance. Those eligible to receive stock option grants under the 1999 Stock Plan include our employees, directors and consultants. The 1999 Stock Plan is administered by the compensation committee of our board of directors. As of December 31, 1999, there were outstanding options to purchase 524,008 shares of common stock under our 1999 Stock Plan. Subject to the provisions of the 1999 Stock Plan, the administrator of the 1999 Stock Plan has the discretion to determine the optionees and/or grantees, the type of options to be granted, the vesting provisions, the terms of the grants and other related grant provisions. The exercise price of an incentive stock option may not be less than the fair market value per share of the common stock on the date of grant or, in the case of an optionee who beneficially owns 10% or more of the voting power of all classes of our capital stock, not less than 110% of the fair market value per share on the date of grant. The exercise price of a non-qualified stock option may not be less than 85% of the fair market value per share of the common stock on the date of grant. Fair market value is determined by the plan administrator in good faith. We anticipate that following consummation of this offering, fair market value shall be determined in accordance with the closing sales price of our common stock as quoted on the Nasdaq National Market. The 1999 Stock Plan also allows for the grant of restricted stock and other awards, in the discretion of the plan administrator. Incentive stock options granted under the 1999 Stock Plan terminate not more than ten years from the date of grant, subject to earlier termination upon or after a fixed period following the optionee's death, disability or termination of employment with us. The term of non-qualified option grants is not limited, provided that the term of any options, including incentive stock options and non-qualified options, granted to a holder of more than 10% of the capital stock may be no longer than five years. Options granted under the 1999 Stock Plan will vest in the manner determined by the plan administrator. Options are not assignable or otherwise transferable except by will or as per the laws of descent and distribution. In the event of certain mergers, a reorganization, or consolidation of us with or into another corporation or the sale of all or substantially all our assets or all of our capital stock in which the successor corporation does not assume outstanding options or issue equivalent options, our board of directors is required to provide accelerated vesting of outstanding options. Employee Stock Purchase Plan Our Employee Stock Purchase Plan provides our employees with an opportunity to purchase our common stock through accumulated payroll deductions and at a discount from fair market value. The plan was approved 44 by our board of directors on December 9, 1999 and was approved by our stockholders on December 31, 1999. The plan became effective on December 9, 1999. The total number of shares of common stock with respect to which purchases may be made under the plan is 4,000,000, which amount shall be adjusted in accordance with the terms of the plan. The Employee Stock Purchase Plan will be administered by our compensation committee. Eligible employees may purchase up to a maximum fair market value of $25,000 for all purchases ending within the same calendar year under this plan. Our employees are eligible to participate if they are employed by us for at least 20 hours per week and for more than five months in any calendar year and do not own 5% or more of our voting stock. The initial offering period under the plan will commence on the date that the registration statement with respect to this offering is declared effective by the Securities and Exchange Commission and ends on or about December 31, 2000. It is currently contemplated that new offering periods will commence every six months thereafter. The purchase price per share for our common stock under the plan will be equal to the lower of 85% of the fair market value of our common stock on the first or last day of each purchase period. Employees may end their participation under the plan at any time prior to the exercise date of any one purchase period and, generally, such participants shall be automatically terminated upon termination of employment. In the event we are the surviving corporation in any merger, reorganization or other business combination, options to purchase shares issued under the plan shall be assumed. A dissolution or liquidation or a merger or consolidation in which we are not the surviving entity will cause each option then outstanding to terminate. Generally, our board of directors can amend, modify or terminate the plan at any time provided the rights of plan participants are not impaired. The plan terminates on December 31, 2004 unless earlier terminated by our board of directors. Employment Agreements, Non-Competition, Non-Disclosure and Invention Assignment Agreements Mr. Dobrinsky is a party to an agreement with us effective December 31, 1999 under which he serves as our Chairman of the Board, President and Chief Executive Officer at a base salary of $225,000, subject to annual adjustment. Mr. Korb is a party to an agreement with us effective December 31, 1999 under which he serves as our Executive Vice President at a base salary of $225,000, subject to annual adjustment. Mr. Elenio is a party to an agreement with us effective December 31, 1999 under which he serves as our Chief Financial Officer, Treasurer and Secretary at a base salary of $150,000, subject to annual adjustment. Mr. Odom is a party to an agreement with us effective December 31, 1999 under which he serves as our Vice President, Network Operations and Technology at a base salary of $125,000, subject to annual adjustment, with a minimum bonus of $25,000. The Compensation Committee may award any or all of these individuals additional bonus payments or option grants in its discretion. The initial term of each such agreement is for three years and renews annually for one year periods thereafter. In the event Mr. Dobrinsky, Mr. Korb or Mr. Elenio is terminated without cause, resigns for good reason or, in the case of each of Mr. Dobrinsky and Mr. Korb, is not reelected to our board of directors, he shall be entitled to severance in an amount to include all payments that otherwise would have been paid to him through the end of the then current term of the agreement. However, in no event shall such severance amount be less than such employee's then current one year annual base salary, or if such termination occurs after the third anniversary of the effective date of such employee's agreement, such amount shall be no less than such employee's then current annual salary plus one-twelfth of such annual salary for each year of employment commenced beyond such anniversary date. If Mr. Odom is terminated without cause or resigns for good reason, we must pay Mr. Odom salary and benefits for a period of six months from the date of such termination or resignation. In the event any of the foregoing employees dies or is terminated for disability, he or his representative shall be entitled to continued payments of base salary for a period of one year plus, in the case of termination for disability, certain other benefits. Each of Mr. Dobrinsky and Mr. Korb will also receive $800 per month in automobile allowances and will be reimbursed for additional automobile expenses incurred in connection with their duties. In addition, each of Mr. Dobrinsky and Mr. Korb also is the beneficiary of a term life insurance policy in his respective name, in the face amount of up to $1.0 million, for which we pay the premiums. Each employment agreement also contains certain non-competition, non-solicitation, invention assignment and confidentiality provisions and also requires that we maintain standard directors and officers insurance of no less than $10.0 million. 45 We require that all employees sign an agreement with us pursuant to which they agree to maintain the confidentiality of our proprietary information, to assign any inventions to us, and to agree not to solicit our customers, suppliers or employees away from us. Compensation Committee Interlocks and Insider Participation Until our board of directors formed its compensation committee on December 9, 1999, the compensation of our executive officers during 1999 was determined by the entire board of directors. The compensation committee consists of Messrs. Blumenstein, Docter and Seybold. There are no compensation committee interlocks. Since our inception in 1996, we consummated several rounds of private equity financing. Certain of these transactions included issuances of our capital stock to individuals who serve on our board of directors. In addition, certain individuals were granted options or issued warrants to purchase shares of our common stock. Robi . CIBC WMV Inc. purchased 7,500 shares of Series A Preferred Blumenstein Stock on June 25, 1999 for an aggregate of $7.5 million. Mr. Blumenstein serves on our board of directors as the representative of CIBC WMV Inc. Such shares of Series A Preferred Stock shall convert into an aggregate of 5,741,632 shares of common stock upon completion of this offering. . Granted options to purchase 32,000 shares of common stock at an exercise price of $1.31 per share on December 31, 1999. One third of such options shall vest on each of the first, second and third anniversaries from the date of grant. Aaron . Purchased 8,533,280 shares of common stock on August 8, 1996 Dobrinsky for an aggregate of $533.33 upon founding of GoAmerica. . Granted options to purchase 80,000 shares of common stock at an exercise price of $0.56 per share on August 3, 1999. All such options vested immediately. . Granted options to purchase 160,000 shares of common stock at an exercise price of $5.02 per share on January 6, 2000. All of such options vested immediately. Alan Docter . Purchased 800,000 shares of common stock on October 15, 1996 for an aggregate of $250,000. . Purchased, on January 31, 1998, 141,440 shares of common stock and warrants to purchase 26,560 shares of common stock at an exercise price of $1.23 per share, for an aggregate of $130,000. . Purchased, on September 22, 1998, 536,672 shares of common stock and warrants to purchase 398,576 shares of common stock at an exercise price of $1.51 per share, for an aggregate of $500,000. Such warrants were issued in connection with Mr. Docter's assistance in our equity financing efforts. . Received warrants to purchase 53,664 shares of common stock on May 15, 1999 at an exercise price of $.00125 per share in connection with the May 1999 Agreement set forth below. . Purchased 130,816 shares of common stock pursuant to certain pre-emptive rights on November 30, 1999 for an aggregate of $136,703. 46 . Purchased 320 shares of Series A Preferred Stock pursuant to certain pre-emptive rights on November 30, 1999 for an aggregate of $320,000. Such shares of Series A Preferred Stock shall convert into an aggregate of 244,984 shares of common stock upon completion of this offering. . Granted options to purchase 32,000 shares of common stock at an exercise price of $1.31 per share on December 31, 1999. One third of such options shall vest on each of the first, second and third anniversaries from the date of grant. Joseph Korb . Purchased 4,266,720 shares of common stock on October 7, 1996 for an aggregate of $266.67. . Granted options to purchase 80,000 shares of common stock at an exercise price of $0.56 per share on August 3, 1999. All such options vested immediately. . Granted options to purchase 160,000 shares of common stock at an exercise price of $5.02 per share on January 6, 2000. All of such options vested immediately. Mark Kristoff . Purchased 160,000 shares of common stock on October 15, 1996 for an aggregate of $50,000. . Purchased 156,336 shares of common stock on September 22, 1998 for an aggregate of $150,000. . Received warrants to purchase 15,632 shares of common stock on May 15, 1999 at an exercise price of $.00125 per share in connection with the May 1999 agreement set forth below. . Granted options to purchase 32,000 shares of common stock at an exercise price of $1.31 per share on December 31, 1999. One third of such options shall vest on each of the first, second and third anniversaries from the date of grant. Zachary . Zackfoot Investment LLC purchased 9,600 shares of common Prensky stock for a purchase price of $10,686 and received 49,568 shares of common stock and warrants to purchase 139,504 shares of common stock at an exercise price of $1.51 per share on May 28, 1998 in connection with Zackfoot Investment LLC's assistance in our equity financing efforts. Mr. Prensky was Chief Executive Officer and Chairman of Zackfoot Investment LLC. . Zackfoot Investment LLC purchased 3,200 shares of common stock for a purchase price of $3,562 and received 3,328 shares of common stock and warrants to purchase 51,760 shares of common stock at an exercise price of $1.93 per share on June 30, 1998 in connection with Zackfoot Investment LLC's assistance in our equity financing efforts. . Zackfoot Investment LLC received warrants to purchase 9,848 shares of common stock on May 19, 1999 at an exercise price of $.00125 per share in connection with the May 1999 agreement set forth below. . Granted options to purchase 32,000 shares of common stock at an exercise price of $1.31 per share on December 31, 1999. One third of such options shall vest on each of the first, second and third anniversaries from the date of grant. 47 We also entered into a financial services consulting agreement with CIBC World Markets Corp. pursuant to which CIBC was engaged to evaluate certain potential financial and strategic initiatives. Mr. Blumenstein is the designee of CIBC WMV, Inc. on our Board of Directors. In exchange for such services, we paid a retainer fee of $50,000 to CIBC World Markets Corp. In connection with the issuance and sale of our Series B Preferred Stock in January 2000, we paid CIBC World Markets, Inc. $780,000 in cash and issued 226,816 shares of our common stock. CIBC paid a finder's fee to a third party. For all future transactions for which CIBC is entitled to compensation, if any, we have agreed to pay a transaction fee in the amount of 6% of gross proceeds raised in such a financing transaction, excluding this offering. Such payment for services, if any, will be made one-half in cash and one-half in our equity securities. This agreement will terminate upon the closing of this offering. The May 1999 Agreements with Certain Prior Investors In May 1999, each of GoAmerica, Aaron Dobrinsky, Joseph Korb and certain prior investors, including Zackfoot Investments LLC, of which Mr. Prensky was a managing director, and Alan Docter, entered into various agreements, including a settlement agreement and release. The settlement agreement and release resulted from claims by such investors that they were entitled to additional securities of GoAmerica, at no additional cost, as a result of the issuance of certain GoAmerica securities and the granting of certain rights by GoAmerica to subsequent third party investors on terms and conditions alleged to be more favorable, than were provided to the investors making such claims, including the valuation of securities purchased. All parties entered the settlement agreement and release without admission of any liability or wrongdoing. In connection with the May 1999 agreements, we agreed to issue to such investors warrants to purchase an aggregate of 549,000 shares of common stock and each of Messrs. Dobrinsky and Korb agreed to issue to such investors options to purchase an aggregate of 75,880 and 37,968 shares of the common stock held by each of them respectively. As a result of such agreements, we recorded a non- cash charge of approximately $297,000 during 1999. We anticipate that all such options and warrants will be exercised as of the consummation of this offering. Key Person Insurance We maintain, and are the beneficiary of, life insurance policies on the life of Aaron Dobrinsky in the aggregate amount of $3.0 million. We have applied for similar life insurance on the life of Joseph Korb in the amount of $3.0 million for which we will be the beneficiary. There can be no assurance that such insurance on Mr. Korb will be obtained. We do not intend to maintain key person life insurance on any of our other executive officers or key personnel. Limitation of Liability and Indemnification of Directors and Officers Our certificate of incorporation limits the liability of directors to the maximum extent permitted by Delaware law. Delaware law provides that directors of a corporation will not be personally liable for monetary damages for breach of their fiduciary duties as directors, except liability for: . any breach of their duty of loyalty to the corporation or its stockholders; . acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law; . unlawful payments of dividends or unlawful stock repurchases or redemptions; or . any transaction from which the director derived an improper personal benefit. This limitation of liability does not apply to liabilities arising under the federal securities laws and does not affect the availability of equitable remedies such as injunctive relief or rescission. 48 Our certificate of incorporation and bylaws provide that we shall indemnify our directors, officers, employees and agents to the fullest extent permitted by law. We believe that indemnification under our bylaws covers at least negligence and gross negligence on the part of indemnified parties. Upon the completion of this offering, we expect to have director and officer liability insurance in the minimum amount of $25,000,000 with respect to claims made against our directors and officers, including matters arising under the Securities Act. We have also entered into written agreements to indemnify our directors and executive officers, in addition to the indemnification provided for in our bylaws. These agreements, among other things, provide for indemnification of our directors and executive officers for judgments, fines, settlement amounts and expenses, including attorneys' fees, incurred by any of these persons in any action or proceeding, including any action by or in the right of GoAmerica, Inc. arising out of that person's services as our director or executive officer, or as a director or executive officer of any of our subsidiaries or any other company or enterprise to which such person provides services at our request. We believe that these provisions and agreements are necessary to attract and retain qualified persons as directors and executive officers. There is no pending litigation or proceeding involving any of our directors, officers, employees or agents where indemnification will be required or permitted. We are not aware of any pending or threatened litigation or proceeding that might result in a claim for such indemnification. 49 CERTAIN TRANSACTIONS Transactions involving each of Robi Blumenstein, Aaron Dobrinsky, Alan Docter, Joseph Korb, Mark Kristoff and Zachary Prensky are included under the heading Compensation Committee Interlocks and Insider Participation. Those transactions occurred while each such individual was serving on our board of directors and, in the case of Mr. Dobrinsky, while he was also serving as our president and chief executive officer. Francis Elenio, our chief financial officer, treasurer and secretary, was granted options to purchase 240,000 shares of GoAmerica Communications Corp. common stock for $0.56 per share on August 3, 1999 in his capacity as an officer of GoAmerica Communications Corp. In connection with our reorganization on December 31, 1999, all such options are now exercisable into shares of our common stock. Mr. Elenio also was granted options to purchase 80,000 shares of common stock for $5.02 per share on January 6, 2000. All such options are immediately exercisable. In July 1998, we entered into a consulting arrangement with Andrew Seybold Group LLC, pursuant to which we are obligated to pay Mr. Seybold's firm $3,000 per month for consulting services and expertise relating to the wireless data and communications industry. On December 31, 1999, our compensation committee granted Mr. Seybold options to purchase 64,000 shares of our common stock at $1.31 per share in connection with his services to be rendered as a member of our board of directors. One third of such options shall vest on each of the first, second and third anniversaries from the date of grant. In January 2000, we issued and sold an aggregate of 648,057 shares of Series B Convertible Preferred Stock to Dell USA L.P., Carousel Capital Partners, L.P., Forstmann Little & Co. Equity Partnership - VI, L.P. and Impact Venture Partners, L.P. Mr. Schwab, a managing director of Carousel Capital Partners, serves as the designee of Forstmann Little on our board of directors. Adam Dell, managing partner of Impact Venture Partners, was elected to our board of directors in February 2000 as the designee of Dell USA L.P. Each of Mr. Dell and Mr. Schwab was granted options in February 2000 to purchase 32,000 shares of common stock at $15.00 per share. One third of such options shall vest on each of the first, second and third anniversaries from the date of grant. 50 PRINCIPAL STOCKHOLDERS The following table sets forth as of February 28, 2000, as adjusted to give effect to the sale of common stock offered hereby, certain information regarding beneficial ownership of our common stock by: . each person or group of affiliated persons we expect to be the beneficial owner of more than 5% of the outstanding shares of common stock; . each director; . each Named Executive Officer; . and all directors and Named Executive Officers as a group. The address for each officer is c/o GoAmerica, Inc., 401 Hackensack Avenue, Hackensack, New Jersey 07601.
Percentage(/2/) -------------------------------- Name Shares(/1/) Prior to Offering After Offering - ---- ----------- ----------------- -------------- Aaron Dobrinsky(/3/)............. 8,425,848 22.5% 17.8% Dobrinsky Family Holdings, L.P.(/4/)....................... 4,092,624 11.0 8.7 Dobrinsky Business Holdings, L.P.(/4/)....................... 2,455,560 6.6 5.2 CIBC WMV Inc.(/5/)............... 5,741,632 15.5 12.2 Robi Blumenstein(/6/)............ -- -- -- Joseph Korb(/7/)................. 4,332,752 11.6 9.2 Korb Business Holdings, L.P.(/8/)....................... 2,046,376 5.5 4.3 Dell USA L.P.(/9/)............... 2,592,224 7.0 5.5 Adam Dell(/10/).................. 592,208 1.6 1.3 Alan Docter(/11/)................ 2,684,872 7.1 5.6 Mark Kristoff(/12/).............. 331,968 * * Francis Elenio(/13/)............. 320,000 * * Zachary Prensky(/14/)............ 218,320 * * Nelson Schwab(/15/).............. 1,296,112 3.5 2.8 Andrew Seybold................... -- -- -- All executive officers and directors as a group (10 persons)(/16/).................. 18,202,080 47.2% 37.5%
- -------- * Less than 1%. (1) Beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power and also any shares which the individual or entity has a right to acquire within 60 days after February 28, 2000 through the exercise of any stock options or warrants. We have also assumed the conversion of all outstanding shares of Preferred Stock into shares of our common stock upon completion of this offering. The inclusion herein of such shares, however, does not constitute an admission that the named stockholder is a direct or indirect beneficial owner of such shares. Unless otherwise indicated, each person or entity named in the table has sole voting power and investment power with respect to all shares of capital stock listed as owned by such person or entity. (2) Applicable percentage of ownership is based on an aggregate of 37,136,760 shares of common stock outstanding on February 28, 2000 (including 8,038,304 shares of common stock to be issued upon conversion of all outstanding shares of Series A Preferred Stock and 5,184,456 shares of common stock issuable upon conversion of our Series B Preferred Stock upon completion of the offering) and an aggregate of 47,136,760 shares of common stock outstanding after the completion of this offering. (3) Includes 240,000 shares subject to options that are immediately exercisable. Also includes 4,092,624 shares held by Dobrinsky Family Holdings, L.P. and 2,455,560 shares held by Dobrinsky Business Holdings, L.P. 51 (4) Mr. Dobrinsky has voting and dispositive power with respect to the shares of common stock held by Dobrinsky Family Holdings, L.P. and Dobrinsky Business Holdings, L.P. (5) Represents 5,741,632 shares to be issued in connection with the conversion of 7,500 shares of Series A Preferred Stock upon completion of this offering. Excludes 226,816 shares of common stock issued to CIBC World Markets, Inc. for services rendered in connection with the Series B Preferred Stock Financing. (6) Mr. Blumenstein is the designee of CIBC WMV, Inc. on our board of directors. Mr. Blumenstein does not have the power to vote or direct the vote of and to dispose or direct the disposition of the shares owned by CIBC WMV Inc. Accordingly, Mr. Blumenstein expressly disclaims beneficial ownership of such shares. (7) Includes 240,000 shares subject to options that are immediately exercisable. Also includes 2,046,376 shares held by Korb Business Holdings, L.P. (8) Mr. Korb has voting and dispositive power with respect to the shares of common stock held by Korb Business Holdings, L.P. (9) Represents 2,592,224 shares of common stock to be issued in connection with the conversion of the Series B Preferred Stock. (10) Represents 592,208 shares of common stock to be issued in connection with the conversion of the Series B Preferred Stock owned by Impact Venture Partners, L.P., of which Mr. Dell serves as managing partner. Mr. Dell expressly disclaims beneficial ownership of such shares except with respect to his proportionate interest in the limited partnership. (11) Includes 244,984 shares to be issued in connection with the conversion of 320 shares of Series A Preferred Stock upon completion of this offering. Also includes 478,800 shares subject to warrant agreements that are immediately exercisable. (12) Includes 15,632 shares subject to a warrant agreement that is immediately exercisable. (13) Represents 320,000 shares subject to options that are immediately exercisable. (14) Includes 139,504 shares subject to a warrant agreement in the name of Zackfoot Investments, LLC that is immediately exercisable. (15) Represents 1,296,112 shares of common stock to be issued in connection with the conversion of the Series B Preferred Stock owned by Carousel Capital Partners, L.P., of which Mr. Schwab serves as a managing director. Mr. Schwab expressly disclaims beneficial ownership of such shares except with respect to his proportionate interest in the limited partnership. (16) See notes 3 through 15. 52 DESCRIPTION OF CAPITAL STOCK General GoAmerica Communications Corp. was incorporated in Delaware in 1996. In December 1999, GoAmerica, Inc. was incorporated in Delaware and each of the stockholders of GoAmerica Communications Corp. exchanged all their outstanding shares of common stock and preferred stock of that company for newly issued shares of GoAmerica, Inc. with equivalent rights and preferences. As a result, GoAmerica Communications Corp. became a wholly-owned subsidiary of GoAmerica, Inc. In addition, each outstanding warrant and option to purchase shares of common stock of GoAmerica Communication Corp. is now exercisable for shares of common stock of GoAmerica, Inc. Upon consummation of this offering, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.01 per share, and 4,351,943 shares of undesignated preferred stock, par value $0.01 per share. At December 31, 1999, after giving effect to the conversion of all outstanding shares of Series A Preferred Stock and Series B Preferred Stock upon consummation of this offering, 47,136,760 shares of common stock were outstanding and held by 77 stockholders. The following statements are brief summaries of certain provisions with respect to our capital stock contained in our certificate of incorporation and bylaws, copies of which have been filed as exhibits to our registration statement. See "Where You Can Find More Information." The following summary is qualified in its entirety by reference to such documents. Common Stock The holders of our common stock are entitled to one vote for each share held of record upon such matters and in such manner as may be provided by law. Subject to preferences applicable to any outstanding shares of preferred stock, the holders of common stock are entitled to receive ratably dividends, if any, as may be declared by the board of directors out of funds legally available for dividend payments. In the event we liquidate, dissolve or wind up, the holders of common stock are entitled to share ratably in all assets remaining after payment of liabilities and liquidation preferences of any outstanding shares of the preferred stock. Holders of common stock have no preemptive rights or rights to convert their common stock into any other securities. There are no redemption or sinking fund provisions applicable to the common stock. Preferred Stock The preferred stock is issuable from time to time in one or more series and with such designations, preferences and other rights for each series as shall be stated in the resolutions providing for the designation and issue of each such series adopted by our board of directors. The board of directors is authorized by our Certificate of Incorporation to determine, among other things, the voting, dividend, redemption, conversion, exchange and liquidation powers, rights and preferences and the limitations thereon pertaining to such series. The board of directors, without stockholder approval, may issue preferred stock with voting and other rights that could adversely affect the voting power of the holders of the common stock and that could have certain anti-takeover effects. We have no present plans to issue any shares of preferred stock. The ability of the board of directors to issue preferred stock without stockholder approval could have the effect of delaying, deferring or preventing a change in control of us or the removal of existing management. Warrants At December 31, 1999, we had outstanding warrants to purchase an aggregate of 1,276,800 shares of our common stock. The weighted average exercise price of the warrants is $1.17 per share. Any warrant may be exercised by applying the value of a portion of the warrant, which is equal to the number shares issuable under the warrant being exercised multiplied by the fair market value of a share of our common stock, less the per share exercise price, in lieu of payment of the exercise price per share. Of such warrants, an aggregate of 53 848,912 will expire in 2001, an aggregate of 42,880 will expire in 2003, an aggregate of 65,008 will expire in 2004, and an aggregate of 320,000 will expire in 2008. Delaware Anti-Takeover Law and Our Certificate of Incorporation and Bylaw Provisions Provisions of Delaware law and our certificate of incorporation and bylaws could make it difficult for a third party to acquire us and to remove our incumbent officers and directors. These provisions, summarized below, are expected to discourage coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of GoAmerica to negotiate first with our board of directors. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited acquisition proposal outweigh the disadvantages of discouraging such proposals because, among other things, negotiation could result in an improvement of the terms of the proposal. We are subject to Section 203 of the Delaware General Corporation Law, which regulates corporate acquisitions. In general, Section 203 prohibits a publicly- held Delaware corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years following the date the person became an interested stockholder, unless: . the board of directors approved the transaction in which such stockholder became an interested stockholder prior to the date the interested stockholder attained such status; . upon consummation of the transaction that resulted in the stockholder's becoming an interested stockholder, he or she owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding shares owned by persons who are directors and also officers; or . on or subsequent to such date the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders by the affirmative vote of at least 66 2/3% of the corporation's voting stock not owned by the interested stockholder. A "business combination" generally includes a merger, sale of assets or stock, or other transaction resulting in a financial benefit to the interested stockholder. In general, an "interested stockholder" is a person who, together with affiliates and associates, owns, or within three years prior to the determination of interested stockholder status, did own, 15% or more of a corporation's voting stock. Our certificate of incorporation provides that, effective upon the closing of this offering, the terms of office of the members of the board of directors will be divided into three classes: Class A, whose term will expire at the annual meeting of stockholders to be held in 2001, Class B, whose term will expire at the annual meeting of stockholders to be held in 2002, and Class C, whose term will expire at the annual meeting of stockholders to be held in 2003. At each annual meeting of stockholders after the initial classification, the successors to directors whose term will then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our bylaws permit the board of directors to increase or decrease the size of the board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the total number of directors. This classification of the board of directors may have the effect of delaying or preventing changes in control or management of GoAmerica. Furthermore, our certificate of incorporation and bylaws also provide that: . the affirmative vote of the holders of at least 80% of the voting power of all outstanding shares of the capital stock of GoAmerica shall be required to adopt, amend or repeal any provision of our bylaws; . upon the closing of this offering, stockholders of GoAmerica may not take any action by written consent; 54 . upon the closing of this offering, special meetings of stockholders may be called only by our president, the chairman of our board of directors or a majority of our board of directors and business transacted at any such special meeting shall be limited to matters relating to the purposes set forth in the notice of such special meeting; . our board of directors, when evaluating an offer related to a tender or exchange offer or other business combination, is authorized to give due consideration to any relevant factors, including the social, legal and economic effects upon employees, suppliers, customers, creditors, the community in which we conduct business, and the economy of the state, region and nation; and . the affirmative vote of the holders of at least 80% of the voting power of all outstanding shares of the capital stock of GoAmerica shall be required to amend the above provisions or the limitations on director liability. The Delaware statute, the undesignated authorized preferred stock and the foregoing provisions of our certificate of incorporation and our bylaws may discourage certain types of transactions involving an actual or potential change in control of GoAmerica and could have the effect of delaying, deterring or preventing a change in control of GoAmerica. In addition, in the event of certain mergers, a reorganization or consolidation of GoAmerica with or into another corporation or the sale of all or substantially all of our assets or all of our capital stock wherein the successor corporation does not assume outstanding options or issue equivalent options, our board of directors is required to accelerate vesting of options outstanding under our 1999 Stock Plan. Registration Rights In October 1996, we entered into a registration rights agreement pursuant to which we granted registration rights to stockholders covering an aggregate of 5,501,216 shares of our common stock. Messrs. Docter and Kristoff are among such stockholders. Pursuant to the October 1996 registration rights agreement, at any time beginning six months after the effective date of this offering, the stockholders of at least a majority of such registrable shares of common stock have the right, subject to certain restrictions set forth therein, to require that we register, at our expense, on no more than two occasions any or all of their shares of common stock covered by such agreement. The October 1996 registration rights agreement also provides that, if at any time we propose to register any of our common stock under the Securities Act for sale to the public on either a Form S-1, Form S-2 or Form S-3 Registration Statement, those stockholders party to the agreement have unlimited piggyback registration rights at our expense, subject to certain restrictions, including the right of the managing underwriter in such offering to limit the amount of securities registered by such stockholders. In January 1998, we issued warrants to purchase 16,320 shares of our common stock and such shares have registration rights similar to the registration rights set forth in the October 1996 registration rights agreement. In June 1999, we entered into a registration rights agreement pursuant to which we granted registration rights to stockholders covering an aggregate of 7,655,512 shares of our common stock that will be issued upon the consummation of this offering and the automatic conversion of their shares of Series A Preferred Stock. This number of shares also included shares of Series A Preferred Stock sold in August 1999. CIBC WMV is one of the stockholders party to this agreement. Pursuant to the June 1999 registration rights agreement, at any time beginning 180 days after the effective date of this offering, the stockholders of at least 67% of such shares have the right, subject to certain restrictions set forth in the June 1999 registration rights agreement, to request that we register, at our expense, any or all of their shares. The June 1999 registration rights agreement also provides that, if at any time we propose to register any of our common stock under the Securities Act for sale to the public, the stockholders party to this agreement have unlimited piggyback registration rights at our expense, subject to certain restrictions, including the right 55 of the managing underwriter to limit the amount of securities registered by such stockholders. In addition, the 1999 Registration Rights Agreement provides that under certain circumstances, stockholders party thereto may register up to fifty percent of the number of shares available to be sold in any secondary offering of our common stock. In January 2000, we entered into a registration rights agreement in which we granted registration rights to stockholders covering an aggregate of 5,184,456 shares of our common stock that will be issued upon the automatic conversion of their shares of Series B Preferred Stock upon the completion of this offering. Dell USA L.P., Impact Venture Partners, L.P., Carousel Capital Partners, L.P. and Forstmann Little Equity Partnership-VI, L.P. are the stockholders party to this agreement. The January 2000 registration rights agreement provides that at any time beginning 180 days after the effective date of this offering, the stockholders of at least 50% of such shares have the right, subject to certain restrictions, to request that we register, at our expense, any or all of their shares. The January 2000 registration rights agreement also provides that, if at any time we propose to register any of our common stock under the Securities Act for sale to the public, the stockholders party to this agreement have unlimited piggyback registration rights at our expense, subject to certain restrictions, including the right of the managing underwriter to limit the amount of securities registered by such stockholders. In the event that the holders of our Series B Preferred Stock, Series A Preferred Stock and Common Stock desire to register their shares together and there is a need to reduce the number of shares registered, the Series B Preferred Stock stockholders will have priority over other stockholders for the registration of their shares. This agreement also provides that under certain circumstances, these stockholders may register all of their shares available to be sold in any secondary offering of our common stock. Our underwriters have advised our stockholders that they may not participate in this offering or otherwise exercise any of their registration rights in connection herewith. Listing We have applied to have our common stock approved for quotation on the Nasdaq National Market under the symbol "GOAM". Transfer Agent and Registrar The transfer agent and registrar for the common stock is American Stock Transfer & Trust Company. The transfer agent's address and telephone number is 40 Wall Street, New York, New York 10005, 718-921-8200. 56 SHARES ELIGIBLE FOR FUTURE SALE Upon completion of this offering, we will have 47,136,760 shares of common stock outstanding. Of these shares, the 10,000,000 shares sold in the offering, plus any additional shares sold upon exercise of the underwriters' over- allotment option, will be freely transferable by persons other than "affiliates" of GoAmerica without restriction or further registration under the Securities Act. The remaining 37,136,760 outstanding shares will be "restricted securities" (the "Restricted Shares") within the meaning of Rule 144 under the Securities Act and may not be sold in the absence of registration under the Securities Act unless an exemption from registration is available, such as the exemption afforded by Rule 144. Each of GoAmerica, our officers and directors, and certain of our stockholders have entered into "lock-up" agreements with a representative of the underwriters, providing that, subject to certain exceptions, they will not offer, sell or otherwise dispose of any shares of common stock, or securities convertible into or exchangeable for common stock, or enter into any agreement to do so, for a period of 180 days after the date of this prospectus without the prior written consent of Bear, Stearns & Co. Inc. acting as a representative of the underwriters. Bear, Stearns & Co. Inc. may release any of such shares in its sole discretion at any time and without prior notice. Following expiration of the "lock-up" period, all the Restricted Shares will become eligible for sale at various times commencing immediately pursuant to Rule 144, subject to certain limitations described below. In addition, certain of the Restricted Shares may be sold upon expiration of the "lock-up" period if eligible stockholders elect to exercise available registration rights. See "Description of Capital Stock--Registration Rights." Rule 144, as currently in effect, provides that an affiliate of GoAmerica or a person, or persons whose sales are aggregated, who has beneficially owned Restricted Shares that were issued by GoAmerica or purchased by such person from a nonaffiliate of GoAmerica at least one year prior to such sale is entitled to sell, commencing 90 days after the date of this prospectus, within any three-month period, a number of shares that does not exceed the greater of 1% of the then outstanding shares of common stock (approximately shares of common stock immediately after this offering) and the average weekly trading volume in the common stock during the four calendar weeks preceding such sale. Sales under Rule 144 also are subject to certain manner-of-sale provisions, notice requirements and the availability of current public information about us. However, a person who is not an "affiliate" of GoAmerica at any time during the three months preceding a sale, and who has beneficially owned Restricted Shares that were issued by GoAmerica or purchased by such person from a nonaffiliate of GoAmerica at least two years prior to such sale, is entitled to sell such shares under Rule 144 without regard to the limitations described above. As of the date of this prospectus, there were outstanding options and warrants to purchase an aggregate of 3,716,808 shares of common stock. After giving effect to vesting provisions limiting the exercisability of all the outstanding options and the "lock-up" period applicable to certain option holders, none of these shares will become available for sale in the public market pursuant to Rules 144 and 701 under the Securities Act until at least 180 days after completion of this offering. Rule 701 relates to the sale of shares issuable under compensatory stock plans. 1,996,800 of such shares will become available for resale at the expiration of the "lock-up" period. We intend to register on a Form S-8 registration statement under the Securities Act, during the 180-day lock-up period, the resale of 6,716,000 shares of common stock issuable upon the exercise of outstanding options or reserved for issuance under the 1999 Stock Plan and the resale of 4,000,000 shares of common stock to be sold to employees pursuant to our Employee Stock Purchase Plan. See "Management--GoAmerica, Inc. 1999 Stock Option Plan" and "--Employee Stock Purchase Plan." Since there has been no public market for shares of the common stock prior to this offering, we are unable to predict the effect that sales made pursuant to Rules 144 or 701 under the Securities Act, or otherwise, may have on the prevailing market price of the shares of the common stock. Sales of a substantial amount of the common stock in the public market, or the perception that such sales could occur, could adversely affect the market prices of our stock. See "Risk Factors--Future sales of our common stock may negatively affect our stock price." 57 CERTAIN U.S. TAX CONSEQUENCES TO NON-U.S. HOLDERS Following is a general discussion of the material U.S. federal income and estate tax consequences of the ownership and disposition of the common stock applicable to non-U.S. holders of our common stock. For purposes of this discussion, a non-U.S. holder is any holder of our common stock that, for U.S. federal income tax purposes, is not a U.S. person (as defined below). This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant in light of a non-U.S. holder's particular facts and circumstances, such as being a U.S. expatriate, and does not address any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. Furthermore, the following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. We have not and will not seek a ruling from the Internal Revenue Service with respect to the U.S. federal income and estate tax consequences described below, and as a result, there can be no assurance that the Internal Revenue Service will not disagree with or challenge any of the conclusions set forth in this discussion. For purposes of this discussion, the term U.S. person means: . a citizen or resident of the United States; . a corporation, partnership or other entity created or organized in the United States or under the laws of the United States or any political subdivision thereof; . an estate whose income is included in gross income for U.S. federal income tax purposes regardless of its source; or . a trust whose administration is subject to the primary supervision of a U.S. court and which has one or more U.S. persons who have the authority to control all substantial decisions of the trust. Dividends A dividend paid to a non-U.S. holder generally will be subject to U.S. withholding tax either at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable income tax treaty. Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder are exempt from that withholding tax. However, those effectively connected dividends, net of certain deductions and credits, are taxed at the same graduated rates applicable to U.S. persons. In addition to the graduated tax described above, dividends received by a corporate non-U.S. holder that are effectively connected with a U.S. trade or business of the corporate non-U.S. holder may also be subject to a branch profits tax at a rate of 30% or such lower rate as may be specified by an applicable income tax treaty. A non-U.S. holder that is eligible for a reduced rate of withholding tax pursuant to an applicable income tax treaty may be required to submit documentation to avail itself of that treaty and may be able to obtain a refund of any excess amounts withheld by GoAmerica by filing an appropriate claim for refund with the Internal Revenue Service. Gain On Disposition Of Common Stock A non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our common stock unless: . the gain is effectively connected with a U.S. trade or business of the non-U.S. holder (which gain, in the case of a corporate non-U.S. holder, must also be taken into account for branch profits tax purposes); 58 . the non-U.S. holder is an individual who holds his or her common stock as a capital asset (generally, an asset held for investment purposes) and who is present in the United States for a period or periods aggregating 183 days or more during the calendar year in which the sale or disposition occurs and certain other conditions are met; or . we are or have been a "United States real property holding corporation" for U.S. federal income tax purposes at any time within the shorter of the five-year period preceding the disposition or the holder's holding period for its common stock. We believe that we are not and do not believe that we will become a "United States real property holding corporation" for U.S. federal income tax purposes. Backup Withholding and Information Reporting Generally, we would be required to report annually to the Internal Revenue Service the amount of dividends, if any, paid on the common stock, the name and address of the recipient, and the amount, if any, of tax withheld. A similar report would be sent to the recipient. Pursuant to applicable income tax treaties or other agreements, the Internal Revenue Service may make its reports available to tax authorities in the recipient's country of residence. Dividends paid to a non-U.S. holder at an address within the United States may be subject to backup withholding at a rate of 31% if the non-U.S. holder fails to establish that it is entitled to an exemption or to provide a correct taxpayer identification number and other information to the payer. Backup withholding will generally not apply to the dividends paid to non-U.S. holders at an address outside the United States on or prior to December 31, 2000 unless the payer has knowledge that the payee is a U.S. person. Under recently finalized Treasury Regulations regarding withholding and information reporting, payment of dividends to non-U.S. holders at an address outside the United States after December 31, 2000 may be subject to backup withholding at a rate of 31% unless such non-U.S. holder satisfies various certification requirements. Under current Treasury Regulations, the payment of the proceeds of the disposition of our common stock to or through the U.S. office of a broker is subject to information reporting and backup withholding at a rate of 31% unless the holder certifies its non-U.S. status under penalties of perjury or otherwise establishes an exemption. Generally, the payment of the proceeds of the disposition by a non-U.S. holder of our common stock outside the United States to or through a foreign office of a broker will not be subject to backup withholding but will be subject to information reporting requirements if the broker is: . a U.S. person; . a "controlled foreign corporation" for U.S. federal income tax purposes; or . a foreign person 50% or more of whose gross income for certain periods is from the conduct of a U.S. trade or business unless the broker has documentary evidence in its files of the holder's non- U.S. status and certain other conditions are met, or the non-U.S. holder otherwise establishes an exemption. Neither backup withholding nor information reporting generally will apply to a payment of the proceeds of a disposition of our common stock by or through a foreign office of a foreign broker not subject to the preceding sentence. In general, the recently finalized Treasury Regulations, described above, do not significantly alter substantive withholding and information reporting requirements but would alter procedures for claiming benefits of an income tax treaty and change the certifications procedures relating to the receipt by intermediaries of payments on behalf of the beneficial owner of shares of common stock. Non-U.S. holders should consult their tax advisors regarding the effect, if any, of those final Treasury Regulations on an investment in our common stock. Those final Treasury Regulations are generally effective for payments made after December 31, 2000. 59 Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is furnished to the Internal Revenue Service. Estate Tax An individual non-U.S. holder who owns our common stock at the time of his or her death or had made certain lifetime transfers of an interest in our common stock will be required to include the value of our common stock in his or her gross estate for U.S. federal estate tax purposes, unless an applicable estate tax treaty provides otherwise. The foregoing discussion is a summary of the principal U.S. federal income and estate tax consequences of the ownership, sale or other disposition of our common stock by non-U.S. holders. Accordingly, investors are urged to consult their own tax advisors with respect to the income and estate tax consequences of the ownership and disposition of common stock, including the application and effect of the laws of any state, local, foreign or other taxing jurisdiction. 60 UNDERWRITING Subject to the terms and conditions set forth in an underwriting agreement dated , 2000, each of the underwriters named below, through their representatives Bear, Stearns & Co. Inc., Chase Securities Inc., U.S. Bancorp Piper Jaffray Inc., SoundView Technology Group, Inc. and DLJdirect Inc., has severally agreed to purchase from us the aggregate number of shares of common stock set forth opposite its name below at the public offering price less the underwriting discount set forth on the cover page of this prospectus.
Underwriters Number of Shares - ------------ ---------------- Bear, Stearns & Co. Inc........................................ Chase Securities Inc........................................... U.S. Bancorp Piper Jaffray Inc................................. SoundView Technology Group, Inc................................ DLJdirect Inc.................................................. ---------- Total........................................................ 10,000,000 ==========
The underwriting agreement provides that the obligations of the several underwriters thereunder are subject to approval of certain legal matters by their counsel and to various other conditions. Under the underwriting agreement, the underwriters are obligated to purchase and pay for all of the above shares of common stock, other than those covered by the over-allotment option described below, if they purchase any of the shares. The underwriters propose to initially offer some of the shares directly to the public at the offering price set forth on the cover page of this prospectus and some of the shares to dealers at this price less a concession not in excess of $ per share. The underwriters may allow, and dealers may re-allow, concessions not in excess of $ per share on sales to other dealers. After the initial offering of the shares to the public, the underwriters may change the offering price, concessions and other selling terms. The underwriters do not intend to confirm sales to any accounts over which they exercise discretionary authority. We have granted the underwriters an option exercisable for 30 days from the date of the underwriting agreement to purchase up to 1,500,000 additional shares, at the offering price less the underwriting discount. The underwriters may exercise this option solely to cover over-allotments, if any, made in connection with this offering. To the extent underwriters exercise this option in whole or in part then each of the underwriters will become obligated, subject to conditions, to purchase a number of additional shares approximately proportionate to each underwriter's initial purchase commitment as indicated in the preceding table. We have agreed to indemnify the underwriters against certain liabilities, including liabilities under the Securities Act. Our directors, executive officers and stockholders, who collectively hold a total of 37,204,808 shares of common stock, have agreed, subject to limited exceptions, not to sell or offer to sell or otherwise dispose of any shares of common stock or securities convertible into or exercisable or exchangeable for our common stock, for a period of 180 days after the date of this prospectus without the prior written consent of Bear, Stearns & Co. Inc., on behalf of the underwriters. In addition, we have agreed that for a period of 180 days after the date of this prospectus we will not offer, sell or otherwise dispose of any shares of common stock except for the shares offered in this offering and any shares offered in connection with employee benefit plans, without the consent of Bear, Stearns & Co. Inc., on behalf of the underwriters. 61 Prior to the offering, there has been no public market for our common stock. Consequently, the initial offering price for the common stock will be determined by negotiations between us and the representatives of the underwriters. Among the factors to be considered in these negotiations will be: . our results of operations in recent periods; . estimates of our business potential; . an assessment of our management; . prevailing market conditions; and . the prices of similar securities of generally comparable companies. We have applied to have our common stock approved for quotation on the Nasdaq National Market under the symbol "GOAM." We cannot assure you, however, that an active or orderly trading market will develop for the common stock or that our common stock will trade in the public markets subsequent to the offering at or above the initial offering price. In order to facilitate the offering, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the common stock during and after the offering. Specifically, the underwriters may over-allot or otherwise create a short position in the common stock for their own account by selling more shares of common stock than we have actually sold to them. The underwriters may elect to cover any short position by purchasing shares of common stock in the open market or by exercising the over-allotment option granted to the underwriters. In addition, the underwriters may stabilize or maintain the price of the common stock by bidding for or purchasing shares of common stock in the open market and may impose penalty bids, under which selling concessions allowed to syndicate members or other broker-dealers participating in the offering are reclaimed if shares of common stock previously distributed in the offering are repurchased in connection with stabilization transactions or otherwise. The effect of these transactions may be to stabilize or maintain the market price at a level above that which might otherwise prevail in the open market and these transactions may be discontinued at any time. The imposition of a penalty bid may also affect the price of the common stock to the extent that it discourages resales. No representation is made as to the magnitude or effect of these activities. A prospectus in electronic format is being made available on an Internet Web site maintained by Wit SoundView's affiliate, Wit Capital Corporation. In addition, other dealers purchasing shares from Wit SoundView in this offering have agreed to make a prospectus in electronic format available on Web sites maintained by each of these dealers. An electronic prospectus is also available on the Web site maintained by DLJdirect Inc. Other than the prospectus in electronic format, the information on these Web sites and any information contained on any other Web site maintained by Wit Capital or DLJdirect Inc. is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter and should not be relied upon by investors. Other than their respective participation as underwriters in this offering, none of the underwriters has any relationship with GoAmerica, or any of its founders or significant stockholders, except as follows. In January 2000, GoAmerica and DLJdirect Inc. entered into a co-marketing arrangement pursuant to which each party features the services of the other. There are no payment or fee obligations which arise from this co-marketing relationship. The underwriters have reserved for sale, at the initial public offering price, up to 500,000 shares of common stock for employees, directors and other persons associated with us who express an interest in purchasing these shares of common stock in the offering. The number of shares available for sale to the general public in the offering will be reduced to the extent these persons purchase reserved shares. Any reserved shares not purchased by these persons will be offered by the underwriters to the general public on the same terms as the other shares offered in this offering. 62 The underwriters may, from time to time, engage in transactions with, and perform services for, us in the ordinary course of their business. The following table shows the underwriting discount to be paid to the underwriters in connection with this offering. These amounts are shown assuming both no exercise and full exercise of the underwriters' option to purchase additional shares of common stock.
No Exercise Full Exercise ----------- ------------- Per share.......................................... $ $ Total.............................................. $ $
Other expenses of this offering (including the registration fees and the fees of financial printers, counsel and accountants) payable by us are expected to be approximately $1.4 million. 63 LEGAL MATTERS The validity of the shares of the common stock offered hereby will be passed upon by Buchanan Ingersoll Professional Corporation, Princeton, New Jersey. Certain legal matters in connection with the offering will be passed upon for the underwriters by Sidley & Austin, New York, New York. EXPERTS Ernst & Young LLP, independent auditors, have audited our financial statements at December 31, 1998 and 1999, and for each of the three years in the period ended December 31, 1999 as set forth in their report. We have included our financial statements in the prospectus and elsewhere in the registration statement in reliance on Ernst & Young LLP's report, given on their authority as experts in accounting and auditing. John D. Hilcher, CPA, independent auditor, has audited the financial statements of the business segment ZAP.IT for the six month period ended June 30, 1998 as set forth in his report. We have included these financial statements in the prospectus and elsewhere in the registration statement in reliance on John D. Hilcher's report, given on his authority as an expert in accounting and auditing. WHERE YOU CAN FIND MORE INFORMATION We have filed with the Securities and Exchange Commission a registration statement on Form S-1 under the Securities Act, with respect to the shares of common stock offered hereby. This prospectus does not contain all the information which is in the registration statement. We refer to the registration statement and to the exhibits and schedules filed with the Registration Statement for further information with respect to us and the shares of common stock offered in this prospectus. Statements contained herein as to the content of any contract or other document are materially complete. However, reference is made to the copy of such contract or other document filed as an exhibit to the registration statement, and each such statement is qualified in its entirety by such reference. The registration statement and the exhibits and schedules thereto may be inspected without charge at the Public Reference Room of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission located at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Copies of such documents may be obtained from the Public Reference Room of the Commission at prescribed rates. This material also may be obtained on the Commission's website at http://www.sec.gov. Information regarding the operation of the Public Reference Room may be obtained by calling the Commission at 1(800) SEC-0330. We intend to furnish our stockholders with annual reports containing financial statements certified by our independent accountants and make available quarterly reports containing unaudited financial information for the first three quarters of each year. 64 GOAMERICA, INC. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- GoAmerica, Inc. Report of Independent Auditors........................................... F-2 Consolidated Balance Sheets as of December 31, 1998 and 1999............. F-3 Consolidated Statements of Operations for the years ended December 31, 1997, 1998 and 1999..................................................... F-4 Consolidated Statements of Stockholders' Equity (Deficit) for the years ended December 31, 1997, 1998 and 1999.................................. F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1997, 1998 and 1999..................................................... F-6 Notes to Consolidated Financial Statements............................... F-7 ZAP.IT Business Segment Report of Independent Auditors........................................... F-19 Statement of Operations from Business Segment for the six months ended June 30, 1998........................................................... F-21 Statement of Cash Flows from Business Segment for the six months ended June 30, 1998........................................................... F-22 Notes to Financial Statements of Business Segment........................ F-23
F-1 REPORT OF INDEPENDENT AUDITORS The Board of Directors GoAmerica, Inc. We have audited the accompanying consolidated balance sheets of GoAmerica, Inc. and subsidiary, as of December 31, 1999 and 1998, and the related consolidated statements of operations, stockholders' equity (deficit) and cash flows for each of the three years in the period ended December 31, 1999. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of GoAmerica, Inc. and subsidiary at December 31, 1999 and 1998, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1999, in conformity with accounting principles generally accepted in the United States. /s/ Ernst & Young LLP MetroPark, New Jersey February 23, 2000 F-2 GOAMERICA, INC. CONSOLIDATED BALANCE SHEETS
Pro forma Stockholders' December 31, Equity ------------------------- ------------- December 31, 1999 1998 1999 (Note 13) ----------- ------------ ------------- Assets Current assets: Cash and cash equivalents........... $ 1,960,954 $ 6,343,793 Accounts receivable, less allowance for doubtful accounts of $20,000 in 1998 and $75,000 in 1999........... 199,021 541,865 Merchandise inventories............. 66,222 589,307 Prepaid expenses and other.......... 34,149 471,455 ----------- ------------ Total current assets.................. 2,260,346 7,946,420 Property, equipment and leasehold improvements, net.................... 643,692 959,243 Deferred costs........................ 510,748 Investment in DataRover Mobile Systems, Inc. ....................... 255,700 Other assets.......................... 105,945 84,573 ----------- ------------ $ 3,009,983 $ 9,756,684 =========== ============ Liabilities, redeemable convertible preferred stock and stockholders' equity (deficit) Current liabilities: Accounts payable.................... $ 165,383 $ 3,837,715 Accrued expenses.................... 604,806 1,460,936 Capital lease obligations........... 157,854 Deferred income..................... 14,508 64,300 ----------- ------------ Total current liabilities............. 784,697 5,520,805 Other liabilities..................... 139,274 Commitments and contingencies Series A redeemable convertible preferred stock, $.01 par value, authorized: none in 1998 and 10,500 shares in 1999; issued and outstanding: none in 1998; 10,500 shares in 1999, and none pro forma 1999, $10,500,000 liquidation preference........................... 20,755,323 $ -- Stockholders' equity (deficit): Preferred stock $.01 par value, authorized: 5,000,000 shares in 1998 and 1999; issued and outstanding: none in 1998 and 1999; none pro forma 1999................ Common stock, $.01 par value; authorized: 40,000,000 in 1998, and 100,000,000 shares in 1999, respectively; issued and outstanding: 21,327,776 in 1998 and 23,687,184 shares in 1999, respectively, and 37,136,760 shares pro forma 1999..................... 213,278 236,872 371,368 Additional paid-in capital.......... 5,855,432 5,483,655 51,294,482 Deferred employee compensation...... (7,067,533) (7,067,533) Accumulated deficit................. (3,843,424) (15,311,712) (15,311,712) ----------- ------------ ----------- Total stockholders' equity (deficit).. 2,225,286 (16,658,718) $29,286,605 ----------- ------------ =========== $ 3,009,983 $ 9,756,684 =========== ============
See accompanying notes. F-3 GOAMERICA, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
Year ended December 31 -------------------------------------- 1997 1998 1999 ----------- ----------- ------------ Revenues: Subscriber.......................... $ 114,524 $ 359,364 $ 1,182,695 Equipment........................... 33,431 449,027 1,341,356 Other............................... 24,775 18,264 206,496 ----------- ----------- ------------ 172,730 826,655 2,730,547 Costs and expenses: Cost of subscriber revenue.......... 87,551 303,477 4,051,182 Cost of equipment revenue........... 14,960 532,074 1,648,160 Sales and marketing................. 242,708 908,694 3,283,021 General and administrative.......... 841,090 1,549,188 4,809,232 Depreciation and amortization....... 32,384 123,616 275,067 Settlement costs.................... 297,310 ----------- ----------- ------------ 1,218,693 3,417,049 14,363,972 ----------- ----------- ------------ Loss from operations.................. (1,045,963) (2,590,394) (11,633,425) Interest income..................... 13,685 165,137 ----------- ----------- ------------ Net loss.............................. $(1,045,963) $(2,576,709) $(11,468,288) =========== =========== Beneficial conversion feature and accretion of redemption value of mandatorily redeemable convertible preferred stock...................... (10,463,472) ------------ Net loss applicable to common stockholders......................... $(21,931,760) ============ Basic net loss per share applicable to common stockholders.................. $ (0.07) $ (0.14) $ (1.02) Diluted net loss per share applicable to common stockholders............... $ (0.06) $ (0.14) $ (1.00) =========== =========== ============ Weighted average shares used in computation of basic net loss per share applicable to common stockholders......................... 16,083,028 18,391,368 21,590,259 Weighted average shares used in computation of diluted net loss per share applicable to common stockholders......................... 16,518,052 18,826,392 22,025,283 Pro forma basic net loss per share (unaudited).......................... $ (0.45) Pro forma diluted net loss per share (unaudited).......................... -- -- $ (0.45) ============ Weighted average shares used in computation of pro forma basic net loss per share (unaudited).......................... -- -- 25,257,560 Weighted average shares used in computation of pro forma diluted net loss per share (unaudited)........... -- -- 25,692,584
See accompanying notes. F-4 GOAMERICA, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) Period from January 1, 1997 to December 31, 1999
Total Common Stock Additional Deferred Stockholders' ------------------- Paid-in Employee Accumulated Equity Shares Amount Capital Compensation Deficit (Deficit) ---------- -------- ----------- ------------ ------------ ------------- Balance at January 1, 1997................... 16,000,000 160,000 $ 840,000 $ -- $ (220,752) $ 779,248 Issuance of common stock................. 409,440 4,095 410,905 415,000 Net loss............... (1,045,963) (1,045,963) ---------- -------- ----------- ----------- ------------ ------------ Balance at December 31, 1997................... 16,409,440 164,095 1,250,905 -- (1,266,715) 148,285 Sale of common stock and stock purchase warrants.............. 4,918,336 49,183 4,604,527 4,653,710 Net loss............... (2,576,709) (2,576,709) ---------- -------- ----------- ----------- ------------ ------------ Balance at December 31, 1998................... 21,327,776 213,278 5,855,432 -- (3,843,424) 2,225,286 Sale of common stock... 1,875,416 18,754 1,999,322 2,018,076 Issuance of common stock upon exercise of warrants.............. 483,992 4,840 (4,235) 605 Non-cash capital contribution by principal shareholders in connection with settlement agreements............ 148,572 148,572 Issuance of warrants to purchase common stock in connection with settlement agreements............ 148,738 148,738 Deferred non-cash employee compensation.......... 7,799,298 (7,799,298) -- Amortization of non- cash deferred employee compensation.......... 731,765 731,765 Beneficial conversion feature and accretion of redemption value of redeemable convertible preferred stock....... (10,463,472) (10,463,472) Net loss............... (11,468,288) (11,468,288) ---------- -------- ----------- ----------- ------------ ------------ Balance at December 31, 1999................... 23,687,184 $236,872 $ 5,483,655 $(7,067,533) $(15,311,712) $(16,658,718) ========== ======== =========== =========== ============ ============
See accompanying notes. F-5 GOAMERICA, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31 -------------------------------------- 1997 1998 1999 ----------- ----------- ------------ Operating activities Net loss............................... $(1,045,963) $(2,576,709) $(11,468,288) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization......... 32,384 123,616 275,067 Provision for losses on accounts receivable........................... 5,000 15,000 215,297 Non-cash employee compensation........ 731,765 Non-cash settlement costs............. 297,310 Non-cash rent expense................. 139,274 Changes in operating assets and liabilities: Increase in accounts receivable....... (10,492) (199,651) (558,141) Increase in merchandise inventories... (6,420) (3,202) (523,085) (Increase) decrease in prepaid expenses and other assets............ 59,319 (78,316) (432,601) Increase (decrease) in accounts payable.............................. 80,817 (20,125) 3,672,332 Increase (decrease) in accrued expenses............................. 82,501 510,303 856,130 Increase in deferred income........... 14,508 49,792 ----------- ----------- ------------ Net cash used in operating activities.. (802,854) (2,214,576) (6,745,148) Investing activities Purchase of property, equipment and leasehold improvements................ (179,877) (297,769) (387,116) Acquisition of DTS assets.............. (200,000) Investment in DataRover Mobile Systems, Inc................................... (255,700) ----------- ----------- ------------ Net cash used in investing activities.. (179,877) (497,769) (642,816) Financing activities Proceeds from sale of common stock and stock purchase warrants............... 415,000 4,653,710 2,018,681 Proceeds from sale of preferred stock.. 10,291,851 Deferred financing costs............... (510,748) Payments made on capital lease obligations........................... (28,981) ----------- ----------- ------------ Net cash provided by financing activities............................ 415,000 4,653,710 11,770,803 ----------- ----------- ------------ Increase (decrease) in cash and cash equivalents........................... (567,731) 1,941,365 4,382,839 Cash and cash equivalents at beginning of period............................. 587,320 19,589 1,960,954 ----------- ----------- ------------ Cash and cash equivalents at end of period................................ $ 19,589 $ 1,960,954 $ 6,343,793 =========== =========== ============
See accompanying notes. F-6 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1997, December 31, 1998 and December 31, 1999 1. Description of Business GoAmerica, Inc. (the "Company") offers wireless access to the internet and corporate intranet systems to customers located in the United States. The Company has formed strategic relationships with wireless carriers, software providers, and hardware manufacturers who provide the mobile computer user wireless communications, services and devices that complement the Company's services. The Company also distributes wireless communication devices, principally to customers of its wireless services. 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. The Company is highly dependent on third-party providers for wireless communication services. On December 31, 1999, the stockholders of GoAmerica Communications Corp., the predecessor to GoAmerica, Inc., exchanged all of the outstanding common and Series A Preferred shares of GoAmerica Communications Corp. for the same number of shares of similar securities of GoAmerica, Inc., and as a result, GoAmerica Communications Corp. became a wholly-owned subsidiary of GoAmerica, Inc. All outstanding options and warrants of GoAmerica Communications Corp. were exchanged into similar securities of GoAmerica, Inc. Prior to December 31, 1999, GoAmerica, Inc. had no operations, assets or liabilities. This corporate reorganization was accounted for as an exchange of shares between entities under common control and no changes were made to the historical cost basis of GoAmerica Communications Corp.'s net assets. In December 1999, the Company Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission for an initial public offering of the Company's common stock. Basis of Consolidation As noted above, GoAmerica Communications Corp. became a wholly-owned subsidiary of GoAmerica, Inc. effective December 31, 1999. The accompanying consolidated financial statements reflect the results of operations of GoAmerica Communications Corp. through December 31, 1999. All significant intercompany balances and transactions are eliminated in consolidation. 2. Significant Accounting Policies Cash Equivalents Cash equivalents consist of highly liquid investments with a maturity of three month or less when purchased. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, and the reported amounts of certain expenses during the reporting periods. Actual results could differ from those estimates. F-7 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 Merchandise Inventories Merchandise inventories, principally wireless devices, are stated at the lower of cost (first-in, first-out) basis or market. The inventory of the Company is subject to rapid technological changes which could have an adverse impact on its realization in future periods. In addition, there are a limited number of suppliers of the Company's inventory. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements are stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the related assets ranging from three to seven years. Expenditures for maintenance and repairs are charged to expense as incurred. Investment in DataRover Mobile Systems, Inc. The investment in DataRover Mobile Systems, Inc. ("DataRover") consists of the Company's investment in Series B Preferred Stock of DataRover, a private company engaged in the hand-held mobile computing business. The investment is accounted for on a cost basis as the Company's ownership is less than 5% of the total outstanding shares of DataRover at December 31, 1999; the Company does not exercise significant influence over DataRover; and the DataRover stock does not have a readily determinable fair value. Deferred Costs As of December 31, 1999, external costs directly attributable to the planned initial public offering of GoAmerica, Inc. shares have been deferred. These costs will be charged against the Company's additional paid- in-capital in connection with the consummation of its initial public offering. Revenue and Deferred Revenue 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. Also included in subscriber revenue are one-time non-refundable activation fees. To the extent such fees exceed the related costs, they are deferred and recognized ratably over the life of the related service contracts generally six months or twelve months. Equipment revenue is recognized upon shipment. Consulting revenue, included in other revenue, is recognized as the related services are provided. Cost of Revenues Cost of subscriber revenue consists principally of airtime costs. Cost of equipment revenue consists of the cost of equipment sold. Income Taxes Deferred income taxes are determined using the liability method. Under this method, deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. Advertising Costs Advertising costs are expensed as incurred. During 1997, 1998 and 1999, advertising expense was approximately $68,000, $203,000 and $1,081,000, respectively. F-8 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 Research and Development Costs Research and development costs are expensed as incurred. During 1998 and 1999, research and development costs totaled approximately $155,000 and $465,000, respectively. The Company did not incur research and development costs during 1997. Stock-Based Employee Compensation The Company accounts for employee stock-based compensation in accordance with Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock Issued to Employees", using an intrinsic value approach to measure compensation expense, if any. Appropriate disclosures using a fair value based method, as provided by Statement of Financial Accounting Standards ("SFAS") No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), are also reflected in the accompanying notes to the financial statements. Options issued to non- employees are accounted for in accordance with SFAS 123, using a fair value approach. Net Loss Available for Common Stockholders Net loss available for common stockholders represents net loss reduced by accretion of the redeemable preferred stock to redemption value and an amount representing beneficial conversion features on preferred stock. Stock Splits On April 15, 1998, the Company's Board of Directors declared a 2000 for 1 stock split. Additionally, on February 23, 2000, the Company's Board of Directors approved an amendment to the Company's certificate of incorporation to increase the number of common shares authorized from 45,000,000 to 100,000,000. On that same date, the Company's Board of Directors declared an eight for one stock split to become effective upon the filing of the amendment to the certificate of incorporation. All share and per share data included in the financial statements have been retroactively adjusted to reflect the stock splits, and the amendment to the certificate of incorporation. Concentration of Credit Risk Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents and accounts receivable. The Company maintains a significant portion of its cash and cash equivalents with a major regional bank. The Company performs periodic credit evaluations of its customers but generally does not require collateral. Fair Value of Financial Instruments The carrying amounts of the Company's financial instruments, which include cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and Series A redeemable convertible preferred stock approximate their fair values. Segment Information In June 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," which establishes standards for the way that a F-9 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 public enterprise reports information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. The Company operates in a single segment. The chief operating decision maker allocates resources and assesses the performance associated with wireless services and equipment sales on a single segment basis. Software Development Costs In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants ("AICPA") issued Statement of Position ("SOP") 98-1, "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This SOP is effective for fiscal years beginning after December 15, 1998. The Company has adopted the provisions of SOP 98-1 as of January 1, 1999, with no material effect. All projects are being amortized over their estimated useful lives, which has been determined by management to be three years. Amortization on the projects begins when the software is ready for its intended use. Start-Up Activities In April 1998, the AICPA issued SOP 98-5, "Reporting on the Costs of Start- up Activities." SOP 98-5, effective for fiscal years beginning after December 15, 1998, provides guidance on the financial reporting of start-up costs and organization costs. It requires costs of start-up activities and organization costs to be expensed as incurred. As the Company expensed these costs as incurred, the adoption of this standard as of January 1, 1999 had no impact on the Company's results of operations, financial position or cash flows. Recent Accounting Pronouncements In June 1998, the FASB issued Statement of Financial Accounting Standards No. 133, Accounting for Derivatives and Hedging Activities ("SFAS 133"), which establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts (collectively referred to as derivatives) and for hedging activities. SFAS 133, as amended, is effective for all fiscal quarters of fiscal years beginning after June 15, 2000. As the Company does not currently intend to engage in derivatives or hedging transactions, the Company does not anticipate any effect on its results of operations, financial position or cash flows upon the adoption of SFAS 133. F-10 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 3. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements consists of the following:
December 31, --------------------- 1998 1999 --------- ---------- Furniture, fixtures and equipment..................... $ 197,573 $ 328,142 Computer equipment and software....................... 589,142 1,018,443 Leasehold improvements................................ 17,415 31,502 --------- ---------- 804,130 1,378,087 Less accumulated depreciation and amortization........ (160,438) (418,844) --------- ---------- $ 643,692 $ 959,243 ========= ==========
At December 31, 1999, the Company leased equipment with a cost basis of $186,841 which is included in computer equipment and software. Accumulated amortization on leased equipment was $1,062. 4. Supplemental Balance Sheet Information The following table summarizes the activity in the allowance for doubtful accounts for the years ended December 31, 1997, 1998 and 1999:
December 31 ----------------------- 1997 1998 1999 ------ ------- -------- Balance, beginning of period........................ $ -- $ 5,000 $ 20,000 Provision charged to operations..................... 5,000 15,000 215,000 Amounts written off................................. -- -- 160,000 ------ ------- -------- Balance, end of period.............................. $5,000 $20,000 $ 75,000 ====== ======= ========
Accrued expenses consisted of the following:
December 31, ------------------- 1998 1999 -------- ---------- Inventory purchases..................................... $179,454 $ 85,025 Employee compensation................................... 120,909 213,750 Professional fees....................................... 118,897 233,007 Equipment and leasehold improvement purchases........... -- 125,000 Accrued legal settlement................................ -- 80,000 Marketing expenses...................................... -- 400,000 Carrier services........................................ -- 164,134 Sales and use taxes..................................... 46,581 45,098 Other................................................... 138,965 114,922 -------- ---------- $604,806 $1,460,936 ======== ==========
5. Commitments and Contingencies The Company leases office facilities under an operating lease which expires in 2007. The Company has the option to renew the lease for an additional five year period. F-11 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 On December 15, 1999, the Company entered into a facilities maintenance agreement for a new network operating center. This agreement obligates the Company to make aggregate payments of approximately $1,607,000 through 2004. Future minimum payments to be made pursuant to noncancelable operating leases with initial or remaining terms of one year or more as well as the minimum payments to be made under the facilities maintenance agreement are as follows: 2000............................................................ $ 931,000 2001............................................................ 852,000 2002............................................................ 857,000 2003............................................................ 686,000 2004............................................................ 440,000 Thereafter...................................................... 1,088,000
During 1997, 1998 and 1999 total rent expense was approximately $44,000, $60,000 and $287,000, respectively. At December 31, the Company has accrued approximately $139,000 representing the difference between the actual rental payments due under the lease and the rent expense recorded on a straight line basis. This amount is included in other liabilities. On December 31, 1999, the Company entered into employment agreements with certain of its key executives which provide for fixed compensation and bonuses based upon the Company's operating results, as defined. These agreements generally continue until terminated by the employee or the Company and, under certain circumstances, provide for salary continuance for a specified period. The Company's maximum aggregate liability under the agreements, if all employees were terminated by the Company, is approximately $1,875,000 at the inception of the agreements. During 1999, the Company became a defendant in litigation involving its use of certain computer software. On April 22, 1999, the Company entered into an agreement under which it will pay $170,000 during 1999 and 2000 to settle all claims. The Company recorded a charge to operating results as a result of the settlement during 1999. 6. Data Transmission Services, Inc. In July 1998, the Company acquired certain assets and liabilities of a segment of Data Transmission Services, Inc. ("DTS"), known as ZAP.IT, for approximately $200,000 which was allocated to the acquired assets and liabilities based on their respective estimated fair values. The following unaudited pro forma summary presents the combined results of operations as if the acquisition described above had occurred as of January 1, 1997, and does not purport to be indicative of the results that would have occurred had the transaction been completed as of that date or of results that may occur in the future.
1997 1998 ----------- ----------- Net revenues...................................... $ 303,201 $ 889,122 Net loss.......................................... $(3,082,859) $(3,902,552) Net loss per share--basic......................... $ (0.19) $ (0.21) Net loss per share--diluted....................... $ (0.19) $ (0.21)
F-12 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 7. Benefit Plan The Company has established a defined contribution plan under Section 401(k) of the Internal Revenue Code which provides for voluntary employee contributions of up to 15 percent of compensation for employees meeting certain eligibility requirements. The Company does not contribute to the plan. 8. Series A Redeemable Convertible Preferred Stock On June 25, 1999, the Company sold 7,500 shares of Series A Redeemable Convertible Preferred Stock ("Series A Preferred Stock") to various investors at a purchase price of $1,000 per share, the estimated fair value at such date, resulting in net proceeds of approximately $7,335,000. On August 30, 1999, the Company sold an additional 2,500 shares of Series A Preferred Stock to various investors at a purchase price of $1,000 per share, the estimated fair value at such date, resulting in net proceeds of approximately $2,457,000. During November 1999, the Company sold an additional 500 shares of Series A Preferred Stock. The purchase price of such shares was $1,000 per share, resulting in net proceeds of $500,000. The Company recorded an adjustment to net loss applicable to common stockholders of approximately $500,000 relating to the beneficial conversion feature inherent in the November 1999 issuance. This amount was determined based upon the excess of the estimated fair value of the Company's common stock into which the Series A Preferred Stock was immediately convertible less the initial conversion price of $1.31 per share and in accordance with EITF No. 98-5 Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios limited to the amount of proceeds received for the 500 shares of Series A Preferred Stock. Each share of Series A Preferred Stock has a liquidation value of $1,000 per share and is convertible into shares of common stock at an initial conversion price of $1.31 per share, subject to adjustments, under certain circumstances. Potential adjustments to the initial conversion price would result principally from the issuance or sale of certain equity instruments, as defined, at less than the initial conversion price per share by the Company prior to the date of such conversions. In addition, the initial conversion price is subject to adjustment in the event of a change in control of the Company, as defined. On December 9, 1999, the Company's Board of Directors adopted a resolution which provides for the conversion of the Series A Preferred into common stock upon the consummation of the Company's initial public offering. To the extent not previously converted, upon the five year anniversary of the issuance of the Series A Preferred Stock, a stockholder may request the Company to redeem any or all shares of Series A Preferred Stock held at their then fair market value, as defined. The Series A Preferred Stock pay no dividends; however, such stockholders are entitled to participate in the event dividends are paid to the holders of the Company's common stock. The holders of the Series A Preferred Stock vote together with all other classes of stock on all actions taken by the stockholders of the Company as a single class. Each holder of Series A Preferred Stock is entitled to that number of votes such holder would be entitled to if the holder had converted the shares of Series A Preferred Stock into shares of common stock. The holders of the Series A Preferred Stock have registration rights under an agreement dated June 25, 1999 which provides for the registration of common stock held by such stockholders within the periods specified by such agreements. The holders of the Series A Preferred Stock have anti-dilution rights granted pursuant to an agreement dated August 30, 1999 which allows such stockholders to purchase additional securities of the Company upon the issuance or sale of certain equity instruments, as defined. F-13 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 9. Stockholders' Equity In connection with the sale of certain equity securities, the Company entered into agreements with such stockholders which provided certain rights, including the right to purchase additional equity securities to maintain their respective proportionate ownership in the event of subsequent equity issuances by the Company and certain registration rights in the event the Company was to complete a qualified initial public offering, as defined. In connection with the reorganization described in Note 1 above, the stockholders have agreed to waive certain of these rights through June 30, 2000. During 1998, in conjunction with the sale of its common stock, the Company issued to the purchasers of such common stock warrants to purchase an aggregate of 891,792 shares of the Company's common stock. Exercise prices under the warrants range from $1.23 per share to $1.93 per share. The warrants were exercisable at the date of issue and expire at various dates through January 2003. As of December 31, 1999, all of these warrants remain outstanding. In connection with certain equity financings during 1998, two of the Company's principal shareholders issued to an existing investor in the Company, warrants to purchase 408,160 currently outstanding shares of the Company's common stock owned by the principal shareholders at an exercise price of $.92 per share. Such warrants were exercisable at the date of grant and expire on February 6, 2003. During May 1999, the Company issued to certain stockholders warrants to purchase 113,976 shares of the Company's common stock at a price of $.00125 per share. These warrants were issued to settle the Company's obligations based upon claims by certain stockholders arising from the sale of certain common stock. Also, as part of this settlement, two of the Company's principal stockholders issued options to purchase 113,848 currently outstanding shares of the Company's common stock owned by the principal stockholders at an exercise price of $.00125 per share. As a result of these agreements and the related warrant and option issuances by both the Company and the principal stockholders, the Company recorded a non-cash charge of $297,310 based on the estimated fair value of the warrants and options on the date of issuance. Such fair value was determined to equal the fair value of the underlying common stock. The options issued by the principal stockholders have been accounted for as a capital contribution. In connection with the issuance of certain shares of its common stock during 1998, the Company agreed to issue additional shares in the event certain subscriber levels were not achieved. To satisfy its obligation, in May 1999, the Company issued warrants to purchase 435,024 shares of its common stock at a price of $.00125 per share. The warrants and options described in the two immediately preceding paragraphs were exercisable at the date of grant and expire five years from the date of grant. As of December 31, 1999, 65,008 of these warrants remain outstanding. During the fourth quarter of 1999, the Company sold an additional 1,871,008 shares of its common stock to certain existing common stockholders in connection with the exercise of anti-dilution rights granted to them upon their initial purchase of common stock. The net proceeds to the Company were approximately $1,882,255 In December 1999, the Company's Board of Directors adopted the Employee Stock Purchase Plan to be effective upon completion of the Company's initial public offering of its common stock. The Company initially reserved 4,000,000 shares of common stock for issuance under the plan. As of December 31, 1999, the Company had reserved shares of common stock for issuance as follows: Exercise of common stock options................................... 6,716,000 Exercise of common stock purchase warrants......................... 1,276,800 Employee stock purchase plan....................................... 4,000,000 Conversion of Series A preferred stock............................. 8,038,304
F-14 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 10. Stock Option Plans and Other Stock-Based Compensation On August 3, 1999, the Company adopted the GoAmerica Communications Corp. 1999 Stock Option Plan. This plan provided for the granting of awards to purchase shares of common stock. No further options will be made under the GoAmerica Communications Corp. 1999 Stock Option Plan. In December 1999, the Company's Board of Directors adopted the GoAmerica, Inc. 1999 Stock Plan (the "Plan") as a successor plan to the GoAmerica Communications Corp. 1999 Stock Option Plan, pursuant to which 4,800,000 additional shares of the Company's common stock have been reserved for issuance to selected employees, non-employee directors and consultants. Under the terms of the Plan, a committee of the Company's Board of Directors may grant options to purchase shares of the Company's common stock to employees and consultants of the Company at such prices as may be determined by the committee. The Plan provides for award grants in the form of incentive stock options and non-qualified stock options. Options granted under the Plan generally vest annually over 4 years and expire after 10 years. The following table summarizes activity on a combined basis for the plans during 1999:
Weighted- Average Number of Exercise Options Price --------- --------- Outstanding at January 1, 1999........................... -- $-- Granted.................................................. 2,440,008 .92 Cancelled................................................ -- -- --------- ---- Outstanding at December 31, 1999......................... 2,440,008 .92 ========= ==== Exercisable at December 31, 1999......................... 856,000 .95 ========= ====
The following table summarizes information about fixed price stock options outstanding at December 31, 1999:
Outstanding Exercisable --------------------- ------------------------ Weighted- Average Weighted- Number Weighted- Range of Number Remaining Average Exercisable at Average Exercise of Contractual Exercise December 31, Exercise Prices Shares Life Price 1999 Price -------- --------- ----------- --------- -------------- --------- $.25 160,000 9.6 years $ .25 -- $ -- .56 1,096,000 8.9 years .56 480,000 .56 1.06--1.56 1,024,008 9.7 years 1.21 256,000 1.09 1.91--2.44 160,000 9.6 years 2.24 120,000 2.18
For certain options granted during 1999, the Company has recorded pursuant to APB No. 25 approximately $7,799,000 of deferred compensation expense representing the difference between the exercise price thereof and the market value of the common stock as of the date of grant. This compensation expense is amortized over the vesting period of each option granted. Amortization of deferred compensation under the Plan amounted to approximately $732,000 during the year ended December 31, 1999. During 1996, the Company granted an employee a warrant to purchase up to 320,000 shares of the Company's common stock at $.44 per share, an amount in excess of the estimated fair value at the date of grant. The warrant was exercisable on the date of grant and expires in October 2008. No compensation expense F-15 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 would have been recognized had the Company elected to account for such grant under SFAS No. 123 as the fair value of this warrant at the date of grant estimated using the minimum value method option pricing model was $0. As of December 31, 1999, all of this warrant remains outstanding. The following table discloses, for the year ended December 31, 1999, the number of options granted, the weighted-average fair values and the weighted- average exercise prices for those options with exercise prices greater than, equal to or less than the market price of the common stock on the date of grant.
Number of Fair Exercise Options Value Price --------- ----- -------- Exercise price greater than market price............ 160,000 $0.00 $2.24 Exercise price equals market price.................. 288,000 0.22 1.31 Exercise price less than market price............... 1,992,008 4.04 0.76
Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using the minimum value method option pricing model with the following assumptions for 1999: weighted-average risk-free interest rate of 6.11%; no dividends; and a weighted-average expected life of the options of 3 years. There were no options granted prior to August 1999. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows:
Year ended December 31, 1999 ----------------- Pro forma net loss applicable to common stockholders...... $(22,044,352) Pro forma loss per share--basic .......................... $ (1.02) Pro forma loss per share--diluted ........................ $ (1.00)
The pro forma information above is not likely to be representative of the effects on reported net loss for future years as options are generally granted each year and vest over several years. 11. Income Taxes Significant components of the Company's deferred tax assets and liabilities are as follows:
December 31, ----------------------- 1998 1999 ----------- ---------- Deferred tax assets: Net operating loss carryforward................... $ 1,542,000 6,087,000 Less valuation allowance........................... (1,536,000) (6,071,000) ----------- ---------- Deferred tax asset................................. 6,000 16,000 Deferred tax liabilities: Property, equipment and leasehold improvements.... 6,000 16,000 ----------- ---------- Net deferred tax asset............................. $ -- $ -- =========== ==========
F-16 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 A reconciliation setting forth the differences between the effective tax rate of the Company and the U.S. statutory rate is as follows:
December 31, ---------------------------------- 1997 1998 1999 --------- ---------- ----------- Statutory federal income tax (benefit) at 34%................................ $(355,000) $ (876,000) $(3,855,000) State income tax (benefit), net of federal benefit....................... (62,000) (155,000) (680,000) Increase in valuation allowance........ 417,000 1,031,000 4,535,000 --------- ---------- ----------- Total.................................. $ -- $ -- $ -- ========= ========== ===========
At December 31, 1999, the Company has a federal and state net operating loss ("NOL") carryforward of approximately $15.2 million. The federal NOL carryforwards expire from 2011 to 2019. 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. During 1999, such a change in ownership occurred. As a result of the change, the Company's ability to utilize certain of its net operating loss carryforwards will be limited to approximately $1,400,000 of taxable income, per year. 12. 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 and diluted net loss per share is computed by dividing the net loss available to common stockholders for the period by the weighted-average number of shares of Common Stock outstanding during the period. The calculation of diluted net loss per share excludes potential common shares if the effect is antidilutive. Basic earnings per share is computed by dividing income or loss applicable to common stockholders by the weighted-average number of shares of Common Stock outstanding during this period. Diluted earnings per share is determined in the same manner as basic earnings per share except that the number of shares is increased assuming exercise of dilutive stock options and warrants using the treasury stock method and assuming conversion of the Company's Series A Preferred Stock. In addition, income or loss is adjusted for dividends and other transactions relating to preferred shares for which conversion is assumed. The weighted average number of shares utilized in arriving at diluted earnings per share for all periods presented reflect an adjustment for the 435,024 shares of common stock issuable pursuant to warrants as described in Note 9 above which were issued for nominal consideration. As the Company had a net loss, the impact of the assumed exercise of the stock options, warrants and the assumed preferred stock conversion is anti-dilutive and as such, these amounts (except for warrants as described in Note 9 issued for nominal consideration) have been excluded from the calculation of diluted earnings per share. 13. Unaudited Pro Forma Financial Information The unaudited pro forma net loss per share assumes the conversion of the Series A Preferred Stock to Common Stock, at a conversion price of $1.31. as if it had been converted as the date of issuance , event though the results is anti-dilutive. F-17 GOAMERICA, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) December 31, 1997, December 31, 1998 and December 31, 1999 The following tables present the calculation of basic and diluted net loss per share and pro forma net loss per share for the year ended December 31, 1999:
Denominator Numerator (Weighted- (Net Loss) Average Shares) Per Share ------------ --------------- --------- Basic net loss per common share..... $(21,931,760) 21,590,259 $(1.02) Beneficial conversion feature and accretion of redemption value of mandatorily redeemable convertible preferred stock.................... 10,463,472 -- -- Assumed conversion of shares of mandatorily redeemable convertible preferred stock into shares of common stock at issuance........... -- 3,667,301 -- ------------ ---------- ------ Pro forma basic net loss per common share.............................. $(11,468,288) 25,257,560 $(0.45) ============ ========== ====== Diluted net loss per common share... $(21,931,760) 22,025,283 $(1.00) Beneficial conversion feature and accretion of redemption value of mandatorily redeemable convertible preferred stock.................... 10,463,472 -- -- Assumed conversion of shares of mandatorily redeemable convertible preferred stock into shares of common stock at issuance........... -- 3,667,301 -- ------------ ---------- ------ Pro forma diluted net loss per common share....................... $(11,468,288) 25,692,584 $(0.45) ============ ========== ======
The unaudited pro forma stockholders' equity presented on the balance sheet, assumes the conversion of the Series A Preferred Stock outstanding as of December 31, 1999 and the conversion of the Series B Preferred Stock issued in January 2000. 14. Subsequent Events Sales and Other Issuances of Additional Equity Securities In January 2000, the Company entered into a definitive stock purchase agreement to issue and sell 648,057 shares of its newly designated Series B redeemable convertible preferred stock ("Series B Preferred Stock") for aggregate net proceeds of approximately $25,190,000. Each share of the Series B Preferred Stock has a liquidation value of $40.12 per share and is convertible at any time at the option of the holder into eight shares of common stock, subject to adjustments, under certain circumstances. The Series B Preferred Stock is subject to automatic conversion upon the completion by the Company of a qualified initial public offering, as defined, of its common stock. To the extent not converted, commencing August 30, 2004 a holder of Series B Preferred Stock may require the Company to redeem any or all of the shares of Series B Preferred Stock held at their then fair market value, as defined. The Series B Preferred Stock pays no dividends; however, such stockholders are entitled to participate in the event dividends are paid on the Company's common and preferred stock. The Series B Preferred Stock has voting and registration rights similar to those of the Company's Series A Preferred Stock. In connection with the sale of the Series B Preferred Stock, the Company will pay to its financial advisors certain cash consideration and issue approximately 226,816 shares of its common stock. Based on the beneficial conversion terms of the Series B Preferred Stock, assuming an initial public offering price of $15.00 per share the Company will record an adjustment to net loss applicable to common stockholders for approximately $22 million at the date of issuance which will be accounted for as a beneficial conversion in accordance with EITF 98-5. During January 2000, the Company granted a total of 848,000 additional stock options at an exercise price of $5.02 per share. In connection with these grants, assuming an initial public offering price of $15.00 per share, the Company would record a non-cash compensation charge of approximately $8,457,000, of which approximately $4,405,000 would be incurred in the first quarter of 2000. F-18 INDEPENDENT AUDITOR'S REPORT To the Management of GoAmerica Communications Corporation Hackensack, New Jersey I have audited the accompanying statements of operations from business segment and cash flows from business segment of ZAP.IT for the six month period then ended June 30, 1998. These business segment financial statements are the responsibility of ZAP.IT's management. My responsibility is to express an opinion on these business segment financial statements based on my audit. I conducted my audit in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the business segment financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the business segment financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall business segment financial statement presentation. I believe that my audit provides a reasonable basis for my opinion. In my opinion, the business segment financial statements present fairly, in all material respects, the results of operations and cash flows of ZAP.IT for the six month period then ended June 30, 1998, in conformity with generally accepted accounting principles. The accompanying business segment financial statements have been prepared from the separate records maintained by the business segment and may not necessarily be indicative of the conditions that would have existed or the results of operations if the business segment had been operated as an unaffiliated company. Portions of certain income and expenses represent allocations made from its affiliate for items applicable to the affiliate and its business segment as a whole. The business segment's affiliate entered into an agreement whereby substantially all the assets and liabilities of this business segment were sold to an independent third party. /s/ John D. Hilcher, CPA Bloomfield, New Jersey February 25, 2000 F-19 ZAP.IT STATEMENT OF OPERATIONS FROM BUSINESS SEGMENT
For the Six Month Period Ended June 30, 1998 ------------------------ Revenues........................................ $ 62,467 Expenses Cost of sales.................................. 163,169 Selling and administrative expenses............ 1,039,936 Depreciation and amortization.................. 79,165 Loss due to impairment of long-lived assets.... 158,649 ----------- Total expenses.............................. 1,440,919 ----------- Net (Loss) From Business Segment................ $(1,378,452) ===========
See notes to financial statements. F-20 ZAP.IT STATEMENT OF CASH FLOWS FROM BUSINESS SEGMENT
For the Six Months Ended June 30, 1998 ------------------------ Cash Flows from Operating Activities from Business Segment Net (loss) from business segment................... $(1,378,452) Adjustments to reconcile net (loss) from business segment to net cash (used) by operating activities from business segment: Depreciation..................................... 79,165 Allowance for doubtful accounts.................. 4,000 Loss due to impairment of long-lived assets...... 158,649 Loss due to prepaid asset write-off.............. 61,992 Loss due to inventory write-off.................. 56,600 Loss due to miscellaneous receivable write-off... 5,000 ----------- Net Cash (Used) By Operating Activities from Business Segment.................................... (1,013,046) Cash Flows from Financing Activity from Business Segment Divisional equity advances.......................... 1,013,046 ----------- Net Increase in Cash from Business Segment........... $ -- ===========
See notes to financial statements. F-21 ZAP.IT Notes to Financial Statements of Business Segment June 30, 1998 Note A--Nature of Activities and Organization ZAP.IT was a business segment of its affiliate, Data Transmission Services, Inc., offering wireless and E-mail services nationwide. Note B--Summary of Significant Accounting Policies Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Revenue Recognition. Revenue from sales, services and products are recognized when services are provided or products shipped. Property and Equipment. Property and equipment are stated at cost. Depreciation for financial reporting purposes is provided principally on the straight-line method based upon estimated useful lives. Repairs and maintenance are charged to expense as incurred. Impairment of Long-lived Assets. The business segment evaluated the recoverability of the net carrying value of its property and equipment. These assets were written down to fair value when considered impaired. If the total of future undiscounted cash flows were less than the carrying amount of the property and equipment, the carrying amount would then be written down to fair value, and a loss on impairment recognized in the business segment's statement of operations. Management concluded that property and equipment were impaired upon consideration of the carrying value of these assets as a result of the sale discussed in the following footnote. As a result, management evaluated the carrying value of its property and equipment and recorded a $158,649 noncash charge to its Statement of Operations from Business Segment. F-22 ZAP.IT Notes to Financial Statements of Business Segment--Continued June 30, 1998 Note C--Related Party Transactions The business segment financial statements have been prepared from the separate records maintained by the business segment and may not necessarily be indicative of the conditions that would have existed or the results of operations if the business segment had been operated as an unaffiliated company. Portions of certain income and expenses represent allocations made from its affiliate for items applicable to the affiliate and its business segment as a whole. Note D--Subsequent Event The business segment's affiliate, Data Transmission Services, Inc., closed on an asset purchase agreement on July 14, 1998 whereby the buyer, GoAmerica Communications Corp., purchased certain defined assets and assumed certain defined liabilities of the business segment. F-23 Graphic appears here. The graphic depicts the city of Miami, Florida. The word "go" appears in the foreground and the Company's logo appears across the bottom. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- Prospective investors may rely only on the information contained in this pro- spectus. Neither GoAmerica, Inc. nor any underwriter has authorized anyone to provide prospective investors different or additional information. This pro- spectus is not an offer to sell nor is it seeking an offer to buy these securi- ties in any jurisdiction where the offer or sale is not permitted. The informa- tion contained in this prospectus is accurate only as of the date of the pro- spectus, regardless of the time of delivery of this prospectus or of any sale of these securities. No action is being taken in any jurisdiction outside the United States to permit a public offering of the common stock or possession or distribution of this prospectus in any such jurisdiction. Persons who come into possession of this prospectus in jurisdictions outside the United States are required to in- form themselves about and to observe the restrictions of that jurisdiction re- lated to this offering and the distribution of this prospectus. -------------------- TABLE OF CONTENTS --------------------
Page ---- Prospectus Summary....................................................... 1 Risk Factors............................................................. 6 Use of Proceeds.......................................................... 16 Dividend Policy.......................................................... 16 Capitalization........................................................... 17 Dilution................................................................. 18 Selected Financial Data.................................................. 19 Management's Discussion and Analysis of Financial Condition and Results of Operations........................................................... 21 Business................................................................. 27 Management............................................................... 39 Certain Transactions..................................................... 50 Principal Stockholders................................................... 51 Description of Capital Stock............................................. 53 Shares Eligible for Future Sale.......................................... 57 Certain U.S. Tax Consequences to Non-U.S. Holders........................ 58 Underwriting............................................................. 61 Legal Matters............................................................ 64 Experts.................................................................. 64 Where You Can Find More Information...................................... 64 Index to Consolidated Financial Statements............................... F-1
Until , 2000 (25 days after the date of this prospectus), all dealers effecting transactions in the common stock, whether or not participating in this distribution, may be required to deliver a prospectus. This delivery re- quirement is in addition to the obligation of dealers to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 10,000,000 Shares [LOGO OF GOAMERICA APPEARS HERE] Common Stock --------------- PROSPECTUS --------------- Bear, Stearns & Co. Inc. Chase H&Q U.S. Bancorp Piper Jaffray Wit SoundView --------------- DLJdirect Inc. , 2000 - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- PART II Item 13. Other Expenses of Issuance and Distribution The following table sets forth the costs and expenses, other than underwriting discounts and commissions, payable in connection with the sale and distribution of the securities being registered. All amounts are estimated except the Securities and Exchange Commission registration fee and the NASD filing fee. All the expenses below will be paid by GoAmerica.
Item Amount ---- ------------- Securities and Exchange Commission registration fee........ $ 48,576.00 NASD filing fee............................................ 18,900.00 Nasdaq National Market listing (entry) fee................. 30,000.00 Blue Sky fees and expenses................................. 2,000.00 Printing and engraving expenses............................ 200,000.00 Legal fees and expenses.................................... 600,000.00 Accounting fees and expenses............................... 400,000.00 Transfer Agent and registrar fees.......................... 15,000.00 Miscellaneous.............................................. 35,524.00 ------------- Total.................................................... $1,350,000.00 =============
Item 14. Indemnification of Directors and Officers Section 145 of the Delaware General Corporation Law authorizes a court to award, or a corporation's board of directors to grant indemnity to directors and officers in terms sufficiently broad to permit such indemnification under certain circumstances for liabilities, including reimbursement for expenses incurred, arising under the Securities Act of 1933, as amended. Our Certificate of Incorporation provides for indemnification of our directors and officers to the maximum extent permitted by the Delaware General Corporation Law, and our bylaws provide for indemnification of our directors, officers, employees and other agents to the maximum extent permitted by the Delaware General Corporation Law. In addition, we have entered into indemnification agreements with our directors and officers containing provisions which are in some respects broader than the specific indemnification provisions contained in the Delaware General Corporation Law. The indemnification agreements may require us, among other things, to indemnify our directors against certain liabilities that may arise by reason of their status or service as directors and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified. Reference is also made to Section 7(b) of the underwriting agreement contained in Exhibit 1.1 hereto, indemnifying our officers and directors against certain liabilities. Item 15. Recent Sales of Unregistered Securities GoAmerica Communications Corp. was incorporated in Delaware in 1996. In December 1999, GoAmerica, Inc. was incorporated in Delaware and each of the stockholders of GoAmerica Communications Corp. exchanged all their outstanding shares of common stock and preferred stock of that company for newly issued shares of GoAmerica, Inc. with equivalent rights and preferences. As a result, GoAmerica Communications Corp. became a wholly-owned subsidiary of GoAmerica, Inc. Each outstanding warrant and option to purchase shares of common stock of GoAmerica Communication Corp. are now convertible into shares of common stock of GoAmerica, Inc. All the contractual and other rights and obligations negotiated between the stockholders of GoAmerica Communications Corp. and GoAmerica Communications Corp. were transferred in their entirety to GoAmerica, Inc. II-1 Prior to this offering, we issued the following securities: Issuances of Capital Stock by GoAmerica Communications Corp. Preferred Stock: . from June 1999 through November 1999, 10,500 shares of Series A Preferred Stock were issued to eight (8) accredited investors for an aggregate purchase price of $10,500,000 Common Stock: . in August 1996, an aggregate of 8,533,280 shares of common stock were issued to Aaron Dobrinsky, a founder of GoAmerica Communications Corp. for an aggregate purchase price of $533 . in October 1996 an aggregate of 4,266,720 shares of common stock were issued to Joseph Korb, a founder of GoAmerica Communications Corp. for an aggregate purchase price of $267 . in October 1996, an aggregate of 3,200,000 shares of common stock were issued to sixteen (16) accredited investors for an aggregate purchase price of $1,000,000 . throughout 1997, an aggregate of 409,440 shares of common stock were issued to seven (7) accredited investors for an aggregate purchase price of $415,000 . in January 1998 and March 1998, an aggregate of 632,080 shares of common stock were issued to ten (10) accredited investors for an aggregate purchase price of $268,513 . in May 1998, an aggregate of 1,787,096 shares of common stock were issued to twenty six (26) accredited investors for an aggregate purchase price of $1,839,247 . in June 1998, an aggregate of 390,312 shares of common stock were issued to seventeen (17) accredited investors for an aggregate purchase price of $434,466 . in November 1998, an aggregate of 2,108,848 shares of common stock were issued to twenty three (23) accredited investors for an aggregate purchase price of $2,111,484 . in September 1999, an aggregate of 16,200 shares of common stock were issued to two (2) shareholders upon the exercise of certain outstanding warrants . in September and November 1999, an aggregate of 1,875,416 shares of common stock were issued to twenty five (25) shareholders in connection with the exercise of certain outstanding pre-emptive rights for an aggregate purchase price of $2,018,076 . in December 1999, an aggregate of 467,792 shares of common stock were issued to forty three (43) shareholders upon the exercise of certain outstanding warrants. Issuances of Options and Warrants by GoAmerica Communications Corp. . in August 1999, options to purchase an aggregate of 1,916,000 shares of common stock were granted to employees at a weighted average exercise price of $0.95 . in 1996, warrants to purchase an aggregate of 320,000 shares of common stock were issued to one (1) employee at a weighted average exercise price of $0.44 . in 1998, warrants to purchase an aggregate of 891,792 shares of common stock were issued to ten (10) shareholders at a weighted average exercise price of $1.52 . in 1999, warrants to purchase an aggregate of 549,000 shares of common stock were issued to fifty three (53) shareholders at a weighted average exercise price of $0.00125 Issuances of Capital Stock of GoAmerica, Inc. In December 1999, in connection with our reorganization and in consideration for all the outstanding shares of capital stock and warrants to purchase shares of GoAmerica Communications Corp. common stock, we issued the following securities: . 10,500 shares of our Series A Preferred Stock . 23,687,184 shares of our common stock II-2 . warrants to purchase an aggregate of 1,276,800 shares of our common stock . in addition, the outstanding options to purchase 1,916,000 shares of common stock of GoAmerica Communications Corp. became exercisable to purchase 1,916,000 shares of our common stock In addition, we issued the following securities: Preferred Stock: . in January 2000, prior to the filing of this prospectus, 648,057 shares of Series B Preferred Stock were issued to four (4) accredited institutional investors for an aggregate purchase price of $26,000,047 Common Stock: . in January 2000, 226,816 shares of common stock were issued to two (2) private placement agents in consideration for their services related to the sale of our Series B Preferred Stock . in January and February 2000, 68,048 shares of common stock were issued to eleven (11) shareholders upon the exercise of certain outstanding warrants Options: . in December 1999, options to purchase an aggregate of 524,008 shares of common stock were issued to three (3) employees and four (4) directors at a weighted average exercise price of $1.00 . in January 2000, options to purchase 848,000 shares of common stock were granted to seventeen (17) employees at a weighted average exercise price of $5.02 We believe that the foregoing described issuances of securities, if they constitute sales, are exempt from registration under the Securities Act by virtue of the exemption provided by Section 4(2) thereof for transactions not involving a public offering or Rule 701 under the Securities Act as transactions made pursuant to a written compensatory plan or pursuant to a written contract relating to compensation. The sales of securities were made without the use of an underwriter and the certificates evidencing the shares bear a restrictive legend permitting the transfer thereof only upon registration of the shares or an exemption under the Securities Act. We believe that all recipients had adequate access to information about GoAmerica. Item 16. Exhibits and Financial Statements (a) Exhibits
Exhibit No. Description of Exhibit ------- ---------------------- 1.1 Form of Underwriting Agreement.* 3.1 Certificate of Incorporation of GoAmerica, as amended.* 3.2 Bylaws of GoAmerica. 5.1 Form of Opinion of Buchanan Ingersoll Professional Corporation. 10.1 CDPD Value Added Reseller Agreement by and between GoAmerica and AT&T Wireless Data, Inc. dated May 6, 1997 as amended.+ 10.2 AirBridge Packet Service Agreement by and between GoAmerica and Bell Atlantic NYNEX Mobile, Inc. dated May 13, 1997, as amended.+ 10.3 Value Added Reseller Agreement by and between GoAmerica and BellSouth Wireless Data L.P. dated August 31, 1999.+ 10.4 Reseller Agreement for Messaging Services by and between GoAmerica and ARDIS Company dated August 25, 1999.+ 10.5 Form of Invention Assignment and Non-Disclosure Agreement by and between GoAmerica and its employees.
II-3
Exhibit No. Description of Exhibit ------- ---------------------- 10.6 Form of Indemnification Agreement by and between GoAmerica and each of its directors and executive officers. 10.7 Employment Agreement by and between GoAmerica and Aaron Dobrinsky dated as of December 31, 1999. 10.8 Employment Agreement by and between GoAmerica and Joseph Korb dated as of December 31, 1999. 10.9 Employment Agreement by and between GoAmerica and Francis Elenio dated as of December 31, 1999. 10.10 Employment Agreement by and between GoAmerica and Jesse Odom dated as of December 31, 1999. 10.11 GoAmerica Communications Corp. 1999 Stock Option Plan. 10.12 GoAmerica, Inc. 1999 Stock Plan. 10.13 GoAmerica, Inc. Employee Stock Purchase Plan. 10.14 Lease Agreement by and between GoAmerica and Continental Investors, L.P. dated August 7, 1996, as amended. 10.15 Facilities Maintenance Agreement by and between GoAmerica and Data General, a division of EMC Corporation, dated December 13, 1999. 10.16 Registration Rights Agreement, dated October 15, 1996, by and between GoAmerica Communications Corp. and the Investors set forth therein. 10.17 Registration Rights Agreement, dated June 25, 1999, by and between GoAmerica Communications Corp. and CIBC WMV Inc. and other investors. 10.18 Registration Rights Agreement, dated January 28, 2000, by and between GoAmerica, Inc., Dell USA L.P., Carousel Capital Partners, L.P., Forstmann Little & Co. Equity Partnership-VI, L.P. and Impact Venture Partners, L.P. 21.1 List of subsidiaries of GoAmerica. 23.1 Consent of Ernst & Young LLP.* 23.2 Consent of Buchanan Ingersoll Professional Corporation (contained in the opinion filed as Exhibit 5 to the Registration Statement). 23.3 Consent of John D. Hilcher CPA.* 24 Powers of Attorney of certain officers and directors of GoAmerica (contained on the signature page of this Registration Statement). 27.1 Financial Data Schedule.*
- -------- * Filed herewith. All other exhibits were filed previously. + Confidential treatment has been requested for a portion of this exhibit. (b) Financial Statement Schedules None. Item 17. Undertakings We hereby undertake that: (1) Insofar as indemnification for liabilities arising under the Securities Act may be permitted as to directors, officers and controlling persons of GoAmerica pursuant to the provisions described in Item 14, or otherwise, we have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by GoAmerica of expenses incurred or paid by a director, officer or controlling person of GoAmerica in the successful II-4 defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue. (2) For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus as filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by GoAmerica pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. (3) For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (4) At the closing, specified in the underwriting agreement, we shall provide the underwriters certificates in such denominations and registered in such names as required by the underwriters to permit prompt delivery to each purchaser. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Company has duly caused this Amendment to the Registration Statement on Form S- 1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Hackensack, State of New Jersey, on the 14th day of March, 2000. GoAmerica, Inc. /s/ Aaron Dobrinsky By: _________________________________ Aaron Dobrinsky President and Chief Executive Officer II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, this Amendment to the Registration Statement has been signed by the following persons in the capacities and on the dates indicated.
Signature Title Date --------- ----- ---- /s/ Aaron Dobrinsky President and Chief Executive March 14, 2000 _________________________________ Officer and Director (Principal Aaron Dobrinsky Executive Officer) * Executive Vice President and March 14, 2000 _________________________________ Director Joseph Korb /s/ Francis Elenio Chief Financial Officer, March 14, 2000 _________________________________ Treasurer and Secretary Francis Elenio (Principal Financial and Accounting Officer) * Director March 14, 2000 _________________________________ Robi Blumenstein * Director March 14, 2000 _________________________________ Adam Dell * Director March 14, 2000 _________________________________ Alan Docter * Director March 14, 2000 _________________________________ Mark Kristoff * Director March 14, 2000 _________________________________ Zachary Prensky * Director March 14, 2000 _________________________________ Nelson Schwab * Director March 14, 2000 _________________________________ Andrew Seybold
* By his signature set forth below, the undersigned, pursuant to duly authorized powers of attorney filed with the Securities and Exchange Commission, has signed this Amendment to the Registration Statement on behalf of the persons indicated. By: /s/ Francis Elenio - ------------------------------------- Francis Elenio (Attorney-in-fact) II-7 EXHIBIT INDEX
Exhibit No. Description of Exhibit ------- ---------------------- 1.1 Form of Underwriting Agreement.* 3.1 Certificate of Incorporation of GoAmerica, as amended.* 3.2 Bylaws of GoAmerica. 5.1 Form of Opinion of Buchanan Ingersoll Professional Corporation. 10.1 CDPD Value Added Reseller Agreement by and between GoAmerica and AT&T Wireless Data, Inc. dated May 6, 1997 as amended.+ 10.2 AirBridge Packet Service Agreement by and between GoAmerica and Bell Atlantic NYNEX Mobile, Inc. dated May 13, 1997, as amended.+ 10.3 Value Added Reseller Agreement by and between GoAmerica and BellSouth Wireless Data L.P. dated August 31, 1999.+ 10.4 Reseller Agreement for Messaging Services by and between GoAmerica and ARDIS Company dated August 25, 1999.+ 10.5 Form of Invention Assignment and Non-Disclosure Agreement by and between GoAmerica and its employees. 10.6 Form of Indemnification Agreement by and between GoAmerica and each of its directors and executive officers. 10.7 Employment Agreement by and between GoAmerica and Aaron Dobrinsky dated as of December 31, 1999. 10.8 Employment Agreement by and between GoAmerica and Joseph Korb dated as of December 31, 1999. 10.9 Employment Agreement by and between GoAmerica and Francis Elenio dated as of December 31, 1999. 10.10 Employment Agreement by and between GoAmerica and Jesse Odom dated as of December 31, 1999. 10.11 GoAmerica Communications Corp. 1999 Stock Option Plan. 10.12 GoAmerica, Inc. 1999 Stock Plan. 10.13 GoAmerica, Inc. Employee Stock Purchase Plan. 10.14 Lease Agreement by and between GoAmerica and Continental Investors, L.P. dated August 7, 1996. 10.15 Facilities Maintenance Agreement by and between GoAmerica and Data General, a division of EMC Corporation, dated December 13, 1999. 10.16 Registration Rights Agreement, dated October 15, 1996, by and between GoAmerica Communications Corp. and the Investors set forth therein. 10.17 Registration Rights Agreement, dated June 25, 1999, by and between GoAmerica Communications Corp. and CIBC WMV Inc. and other investors. 10.18 Registration Rights Agreement, dated January 28, 2000, by and between GoAmerica, Inc., Dell USA L.P., Carousel Capital Partners, L.P., Forstmann Little & Co. Equity Partnership-VI, L.P. and Impact Venture Partners, L.P. 21.1 List of subsidiaries of GoAmerica. 23.1 Consent of Ernst & Young LLP.* 23.2 Consent of Buchanan Ingersoll Professional Corporation (contained in the opinion filed as Exhibit 5 to the Registration Statement). 23.3 Consent of John D. Hilcher CPA.* 24 Powers of Attorney of certain officers and directors of GoAmerica (contained on the signature page of this Registration Statement). 27.1 Financial Data Schedule.*
- -------- * Filed herewith. All other exhibits were filed previously. + Confidential treatment has been requested for a portion of this exhibit. EX-1.1 2 UNDERWRITING AGREEMENT Exhibit 1.1 __________ Shares of Common Stock GoAmerica, Inc. UNDERWRITING AGREEMENT ________________, 2000 BEAR, STEARNS & CO. INC. CHASE SECURITIES INC. U.S. BANCORP PIPER JAFFRAY INC. SOUNDVIEW TECHNOLOGY GROUP, INC. DLJDIRECT INC. as Representatives of the several Underwriters named in Schedule I attached hereto c/o Bear, Stearns & Co. Inc. 245 Park Avenue New York, N.Y. 10167 Dear Sirs: GoAmerica, Inc., a corporation organized and existing under the laws of Delaware (the "Company"), proposes, subject to the terms and conditions stated herein, to issue and sell to the several underwriters named in Schedule I hereto (the "Underwriters") an aggregate of [______] shares (the "Firm Shares") of the Company's common stock, par value $0.01 per share (the "Common Stock") and, for the sole purpose of covering over-allotments in connection with the sale of the Firm Shares, at the option of the Underwriters, up to an additional [__________] shares (the "Additional Shares") of Common Stock. The Firm Shares and any Additional Shares purchased by the Underwriters are referred to herein as the "Shares." The Shares are more fully described in the Registration Statement referred to below. 1. Representations and Warranties of the Company. The Company --------------------------------------------- represents and warrants to, and agrees with, the Underwriters that: (a) The Company has filed with the Securities and Exchange Commission (the "Commission") a registration statement, and may have filed an amendment or amendments thereto, on Form S-1 (No. 333-94801), for the --------- registration of the Shares under the Securities Act of 1933, as amended (the "Act"). Such registration statement, including the prospectus, financial statements and schedules, exhibits and all other documents filed as a part thereof, as amended at the time of effectiveness of the registration statement, including any information deemed to be a part thereof as of the time of effectiveness pursuant to paragraph (b) of Rule 430A or Rule 434 of the Rules and Regulations of the Commission under the Act (the "Regulations"), is herein called the "Registration Statement" and the prospectus, in the form first filed with the Commission pursuant to Rule 424(b) of the Regulations or filed as part of the Registration Statement at the time of effectiveness if no Rule 424(b) or Rule 434 filing is required, is herein called the "Prospectus." The term "preliminary prospectus" as used herein means a preliminary prospectus as described in Rule 430 of the Regulations. All references in this Agreement to (i) the Registration Statement, a preliminary prospectus, the Prospectus, or any amendments or supplements to any of the foregoing, shall include any copy thereof filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR") and (ii) the Prospectus shall be deemed to include the "electronic Prospectus" provided for use in connection with the offering of the Shares as contemplated by Section 4(f) of this Agreement. (b) The Commission has not issued an order preventing or suspending the use of any Prospectus relating to the proposed offering of the Shares nor, to the best of the Company's knowledge, instituted proceedings for that purpose. At the time of the effectiveness of the Registration Statement or the effectiveness of any post-effective amendment to the Registration Statement, when the Prospectus is first filed with the Commission pursuant to Rule 424(b) or Rule 434 of the Regulations, when any supplement to or amendment of the Prospectus is filed with the Commission and at the Closing Date and the Additional Closing Date, if any (as hereinafter respectively defined), the Registration Statement and the Prospectus and any amendments thereof and supplements thereto complied or will comply in all material respects with the applicable provisions of the Act and the Regulations and does not or will not contain an untrue statement of a material fact and does not or will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein (i) in the case of the Registration Statement, not misleading and (ii) in the case of the Prospectus, in light of the circumstances under which they were made, not misleading, and the Prospectus, any preliminary prospectus and any supplement thereto or prospectus wrapper prepared in connection therewith, at their respective times of issuance and at the Closing Date, complied and will comply in all material respects with any applicable laws or regulations of foreign jurisdictions in which the Prospectus and such preliminary prospectus, as amended or supplemented, if applicable, are distributed in connection with the offer and sale of the Directed Shares (as hereinafter defined). When any related preliminary prospectus was first filed with the Commission (whether filed as part of the registration statement for the registration of the Shares or any amendment thereto or pursuant to Rule 424(a) of the Regulations) and when any amendment thereof or supplement thereto was first filed with the Commission, such preliminary prospectus and any amendments thereof and supplements thereto complied in all material respects with the applicable provisions of the Act and the Regulations and did not contain an untrue statement of a material fact and did not omit to state any material fact required to be stated therein or necessary in order to make the statements therein in light of the circumstances under which they were made not misleading. The Prospectus and any preliminary prospectus delivered to the Underwriters for use in connection with the offering was identical to the electronically transmitted copies thereof filed with the Commission pursuant to EDGAR, except to the extent permitted by Regulation S-T under the Act. No representation and warranty is made in this subsection (b), however, with respect to any information contained in the Registration Statement or the Prospectus or any related preliminary prospectus or any amendment thereof or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through you as herein stated expressly for use in connection with the preparation thereof. If Rule 434 is used, the Company will comply with the requirements of Rule 434. 2 (c) The Company does not have any subsidiaries other than those listed on Schedule II and does not own or control, directly or indirectly, any interest in any other corporation, association or other business entity. (d) Ernst & Young LLP, who have certified the financial statements and supporting schedules included in the Registration Statement, are independent public accountants as required by the Act and the Regulations. (e) Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, except as set forth in the Registration Statement and the Prospectus, there has been no material adverse change or any development involving a prospective material adverse change in the business, prospects, properties, operations, condition (financial or other) or results of operations of the Company and its subsidiaries taken as a whole ("Material Advance Change"), whether or not arising from transactions in the ordinary course of business, and since the date of the latest balance sheet presented in the Registration Statement and the Prospectus, neither the Company nor any of its subsidiaries has incurred or undertaken any liabilities or obligations, direct or contingent, which are material to the Company and its subsidiaries taken as a whole, except for liabilities or obligations which are reflected in the Registration Statement and the Prospectus. (f) This Agreement and the transactions contemplated herein have been duly and validly authorized by the Company, and this Agreement has been duly and validly executed and delivered by the Company and is enforceable against the Company in accordance with its terms, except as enforcement (i) may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting creditors' rights and remedies generally and (ii) is subject to general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or law). (g) The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, require approval or consent under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to the terms of (A) any agreement, instrument, contract, indenture, mortgage, lease, license, franchise, arrangement or understanding to which the Company or any of its subsidiaries is a party or to which any of such corporations or any of their respective properties or assets are subject, (B) any governmental franchise, license, permit heretofore issued to the Company or any of its subsidiaries, or (ii) violate or conflict with any provision of the Amended and Restated Certificate of Incorporation or Bylaws of the Company or any of its subsidiaries or any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets. (h) No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its subsidiaries or any of their 3 respective properties or assets is required for the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, including the issuance, sale and delivery of the Shares to be issued, sold and delivered by the Company hereunder, except the registration under the Act of the Shares and such consents, approvals, authorizations, orders, registrations, filings, qualifications, licenses and permits as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters. (i) All outstanding shares of capital stock of the Company are duly and validly authorized and issued, fully paid and non-assessable and were not issued and are not now in violation of or subject to any preemptive or similar rights, which have not been duly waived by the holders of such rights. The Shares have been duly authorized for issuance and sale to the Underwriters pursuant to this Agreement and, when issued, delivered and sold in accordance with this Agreement, will be duly and validly issued and outstanding, fully paid and nonassessable, and will not have been issued in violation of or be subject to any preemptive or similar rights. Except as disclosed in the Registration Statement and the Prospectus, there are no outstanding options, warrants or other rights calling for the issuance of, and no commitments, obligations, plans or arrangements to issue, any shares of capital stock of the Company or any security convertible into or exchangeable for capital stock of the Company. The outstanding stock options relating to the Common Stock have been duly authorized and validly issued and conform to the descriptions thereof contained in the Registration Statement and the Prospectus. (j) The Company had, at __________, 2000, an authorized and outstanding capitalization as set forth in the Registration Statement and the Prospectus. The authorized capital stock of the Company, including the Firm Shares, the Common Stock and the Additional Shares conform to the descriptions thereof contained in the Registration Statement and the Prospectus. The form of certificates for the Shares are in due and proper form under the Delaware General Business Corporation Act. (k) Each of the Company and its subsidiaries has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. Each of the Company and its subsidiaries is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing that will not in the aggregate have a material adverse effect, or any development involving a prospective material adverse effect, on the business, prospects, properties, operations, condition (financial or other), stockholders' equity or results of operations on the Company and its subsidiaries taken as a whole (a "Material Adverse Effect"). Each of the Company and its subsidiaries has all requisite power and authority, and all necessary consents, approvals, authorizations, orders, registrations, qualifications, licenses and permits of and from all public, regulatory or governmental agencies and bodies, to own, lease and operate its properties and conduct its business as now being conducted and as described in the Registration Statement and the Prospectus, and no such consent, approval, authorization, order, registration, qualification, license or permit contains a materially burdensome restriction not adequately disclosed in the Registration Statement and the Prospectus. There are no statutes, regulations, contracts or other documents applicable to the Company or any of its subsidiaries that are required to be described in the Registration Statement 4 or Prospectus or to be filed as exhibits to the Registration Statement that are not described or filed as required. Each of the Company and its subsidiaries is in compliance with all applicable laws, orders, rules, regulations, ordinances and directives. (l) Each of the Company and its subsidiaries is not in violation of any provision of its Amended and Restated Certificate of Incorporation or Bylaws or in breach of, or in default under (nor has any event occurred that with notice, lapse of time, or both, would constitute a breach of, or default under), any provision of any agreement (including any exclusivity provision contained therein), instrument, franchise, license or permit to which the Company or any of its subsidiaries is a party or by which any of their respective properties or assets may be bound or affected or any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets, except in all cases as would, individually or in the aggregate, not have a Material Adverse Effect. (m) Except as described in the Prospectus, there is no litigation, arbitration, proceeding, investigation or claim to which the Company or any of its subsidiaries is a party or to which any property or assets of the Company or any of its subsidiaries are subject or which is pending or, to the knowledge of the Company, threatened or contemplated against or otherwise affecting the Company or any of its subsidiaries that might result in a Material Adverse Effect or which is required to be disclosed in the Registration Statement and the Prospectus. (n) Neither the Company nor any of its directors, officers or affiliates (as defined in the Regulations) has taken or will take, directly or indirectly, any action designed to cause or result in, or which constitutes or which might reasonably be expected to constitute, the stabilization or manipulation of the price of the shares of Common Stock to facilitate the sale or resale of the Shares or a violation of Regulation M under the Exchange Act. (o) The financial statements, including the notes thereto, and supporting schedules included in the Registration Statement and the Prospectus present fairly the financial position of the Company as of the dates indicated and the results of its operations of the Company for the periods specified; except as otherwise stated in the Registration Statement, said financial statements have been prepared in conformity with generally accepted accounting principles ("GAAP") applied on a consistent basis; and the supporting schedules included in the Registration Statement present fairly the information required to be stated therein. The selected financial data and the summary financial data included in the Prospectus present fairly the information shown therein and have been compiled on a basis consistent with that of the financial statements included in the Registration Statement. The pro forma financial statements and other pro forma financial information included in the Registration Statement and the Prospectus present fairly the information shown therein, have been prepared in accordance with the Commission's rules and guidelines with respect to pro forma financial statements, have been properly compiled on the pro forma bases described therein, and, in the opinion of the Company, the assumptions used in the preparation thereof are reasonable and the adjustments used therein are appropriate to give effect to the transactions or circumstances referred to therein. No other financial statements are required by Form S-1 or otherwise to be included in the Registration Statement or the Prospectus other than those included therein. 5 (p) No holder of securities of the Company has any rights to cause the Company to issue to it, or register pursuant to the Act, any securities of the Company because of the filing of the Registration Statement in connection with the sale of the Shares contemplated hereby or otherwise, nor does the holder of securities of the Company have preemptive rights or other rights to purchase any of the Shares. (q) The Company is not, and upon consummation of the transactions contemplated hereby and the application of the proceeds therefrom as described in the Prospectus will not be, subject to registration as an "investment company" under the Investment Company Act of 1940. (r) The Common Stock of the Company, including the Shares, has been approved for quotation on the National Association of Securities Dealers Automated Quotation ("Nasdaq") National Market system, subject only to official notice of issuance. (s) The Company owns or possesses valid and enforceable licenses or other rights to use all inventions, patents, patent applications, trademarks, service marks, trade names, copyrights, technology, software, databases, Internet domain names, know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) used in or proprietary techniques (including processes and substances) and other intellectual property rights used in or necessary to conduct, the business now conducted or presently contemplated to be conducted by the Company and its subsidiaries, taken as a whole, as described in the Registration Statement and the Prospectus ("Intellectual Property") free and clear of all liens, claims and encumbrances; the Company has taken all reasonable steps to protect, maintain and safeguard the Intellectual Property for which improper or unauthorized disclosure would impair its value or validity and has executed appropriate nondisclosure and confidentiality agreements and made appropriate filings and registrations in connection with the foregoing; other than as described in the Registration Statement and the Prospectus: (i) there are no third parties who have any rights in the Intellectual Property that could preclude the Company or any of its subsidiaries from conducting their respective business as currently conducted or as presently contemplated to be conducted as described in the Registration Statement and the Prospectus; (ii) there are no pending or threatened actions, suits, proceedings, investigations or claims by others challenging the rights of the Company or (if the Intellectual Property is licensed) the licensor thereof in any Intellectual Property owned or licensed to the Company; (iii) the Company and (if the Intellectual Property is licensed) the licensor thereof has not infringed, or received any notice of infringement of or conflict with, any rights of others with respect to the Intellectual Property; (iv) there is no dispute between the Company or any licensor and any third parties with respect to any Intellectual Property; and (v) there is no dispute between the Company and any licensor with respect to any Intellectual Property. True and correct copies of all licenses and other agreements between the Company and any third party relating to the Intellectual Property, and all amendments and supplements thereto, have been provided to the Underwriters. (t) Each of the Company and its subsidiaries has good and marketable title to all properties (real and personal) owned by the Company or any of its subsidiaries, free and clear of all mortgages, pledges, liens, security interests, claims, restrictions or encumbrances of any kind; and all properties held under lease or license by the Company or any of its 6 subsidiaries are held under valid, subsisting and enforceable leases or licenses. No real property owned, leased, licensed or used by the Company or any of its subsidiaries lies in an area that is, or to the best knowledge of the Company will be, subject to zoning, use or building code restrictions that would prohibit, and no state of facts relating to the actions or inaction of another person or entity or his, her or its ownership, leasing, licensing or use of such real property in the business of the Company as presently conducted or as the Prospectus indicates are contemplated to be conducted. (u) No relationship, direct or indirect, exists between or among the Company or any of its affiliates, on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company, on the other hand, which is required by the Act to be described in the Registration Statement and the Prospectus which is not so described. (v) Neither the Company, nor any director, officer, agent, employee or other person associated with or acting on behalf of the Company has used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; made any direct or indirect unlawful payment to any foreign or domestic government official or employee from corporate funds; violated or is in violation of any provisions of the Foreign Corrupt Practices Act of 1972; or made any bribe, rebate, payoff, influence payment, kickback or other unlawful payment. (w) Each of the Company and its subsidiaries is in compliance with all environmental, safety or similar laws or regulations applicable to them or their business or property relating to the protection of human health and safety, the environment or hazardous or toxic substances or wastes, pollutants or contaminants. (x) There are no existing or threatened labor disputes with the employees of the Company. (y) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended, ("ERISA") that is maintained, administered or contributed to by the Company or any of its affiliates, consultants or third parties with whom the Company has contracted to provide employees or human resource services for employees or former employees of the Company and its affiliates has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Internal Revenue Code of 1986, as amended ("Code"). No prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code has occurred with respect to any such plan excluding transactions effected pursuant to a statutory or administrative exemption. For each such plan which is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA no "accumulated funding deficiency" as defined in Section 412 of the Code has incurred, whether or not waived, and the fair market value of the assets of each such plan (excluding for these purposes accrued but unpaid contributions) exceeded the present value of all benefits accrued under such plan determined using reasonable actuarial assumptions. (z) The Company has timely filed all material federal, state and foreign income and franchise tax returns required to be filed as of the date hereof and have paid all taxes 7 and all assessments shown as due thereon, except to the extent such taxes are (A) currently payable without penalty or interest or (B) being contested in good faith, and there is no tax deficiency that has been asserted against the Company or any of its subsidiaries. All tax liabilities are adequately provided for on the books of the Company. There is no tax deficiency that has been asserted against the Company or any of its subsidiaries. (aa) The Company maintains insurance with insurers of recognized financial responsibility of the types and in the amounts (i) generally deemed adequate for its business and consistent with insurance coverage maintained by similar companies in similar businesses and (ii) required under any of the Company's agreements, licenses or other contracts, all of which insurance is in full force and effect; the Company has no reason to believe that it will not be able to renew its existing insurance as and when such coverage expires or to obtain similar insurance adequate and customary for its business and sufficient to satisfy any requirements of its contracts at a cost that would not have a Material Adverse Effect. (bb) Each of the Company and its subsidiaries maintain systems of internal accounting controls sufficient to provide reasonable assurances that (i) transactions are executed in accordance with management's general or specific authorization, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain accountability for assets, (iii) the access to assets of the Company is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences. (cc) There are no transfer taxes or other similar fees or charges under Federal law or the laws of any state, or any political subdivision thereof, required to be paid in connection with the execution and delivery of this Agreement or the issuance by the Company or sale by the Company of the Shares. (dd) No subsidiary of the Company is currently prohibited, directly or indirectly, from paying any dividends to the Company, from making any other distribution on such subsidiary's capital stock, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary's property or assets to the Company or any other subsidiary of the Company, except as described in or contemplated by the Prospectus. (ee) The statements contained in the Prospectus under the captions "Risk Factors -- Risks Particular to GoAmerica -- We May Not Have Adequately Protected Our Intellectual Property Rights" and "Business -- Intellectual Property Rights," insofar as such statements summarize legal matters, agreements, documents, or proceedings discussed therein, are accurate and fair summaries of such legal matters, agreements, documents or proceedings. (ff) Each and every holder of the capital stock, options and warrants of the Company has duly executed and delivered to the Company the Plan of Reorganization; Waiver of Rights and Amendment to Agreements dated as of December 31, 1999 between the Company, GoAmerica Communications Corp., a Delaware corporation, and such holder. 8 (gg) The statistical and market-related data included in the Registration Statement and the Prospectus are derived from sources which the Company reasonably and in good faith believes to be accurate, reasonable and reliable, and such data agree with the sources from which they were derived. (hh) Each of the Company and its subsidiaries is in compliance with all applicable federal, state, local or foreign laws, regulations, rules, ordinances, orders or directives relating to pollution or (in connection therewith) protection of human health and safety, the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or wildlife, including, without limitation, laws and regulations relating to the release or threatened release of chemicals, pollutants, contaminants, wastes, toxic substances, hazardous substances, petroleum or petroleum products (collectively, "Hazardous Materials") or to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials (collectively, "Environmental Laws"); to the Company's knowledge, no material expenditures are or will be required to comply with the Environmental Laws, and the Company holds all permits, licenses and approvals required to conduct its business thereunder and is in compliance with all terms and conditions of any such permit, license or approval, except where such noncompliance or failure to comply with the terms and conditions of, or failure to receive, such permits, licenses or approvals will not in the aggregate have a Material Adverse Effect; to the Company's knowledge, all properties and assets leased or owned, including, without limitation, all structures, contents, soil, subsoil and groundwater, do not contain Hazardous Materials; and, to the Company's knowledge, the Company has no liability or obligation, whether to any governmental authority or to any other person or entity, for damages, claims, penalties, forfeitures or otherwise, as a consequence of the generation, transportation or disposal of any Hazardous Materials or otherwise under the Environmental Laws. 2. Purchase, Sale and Delivery of the Shares. ----------------------------------------- (a) On the basis of the representations, warranties, covenants and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to sell to the Underwriters and the Underwriters, severally and not jointly, agree to purchase from the Company, at a purchase price per share of $_______, the number of Firm Shares set forth opposite the respective names of the Underwriters in Schedule I hereto plus any additional number of Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 9 hereof. (b) Payment of the purchase price for, and delivery of certificates for, the Shares shall be made at the office of Sidley & Austin, 875 Third Avenue, New York, NY 10022, or at such other place as shall be agreed upon by you and the Company, at 10:00 A.M. New York time on the third or fourth business day (as permitted under Rule 15c6-1 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) (unless postponed in accordance with the provisions of Section 9 hereof) following the date of the effectiveness of the Registration Statement (or, if the Company has elected to rely upon Rule 430A of the Regulations, the third or fourth business day (as permitted under Rule 15c6-1 under the Exchange Act) after the determination of the initial public offering price of the Shares), or such other time not later than ten business days after such date as shall be agreed upon by you and the Company (such time and date of payment and delivery being herein called the "Closing Date"). Payment shall be 9 made to the Company by wire transfer in same day funds, against delivery to you for the respective accounts of the Underwriters of certificates for the Shares to be purchased by them. Certificates for the Shares shall be registered in such name or names and in such authorized denominations as you may request in writing at least two full business days prior to the Closing Date. The Company will permit you to examine and package such certificates for delivery at least one full business day prior to the Closing Date. If you so elect, delivery of the Firm Shares purchased from the Company may be made by credit through full fast transfer to the accounts at The Depository Trust Company designated by you. (c) In addition, the Company hereby grants to the Underwriters the option to purchase up to [__________] Additional Shares at the same purchase price per share to be paid by the Underwriters to the Company for the Firm Shares as set forth in this Section 2, for the sole purpose of covering over- allotments in the sale of Firm Shares by the Underwriters. This option may be exercised at any time or from time to time in whole or in part, on or before the thirtieth day following the date of the Prospectus, by written notice by you to the Company. Such notice shall set forth the aggregate number of Additional Shares as to which the option is being exercised and the date and time, as reasonably determined by you, when the Additional Shares are to be delivered (such date and time being herein sometimes referred to as the "Additional Closing Date"); provided, however, that the Additional Closing Date shall not be earlier than the Closing Date or earlier than the second full business day after the date on which the option shall have been exercised nor later than the eighth full business day after the date on which the option shall have been exercised (unless such time and date are postponed in accordance with the provisions of Section 9 hereof). Certificates for the Additional Shares shall be registered in such name or names and in such authorized denominations as you may request in writing at least two full business days prior to the Additional Closing Date. The Company will permit you to examine and package such certificates for delivery at least one full business day prior to the Additional Closing Date. If you so elect, delivery of the Additional Shares purchased from the Company may be made by credit through full fast transfer to the accounts at The Depository Trust Company designated by you. (d) The number of Additional Shares to be sold to each Underwriter shall be the number which bears the same ratio to the aggregate number of Additional Shares being purchased as the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto (or such number increased as set forth in Section 9 hereof) bears to [______] Firm Shares being purchased from the Company, subject, however, to such adjustments to eliminate any fractional shares as you in your sole discretion shall make. (e) Payment for the Additional Shares shall be made by wire transfer in same day funds at the offices of Sidley & Austin, 875 Third Avenue, New York, NY 10022, or such other location as may be mutually acceptable, upon delivery of the certificates for the Additional Shares to you for the respective accounts of the Underwriters. 3. Offering. -------- (a) Upon your authorization of the release of the Firm Shares, the Underwriters propose to offer the Shares for sale to the public upon the terms set forth in the Prospectus. 10 (b) The Company and the Underwriters hereby agree that up to [__] percent (__%) of the Firm Shares to be purchased by the Underwriters (the "Directed Shares") shall be reserved for sale by the Underwriters to eligible employees of and certain persons designated by the Company ("the Directed Shares Purchasers"), as part of the distribution of the Shares by the Underwriters subject to the terms of this Agreement, the applicable rules, regulations and interpretations of the National Association of Securities Dealers, Inc. (the "NASD") and all other applicable laws, rules and regulations, provided, however, that under no circumstances will you or any other Underwriter be liable to the Company or to any of the Directed Shares Purchasers for any action taken or omitted in good faith in connection with transactions effected with regard to the Directed Shares Purchasers. To the extent that such Directed Shares are not orally confirmed for purchase by such persons by the end of the first day after the date of this Agreement, such Directed Shares will be offered to the public as part of the underwritten offering contemplated hereby. 4. Covenants of the Company. The Company covenants and agrees with the ------------------------ Underwriters that: (a) If the Registration Statement has not yet been declared effective the Company will use its best efforts to cause the Registration Statement and any amendments thereto to become effective as promptly as possible, and if Rule 430A is used or the filing of the Prospectus is otherwise required under Rule 424(b) or Rule 434, the Company will file the Prospectus (properly completed if Rule 430A has been used) pursuant to Rule 424(b) or Rule 434 within the prescribed time period and will provide evidence satisfactory to you of such timely filing. If the Company elects to rely on Rule 434, the Company will prepare and file a term sheet that complies with the requirements of Rule 434. The Company will notify you immediately (and, if requested by you, will confirm such notice in writing) (i) when the Registration Statement and any amendments thereto become effective, (ii) of any request by the Commission for any amendment of or supplement to the Registration Statement or the Prospectus or for any additional information, (iii) of the mailing or the delivery to the Commission for filing of any amendment of or supplement to the Registration Statement or the Prospectus, (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any post- effective amendment thereto or of the initiation, or the threatening, of any proceedings therefor, (v) of the receipt of any comments from the Commission, and (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for that purpose. If the Commission shall propose or enter a stop order at any time, the Company will make every reasonable effort to prevent the issuance of any such stop order and, if issued, to obtain the lifting of such order as soon as possible. The Company will not file any amendment to the Registration Statement, make any filing under Rule 462(b) of the Regulations or file any amendment of or supplement to the Prospectus (including the prospectus required to be filed pursuant to Rule 424(b) or Rule 434) that differs from the prospectus on file at the time of the effectiveness of the Registration Statement before or after the effective date of the Registration Statement to which you shall reasonably object in writing after being timely furnished in advance a copy thereof. 11 (b) The Company will comply with the Act and the Regulations so as to permit the completion of the distribution of the Shares as contemplated in this Agreement and the prospectus. If at any time when a prospectus relating to the Shares is required to be delivered under the Act any event shall have occurred as a result of which the Prospectus as then amended or supplemented would, in the judgment of the Underwriters or the Company include an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it shall be necessary at any time to amend or supplement the Prospectus or Registration Statement to comply with the Act or the Regulations, the Company will notify you promptly and prepare and file with the Commission an appropriate amendment or supplement (in form and substance satisfactory to you) that will correct such statement or omission and will use its best efforts to have any amendment to the Registration Statement declared effective as soon as possible. (c) The Company will promptly deliver to you four signed copies of the Registration Statement, including exhibits and all amendments thereto, and signed copies of all consents, and the Company will promptly deliver to each of the Underwriters such number of copies of any preliminary prospectus, the Prospectus, the Registration Statement and all amendments of and supplements to such documents, if any, as you may reasonably request, and the Company hereby consents to the use of such copies for purposes permitted by the Act. (d) The Company will endeavor in good faith, in cooperation with you, at or prior to the time of effectiveness of the Registration Statement, to qualify the Shares for offering and sale under the securities laws relating to the offering or sale of the Shares of such jurisdictions (domestic or foreign) as you may designate and to maintain such qualification in effect for so long as required for the distribution thereof; except that in no event shall the Company be obligated in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process. The Company will promptly advise you of the receipt by the Company of any notification with respect to suspension of the qualification of the Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and will use every reasonable effort to obtain the withdrawal of any order of suspension as soon as possible. (e) The Company will make generally available (within the meaning of Section 11(a) of the Act) to its security holders and to you as soon as practicable, but not later than 45 days after the end of its fiscal quarter in which the first anniversary date of the effective date of the Registration Statement occurs, an earning statement (in form complying with the provisions of Rule 158 of the Regulations) covering a period of at least twelve consecutive months beginning after the effective date of the Registration Statement. (f) The Company shall cause to be prepared and delivered, at its expense, within one business day from the effective date of this Agreement, to you an "electronic Prospectus" to be used by the Underwriters in connection with the offering and sale of the Shares. As used herein, the term "electronic Prospectus" means a form of Prospectus, and any amendment or supplement thereto, that meets each of the following conditions: (i) it shall be encoded in an electronic format, satisfactory to you, that may be transmitted electronically by you and the other Underwriters to offerees and purchasers of the Shares for at least during the 12 period when the Prospectus is required to be delivered under the Act or the Exchange Act ("the Prospectus Delivery Period"); (ii) it shall disclose the same information as the paper Prospectus and Prospectus filed pursuant to EDGAR, except to the extent that graphic and image material cannot be disseminated electronically, in which case such graphic and image material shall be replaced in the electronic Prospectus with a fair and accurate narrative description or tabular representation of such material, as appropriate; and (iii) it shall be in or convertible into a paper format or an electronic format, satisfactory to you, that will allow investors to store and have continuously ready access to the Prospectus at any future time, without charge to investors (other than any fee charged for subscription to the system as a whole and for on-line time). Such electronic Prospectus may consist of a Rule 434 preliminary prospectus, together with the applicable term sheet, provided that it otherwise satisfies the format and conditions described in the immediately preceding sentence. The Company hereby confirms that it has included or will include in the Prospectus filed pursuant to EDGAR or otherwise with the Commission and in the Registration Statement at the time it was declared effective an undertaking that, upon receipt of a request by an investor or his or her representative within the Prospectus Delivery Period, the Company shall transmit or cause to be transmitted promptly, without charge, a paper copy of the Prospectus. (g) During the period of 180 days from the date of the Prospectus, the Company will not directly or indirectly, without your prior written consent issue, sell, offer or agree to sell, grant any option for the sale of, pledge, or otherwise dispose of or encumber, or otherwise create or maintain a "put equivalent position" (within the meaning of Rule 16a-1(h) under the Exchange Act) in, any shares of the Company's Common Stock (or any securities convertible into, exercisable for or exchangeable for Common Stock), and the Company has obtained or will obtain the undertaking of each of its officers, directors, stockholders not to engage in any of the aforementioned transactions on their own behalf, other than the Company's sale of Shares hereunder, issuance of Common Stock upon the exercise of presently outstanding stock options, warrants and convertible preferred stock, the issuance of stock pursuant to the Company's Employee Stock Purchase Plan, the grant of stock options under the Company's stock option plan and the issuance of restricted stock as a result of a merger or acquisition transaction. The Company agrees not to waive any undertaking obtained pursuant to this paragraph. (h) During a period of three years from the date of the Prospectus, the Company will furnish to you and, upon request, to each of the other Underwriters (i) copies of any reports or other communications that the Company shall send to its stockholders or shall from time to time publish or publicly disseminate, (ii) copies of all reports, financial statements and proxy or information statements filed by the Company with the Commission or any national securities exchange or automated quotation system, and (iii) such other information as you may reasonably request regarding the Company, subject to the provisions of any written agreement that, in the opinion of outside counsel to the Company, prohibit the Company from furnishing such information under any circumstances including, without limitation, an agreement by you to be subject to the provisions of such written agreement. The Company, during the period when the prospectus is required to be delivered under the Act, will file all documents required to be filed with the Commission pursuant to the 1934 Act within the time periods required by the 1934 Act and the rules and regulations of the Commission thereunder. 13 (i) The Company will apply the proceeds from the sale of the Shares as set forth under "Use of Proceeds" in the Prospectus. (j) The Company will use its best efforts to cause the Shares to be qualified for quotation on the Nasdaq National Market and to maintain such quotation so long as any of the Shares are outstanding. (k) The Company will file with its periodic reports pursuant to Section 13 or Section 15 of the Exchange Act such information as may be required pursuant to Rule 463 of the Regulations. (l) The Company, during the Prospectus Delivery Period, will file, on a timely basis, with the Commission and the Nasdaq National Market all reports and documents required to be filed under the Exchange Act. (m) The Company shall engage and maintain, at its expense, a registrar and transfer agent for the Common Stock. (n) If any holder of Directed Shares does not complete and submit the required NASD questionnaires to the reasonable satisfaction of Bear, Stearns & Co. Inc., on behalf of the Underwriters, the Company hereby agrees that it will ensure that such holder's Directed Shares are restricted as required by the NASD or the NASD's rules from sale, transfer, assignment, pledge or hypothecation for a period of three months following the date of this Agreement. The Underwriters will notify the Company as to which persons will need to be so restricted. At the request of the Underwriters, the Company will direct the transfer agent to place a stop transfer restriction upon such securities for such a period of time. Should the Company release, or seek to release, from such restrictions any of the Directed Shares of such holder, the Company agrees to reimburse the Underwriters for any reasonable expenses (including, without limitation, legal expenses) they incur in connection with such release. (o) The Company will use its best efforts to do and perform all things required or necessary to be done and performed under this Agreement by the Company prior to or after the Closing Date or any Additional Closing Date, as the case may be, and to satisfy all conditions precedent to the delivery of the Shares. Bear, Stearns & Co. Inc., on behalf of the several Underwriters, may, in its sole discretion, waive in writing the performance by the Company of any one or more of the foregoing covenants or extend the time for their performance. 5. Payment of Expenses. Whether or not the transactions contemplated in ------------------- this Agreement are consummated or this Agreement is terminated, the Company hereby agrees to pay all costs and expenses incident to the performance of the obligations of the Company hereunder, including those in connection with (i) preparing, printing, duplicating, filing and distributing the Registration Statement, as originally filed and all amendments thereof (including all exhibits thereto), any preliminary prospectus, the Prospectus and any amendments or supplements thereto (including, without limitation, fees and expenses of the Company's accountants and counsel), the underwriting documents and all other documents related to the public offering of the Shares (including those supplied to the Underwriters in quantities as hereinabove stated), (ii) the issuance, transfer and delivery of the Shares to the Underwriters, including any transfer or other taxes payable thereon, (iii) the qualification of the Shares under state or foreign securities or Blue 14 Sky laws, including the costs of printing and mailing a preliminary and final "Blue Sky Survey" and the fees of counsel for the Underwriters and such counsel's disbursements in relation thereto, (iv) quotation of the Shares on the Nasdaq National Market system, (v) filing fees of the Commission and the NASD, (vi) the cost of printing certificates representing the Shares, (vii) the cost and charges of any transfer agent or registrar for the Shares and (viii) all cash and expenses of the Underwriters, including the fees and disbursements of counsel for the Underwriters, in connection with the Directed Shares which are designed by the Company for sale to certain employees of and certain persons designated by the Company. 6. Conditions of Underwriters' Obligations. The obligations of the --------------------------------------- Underwriters to purchase and pay for the Firm Shares and the Additional Shares, as provided herein, shall be subject to the accuracy of the representations and warranties of the Company herein contained, as of the date hereof and as of the Closing Date (for purposes of this Section 6 "Closing Date" shall refer to the Closing Date for the Firm Shares and any Additional Closing Date, if different, for the Additional Shares), to the absence from any certificates, opinions, written statements or letters furnished to you or to Sidley & Austin ("Underwriters' Counsel") pursuant to this Section 6 of any misstatement or omission, to the performance by the Company of its obligations hereunder, and to the following additional conditions: (a) The Registration Statement including any Rule 462(b) Registration Statement, shall have become effective not later than (if pricing pursuant to Rule 430A) 5:30 P.M., New York time, on the date of this Agreement, or at such later time and date as shall have been consented to in writing by you; if the Company shall have elected to rely upon Rule 430A or Rule 434 of the Regulations, the Prospectus shall have been filed with the Commission in a timely fashion in accordance with Section 4(a) hereof; and, at or prior to the Closing Date no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof shall have been issued and no proceedings therefor shall have been initiated or threatened by the Commission. (b) At the Closing Date you shall have received the opinion of Buchanan Ingersoll Professional Corporation, counsel for the Company, dated the Closing Date addressed to the Underwriters and in form and substance satisfactory to Underwriters' Counsel, to the effect that: (i) Each of the Company and its subsidiaries has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation. Each of the Company and its subsidiaries is duly qualified and in good standing as a foreign corporation in each jurisdiction in which the character or location of its properties (owned, leased or licensed) or the nature or conduct of its business makes such qualification necessary, except for those failures to be so qualified or in good standing which will not in the aggregate have a Material Adverse Effect. Each of the Company and its subsidiaries has all requisite corporate authority to own, lease and license its respective properties and conduct its business as now being conducted and as described in the Registration Statement and the Prospectus. All the issued and outstanding capital stock of each subsidiary of the Company has been duly and validly issued and is fully paid and nonassessable and were not issued in violation of preemptive rights (unless such rights have been duly waived by the holders of such rights) and, is owned directly or indirectly by the Company, free and clear of any lien, 15 encumbrance, claim, security interest, restriction on transfer, shareholders' agreement, voting trust of other defect of title whatsoever. (ii) The Company has an authorized capital stock as set forth in the Registration Statement and the Prospectus. All the outstanding shares of Common Stock are duly and validly authorized and issued, are fully paid and nonassessable, were not issued in violation of or subject to any preemptive or similar rights (unless such rights have been duly waived by the holders of such rights) and were issued in compliance with applicable federal and state securities laws. The Shares to be delivered on the Closing Date have been duly and validly authorized and, when delivered by the Company in accordance with this Agreement, will be duly and validly issued, fully paid and nonassessable and will not have been issued in violation of or subject to any preemptive or similar rights. The certificates for the Shares are in due and proper form under the Delaware General Corporation Law. The Common Stock, the Firm Shares and the Additional Shares conform to the descriptions thereof contained in the Registration Statement and the Prospectus. (iii) Except as described in or contemplated by the Prospectus, there are no outstanding securities of the Company convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of capital stock of the Company and there are no outstanding or authorized options, warrants or rights of any character obligating the Company to issue any shares of its capital stock or any securities convertible or exchangeable into or evidencing the right to purchase or subscribe for any shares of such stock; and except as described in the Prospectus, to the knowledge of such counsel, no holder of any securities of the Company or any other person has the right, contractual or otherwise, to cause the Company to sell or otherwise issue to them, or to permit them to underwrite the sale of, any of the Shares or the right to have any Common Shares or other securities of the Company included in the Registration Statement or the right, as a result of the filing of the Registration Statement, to require registration under the Act of any shares of Common Stock or other securities of the Company. (iv) The Shares to be sold under this Agreement to the Underwriters are duly authorized for quotation on the Nasdaq National Market system. (v) This Agreement has been duly and validly authorized, executed and delivered by the Company. (vi) There is no litigation or governmental or other action, suit, proceeding or investigation before any court or before or by any public, regulatory or governmental agency or body pending or to the best of such counsel's knowledge, threatened against, or involving the properties or business of, the Company or any of its subsidiaries, that is of a character required to be disclosed in the Registration Statement and the Prospectus which has not been properly disclosed therein, or of any statute, regulation, contract or other document that is required to be described in the Registration Statement or the Prospectus or to be filed as an exhibit to the Registration Statement that is not described or filed as required. (vii) The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated hereby by the Company do not and will 16 not (A) conflict with or result in a breach of any of the terms and provisions of, or constitute a default (or an event which with notice or lapse of time, or both, would constitute a default) under, require approval or consent under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company or any of its subsidiaries pursuant to, any agreement, instrument, contract, indenture, mortgage, lease, license, arrangement or understanding known to such counsel to which the Company or any of its subsidiaries is a party or by which any of such corporations or their respective properties or assets are subject or (B) contravene any provision of applicable law or violate or conflict with any provision of the Amended and Restated Certificate of Incorporation or Bylaws of the Company or any of its subsidiaries, or, to the best knowledge of such counsel, any judgment, decree, order, statute, rule or regulation of any court or any public, governmental or regulatory agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets. No consent, approval, authorization, order, registration, filing, qualification, license or permit of or with any court or any public, governmental, or regulatory agency or body having jurisdiction over the Company or any of its subsidiaries or any of their respective properties or assets is required for the execution, delivery and performance of this Agreement or the consummation of the transactions contemplated hereby, except for (1) such as may be required under state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters (as to which such counsel need express no opinion) and (2) such as have been made or obtained under the Act. (viii) The Registration Statement and the Prospectus and any amendments thereof or supplements thereto (other than the financial statements and schedules and other financial data included or incorporated by reference therein, as to which no opinion need be rendered) comply as to form in all material respects with the requirements of the Act and the Regulations. (ix) The statements under the captions "Description of Capital Stock" and "Shares Eligible for Future Sale" in the Prospectus, insofar as such statements constitute a summary of documents referred to therein or matters of law, fairly summarize in all material respects the information called for with respect to such documents and matters. (x) Such counsel does not know of any contracts or documents required to be filed as exhibits to the Registration Statement or described in the Registration Statement or the Prospectus which are not so filed or described as required, and such contracts and documents as are summarized in the Registration Statement or the Prospectus are fairly summarized in all material respects. (xi) The Company is not, and upon consummation of the transactions contemplated hereby will not be, subject to registration as an "investment company" or an entity "controlled" by an "investment company" under the Investment Company Act of 1940, as amended. (xii) The Registration Statement is effective under the Act, and, to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereof has been issued and no 17 proceedings therefor have been initiated or threatened by the Commission and all filings required by Rule 424(b) of the Regulations have been made. (xiii) The Company has the corporate power and authority to enter into the Underwriting Agreement and to issue, sell and deliver to the Underwriters the Shares to be issued and sold by it hereunder. (xiv) The form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements, with any applicable requirements of the Amended and Restated Certificate of Incorporation and Bylaws of the Company and with the requirements of The Nasdaq Stock Market, Inc. (xv) To the knowledge of such counsel, there are no statutes or regulations that are required to be described in the Prospectus that are not described as required. (xvi) All descriptions in the Registration Statement of contracts and other documents to which the Company is a party are accurate in all material respects; to the knowledge of such counsel, there are no franchises, contracts, indentures, mortgages, loan agreements, notes, leases or other instruments required to be described or referred to in the Registration Statement or to be filed as exhibits thereto other than those described or referred to therein or filed or incorporated by reference as exhibits thereto, and the descriptions thereof or references thereto are correct in all material respects. (xvii) In addition, such opinion shall also contain a statement that such counsel has participated in conferences with officers and representatives of the Company, representatives of the independent public accountants for the Company and the Underwriters at which the contents and the Prospectus and related matters were discussed and, no facts have come to the attention of such counsel which would lead such counsel to believe that either the Registration Statement at the time it became effective (including the information deemed to be part of the Registration Statement at the time of effectiveness pursuant to Rule 430A(b) or Rule 434, if applicable), or any amendment thereof made prior to the Closing Date as of the date of such amendment, contained an untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus as of its date (or any amendment thereof or supplement thereto made prior to the Closing Date as of the date of such amendment or supplement) and as of the Closing Date contained or contains an untrue statement of a material fact or omitted or omits to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (it being understood that such counsel need express no belief or opinion with respect to the financial statements and schedules included or incorporated by reference therein). In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of fact, to the extent they deem proper, on 18 certificates of responsible officers of the Company and certificates or other written statements of officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company and its subsidiaries, provided that copies of any such statements or certificates shall be delivered to Underwriters' Counsel. The opinion of such counsel for the Company shall state that the opinion of any such other counsel is in form satisfactory to such counsel and, in their opinion, you and they are justified in relying thereon. (c) At the Closing Date you shall have received the opinion of Winston & Strawn, counsel for the Company, dated the Closing Date addressed to the Underwriters and in form and substance satisfactory to Underwriters' Counsel, to the effect that: (i) The Company is listed in the records of the United States Patent and Trademark Office ("PTO") as the owner of record of each of the trademark registrations and applications listed in Schedule A to such opinion (herein called the "Trademarks"). To such counsel's knowledge, there are no asserted or unasserted claims of any persons relating to the scope or ownership of any of the Trademarks, there are no liens which have been filed against any of the Trademarks, there are no material defects of form in the preparation or filing of the Trademarks, Trademark applications are being diligently prosecuted, and none of such Trademarks has been finally rejected or abandoned. Further, nothing has come to our attention that leads us to believe that the Trademark applications will not eventuate in registered Trademarks, or that any Trademark registrations issued, or to be issued in respect of any such Trademark applications, will not be valid or will not afford the Company reasonable trademark protection relative to the subject matter thereof. (ii) The Company owns or possesses valid and enforceable licenses or other rights to use all Intellectual Property. (iii) Other than as described in the Registration Statement and the Prospectus: (A) there are no third parties who have any rights in the Intellectual Property that could preclude the Company from conducting business as currently conducted or as presently contemplated to be conducted as described in the Registration Statement and the Prospectus; (B) there are no pending or threatened actions, suits, proceedings, investigations or claims by others challenging the rights of the Company or, if the Intellectual Property is licensed to the Company, in respect of any third-party licensor; (C) neither the Company nor, to the extent any Intellectual Property is licensed to the Company, any third-party licensor has infringed, or received any notice of infringement of or conflict with, any rights of others with respect to the Intellectual Property; and (D) there is no dispute between the Company and any third-party licensor with respect to any Intellectual Property. In rendering such opinion, such counsel may rely (A) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to Underwriters' Counsel) of other counsel reasonably acceptable to Underwriters' Counsel, familiar with the applicable laws; (B) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and certificates or other written statements of officers of departments of various jurisdictions having custody of documents respecting the 19 corporate existence or good standing of the Company and its subsidiaries, provided that copies of any such statements or certificates shall be delivered to Underwriters' Counsel. The opinion of such counsel for the Company shall state that the opinion of any such other counsel is in form satisfactory to such counsel and, in their opinion, you and they are justified in relying thereon. (d) All proceedings taken in connection with the sale of the Firm Shares and the Additional Shares as herein contemplated shall be satisfactory in form and substance to you and to Underwriters' Counsel, and the Underwriters shall have received from said Underwriters' Counsel a favorable opinion, dated as of the Closing Date with respect to the issuance and sale of the Shares, the Registration Statement and the Prospectus and such other related matters as you may reasonably require, and the Company shall have furnished to Underwriters' Counsel such documents as they request for the purpose of enabling them to pass upon such matters. (e) At the Closing Date you shall have received a certificate of the Chief Executive Officer and Chief Financial Officer of the Company, dated as of the Closing Date, to the effect that (i) the condition set forth in subsection (a) of this Section 6 has been satisfied, (ii) as of the date hereof and as of the Closing Date the representations and warranties of the Company set forth in Section 1 hereof are true and correct in all respects, (iii) as of the Closing Date the obligations of the Company to be performed hereunder on or prior thereto have been duly performed, and (iv) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, the Company and its subsidiaries have not sustained any material loss or interference with their respective businesses or properties from fire, flood, hurricane, accident or other calamity, whether or not covered by insurance, or from any labor dispute or any legal or governmental proceeding, and there has not been a Material Adverse Change, or any development involving a Material Adverse Change, except in each case as described in the Prospectus. (f) At the time this Agreement is executed and at the Closing Date, you shall have received a letter, from Ernst & Young LLP, independent public accountants for the Company, dated, respectively, as of the date of this Agreement and as of the Closing Date addressed to the Underwriters and in form and substance satisfactory to you, to the effect that: (i) they are independent certified public accountants with respect to the Company within the meaning of the Act and the Regulations and stating that the answer to Item 10 of the Registration Statement is correct insofar as it relates to them; (ii) stating that, in their opinion, the financial statements and schedules of the Company included in the Registration Statement and the Prospectus and covered by their opinion therein comply as to form in all material respects with the applicable accounting requirements of the Act and the applicable published rules and regulations of the Commission thereunder; (iii) on the basis of procedures consisting of a reading of the latest available unaudited interim financial statements of the Company, a reading of the minutes of meetings and consents of the stockholders and board of directors of the Company and the committees of such board subsequent to [December 31, 1999], inquiries of officers and other employees of the Company who have responsibility for financial and accounting matters of the Company with respect to transactions and events subsequent to [December 31, 1999] a review of interim financial information in accordance with Statement of Auditing Standards No. 71, Interim Financial Information, with respect to the period ended [_________] and other specified procedures and inquiries to a date not more than five days prior to the date of such letter, nothing 20 has come to their attention that would cause them to believe that: (A) the unaudited financial statements and schedules of the Company presented in the Registration Statement and the Prospectus do not comply as to form in all material respects with the applicable accounting requirements of the Act and the applicable published rules and regulations of the Commission thereunder or that such unaudited financial statements are not fairly presented in conformity with generally accepted accounting principles applied on a basis substantially consistent with that of the audited financial statements included in the Registration Statement and the Prospectus; (B) with respect to the period subsequent to [December 31, 1999] there were, as of the date of the most recent available monthly financial statements of the Company, if any, and as of a specified date not more than five days prior to the date of such letter, any changes in the capital stock or long-term indebtedness of the Company or any decrease in the net current assets or stockholders' equity of the Company, in each case as compared with the amounts shown in the most recent balance sheet presented in the Registration Statement and the Prospectus, except for changes or decreases which the Registration Statement and the Prospectus disclose have occurred or may occur or which are set forth in such letter or (C) that during the period from [December 31, 1999] to the date of the most recent available monthly financial statements of the Company, if any, and to a specified date not more than five days prior to the date of such letter, there was any decrease, as compared with the corresponding period in the prior fiscal year, in total revenues, or total or per share net income, except for decreases which the Registration Statement and the Prospectus disclose have occurred or may occur or which are set forth in such letter; and (iv) stating that they have compared specific dollar amounts, numbers of shares, percentages of revenues and earnings, and other financial information pertaining to the Company set forth in the Registration Statement and the Prospectus, which have been specified by you prior to the date of this Agreement, to the extent that such amounts, numbers, percentages, and information may be derived from the general accounting and financial records of the Company or from schedules furnished by the Company, and excluding any questions requiring an interpretation by legal counsel, with the results obtained from the application of specified readings, inquiries, and other appropriate procedures specified by you set forth in such letter, and found them to be in agreement. In addition, such letter shall state that the pro forma financial information included in the Registration Statement and the Prospectus complies as to form in all material respects with the applicable accounting requirements of the Act, including Rule 11-02 of Regulation S-X, and that the pro forma adjustments have been properly applied to historical amounts in the compilation of such pro forma financial information. (g) Prior to the Closing Date the Company shall have furnished to you such further information, certificates and documents as you may reasonably request. (h) You shall have received from each person who is a director, officer or holder of capital stock, options or warrants of the Company an agreement substantially in the form of Exhibit A hereto, and such agreement shall be in full force and effect on the Closing Date. (i) At the Closing Date, the Shares shall have been approved for quotation on the Nasdaq National Market system. If any of the conditions specified in this Section 6 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates, opinions, written statements 21 or letters furnished to you or to Underwriters' Counsel pursuant to this Section 6 shall not be in all material respects reasonably satisfactory in form and substance to you and to Underwriters' Counsel, all obligations of the Underwriters hereunder may be canceled by you at, or at any time prior to, the Closing Date and the obligations of the Underwriters to purchase the Additional Shares may be cancelled by you at, or at any time prior to, the Additional Closing Date. Notice of such cancellation shall be given to the Company in writing, or by telephone, telex or telegraph, confirmed in writing. 7. Indemnification. --------------- (a) The Company agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any and all losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Shares, as originally filed, or any filed amendment thereof, or any related preliminary prospectus or the Prospectus, or in any supplement thereto or amendment thereof, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; or (ii) (A) the violation of any applicable laws or regulations of foreign jurisdictions where Directed Shares have been offered and (B) any untrue statement or alleged untrue statement of a material fact included in the supplement or prospectus wrapper material distributed in connection with the reservation and sale of the Directed Shares to eligible employees and certain persons designated by the Company or the omission or alleged omission therefrom of a material fact necessary to make the statements therein, when considered in conjunction with the Prospectus or preliminary prospectus, not misleading; provided, however, that the Company will not be liable in any such case to the extent but only to the extent that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through you expressly for use therein. This indemnity agreement will be in addition to any liability which the Company may otherwise have including under this Agreement. (b) Each Underwriter severally, and not jointly, agrees to indemnify and hold harmless the Company, each of the directors of the Company, each of the officers of the Company who shall have signed the Registration Statement, and each other person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, against any losses, liabilities, claims, damages and expenses whatsoever as incurred (including but not limited to attorneys' fees and any and all expenses whatsoever incurred in investigating, preparing or defending against any litigation, commenced or threatened, or any claim whatsoever, and any and all amounts paid in settlement of any claim or 22 litigation), joint or several, to which they or any of them may become subject under the Act, the Exchange Act or otherwise, insofar as such losses, liabilities, claims, damages or expenses (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the registration statement for the registration of the Shares, as originally filed, or any filed amendment thereof, or any related preliminary prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that any such loss, liability, claim, damage or expense arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information furnished to the Company by or on behalf of any Underwriter through you expressly for use therein; provided, however, that in no case shall any Underwriter be liable or responsible for any amount in excess of the underwriting discount applicable to the Shares purchased by such Underwriter hereunder. This indemnity will be in addition to any liability which any Underwriter may otherwise have including under this Agreement. The Company acknowledges that the statements set forth in the last paragraph of the cover page and the [___] paragraphs and the list of Underwriters and the number of shares listed opposite their respective names in the first paragraph under the caption "Underwriting" in the Prospectus constitute the only information furnished in writing by or on behalf of any Underwriter expressly for use in the registration statement for the registration of the Shares, as originally filed, or in any filed amendment thereof, any related preliminary prospectus or the Prospectus or in any amendment thereof or supplement thereto, as the case may be. (c) In connection with the offer and sale of the Directed Shares, the Company agrees, promptly upon a request in writing, to indemnify and hold harmless the Underwriters from and against any and all losses, liabilities, claims, damages and expenses incurred by them as a result of (i) the failure of the Directed Shares Purchasers to pay for and accept delivery of the Directed Shares which, by the end of the day following the date of this Agreement, were subject to a properly confirmed agreement to purchase such Directed Shares or (ii) the refusal of any Directed Shares Purchasers that are also employees of the Company to properly confirm their respective agreements to purchase the Directed Shares that they had agreed to purchase by the end of the first day after the date of this Agreement. (d) Promptly after receipt by an indemnified party under subsection (a), (b) or (c) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify each party against whom indemnification is to be sought in writing of the commencement thereof (but the failure so to notify an indemnifying party shall not relieve it from any liability which it may have under this Section 7). In case any such action is brought against any indemnified party, and it notifies an indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein, and to the extent it may elect by written notice delivered to the indemnified party promptly after receiving the aforesaid notice from such indemnified party, to assume the defense thereof with counsel satisfactory to such indemnified party. Notwithstanding the foregoing, the indemnified party or parties shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such indemnified party or parties unless (i) the employment of such counsel 23 shall have been authorized in writing by one of the indemnifying parties in connection with the defense of such action, (ii) the indemnifying parties shall not have employed counsel to have charge of the defense of such action within a reasonable time after notice of commencement of the action, or (iii) such indemnified party or parties shall have reasonably concluded that there may be defenses available to it or them which are different from or additional to those available to one or all of the indemnifying parties (in which case the indemnifying parties shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the indemnifying parties. Anything in this subsection to the contrary notwithstanding, an indemnifying party shall not be liable for any settlement of any claim or action effected without its written consent; provided, however, that such consent was not unreasonably withheld. 8. Contribution. In order to provide for contribution in circumstances ------------ in which the indemnification provided for in Section 7 hereof is for any reason held to be unavailable from any indemnifying party or is insufficient to hold harmless a party indemnified thereunder, the Company and the Underwriters shall contribute to the aggregate losses, claims, damages, liabilities and expenses of the nature contemplated by such indemnification provision (including any investigation, legal and other expenses incurred in connection with, and any amount paid in settlement of, any action, suit or proceeding or any claims asserted, but after deducting in the case of losses, claims, damages, liabilities and expenses suffered by the Company any contribution received by the Company from persons, other than the Underwriters, who may also be liable for contribution, including persons who control the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, officers of the Company who signed the Registration Statement and directors of the Company) as incurred to which the Company and one or more of the Underwriters may be subject, in such proportions as is appropriate to reflect the relative benefits received by the Company and the Underwriters from the offering of the Shares or, if such allocation is not permitted by applicable law or indemnification is not available as a result of the indemnifying party not having received notice as provided in Section 7 hereof, in such proportion as is appropriate to reflect not only the relative benefits referred to above but also the relative fault of the Company and the Underwriters in connection with the statements or omissions which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as (x) the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company and (y) the underwriting discounts and commissions received by the Underwriters, respectively, in each case as set forth in the table on the cover page of the Prospectus. The relative fault of the Company and of the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission or any violation of the nature referred to in Section 7(a)(ii). The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 8 were determined by pro rata allocation (even if the Underwriters 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 above. Notwithstanding the provisions of this Section 8, (i) in no case shall any Underwriter be liable or responsible for any amount in excess of the underwriting discount and commission 24 applicable to the Shares purchased by such Underwriter hereunder, and (ii) no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. Notwithstanding the provisions of this Section 8 and the preceding sentence, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. For purposes of this Section 8, each person, if any, who controls an Underwriter within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act shall have the same rights to contribution as such Underwriter, and each person, if any, who controls the Company within the meaning of Section 15 of the Act or Section 20(a) of the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the Company, subject in each case to clauses (i) and (ii) of this Section 8. Any party entitled to contribution will, promptly after receipt of notice of commencement of any action, suit or proceeding against such party in respect of which a claim for contribution may be made against another party or parties, notify each party or parties from whom contribution may be sought, but the omission to so notify such party or parties shall not relieve the party or parties from whom contribution may be sought from any obligation it or they may have under this Section 8 or otherwise. No party shall be liable for contribution with respect to any action or claim settled without its consent; provided, however, that such consent was not unreasonably withheld. 9. Default by an Underwriter. ------------------------- (a) If any Underwriter or Underwriters shall default in its or their obligation to purchase Firm Shares or Additional Shares hereunder, and if the Firm Shares or Additional Shares with respect to which such default relates do not (after giving effect to arrangements, if any, made by you pursuant to subsection (b) below) exceed in the aggregate 10% of the number of Firm Shares or Additional Shares, to which the default relates shall be purchased by the nondefaulting Underwriters in proportion to the respective proportions which the numbers of Firm Shares set forth opposite their respective names in Schedule I hereto bear to the aggregate number of Firm Shares set forth opposite the names of the nondefaulting Underwriters. (b) In the event that such default relates to more than 10% of the Firm Shares or Additional Shares, as the case may be, you may in your discretion arrange for yourself or for another party or parties (including any nondefaulting Underwriter or Underwriters who so agree) to purchase such Firm Shares or Additional Shares, as the case may be, to which such default relates on the terms contained herein. In the event that within five calendar days after such a default you do not arrange for the purchase of the Firm Shares or Additional Shares, as the case may be, to which such default relates as provided in this Section 9, this Agreement or, in the case of a default with respect to the Additional Shares, the obligations of the Underwriters to purchase and of the Company to sell the Additional Shares shall thereupon terminate, without liability on the part of the Company with respect thereto (except in each case as provided in Section 5, 7(a) and 8 hereof) or the Underwriters, but nothing in this Agreement shall relieve a 25 defaulting Underwriter or Underwriters of its or their liability, if any, to the other Underwriters and the Company for damages occasioned by its or their default hereunder. (c) In the event that the Firm Shares or Additional Shares to which the default relates are to be purchased by the nondefaulting Underwriters, or are to be purchased by another party or parties as aforesaid, you or the Company shall have the right to postpone the Closing Date or Additional Closing Date, as the case may be for a period, not exceeding five business days, in order to effect whatever changes may thereby be made necessary in the Registration Statement or the Prospectus or in any other documents and arrangements, and the Company agrees to file promptly any amendment or supplement to the Registration Statement or the Prospectus which, in the opinion of Underwriters' Counsel, may thereby be made necessary or advisable. The term "Underwriter" as used in this Agreement shall include any party substituted under this Section 9 with like effect as if it had originally been a party to this Agreement with respect to such Firm Shares and Additional Shares. 10. Survival of Representations and Agreements. All representations and ------------------------------------------ warranties, covenants and agreements of the Underwriters and the Company contained in this Agreement, including the agreements contained in Section 5, the indemnity agreements contained in Section 7 and the contribution agreements contained in Section 8, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling person thereof or by or on behalf of the Company, any of its officers and directors or any controlling person thereof, and shall survive delivery of and payment for the Shares to and by the Underwriters. The representations contained in Section 1 and the agreements contained in Sections 5, 7, 8 and 11(d) hereof shall survive the termination of this Agreement, including termination pursuant to Section 9 or 11 hereof. 11. Effective Date of Agreement; Termination. ---------------------------------------- (a) This Agreement shall become effective, upon the later of (i) when you and the Company shall have received notification of the effectiveness of the Registration Statement or (ii) the execution of this Agreement. If either the initial public offering price or the purchase price per Share has not been agreed upon prior to 5:00 P.M., New York time, on the fifth full business day after the Registration Statement shall have become effective, this Agreement shall thereupon terminate without liability to the Company or the Underwriters except as herein expressly provided. Until this Agreement becomes effective as aforesaid, it may be terminated by the Company by notifying you or by you notifying the Company. Notwithstanding the foregoing, the provisions of this Section 11 and of Sections 1, 5, 7 and 8 hereof shall at all times be in full force and effect. (b) You shall have the right to terminate this Agreement at any time prior to the Closing Date or the obligations of the Underwriters to purchase the Additional Shares at any time prior to the Additional Closing Date, as the case may be, (i) if any domestic or international event or act or occurrence has materially disrupted, or in your opinion will in the immediate future materially disrupt, the market for the Company's securities or securities in general, or (ii) if trading on the New York or 26 American Stock Exchanges or on Nasdaq shall have been suspended, or minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the New York or American Stock Exchanges or on Nasdaq by the New York or American Stock Exchanges or Nasdaq, respectively, or by order of the Commission or any other governmental authority having jurisdiction, or (iii) if a banking moratorium has been declared by a state or federal authority or if any new restriction materially adversely affecting the distribution of the Firm Shares or the Additional Shares, as the case may be, shall have become effective, or (iv) (A) if the United States becomes engaged in hostilities or there is an escalation of hostilities involving the United States or there is a declaration of a national emergency or war by the United States or (B) if there shall have been such change in political, financial or economic conditions if the effect of any such event in (A) or (B) as in your judgment makes it impracticable or inadvisable to proceed with the offering, sale and delivery of the Firm Shares or the Additional Shares, as the case may be, on the terms contemplated by the Prospectus. (c) Any notice of termination pursuant to this Section 11 shall be by telephone, telex, or telegraph, confirmed in writing by letter. (d) If this Agreement shall be terminated pursuant to any of the provisions hereof (otherwise than pursuant to (i) notification by you as provided in Section 11(a) hereof or (ii) Section 9(b) or 11(b) hereof), or if the sale of the Shares provided for herein is not consummated because any condition to the obligations of the Underwriters set forth herein is not satisfied or because of any refusal, inability or failure on the part of the Company to perform any agreement herein or comply with any provision hereof, the Company will, subject to demand by you, reimburse the Underwriters for all out-of-pocket expenses (including the fees and expenses of their counsel), incurred by the Underwriters in connection herewith. 12. Notices. All communications hereunder, except as may be otherwise ------- specifically provided herein, shall be in writing and, if sent to any Underwriter, shall be mailed, delivered, or telexed or telegraphed and confirmed in writing, to such Underwriter c/o Bear, Stearns & Co. Inc., 245 Park Avenue, New York, New York 10167, Attention: Equity Syndicate; if sent to the Company, shall be mailed, delivered, or telegraphed and confirmed in writing to GoAmerica, Inc., Hackensack Avenue, Hackensack, New Jersey 07601, Attention: President. 13. Parties. This Agreement shall inure solely to the benefit of, and ------- shall be binding upon, the Underwriters and the Company and the controlling persons, directors, officers, employees and agents referred to in Sections 7 and 8, and their respective successors and assigns, and no other person shall have or be construed to have any legal or equitable right, remedy or claim under or in respect of or by virtue of this Agreement or any provision herein contained. The term "successors and assigns" shall not include a purchaser, in its capacity as such, of Shares from any of the Underwriters. 14. Governing Law. This Agreement shall be governed by and construed in ------------- accordance with the laws of the State of New York, but without regard to principles of conflicts of law. 15. Knowledge. As used in this Agreement, "to the Company's knowledge" or --------- "to the knowledge of the Company" means that the officers, directors, executive officers and key employees of the Company have, or after due inquiry and investigation would have, awareness or knowledge of such matter. 27 If the foregoing correctly sets forth the understanding between you and the Company, please so indicate in the space provided below for that purpose, whereupon this letter shall constitute a binding agreement among us. Very truly yours, GOAMERICA, INC. By:_______________________________ Name: Title: Accepted as of the date first above written BEAR, STEARNS & CO. INC. CHASE SECURITIES INC. U.S. BANCORP PIPER JAFFRAY INC. SOUNDVIEW TECHNOLOGY GROUP, INC. DLJDIRECT INC. on behalf of themselves and the other Underwriters named in Schedule I hereto Bear, Stearns & Co. Inc. By:________________________________ Name: _____________________________ 28 EXHIBIT A Bear, Stearns & Co., Inc. Chase Securities Inc. U.S. Bancorp Piper Jaffray Inc. SoundView Technology Group, Inc. DLJdirect Inc. as Representatives of the Several Underwriters c/o Bear, Stearns & Co., Inc. 245 Park Avenue New York, New York 10167 Re: GoAmerica, Inc. (the "Company") Ladies and Gentlemen: This letter is being delivered to you in connection with the proposed Underwriting Agreement (the "Underwriting Agreement"), between GoAmerica, Inc., a Delaware corporation (the "Company"), and each of you as representatives of a group of Underwriters named therein, relating to an underwritten public offering (the "Offering") of Common Stock, $.01 par value (the "Common Stock"), of the Company. In order to induce you and the other Underwriters to enter into the Underwriting Agreement, the undersigned will not, without the prior written consent of Bear, Stearns & Co. Inc., offer, sell, contract to sell, pledge or otherwise dispose of (or enter into any transaction or agreement which is designed to, or might reasonably be expected to, result in the disposition (whether by actual disposition or effective economic disposition due to cash settlement or otherwise) by the undersigned or the Company or any affiliate of the Company or any person in privity with the Company or any affiliate of the Company) directly or indirectly, including the filing (or participation in the filing of) a registration statement with the Securities and Exchange Commission in respect of, or establish or increase a put equivalent position or liquidate or decrease a call equivalent position within the meaning of Section 16 of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission promulgated thereunder with respect to, any shares of capital stock of the Company or any securities convertible into, or exercisable or exchangeable for, such capital stock, or publicly announce an intention to effect any such transaction, for a period of 180 days after the date of the final Prospectus relating to the Offering, other than shares of Common Stock disposed of as bona fide gifts approved by Bear, Stearns & Co. Inc. If for any reason the Underwriting Agreement shall be terminated prior to the Closing Date (as defined in the Underwriting Agreement), the agreement set forth above shall likewise be terminated. Yours very truly, ____________________________ Signature Address: 30 SCHEDULE I
Name of Underwriter Number of Firm Shares to be Purchased - ------------------------------------------------------------------------------------------------ Bear, Stearns & Co. Inc............................................... --------------------- Chase Securities Inc.................................................. --------------------- U.S. Bancorp Piper Jaffray Inc........................................ --------------------- SoundView Technology Group, Inc....................................... --------------------- DLJdirect Inc......................................................... --------------------- Total................................................................. ---------------------
SCHEDULE II List of Subsidiaries GoAmerica Communications Corp. 100% owned GoAmerica Marketing, Inc. 100% owned Data Rover ___% in trust EX-3.1 3 CERTIFICATE OF GOAMERICA EXHIBIT 3.1 CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF GOAMERICA, INC. GOAMERICA, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows: FIRST: That the Certificate of Incorporation of the Corporation was originally filed with the Office of the Secretary of the State of the State of Delaware on December 1, 1999 (the "Certificate"), and was amended by filings with the Office of the Secretary of the State of the State of Delaware on each of January 18, 2000 and February 25, 2000. SECOND: That the Board of Directors of the Corporation, acting by Unanimous Written Consent dated March 6, 2000, adopted a resolution proposing and declaring advisable the following amendment to the Certificate: Article FOURTH subsection (a) of the Certificate is hereby amended to read, in its entirety, as follows: "(a) The total number of shares of capital stock which the Corporation shall have the authority to issue is 205,010,500 shares, consisting of: (i) two hundred million (200,000,000) shares of Common Stock, par value $0.01 per share (the "Common Stock"); (ii) four million three hundred fifty one thousand nine hundred forty-three (4,351,943) shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock"); (iii) ten thousand five hundred (10,500) shares of Preferred Stock, par value $0.01 per share, which shares are designated as Series A Preferred Stock (the "Series A Preferred Stock"), having the terms, powers, preferences and rights as set forth in the Certificate, until such time as none of such shares of Series A Preferred Stock remains outstanding; and (iv) six hundred forty eight thousand fifty seven (648,057) shares of Preferred Stock, par value $0.01 per share, which shares are designated as Series B Preferred Stock (the "Series B Preferred Stock"), having the terms, powers, preferences and rights as set forth in the Certificate of Designation, Preferences and Rights of Series B Stock of GoAmerica, Inc. filed with the Secretary of State of the State of Delaware on January 18, 2000, until such time as none of such shares of Series B Preferred Stock remains outstanding." THIRD: That the aforesaid amendment was duly adopted by the Board of Directors and by the stockholders of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. ******* IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its duly elected President and attested by its duly elected Secretary on this 6th day of March, 2000. ATTEST: GOAMERICA, INC. By: /s/ Francis J. Elenio By: /s/ Aaron Dobrinsky --------------------- ------------------- Francis J. Elenio Aaron Dobrinsky, Chief Financial Officer, President and Chief Executive Officer Treasurer and Secretary CERTIFICATE OF AMENDMENT TO THE CERTIFICATE OF INCORPORATION OF GOAMERICA, INC. GOAMERICA, INC., a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY as follows: FIRST: That the Certificate of Incorporation of the Corporation was originally filed with the Office of the Secretary of the State of Delaware on December 1, 1999 (the "Certificate"). SECOND: That the Board of Directors of the Corporation, acting by Unanimous Written Consent dated February 23, 2000, adopted a resolution proposing and declaring advisable the following amendment to the Certificate: Article FOURTH subsection (a) of the Certificate is hereby amended to read, in its entirety, as follows: "(a) The total number of shares of capital stock which the Corporation shall have the authority to issue is 105,010,500 shares, consisting of: (i) one hundred million (100,000,000) shares of Common Stock, par value $0.01 per share (the "Common Stock"); (ii) four million three hundred fifty one thousand nine hundred forty-three (4,351,943) shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock"); (iii) ten thousand five hundred (10,500) shares of Preferred Stock, par value $0.01 per share, which shares are designated as Series A Preferred Stock (the "Series A Preferred Stock"), having the terms, powers, preferences and rights as set forth in the Certificate, until such time as none of such shares of Series A Preferred Stock remains outstanding; and (iv) six hundred forty eight thousand fifty seven (648,057) shares of Preferred Stock, par value $0.01 per share, which shares are designated as Series B Preferred Stock (the "Series B Preferred Stock"), having the terms, powers, preferences and rights as set forth in the Certificate of Designation, Preferences and Rights of Series B Stock of GoAmerica, Inc. filed with the Secretary of State of the State of Delaware on January 18, 2000, until such time as none of such shares of Series B Preferred Stock remains outstanding. Each share of Common Stock, $.01 par value, of the Corporation issued and outstanding or held in the treasury of the Corporation is hereby reclassified and changed into eight (8) fully paid and nonassessable shares of Common Stock, $.01 par value, of the Corporation and each holder of record of a certificate for one or more shares of Common Stock, $.01 par value, of the Corporation as of the close of business on the date this Certificate of Amendment to the Certificate of Incorporation becomes effective shall be entitled to receive, as soon as practicable, and without surrender of such certificate or certificates, a certificate representing seven (7) additional shares of Common Stock, $.01 par value, for each share of Common Stock, $.01 par value, represented by the certificate or certificates of such holder." THIRD: That the aforesaid amendment was duly adopted by the Board of Directors and by the stockholders of the Corporation in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware. ******* IN WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by its duly elected President and attested by its duly elected Secretary on this 23rd day of February, 2000. ATTEST: GOAMERICA, INC. By: /s/ Francis J. Elenio By: /s/ Aaron Dobrinsky --------------------- ------------------- Francis J. Elenio Aaron Dobrinsky, Chief Financial Officer, President and Chief Executive Officer Treasurer and Secretary CERTIFICATE OF INCORPORATION OF GOAMERICA, INC. FIRST: The name of the Corporation is GoAmerica, Inc. ------ SECOND: The Corporation's registered office in the State of Delaware is ------ located at Corporation Service Corporation, 1013 Centre Road, City of Wilmington County of New Castle, Delaware 19805. The name of its registered agent at such address is Corporation Service Corporation. THIRD: The purpose for which the Corporation is organized is to engage in any ----- lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. FOURTH: (a) The total number of shares of capital stock which the ------ Corporation shall have the authority to issue is 50,010,500 shares, consisting of: (i) forty five million (45,000,000) shares of Common Stock, par value $0.01 per share (the "Common Stock"); (ii) five million (5,000,000) shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock"); and ten thousand five hundred (10,500) shares of Preferred Stock, par value $0.01 per share, which shares shall be designated as Series A Preferred Stock (the "Series A Preferred Stock"), having the terms, powers, preferences and rights as set forth below, until such time as none of such shares of Series A Preferred Stock remains outstanding. (b) The authorized but undesignated Preferred Stock may be issued from time to time in one or more series. The Board of Directors is authorized, subject to limitations prescribed by law and the provisions of subsection (a) above, to provide for the issuance of the shares of Preferred Stock in series, and by filing a certificate pursuant to the applicable law of the State of Delaware, to establish from time to time the number of shares to be included in each such series, and to fix the designation, powers, preferences and rights of the shares of each such series and the qualification, limitations or restrictions thereof. The authority of the Board of Directors with respect to each series shall include, but not be limited to, determination of the following: (i) The number of shares constituting that series and the distinctive designation of that series; (ii) The dividend rate on the shares of that series, whether dividends shall be cumulative, and if so, from which date or dates, and the relative rights of priority, if any, of payment of dividends on shares of that series; (iii) Whether that series shall have voting rights, in addition to the voting rights provided by law, and, if so, the terms of such voting rights; (iv) Whether that series shall have conversion privileges, and, if so, the terms and conditions of such conversion, including provision for adjustment of the conversion rate in such events as the Board of Directors shall determine; (v) Whether or not the shares of that series shall be redeemable, and, if so, the terms and conditions of such redemption, including the date or dates upon or after which they shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (vi) The rights of the shares of that series in the event of voluntary or involuntary liquidation, dissolution or winding up of the Corporation, and the relative rights of priority, if any, of payment of shares of that series; and (vii) Any other relative rights, preferences and limitations of that series. 1. Terms Applicable to Series A Preferred Stock. -------------------------------------------- Section 1. Dividends. --------- Holders of Series A Preferred Stock shall not be entitled to dividends in cash or property except when, as and if declared by the Board of Directors of the Corporation as a condition to the declaration or payment of a dividend on any other shares. No cash or property dividend or distributions shall be declared or paid on any shares of Common Stock or on any other series of preferred stock ranking junior to or on a parity with the Series A Preferred Stock with respect to dividends, unless the holders of the Series A Preferred Stock receive such cash or property dividend or distributions in an amount per Share of Series A Preferred Stock at least equal to the greater of (i) the dividends or distributions payable on the number of shares of Common Stock in to which a Share of Series A Preferred Stock is then convertible or (ii) the dividends or distributions per share payable to holders of any series of preferred stock ranking junior to or on a parity with the Series A Preferred Stock multiplied by a fraction, the numerator of which is the number of shares of Common Stock into which a Share of Series A Preferred Stock is then convertible and the denominator of which is the number of shares of Common Stock into which a share of such series of preferred stock ranking to junior or on a parity with the Series A Preferred Stock is then convertible; provided that if such other series -------- of preferred stock is not convertible into Common Stock, then the numerator of such fraction shall be the liquidation preference of a Share of the Series A Preferred Stock and the denominator of such fraction shall be the liquidation preference of a share of such other series of preferred stock. 1A. Dividends and Distributions in respect of Junior Securities. If at any time all unpaid dividends have not been paid in full in cash, the Corporation shall not, for any reason, declare or pay any dividends in respect to Junior Securities or repurchase, redeem or acquire any Junior Securities, or otherwise make a distribution or other payment in respect of any Junior Security, directly or indirectly, in cash, property, assets, rights, securities or other consideration. -2- Section 2. Liquidation. ----------- 2A. Expect as provided in Section 2B, upon any liquidation, dissolution or ---------- winding up of the Corporation, the holder of Series A Preferred Stock will be entitled to be paid, before any distribution or payment is made upon any Junior Securities, an amount in cash equal to the aggregate Liquidation Value of all Shares outstanding, and the holders of Series A Preferred Stock will not be entitled to any further payment. If upon any such liquidation, dissolution or winding up of the Corporation, the Corporation's assets to be distributed among the holders of the Series A Preferred Stock are insufficient to permit payment to such holders of the aggregate amount which they are entitled to be paid, then the entire assets to be distributed will be distributed ratably among such holders based upon the aggregate Liquidation Value of the Convertible Preferred Stock held by each such holder. The Corporation will mail written notice of such liquidation, dissolution or winding up, not less than 60 days prior to the payment date stated therein, to each record holder of Series A Preferred Stock. 2B. If, upon any such liquidation, dissolution or winding up of the Corporation, the Corporation declares or pays a dividend upon the Common Stock payable in cash or property (a "Liquidating Dividend"), then the Corporation -------------------- shall pay to the holders of Series A Preferred Stock at the time of payment thereof the higher of (x) the Liquidation Value in accordance with Section 2A ---------- above or (y) Liquidating Dividends which would have been paid on the shares of Common Stock had such Series A Preferred Stock been converted immediately prior to the date on which a record is taken for such Liquidating Dividend, or, if no record is taken, the date as of which the record holders of Common Stock entitled to such dividends are to be determined. 2C. For purposes hereof, a liquidation or winding up of the Corporation shall include: (i) the consolidation or merger of the Corporation into or with any other entity; provided that the Corporation may merge with any wholly-owned ------------- subsidiary without paying any Liquidation Value to the holders of the Series A Preferred Stock so long as (a) the Corporation is the surviving corporation, (b) the terms of the Series A Preferred Stock are not changed and (c) the Series A Preferred Stock is not exchanged for cash, securities or other property, or (ii) the sale or transfer by the Corporation of all or substantially all of its assets to another entity. 2D. Notwithstanding any of the other provisions applicable to the Series A Preferred Stock set forth herein, no holder of Series A Preferred Stock shall be entitled to a dividend payment of any kind, whether in the form of a Liquidating Dividend or otherwise, in connection with the initial public offering of the Company's Common Stock. Section 3. Voting Rights. The holders of the Series A Preferred Stock shall ------------- be entitled to notice of all stockholders' meetings in accordance with the Corporation's bylaws, and except as otherwise provided herein and as otherwise required by law, the holders of the Series A Preferred Stock shall be entitled to vote on all matters submitted to the stockholders for a vote together with the holders of the Common Stock voting together as a single class; provided, -------- however, that the affirmative vote of holders of not less than fifty-one percent - ------- (51%) of Series A Preferred Stock then outstanding shall be required to (i) amend or repeal any provision of the Corporation's Certificate of Incorporation or Bylaws if such action would adversely affect the rights, preferences or privileges of the Series A Preferred Stock, (ii) create (by classification or otherwise) any new class or series of -3- Stock, or (iii) redeem any shares of another series of preferred stock or common stock (other than pursuant to employee agreements). On any matters on which the holders of the Series A Preferred Stock shall be entitled to vote together with the holders of Common Stock, each holder of whole shares of Common Stock into which such holder's Shares of Series A Preferred Stock are convertible (as adjusted from time to time pursuant to Section 4 hereof) on the ------- - record date for such vote. Section 4. Conversion. ---------- 4A. Conversion Procedure. -------------------- (i) At any time and from time to time, any holder of Convertible Preferred Stock may convert all or any portion of the Series A Preferred Stock (including any fraction of a Share) held by such holder into a number of shares of Common Stock computed by multiplying the number of Shares to be converted by $1,000 and dividing the result by the Conversion Price then in effect. (ii) Concurrently with the completion of a Qualified IPO or immediately following a Market Float Trigger, the Corporation may convert all or any portion of the Series A Preferred Stock (including any fraction of a Share) into a number of shares of Common Stock computed by multiplying the number of Shares to be converted by $1,000 and dividing the result by the Conversion Price then in effect. (iii) Each conversion of Series A Preferred Stock shall be deemed to have been effected as of the close of business on the date on which the certificate or certificates representing the Series A Preferred Stock to be converted have been duly endorsed and surrendered at a principal office of the Corporation (a "Conversion Date") along with written notice to the Corporation --------------- that such holder elects to convert such Shares and stating the number of Shares being converted and setting forth the names in which such holder wishes the certificates for shares of Common Stock to be issued if such names shall be different than that of such holder. At such time as such conversion has been effected, then the rights of the holder of such surrendered Series A Preferred Stock shall cease and the Person or Persons in whose name or names any certificate or certificates for shares of Common Stock are to be issued upon such conversion shall be deemed to have become the holder or holders of record of shares of Common Stock represented thereby. (iv) Notwithstanding any other provision hereof, if a conversion of Series A Preferred Stock is to be made in connection with a Public Offering, the conversion of any Shares of Series A Preferred Stock may, at the election of the holder of such Shares, be conditioned upon the consummation of the Public Offering in which case such conversion shall not be deemed to be effective until the consummation of the Public Offering. (v) As soon as possible after a conversion has been effected (but in any event within five business days in the case of subparagraph (a) below), the Corporation shall deliver to the converting holder: (a) a certificate or certificates representing the number of shares of Common Stock issuable by reason of such conversion in such name or names and such denomination or denominations as the converting holder has specified; -4- (b) the amount payable under subparagraph (viii) below with respect to such conversion; and (c) a certificate representing any Shares of Series A Preferred Stock which were represented by the certificate or certificates delivered to the Corporation in connection with such conversion but which were not converted. (vi) The issuance of certificates for shares of Common Stock upon conversion of Series A Preferred Stock shall be made without charge to the holders of such Series A Preferred Stock for any issuance tax in respect thereof or other cost incurred by the Corporation in connection with such conversion and the related issuance of shares of Common Stock. Upon conversion of each Share of Series A Preferred Stock, the Corporation shall take all such actions as are necessary in order to insure that the Common Stock issuable with respect to such conversion shall be validly issued, fully paid and nonassessable. (vii) The Corporation shall not close its books against the transfer of Series A Preferred Stock or of Common Stock issued or issuable upon conversion of Series A Preferred Stock in any manner which interferes with the timely conversion of Series A Preferred Stock. The Corporation shall cooperate with any holder of Shares required to make any governmental filings or obtain any governmental approval prior to or in connection with any conversion of Shares hereunder (including, without limitation, making any filings required to be made by the Corporation). (viii) If any fractional interest in a share of Common Stock would, except for the provisions of this subparagraph, be deliverable upon any conversion of the Series A Preferred Stock, the Corporation, in lieu of delivering the fractional share therefor, shall pay an amount to the holder thereof equal to the fair market value, as determined by the board of directors in good faith. (ix) The Corporation shall at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of issuance upon the conversion of the Series A Preferred Stock, such number of shares of Common Stock issuable upon the conversion of all outstanding Series A Preferred Stock. All shares of Common Stock which are so issuable shall, when issued, be duly and validly issued, fully paid and nonassessable and free from all taxes, liens and charges. The Corporation shall take all such actions as may be necessary to assure that all such shares of Common Stock may be so issued without violation of any applicable law or governmental regulation or any requirements of any domestic securities exchange upon which shares of Common Stock may be listed (except for official notice of issuance which shall be immediately delivered by the Corporation upon each such issuance). 4B. Conversion Price. ---------------- The initial Conversion Price shall be $10.45. The Conversion Price shall be subject to adjustment from time to time pursuant to this Section 4. --------- 4C. Adjustment to Conversion Price. The Conversion Price will be ------------------------------ adjusted as follows: (i) If the per share price to the public of the Corporation's Initial Public Offering is less than two and one-half times the then applicable Conversion Price of the Preferred Stock, the Conversion Price will be adjusted to an amount equal to 40% of the per share price of the Corporation's Initial Public Offering. (ii) If, prior to a Qualified IPO, the Corporation undergoes a Fundamental Change which yields an amount which is less per Common Share than two times the applicable -5- Conversion Price at the time of Fundamental Change, the Conversion Price will be adjusted to 50% of the price per share of the Fundamental Change. (iii) If, prior to a Qualified IPO, the Corporation issues Common Stock, warrants, options or similar securities at a price below the then applicable Conversion Price (other than Securities issued to employees or consultants as incentive compensation whether through a Corporation stock option plan or otherwise), the Conversion Price will be adjusted to the issuing price of such Common Stock and in the case of warrants, options or similar securities (other than warrants, options or similar securities issued prior to the date hereof), the Conversion Price will be adjusted to the sum of the issuing price of such warrants, options, or new securities plus the additional consideration payable to the Corporation upon exercise of such warrants, options or similar securities; provided, that upon expiration of any such options or termination any right to either exercise the warrants or convert similar securities, the Conversion Price then in effect hereunder shall forthwith be increased to the Conversion Price which would have been in effect at the time of such expiration or termination had such option, warrant or similar security, to the extent outstanding immediately prior to such expiration or termination, never been issued. If the Corporation shall declare a dividend or make any other distribution upon any stock of the Corporation payable in warrants, options or similar securities, any warrants, options or similar securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold without consideration to the extent no consideration is required to be paid upon the exercise of such options or the exercise of such warrants or similar securities. (iv) If the Corporation at any time subdivides (by any stock split, stock dividend, recapitalization or otherwise) one or more classes of its outstanding shares of Common Stock into a greater number of shares, the Conversion Price in effect immediately prior to such subdivision shall be proportionately reduced, and if the Corporation at any time combines (by reverse stock split or otherwise) one or more classes of is outstanding shares of Common Stock into a smaller number of shares, the Conversion Price in effect immediately prior to such combination shall be proportionately increased. 4D. Selection of Independent Appraiser. ---------------------------------- If the Fair Market Value of the Series A Preferred Stock is to be determined by an Independent Appraiser, the directors other than those appointed by the holders of the Series A Preferred Stock, and the holders of a majority of the Series A Preferred Stock, each shall select an Independent Appraiser to make the determination. If the determinations of Fair Market Value reached by both Independent Appraisers vary by less than 20% of the higher determination, Fair Market Value shall be the average of the two determinations. If the determinations of Fair Market Value reached by both Independent Appraisers vary by greater than 20% of the higher determination, Fair Market Value shall be determined by a third Independent Appraiser selected jointly by the directors other than those appointed by the holders of the Series A Preferred Stock and the holders of a majority of the Series A Preferred Stock and the determination of such Independent Appraiser shall be final and binding upon the parties, and the Corporation and the holders of the Series A Preferred Stock shall pay the fees and expenses of all such appraisers, payable one-half by the Corporation and one-half by the holders of the Series A Preferred Stock on a pro rata basis; provided that the Fair Market Value determined by the third Independent - -------- ---- Appraiser is between the determination of Fair Market Value by the two other Independent Appraisers selected and if such Fair Market Value is not between the determination of Fair Market Value by the two other Independent Appraisers selected, the Fair Market Value shall be such value -6- determined by the originally selected Independent Appraiser which is nearest to the determination may be the third Independent Appraiser. 4E. Notices. ------- (i) Immediately upon any adjustment of the Conversion Price, the Corporation shall give written notice thereof to all holders of Series A Preferred Stock, setting forth in reasonable detail and certifying the calculation of such adjustment. (ii) The Corporation shall give written notice to all holders of Series A Preferred Stock at least 10 days prior to the date on which the Corporation closes its books or takes a record (a) with respect to any dividend or distribution upon Common Stock, (b) with respect to any pro rata subscription offer to holders of Common Stock or (c) for determining rights to vote with respect to any Fundamental Change, dissolution or liquidation. (iii) The Corporation shall also give written notice to the holders of Series A Preferred Stock at least 10 days prior to the date on which any Fundamental Change shall take place. Section 5. Purchase Rights. If at any time the Corporation grants, --------------- issues or sells any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property pro rata to the record holders of any class of Common Stock (the "Purchase Rights"), then each holder of Series A --------------- Preferred Stock shall be entitled to acquire, upon the terms applicable to such Purchase Rights, the aggregate Purchase Rights which such holder could have acquired if such holder had held the number of shares of Common Stock acquirable upon conversion of such holder's Series A Preferred Stock immediately before the date on which a record is taken for the grant, issuance or sale of such Purchase Rights, or, if no such record is taken, the date as of which the record holders of Common Stock are to be determined for the grant, issue or sale of such Purchase Rights. Section 6. No Reissuance of Preferred. No shares of Preferred -------------------------- acquired by this Corporation by reason of redemption, purchase, conversion or otherwise shall be reissued. 2. Miscellaneous. ------------- Section A. Registration of Transfer. ------------------------ The Corporation will keep at its principal office a register for the registration of Series A Preferred Stock. Upon the surrender of any certificate representing Series A Preferred Stock at such place, the Corporation will, at the request of the record holder of such certificate, execute and deliver (at the Corporation's expense) a new certificate or certificates in exchange therefor representing in the aggregate the number of Shares represented by the surrendered certificate. Each such new certificate will be registered in such name and will represent such number of Shares as is requested by the holder of the surrendered certificate and will be substantially identical in form to the surrendered certificate. Section B. Replacement. ----------- Upon receipt of evidence reasonably satisfactory to the Corporation (an affidavit of the registered holder will be satisfactory) of the ownership and the loss, theft, destruction or -7- mutilation of any certificate evidencing Shares of any class of Series A Preferred Stock, and in the case of any such loss, theft or destruction, upon receipt of indemnity reasonably satisfactory to the Corporation (provided that if the holder is an institutional investor its own agreement will be satisfactory), or, in the case of any such mutilation upon surrender of such certificate, the Corporation will (at its expense) execute and deliver in lieu of such certificate a new certificate of like kind representing the number of Shares of such class represented by such lost, stolen, destroyed or mutilated certificate and dated the date of such lost, stolen, destroyed or mutilated certificate, and dividends will accrue on the Series A Preferred Stock represented by such new certificate from the date to which dividends have been fully paid on such lost, stolen, destroyed or mutilated certificate. Section C. Definitions. ----------- "Business Day" means a day, other than a Saturday or Sunday, on which the ------------ principal commercial banks located in New York are open for business during normal banking hours. "Common Stock" means the Corporation's Common Stock, par value $0.01 per ------------ share. "Corporation" means GoAmerica, Inc., a Delaware corporation. ----------- "Series A Preferred Stock" means the Corporation's Series A Preferred ------------------------ Stock, par value $0.01 per share. "Fair Market Value" means, with respect to a Share, on any Business Day: ----------------- (a) if the Common Stock is publicly traded at the time of determination, the value determined by multiplying the number shares of Common Stock into which all Shares are then convertible in accordance with Section 4 by the average of the closing prices for the Common Stock on --------- all domestic securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on such day, the average of the highest bid and lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted on the NASDAQ system as of the close of trading on such day, or if on any day such security is not quoted in the NASDAQ system, the average of the highest bid and lowest asked prices on such day in the domestic over-the- counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of twenty (20) days consisting of the day as of which "Fair Market Value" is being determined and the nineteen (19) consecutive Business Days prior to such day; (b) if the Common Stock is being registered pursuant to an initial Public Offering, for purposes of determining the adjustment to Conversion Price in accordance with Section 4C in connection with such Liquidity Event ---------- and for disclosure purposes for the registration statement relating to such Public Offering, Fair Market Value of the Series A Preferred Stock will be determined by reference to the midpoint of the range of the initial Public Offering price to the public as reflected on the applicable registration statement; provided that such adjustment to Conversion Price will be -------- further adjusted in -8- accordance with Section 4C to reflect the Fair Market Value by reference to ---------- the initial Public Offering price on the day that the applicable registration statement is declared effective by the Securities and Exchange Commission; or (c) if the Common Stock is not Publicly Traded at the time of determination, the Fair Market Value of the Series A Preferred Stock will be the fair value of the Series A Preferred Stock as determined jointly by the directors other than those appointed by the holders of the Series A Preferred Stock, taking into account their fiduciary duties, and the holders of a majority of the Series A Preferred Stock. If such parties are unable to reach an agreement within a reasonable period of time, such Fair Market Value shall be determined by an Independent Appraiser chosen pursuant to Section 4D. ---------- Any such determination made by an Independent Appraiser shall be made in accordance with the procedures set forth in Section 4D. ---------- "Fundamental Change" means (a) a sale or transfer of more than 50% of the ------------------ assets of the Corporation on a consolidated basis in any transactions or series of related transactions (other than in the ordinary course of business), or (b) a sale or transfer of more than 50% of the capital stock of the Corporation on a consolidated basis in any transactions or series of related transactions, and (c) any merger or consolidation to which the Corporation is a party, except for a merger in which the Corporation is the surviving entity and, after giving effect to such merger, the holders of the Corporation's outstanding capital stock (on a fully diluted basis) immediately prior to the merger will own the Corporation's outstanding capital stock (on a fully diluted basis) having a majority of the ordinary voting power to elect the Corporation's board of directors. "Independent Appraiser" shall mean an independent appraiser experienced in --------------------- valuing securities selected by the Corporation and the holders of a majority of the Series A Preferred Stock in accordance with Section 4D. ---------- "Junior Securities" means any of the Corporation's or any Subsidiaries' ----------------- equity securities, including any warrants, options or right to acquire any such equity security, other than the Series A Preferred Stock. "Liquidation Value" of any Share as of any particular date will be $1,000. ----------------- "Liquidity Event" means (a) a Public Offering; (b) the closing of any --------------- merger, combination, consolidation or similar business transaction involving the Corporation in which the holders of Common Stock immediately prior to such closing are not the holders of a majority of the ordinary voting securities of the surviving person in such transaction immediately after such closing (a "Business Combination"); (c) the closing of any sale or transfer by the -------------------- Corporation of all or substantially all of its assets to an acquiring person in which the holders of Common Stock immediately prior to such closing are not the holders of a majority of the ordinary voting securities of the acquiring person immediately after such closing (an "Asset Sale"); or (d) the closing of any sale ---------- by the holders of Common Stock of an amount of Common Stock that equals or exceeds a majority of the shares of Common Stock immediately prior to such closing to a person in which the holders of the Common Stock immediately prior to such -9- closing are not the holders of a majority of the ordinary voting securities of such person immediately after such closing (a "Stock Sale"). ---------- "Market Float Trigger" means, following an initial Public Offering of the -------------------- Corporation's common shares, the aggregate Fair Market Value of the Common Stock held by the public exceeding $25,000,000, based on the average of the closing prices for the Common Stock on all domestic securities exchanges on which such security may at the time be listed, or, if there have been no sales on any such exchange on such day, the average of the highest bid and the lowest asked prices on all such exchanges at the end of such day, or, if on any day such security is not so listed, the average of the representative bid and asked prices quoted on the NASDAQ system as of the close of trading on such day, or if on any day such security is not quoted in the NASDAQ system, the average of the highest bid and lowest asked prices on such day in the domestic over-the-counter market as reported by the National Quotation Bureau, Incorporated, or any similar successor organization, in each such case averaged over a period of twenty (20) days consisting of the day as of which "Market Float Trigger" is being determined and the nineteen (19) consecutive Business Days prior to such day. "NASDAQ" shall mean the NASDAQ National Market or the NASDAQ Smallcap ------ Market. "Person" means an individual, a partnership, a corporation, an ------ association, a joint stock Corporation, a trust, a joint venture, an unincorporated organization and a governmental entity or any department, agency or political subdivision thereof. "Public Offering" means any offering by the Corporation of its equity --------------- securities to the public pursuant to an effective registration statement under the Securities Act of 1933, as then in effect, or any comparable statement under any similar federal statute then in force (other than a registration statement on Forms S-4 or S-8, or any successor form thereto). "Qualified IPO" means a firm commitment, underwritten Public Offering ------------- pursuant to an effective registration statement under the Securities Act of the Corporation's common shares to the public resulting in aggregate gross proceeds of not less than $25,000,000 and a market valuation of the Common Stock of at least $125,000,000. "Share" means a share of Series A Preferred Stock. ----- Section D. Amendment and Waiver. -------------------- No amendment, modification or waiver will be binding or effective with respect to any provision of subdivision I or II without the prior written consent of the holders of at least 67% of the Series A Preferred Stock outstanding at the time such action is taken; and provided that no such change in the terms hereof may be accomplished by merger or consolidation of the Corporation with another corporation unless the Corporation has obtained the prior written consent of the holders of the applicable percentage of the Series A Preferred Stock. -10- Section E. Limitations. So long as any Shares of the Series A Preferred ----------- Stock are outstanding, the Corporation shall not, without the affirmative vote or the written consent of the holders of at least 51% of the Series A Preferred Stock: (a) create, authorize or issue any class or series of stock ranking either as to payment of dividends or distribution of assets prior to or on parity with the Series A Preferred Stock; or (b) change the preferences, rights or powers with respect to the Series A Preferred Stock so as to affect such stock adversely. Section F. Notices. ------- Except as otherwise expressly provided, all notices referred to herein will be in writing and will be delivered by registered or certified mail, return receipt requested, postage prepaid and will be deemed to have been given when so mailed (i) to the Corporation, at its principal executive offices and (ii) to any stockholder, at such holder's address as it appears in the stock records of the Corporation (unless otherwise indicated by any such holder). Section G. Effective Date. The effective date of this Certificate shall -------------- be the date of filing with the Secretary of the State of Delaware. FIFTH: Upon the consummation of an initial Public Offering, the initial ----- Directors and the Directors thereafter elected by the holders of voting stock shall, in accordance with the Corporation's By-laws, be classified in respect to the time for which they shall severally serve on the Board of Directors by dividing them into three staggered classes which shall be as nearly equal in number as possible. Each member of each class shall serve for three-year terms. At each annual meeting of the stockholders, the stockholders shall elect Directors of the class which term then expires, to serve until the third succeeding annual meeting. Except as otherwise provided in this Certificate of Incorporation, each Director shall serve for the term for which elected and until his or her successor shall be duly elected and shall qualify. SIXTH: The name and mailing address of the sole incorporator is Francis J. ----- Elenio c/o GoAmerica, Inc. 401 Hackensack Avenue, Hackensack, N.J. 07601. SEVENTH: The Corporation is to have perpetual existence. ------- EIGHTH: The following provisions are included for the management of the ------ business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its Board of Directors and stockholders: (i) The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the Bylaws of the Corporation, subject to any limitation thereof contained in the Bylaws. The stockholders also shall have the power to adopt, amend or repeal the Bylaws of the Corporation; provided, however, that, in addition to any vote of the ------- ------- holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative -11- vote of the holders of at least eighty percent (80%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to adopt, amend or repeal any provision of the Bylaws of the Corporation. (ii) Upon the consummation of an initial Public Offering of securities of the Corporation under the Securities Act, stockholders of the Corporation may not take any action by written consent in lieu of a meeting. (iii) Special meetings of stockholders may be called at any time only by the President, the Chairman of the Board of Directors of the Corporation (if any) or a majority of the Board of Directors of the Corporation. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes set forth in the notice of such special meeting. (iv) The Board of Directors of the Corporation, when evaluating any offer of another party (a) to make a tender or exchange offer for any equity security of the Corporation or (b) to effect a business combination, shall, in connection with the exercise of its judgment in determining what is in the best interests of the Corporation as a whole, be authorized to give due consideration to any such factors as the Board of Directors of the Corporation determines to be relevant, including, without limitation: (1) the interests of the Corporation's stockholders, including the possibility that these interests might be best served by the continued independence of the Corporation; (2) whether the proposed transaction might violate federal or state laws; (3) not only the consideration being offered in the proposed transaction, in relation to the then current market price for the outstanding capital stock of the Corporation, but also to the market price for the capital stock of the Corporation over a period of years, the estimated price that might be achieved in a negotiated sale of the Corporation as a whole or in part or through orderly liquidation, the premiums over market price for the securities of other corporations in similar transactions, current political, economic and other factors bearing on securities prices and the Corporation's financial condition and future prospects; and (4) the social, legal and economic effects upon employees, suppliers, customers, creditors and others having similar relationships with the Corporation, upon the communities in which the Corporation conducts its business and upon the economy of the state, region and nation. In connection with any such evaluation, the Board of Directors of the Corporation is authorized to conduct such investigations and engage in such legal proceedings as the Board of Directors of the Corporation may determine. -12- (v) in addition to any vote of the holders of any class or series of stock of the Corporation required by law or by this Certificate of Incorporation, the affirmative vote of the holders of at least eighty percent (80%) of the voting power of all of the then outstanding shares of the capital stock of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend any provision of Articles EIGHTH or NINTH of this Certificate of Incorporation. NINTH: A director of the Corporation shall not be personally liable either ----- to the Corporation or to any stockholder for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, or (ii) for acts or omissions which are not in good faith or which involve intentional misconduct or knowing violation of the law, or (iii) for any matter in respect of which such director shall be liable under Section 174 of Title 8 of the General Corporation Law of the State of Delaware or any amendment thereto or successor provision thereto, or (iv) for any transaction from which the director shall have derived an improper personal benefit. Neither amendment nor repeal of this paragraph nor the adoption of any provision of the Certificate of Incorporation inconsistent with this paragraph shall eliminate or reduce the effect of this paragraph in respect of any matter occurring, or any cause of action, suit or claim that, but for this paragraph of this Article, would accrue or arise, prior to such amendment, repeal or adoption of an inconsistent provision. TENTH: Election of directors need not be by written ballot. ----- ********* -13- IN WITNESS WHEREOF, the undersigned, being the sole incorporator hereinabove named, does hereby execute this Certificate of Incorporation this 1st day of December, 1999. By: /s/ Francis J. Elenio ---------------------- Francis J. Elenio Sole Incorporator -14- EX-23.1 4 CONSENT OF ERNST & YOUNG LLP Exhibit 23.1 CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 23, 2000 in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-94801) and related Prospectus of Go America, Inc. for the registration of 11,500,000 shares of its common stock. /s/ Ernst & Young LLP ----------------------------------- MetroPark, New Jersey March 13, 2000 EX-23.3 5 CONSENT OF JOHN D. HILCHER Exhibit 23.3 CONSENT OF INDEPENDENT AUDITOR I consent to the reference to my firm under the caption "Experts" and to the use of my report dated February 25, 2000 with respect to the financial statements of the business segment ZAP.IT in Amendment No. 2 to the Registration Statement (Form S-1 No. 333-94801) and related Prospectus of Go America, Inc. for the registration of 11,500,000 shares of its common stock. /s/ John D. Hilcher CPA ----------------------------------- March 13, 2000 EX-27.1 6 FINANCIAL DATA SCHEDULE
5 12-MOS 12-MOS 12-MOS DEC-31-1999 DEC-31-1998 DEC-31-1997 JAN-01-1999 JAN-01-1998 JAN-01-1997 DEC-31-1999 DEC-31-1998 DEC-31-1997 6,343,793 1,960,954 19,589 0 0 0 616,865 219,021 10,492 (75,000) (20,000) (5,000) 589,307 66,222 6,420 7,946,420 2,260,346 32,101 1,378,087 804,050 254,269 (418,844) (160,438) (35,742) 9,756,684 3,009,983 323,606 5,520,805 784,697 175,321 0 0 0 0 0 0 20,755,323 0 0 236,872 213,278 148,285 (16,421,846) 2,012,008 0 9,756,684 3,009,983 323,606 2,730,547 826,655 172,730 2,730,547 826,655 172,730 5,699,342 835,551 102,511 5,699,342 835,551 102,511 8,664,630 2,581,498 1,116,182 0 0 0 0 0 0 (11,468,288) (2,576,709) (1,045,963) 0 0 0 (11,468,288) (2,576,709) (1,045,963) 0 0 0 0 0 0 0 0 0 (11,468,288) (2,576,709) (1,045,963) (1.02) (0.14) (0.07) (1.00) (0.14) (0.06)
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