Unassociated Document


    


    EXHIBIT
      4.1

     

    SECURITIES
      PURCHASE AGREEMENT

     

    This
      SECURITIES PURCHASE AGREEMENT (the “Agreement”) dated as of December 10, 2007,
      is made by and among Internet America, Inc., a Texas corporation, with
      headquarters located at 10930 W. Sam Houston Pkwy., N. Suite 200, Houston,
      Texas
      77064 (the “Company”), and the investors named on the signature pages hereto,
      together with their permitted transferees (whether one or more, the
“Investors”).

     

    RECITALS:

     

    A. The
      Company and the Investors are executing and delivering this Agreement in
      reliance upon the exemptions from securities registration afforded by Section
      4(2) of the Securities Act and Rule 506 under Regulation D.

     

    B. Each
      of
      the Investors desires, upon the terms and conditions stated in this Agreement,
      to purchase that number of shares of common stock, $0.01 par value (“Common
      Stock”), of the Company indicated on their respective
      signature
      page hereto (the “Common Shares”) at the per share price indicated on
      their
      respective
      signature page hereto.

     

    C. Contemporaneously
      with the execution and delivery of this Agreement, the parties hereto are
      executing and delivering a Registration Rights Agreement under which the Company
      has agreed to provide certain registration rights under the Securities Act,
      the
      rules and regulations promulgated thereunder, and applicable state securities
      laws.

     

    D. The
      capitalized terms used herein and not otherwise defined have the meanings given
      them in Article IX hereof.

     

    In
      consideration of the premises and the mutual covenants contained herein and
      other good and valuable consideration, the receipt and sufficiency of which
      are
      hereby acknowledged, the Company and the Investors hereby agree as
      follows:

     

    ARTICLE
      I

    PURCHASE
      AND SALE OF COMMON STOCK

     

    1.1 Purchase
      and Sale of Common Stock.
      At the
      Closing, subject to the terms of this Agreement and the satisfaction or waiver
      of the conditions set forth in Articles VI and VII hereof, the Company will
      issue and sell to each Investor, and each Investor will (on a several and not
      a
      joint basis) purchase from the Company, such number of Common Shares set forth
      on the Investor’s signature page. The Company will add each
      Investor’s
      name and
      number of shares purchased to Exhibit A and amend Exhibit A from time to time
      to
      add new Investors.

     

    1.2 Payment.
      Each
      Investor will pay the purchase price for the Common Shares as is set forth
      on
      the Investor’s signature page. Each Investor will make payment by wire transfer
      of immediately available funds in accordance with the Company’s written wire
      instructions. At Closing the Company will deliver to each Investor, free and
      clear of all restrictive and other legends (except as expressly provided
      herein), one or more certificates representing the number of Common Shares
      purchased by such Investor against delivery of the purchase price as described
      above. 

     

    
      
        
        

      

      
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    1.3 Closing
      Date.
      Subject
      to the satisfaction or waiver of the conditions set forth in Articles VI and
      VII
      hereof, the closing of the sale and purchase of the Common Shares (the
“Closing”) will take place at 8:00 a.m., Houston time, on or prior to December
      10, 2007 as identified by one day prior notice from the Company, or at another
      date or time agreed upon by the parties to this Agreement (the “Closing Date”).
      The Closing will be held at the offices of the Company located
      at 10930
      W.
      Sam Houston Parkway, N., Suite 200, Houston, Texas 77064, or at such other
      place
      as the parties agree.

     

    ARTICLE
      II

    REPRESENTATIONS
      AND WARRANTIES OF INVESTORS

     

    Each
      Investor represents and warrants to the Company, severally and solely with
      respect to itself and its purchase hereunder and not with respect to any other
      Investor, that:

     

    2.1 Investment
      Purpose.
      The
      Investor is purchasing the Common Shares for its own account and not with a
      present view toward the public sale or distribution thereof, except pursuant
      to
      sales registered or exempted from registration under the Securities Act;
      provided, however, that by making the representations herein, such Investor
      does
      not agree to hold any of the Common Shares for any minimum or other specific
      term and reserves the right to dispose of the Common Shares at any time in
      accordance with or pursuant to a registration statement or an exemption from
      the
      registration requirements of the Securities Act. The Investor is not purchasing
      the Common Shares with a view toward making a tender or exchange offer for
      other
      shares of outstanding Common Stock, and has no present intention of acquiring
      a
      majority of the outstanding shares of Common Stock of the Company.

     

    2.2 Accredited
      Investor Status.
      The
      Investor is an “accredited investor” as defined in Rule 501(a) of Regulation D
      in that, if a trust, it has total assets in excess of $5,000,000 and was not
      formed for the specific purpose of acquiring the Common Shares. The person
      directing the purchase of the Common Shares for the Investor has experience
      as
      an investor in securities representing an investment decision like that involved
      in the purchase of the Common Shares and acknowledges that he has the knowledge,
      sophistication, and experience in financial and business matters as to be
      capable of evaluating the merits and risks of an investment in the Common Shares
      and that the Investor has the ability to bear the economic risks of an
      investment in the Common Shares. 

     

    2.3 Reliance
      on Exemptions.
      The
      Investor understands that the Common Shares are being offered and sold to it
      in
      reliance upon specific exemptions from the registration requirements of United
      States federal and state securities laws and that the Company is relying upon
      the truth and accuracy of, and the Investor’s compliance with, the
      representations, warranties, agreements, acknowledgments and understandings
      of
      the Investor set forth herein in order to determine the availability of such
      exemptions and the eligibility of the Investor to acquire the Common
      Shares.

     

    
      
        
        

      

      
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    2.4 Information.
      The
      Investor and its advisors, if any, have reviewed the SEC Documents and
have
      been
      furnished with all materials relating to the business, finances, and operations
      of the Company, and materials relating to the offer and sale of the Common
      Shares, that have been requested by the Investor or its advisors, if any. The
      Investor and its advisors, if any, have been afforded the opportunity to ask
      questions of the Company. Neither such inquiries nor any other due diligence
      investigation conducted by Investor or any of its advisors or representatives
      modify, amend, or affect the Investor’s right to rely on the Company’s
      representations and warranties contained in Article III below. The Investor
      acknowledges and understands that its investment in the Common Shares involves
      a
      significant degree of risk, including the risks reflected in the SEC Documents,
      and that the market price of the Common Stock has been and continues to be
      volatile and that no representation is being made as to the future value of
      the
      Common Stock.

     

    2.5 Governmental
      Review.
      The
      Investor understands that no United States federal or state agency or any other
      government or governmental agency has passed upon or made any recommendation
      or
      endorsement of the Common Shares or an investment therein.

     

    2.6 Transfer
      or Resale.
      The
      Investor understands that:

     

    (a) except
      as
      provided in the Registration Rights Agreement, the Common Shares have not been
      registered under the Securities Act or any applicable state securities laws
      and,
      consequently, the Investor may have to bear the risk of owning the Common Shares
      for an indefinite period of time because the Common Shares may not be
      transferred unless (i) the resale of the Common Shares is registered pursuant
      to
      an effective registration statement under the Securities Act; (ii) the Investor
      has delivered to the Company an opinion of counsel (in form, substance and
      scope
      reasonably satisfactory to the Company) to the effect that the Common Shares
      to
      be sold or transferred may be sold or transferred pursuant to an exemption
      from
      such registration; (iii) the Common Shares are sold or transferred pursuant
      to
      Rule 144; or (iv) the Common Shares are sold or transferred to an affiliate
      (as
      defined in Rule 144) of the Investor; 

     

    (b) any
      sale
      of the Common Shares made in reliance on Rule 144 may be made only in accordance
      with the terms of Rule 144 and, if Rule 144 is not applicable, any resale of
      the
      Common Shares under circumstances in which the seller (or the person through
      whom the sale is made) may be deemed to be an underwriter (as that term is
      defined in the Securities Act) may require compliance with another exemption
      under the Securities Act or the rules and regulations of the SEC
      thereunder;

     

    (c) except
      as
      set forth in the Registration Rights Agreement, neither the Company nor any
      other person is under any obligation to register the Common Shares under the
      Securities Act or any state securities laws or to comply with the terms and
      conditions of any exemption thereunder; and 

     

    (d) notwithstanding
      anything in this Agreement to the contrary, the Company agrees to
      register
      any
      Common Shares issued to an Investor hereunder in the name of any partner of
      such
      Investor, and any such partner shall be deemed to be an Investor for all
      purposes of this Agreement and the Registration Rights Agreement, provided
      that
      any such partner agrees in writing to be subject to the terms of this Agreement
      and the Registration Rights Agreement to the same extent as if such partner
      were
      an original Investor hereunder and thereunder.

     

    
      
        
        

      

      
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    2.7 Legends.
      The
      Investor understands that until (a) the Common Shares may be sold by the
      Investor under Rule 144(k) or (b) such time as the resale of the Common Shares
      has been registered under the Securities Act as contemplated by the Registration
      Rights Agreement, the certificates representing the Common Shares will bear
      a
      restrictive legend in substantially the following form (and a stop-transfer
      order may be placed against transfer of the certificates for such Common
      Shares):

     

    THE
      SECURITIES (THE “SECURITIES”) EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
      THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY,
      MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY
      ITS
      ACQUISITION HEREOF, THE HOLDER AGREES THAT IT WILL NOT OFFER, RESELL, PLEDGE
      OR
      OTHERWISE TRANSFER (INDIVIDUALLY AND COLLECTIVELY, A “TRANSFER”) THE SECURITIES
      EVIDENCED HEREBY, EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
      THE SECURITIES ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
      SECURITIES ACT. IF THE PROPOSED TRANSFER IS TO BE MADE PURSUANT TO AN EXEMPTION
      FROM REGISTRATION UNDER THE SECURITIES ACT, THE HOLDER MUST, PRIOR TO SUCH
      TRANSFER, FURNISH TO THE COMPANY AND THE TRANSFER AGENT SUCH CERTIFICATIONS,
      LEGAL OPINIONS OR OTHER INFORMATION AS THEY MAY REASONABLY REQUIRE TO CONFIRM
      THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
      TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
      ACT
      OR ANY STATE OR FOREIGN SECURITIES LAW. NOTWITHSTANDING THE FOREGOING, THE
      SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR
      OTHER
      LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES.

     

    The
      legend set forth above will be removed and the Company will issue a certificate
      without the legend to the holder of any certificate upon which it is stamped,
      in
      accordance with the terms of Article V hereof.

     

    2.8 Authorization;
      Enforcement.
      This
      Agreement and the Registration Rights Agreement have been duly and validly
      authorized, executed, and delivered on behalf of the Investor and are valid
      and
      binding agreements of the Investor, enforceable in accordance with their terms,
      subject to the effect of any applicable bankruptcy, insolvency, reorganization,
      moratorium, or similar laws affecting the rights of creditors generally and
      the
      application of general principles of equity.

     

    
      
        
        

      

      
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    2.9 Residency.
      The
      Investor is a resident, or was organized under the laws, of the jurisdiction
      set
      forth immediately below such Investor’s name on the signature pages
      hereto.

     

    2.10 No
      Intent to Effect a Change of Control.
      The
      Investor has no present intent to change or influence the control of the Company
      within the meaning of Rule 13d-1 of the Exchange Act.

     

    2.11 No
      Hedging.
      The
      Investor has not established any hedge or other position in the Common Stock
      that is outstanding on the Closing Date which is designed to or could reasonably
      be expected to lead to or result in any sale of the Common Shares. For purposes
      hereof, a “hedge or other position” would include effecting any short sale or
      having in effect any short position or any purchase, sale or grant of any put
      option, call option or prepaid forward contract with respect to the Common
      Stock
      of the Company or with respect to any security (other than a broad-based market
      basket or index) that includes, relates to or derives any significant part
      of
      its value from the Common Stock. 

     

    ARTICLE
      III

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

     

    The
      Company and each of its Subsidiaries, as applicable, represents and warrants
      to
      the Investors that:

     

    3.1 Organization
      and Qualification.
      The
      Company and its Subsidiaries are duly incorporated, validly existing, and in
      good standing under the laws of the jurisdictions in which they are
      incorporated, with full power and authority (corporate and other) to own, lease,
      use and operate their properties, if any, and to carry on their businesses
      as
      and where now owned, leased, used, operated and conducted. The Company and
      its
      Subsidiaries are
      duly
      qualified to do business and
      are in
      good standing in every jurisdiction in which the nature of the business
      conducted by them makes such qualification necessary, except where the failure
      to be so qualified or in good standing would not have a Material Adverse Effect.
      

     

    3.2 Authorization;
      Enforcement.
      (a) The
      Company has all requisite corporate power and authority to enter into and to
      perform its obligations under this Agreement and the Registration Rights
      Agreement, to consummate the transactions contemplated hereby and thereby and
      to
      issue the Common Shares in accordance with the terms hereof and thereof; (b)
      the
      execution, delivery and performance of this Agreement and the Registration
      Rights Agreement by the Company and the consummation by it of the transactions
      contemplated hereby and thereby (including without limitation the issuance
      of
      the Common Shares) have been duly authorized by the Company’s Board of Directors
      and no further consent or authorization of the Company, its Board or Directors,
      or its stockholders is required; (c) this Agreement and the Registration Rights
      Agreement have been duly executed by the Company; and (d) each of this Agreement
      and the Registration Rights Agreement constitutes a legal, valid, and binding
      obligation of the Company enforceable against the Company in accordance with
      its
      respective terms, except as may be limited by any applicable bankruptcy,
      insolvency, reorganization, moratorium, or similar laws affecting the rights
      of
      creditors generally and the application of general principles of
      equity.

     

    
      
        
        

      

      
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    3.3 Capitalization.
      As of
      the date prior to the Closing Date, the authorized capital stock of the Company
      consists of 40,000,000 shares of common stock and 5,000,000 shares of preferred
      stock, $.01 par value per share, which may be divided into and issued in one
      or
      more series upon the creation thereof by the Board of Directors of the Company
      (the “Board”). As of the date of this Agreement, (i) 12,857,031 shares of Common
      Stock are issued and outstanding, (ii) 2,176,632 shares of Common Stock have
      been authorized and reserved for issuance under Stock Plans; (iii) no shares
      of
      Common Stock are held by the Company in its treasury, (iv) 4,000,000 shares
      of
      preferred stock have been designated as Series A Preferred Stock (the “Preferred
      Stock”) and 2,889,076 shares are issued and outstanding. All of such outstanding
      shares of capital stock have been duly authorized and are validly issued, fully
      paid, and nonassessable and issued in compliance with all applicable state
      and
      federal laws concerning the issuance of securities. Except as set forth in
      the
      Rights Agreement dated as of August 9, 2004 (the “Rights Agreement”) by and
      between the Company and American Stock Transfer & Trust Company, as the
      rights agent, no shares of capital stock of the Company, including the Common
      Shares, are subject to preemptive rights or any other similar rights of the
      other stockholders of the Company or any liens or encumbrances imposed through
      the actions or failure to act of the Company. Except as set forth in the Rights
      Agreement and pursuant to the terms of the Preferred Stock, there are no
      outstanding options, warrants, scrip, rights to subscribe for, puts, calls,
      rights of first refusal, agreements, understandings, claims, or other
      commitments or rights of any character whatsoever relating to, or securities
      or
      rights convertible into, exercisable for, or exchangeable for any shares of
      capital stock of the Company, or arrangements by which the Company is or may
      become bound to issue additional shares of capital stock of the Company. The
      Company’s Articles of Incorporation and the Company’s By-laws, each as in effect
      on the date hereof, filed as exhibits to the Company’s SEC Documents, are true
      and correct copies of each such document.

     

    3.4 Issuance
      of Common Shares.
      The
      Common Shares have been duly authorized and, upon issuance in accordance with
      the terms of this Agreement, will be validly issued, fully paid, and
      non-assessable, free from all taxes, liens, claims, encumbrances, and charges
      with respect to the issuance thereof, will not be subject to preemptive rights
      or other similar rights of stockholders of the Company, and will not impose
      personal liability on the holders thereof. 

     

    3.5 Outstanding
      Debt.
      The
      Company has no Indebtedness for Borrowed Money (as hereinafter defined) except
      as otherwise set forth in the SEC Documents. The Company is not in default
      in
      the payment of the principal of or interest or premium on any such Indebtedness
      for Borrowed Money, and no event has occurred or is continuing under the
      provisions of any instrument, document or agreement evidencing or relating
      to
      any such Indebtedness for Borrowed Money which with the lapse of time or the
      giving of notice, or both, would constitute an event of default
      thereunder.

     

    3.6 No
      Conflicts; No Violation.
      

     

    (a) The
      execution, delivery, and performance of this Agreement and the Registration
      Rights Agreement by the Company, and the consummation by the Company of the
      transactions contemplated hereby and thereby (including, without limitation,
      the
      issuance of the Common Shares) do not and will not (i) conflict with or result
      in a violation of any provision of the Articles of Incorporation or By-laws,
      (ii) violate or conflict with, or result in a breach of any provision of, or
      constitute a default (or an event which with notice or lapse of time or both
      could become a default) under, or give to others any rights of termination,
      amendment (including without limitation, the triggering of any anti-dilution
      provision), acceleration or cancellation of, any agreement, indenture, patent,
      patent license, or instrument to which the Company is a party, or (iii) result
      in a violation of any law, rule, regulation, order, judgment or decree
      (including U.S. federal and state securities laws and regulations and
      regulations of any self-regulatory organizations to which the Company or its
      securities are subject) applicable to the Company or by which any property
      or
      asset of the Company is bound or affected (except for such conflicts, breaches,
      defaults, terminations, amendments, accelerations, cancellations and violations
      as would not, individually or in the aggregate, have a Material Adverse Effect).
      

     

    
      
        
        

      

      
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    (b) The
      Company is not in violation of its Articles of Incorporation, By-laws or other
      organizational documents and the Company is not in default (and no event has
      occurred which with notice or lapse of time or both could put the Company in
      default) under, and the Company has not taken any action or failed to take
      any
      action that (and no event has occurred which, without notice or lapse of time
      or
      both) would give to others any rights of termination, amendment, acceleration
      or
      cancellation of, any agreement, indenture or instrument to which the Company
      is
      a party or by which any property or assets of the Company is bound or affected,
      except for possible defaults as would not, individually or in the aggregate,
      have a Material Adverse Effect. 

     

    (c) The
      Company is not conducting, and, so long as any Investor owns any of the Common
      Shares, will not conduct, its business in violation of any law, ordinance or
      regulation of any governmental entity, the failure to comply with which would,
      individually or in the aggregate, have a Material Adverse Effect.

     

    (d) Except
      as
      specifically contemplated by this Agreement and as required under the Securities
      Act and any applicable state securities laws or any listing agreement with
      any
      securities exchange or automated quotation system, the Company is not required
      to obtain any consent, authorization or order of, or make any filing or
      registration with, any court or governmental agency or any regulatory or self
      regulatory agency in order for it to execute, deliver or perform any of its
      obligations under this Agreement or the Registration Rights Agreement, in each
      case in accordance with the terms hereof or thereof, or to issue and sell the
      Common Shares in accordance with the terms hereof.

     

    3.7 SEC
      Documents, Financial Statements.
      Since
      September 30, 2007, the Company has filed all reports, schedules, forms,
      statements, and other documents required to be filed by it with the SEC pursuant
      to the reporting requirements of the Exchange Act (all of the foregoing filed
      prior to the date hereof and all exhibits included therein and financial
      statements and schedules thereto and documents (other than exhibits)
      incorporated by reference therein, being hereinafter referred to herein as
      the
“SEC Documents”). As of their respective dates, the SEC Documents complied in
      all material respects with the requirements of the Exchange Act or the
      Securities Act, as the case may be, and the rules and regulations of the SEC
      promulgated thereunder applicable to the SEC Documents, and none of the SEC
      Documents, at the time they were filed with the SEC, contained any untrue
      statement of a material fact or omitted to state a 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. As of their
      respective dates, the financial statements of the Company included in the SEC
      Documents complied as to form in all material respects with applicable
      accounting requirements and the published rules and regulations of the SEC
      with
      respect thereto. Such financial statements are complete and correct in all
      material respects and have been prepared in accordance with U.S. generally
      accepted accounting principles, consistently applied, during the periods
      involved (except (i) as may be otherwise indicated in such financial statements
      or the notes thereto, or (ii) in the case of unaudited interim statements,
      to
      the extent they may not include footnotes or may be condensed or summary
      statements) and fairly present in all material respects the financial position
      of the Company as of the dates thereof and the results of its operations and
      cash flows for the periods then ended (subject, in the case of unaudited
      statements, to normal year-end audit adjustments). Except as set forth in the
      financial statements included in the SEC Documents, to the Company’s knowledge
      the Company has no liabilities, contingent or otherwise, other than liabilities
      incurred in the ordinary course of business subsequent to September 30, 2007,
      and liabilities of the type not required under generally accepted accounting
      principles to be reflected in such financial statements.

     

    
      
        
        

      

      
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    3.8  Absence
      of Certain Changes.
      Except
      as disclosed in the SEC Documents since September 30, 2007, there has not been,
      to the Company’s knowledge:

     

    (a) Any
      change in the assets, liabilities, financial condition, prospects, or
      operations of the Company from that reflected in the SEC Documents, other than
      changes in the ordinary course of business, none of which individually or in
      the
      aggregate has had or is reasonably expected to have a Material Adverse Effect
      or, to the knowledge of the Company, any development that could reasonably
      be
      expected to have such a Material Adverse Effect;

     

    (b) Any
      resignation or termination of any officer, key employee, or group of employees
      of the Company; and the Company, to the best of its knowledge, does not know
      of
      the impending resignation or termination of employment of any such officer,
      key
      employee, or group of employees;

     

    (c) Any
      material change, except in the ordinary course of business, in the contingent
      obligations of the Company by way of guaranty, endorsement, indemnity, warranty,
      or otherwise;

     

    (d) Any
      damage, destruction, or loss, whether or not covered by insurance, materially
      and adversely affecting the properties, business or prospects or financial
      condition of the Company;

     

    (e) Any
      waiver by the Company of a valuable right or of a material debt owed to
      it;

     

    (f) Any
      direct or indirect loans made by the Company to any stockholder, employee,
      officer, or director of the Company, other than advances made in the ordinary
      course of business;

     

    
      
        
        

      

      
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    (g) Any
      material change in any compensation arrangement or agreement with any employee,
      officer, director, or stockholder;

     

    (h) Any
      declaration or payment of any dividend or other distribution of the assets
      of
      the Company;

     

    (i) Any
      labor
      organization activity related to the Company;

     

    (j) Any
      debt,
      obligation, or liability incurred, assumed, or guaranteed by the Company, except
      those for immaterial amounts and for current liabilities incurred in the
      ordinary course of business;

     

    (k) Any
      sale,
      assignment, or transfer of any patents, trademarks, copyrights, trade secrets,
      or other intangible assets;

     

    (l) Any
      change in any material agreement to which the Company is a party or by which
      it
      is bound which materially and adversely affects the business, assets,
      liabilities, financial condition, operations, or prospects of the
      Company;

     

    (m) Any
      other
      event or condition of any character that, either individually or cumulatively,
      has materially and adversely affected the business, assets, liabilities,
      financial condition, prospects, or operations of the Company; or

     

    (n) Any
      arrangement or commitment by the Company to do any of the acts described in
      subsection (a) through (m) above.

     

    3.9 Absence
      of Litigation.
      There
      is no action, suit, claim, proceeding, inquiry, or investigation before or
      by
      any court, public board, government agency, self-regulatory organization, or
      body pending or, to the knowledge of the Company, threatened against or
      affecting the Company or any of its officers or directors acting as such that
      could, individually or in the aggregate, have a Material Adverse Effect. The
      Company is not aware of any facts or circumstances which would reasonably be
      expected to give rise to any such action or proceeding. The foregoing includes,
      without limitation, actions pending or, to the Company’s knowledge, threatened
      or any basis therefor known by the Company involving the prior employment of
      any
      of the Company’s employees, their use in connection with the Company’s business
      of any information or techniques allegedly proprietary to any of their former
      employers, or their obligations under any agreements with prior employers.
      

     

    3.10 Intellectual
      Property Rights.
      

     

    (a) The
      Company owns or possesses the licenses or rights to use all patents, patent
      applications, patent rights, inventions, know-how, trade secrets, trademarks,
      trademark applications, service marks, service names, trade names, and
      copyrights necessary to enable it to conduct its business as now operated (the
      “Intellectual Property”). To the Company’s knowledge, no product or service
      marketed or sold (or proposed to be marketed or sold) by the Company violates
      or
      will violate any license or infringe any intellectual property rights of any
      other party. 

     

    
      
        
        

      

      
        9

        
          

        

      

      
        
        

      

    

     

    Confidential
      Treatment Requested by Internet America, Inc., Exhibit 4.1 to the 8-K filed
      on
      December 11, 2007.

     

    (b) There
      is
      no claim or action pending and the Company has not received any communications
      alleging that the Company has violated any of the patents, trademarks, service
      marks, trade names, copyrights, or trade secrets, or other proprietary rights
      of
      any other person or entity or that challenges the right of the Company with
      respect to any Intellectual Property. 

     

    (c) The
      Company has obtained and posseses valid licenses to use all of the software
      programs present on the computers and other software-enabled electronic devices
      that it owns or leases or that it has otherwise provided to its employees for
      their use in connection with the Company’s business.

     

    (d) The
      Company is not aware that any of its employees is obligated under any contract
      (including licenses, covenants, or commitments of any nature) or other
      agreement, or subject to any judgment, decree or order of any court or
      administrative agency, that would interfere with their duties to the Company.
      No
      former or current employee, officer, or consultant of the Company has excluded
      works or inventions made prior to his or her employment with the Company from
      his or her assignment of inventions pursuant to such employee, officer or
      consultant’s non-disclosure and invention agreement. To the Company’s
      knowledge, it has or will not need to utilize any inventions, trade secrets,
      or
      proprietary information of any of its employees (or persons it currently intends
      to hire) made prior to their employment by the Company, except for inventions,
      trade secrets or proprietary information that have been assigned to the Company.
      Each employee has assigned to the Company all intellectual property rights
      he or
      she owns that are related to the Company’s business as now
      conducted.

     

    (e) Neither
      the execution, delivery, nor performance of this Agreement, nor the carrying
      on
      of the Company’s business by the employees of the Company, will, to the
      Company’s knowledge, conflict with or result in a breach of the terms,
      conditions or provisions of, or constitute a default under, any contract,
      covenant, or instrument under which any employee is now obligated.

     

    3.11 Contracts.
      All
      material contracts to which the Company or its Subsidiaires are party are valid,
      binding and enforceable and in full force and effect, except where such failures
      to be so valid, binding and enforceable and in full force and effect would
      not,
      individually or in the aggregate, have a Material Adverse Effect,
      [redacted]. The Company is not subject to any charter, corporate, or other
      legal
      restriction, or any judgment, decree, order, rule, or regulation which in the
      reasonable judgment of the Company’s officers has or is expected in the future,
      individually or in the aggregate, to have a Material Adverse Effect. The Company
      is not a party to any contract or agreement which in the reasonable judgment
      of
      the Company’s officers has or is expected to have a Material Adverse
      Effect.

     

    
      
        
        

      

      
        10

        
          

        

      

      
        
        

      

    

     

    3.12 Tax
      Status.
      The
      Company has made or filed all federal, state, and foreign income and all other
      tax returns, reports, and declarations required by any jurisdiction to which
      it
      is subject (unless and only to the extent that the Company has set aside on
      its
      books provisions reasonably adequate for the payment of all unpaid and
      unreported taxes) and has paid all taxes and other governmental assessments
      and
      charges that are material in amount, shown or determined to be due on such
      returns, reports, and declarations, except those being contested in good faith,
      and has set aside on its books provisions reasonably adequate for the payment
      of
      all taxes for periods subsequent to the periods to which such returns, reports,
      or declarations apply. There are no unpaid taxes in any material amount claimed
      to be due by the taxing authority of any jurisdiction, and the Company knows
      of
      no basis for any such claim. The Company has not executed a waiver with respect
      to the statute of limitations relating to the assessment or collection of any
      foreign, federal, state, or local tax. None of the Company’s tax returns is
      presently being audited by any taxing authority, except that the Texas
      Comptroller of the Currency is conducting a Sales and Use Tax Audit of the
      Company for the period from January 2004 through September 2007.

     

    3.13 Certain
      Transactions.
      Except
      as disclosed in the SEC Documents and except for arm’s-length transactions
      pursuant to which the Company makes payments in the ordinary course of business
      upon terms no less favorable than the Company could obtain from third parties,
      and other than the grant of stock options, employment agreements, or the
      ownership of other securities and rights disclosed in filings under the Exchange
      Act, none of the officers, directors, or employees of the Company is presently
      a
      party to any transaction with the Company (other than for services as employees,
      officers and directors), including any contract, agreement, or other arrangement
      providing for the furnishing of services to or by, providing for rental of
      real
      or personal property to or from, or otherwise requiring payments to or from
      any
      officer, director, or employee or, to the knowledge of the Company, any
      corporation, partnership, trust or other entity in which any officer, director,
      or employee has a substantial interest or is an officer, director, trustee
      or
      partner.

     

    3.14 Environmental
      Laws.
      The
      Company (i) is in compliance with all applicable foreign federal, state, and
      local laws and regulations relating to the protection of human health and
      safety, the environment, or hazardous or toxic substances or wastes, pollutants
      or contaminants (“Environmental Laws”), (ii) has received all permits, licenses,
      or other approvals required of them under applicable Environmental Laws to
      conduct its business and (iii) is in compliance with all terms and conditions
      of
      any such permit, license or approval where, in each of the three foregoing
      clauses, the failure to so comply would have, individually or in the aggregate,
      a Material Adverse Effect. 

     

    3.15 Disclosure.
      The
      Company has provided each Investor with all information requested by the
      Investor in connection with its decision to purchase the Common Shares. No
      information relating to or concerning the Company set forth in this Agreement
      or
      provided to the Investors pursuant to Section 2.4 hereof or otherwise provided
      in connection with the transactions contemplated hereby, including without
      limitation any oral or written statements made or given by the officers of
      the
      Company, or any of the Company’s agents, to any Investor, or any Investor’s
      agent, taken as a whole, contained any untrue statement of a material fact
      nor
      omitted to state any material fact necessary in order to make the statements
      made herein or therein, in light of the circumstances under which they were
      made, not misleading. No event or circumstance has occurred or information
      exists with respect to the Company or its business, properties, operations,
      or
      financial conditions, which, under applicable law, rule, or regulation, requires
      public disclosure or announcement by the Company but which has not been so
      publicly announced or disclosed (assuming for this purpose that the Company’s
      reports filed under the Exchange Act are being incorporated into an effective
      registration statement filed by the Company under the Securities Act). To the
      Company’s knowledge, there are no facts which (individually or in the aggregate)
      would have a Material Adverse
      Effect
      that have not been set forth in the Agreement, the exhibits hereto, or in other
      documents delivered to the Investors, or their attorneys or agents in connection
      herewith other than any adverse change, event, or effect that is directly
      attributable to conditions affecting the United States economy generally unless
      such conditions adversely affect the Company in a materially disproportionate
      manner, and any adverse change, event, or effect that is directly attributable
      to conditions affecting the Company’s industry generally, unless such conditions
      adversely affect the Company in a materially disproportionate
      manner.

     

    
      
        
        

      

      
        11

        
          

        

      

      
        
        

      

    

     

    3.16 Acknowledgment
      Regarding Investors’ Purchase of Common Shares.
      The
      Company acknowledges and agrees that each Investor is acting solely in the
      capacity of an arm’s length purchaser with respect to this Agreement and the
      transactions contemplated hereby. The Company further acknowledges that no
      Investor is acting as a financial advisor or fiduciary of the Company (or in
      any
      similar capacity) with respect to this Agreement and the transactions
      contemplated hereby and any statement made by any Investor or any of their
      respective representatives or agents in connection with this Agreement and
      the
      transactions contemplated hereby is not advice or a recommendation and is merely
      incidental to such Investor’s purchase of the Common Shares and has not been
      relied on by the Company in any way. The Company further represents to each
      Investor that the Company’s decision to enter into this Agreement has been based
      solely on an independent evaluation by the Company and its
      representatives.

     

    3.17 No
      Integrated Offering.
      Neither
      the Company, nor any of its affiliates, nor any person acting on its or their
      behalf, has directly or indirectly made any offers or sales in any security
      or
      solicited any offers to buy any security under circumstances that would require
      registration under the Securities Act of the issuance of the Common Shares
      to
      the Investors. 

     

    3.18 No
      Brokers.
      The
      Company has taken no action which would give rise to any claim by any person
      for
      brokerage commissions, finder’s fees or similar payments relating to this
      Agreement or the transactions contemplated hereby.

     

    3.19 Permits;
      Compliance.
      The
      Company is in possession of all franchises, grants, authorizations, licenses,
      permits, easements, variances, exemptions, consents, certificates, approvals
      and
      orders necessary to own, lease and operate its properties and to carry on its
      business as it is now being conducted, except those the failure of which to
      possess would not, individually or in the aggregate, have a Material Adverse
      Effect (collectively, the “Company Permits”), and there is no action pending or,
      to the knowledge of the Company, threatened regarding suspension or cancellation
      of any of the Company Permits. The Company is not in conflict with, or in
      default or violation of, any of the Company Permits, except for any such
      conflicts, defaults or violations which, individually or in the aggregate,
      would
      not reasonably be expected to have a Material Adverse Effect. Since September
      30, 2007, the Company has not received any notification with respect to possible
      conflicts, defaults or violations of applicable laws, except for notices
      relating to possible conflicts, defaults or violations, which conflicts,
      defaults or violations would not have a Material Adverse Effect. 

     

    
      
        
        

      

      
        12

        
          

        

      

      
        
        

      

    

     

    3.20 Title
      to Property.
      The
      Company has good and marketable title in fee simple to all real property and
      good and marketable title to all personal property owned by it which is material
      to the business of the Company. Any real property and facilities held under
      lease by the Company are held by it under valid and enforceable leases with
      such
      exceptions as would not have a Material Adverse Effect. 

     

    3.21 Insurance.
      The
      Company is insured by insurers of recognized financial responsibility against
      such losses and risks and in such amounts as is prudent and customary in the
      businesses in which the Company is engaged. The Company has no reason to believe
      that it will not be able to renew its existing insurance coverage as and when
      such coverage expires or to obtain similar coverage from similar insurers as
      may
      be necessary to continue its business at a cost that would not have a Material
      Adverse Effect.

     

    3.22 Sarbanes-Oxley;
      Internal
      Accounting Controls.
      The
      Company is in material compliance with all provisions of the Sarbanes-Oxley
      Act
      of 2002 that are applicable to it as of the Closing Date.
      The
      Company maintains a system of internal accounting controls sufficient, in the
      judgment of the Company’s board of directors, to provide reasonable assurance
      that (a) transactions are executed in accordance with management’s general or
      specific authorizations, (b) transactions are recorded as necessary to permit
      preparation of financial statements in conformity with generally accepted
      accounting principles and to maintain asset accountability, (c) access to assets
      is permitted only in accordance with management’s general or specific
      authorization, (d) the recorded accountability for assets is compared with
      the
      existing assets at reasonable intervals and appropriate action is taken with
      respect to any differences, and (e) financial reporting and the preparation
      of
      financial statements for external purposes in accordance with U.S. generally
      accepted accounting principles are reliable. The
      Company has established disclosure controls and procedures (as defined in
      Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such
      disclosure controls and procedures to ensure that material information relating
      to the Company, including its Subsidiaries, is made known to the certifying
      officers by others within those entities, particularly during the period in
      which the Company’s most recently filed periodic report under the Exchange Act,
      as the case may be, is being prepared. The Company’s certifying officers have
      evaluated the effectiveness of the Company’s controls and procedures as of the
      date prior to the filing date of the most recently filed periodic report under
      the Exchange Act (such date, the “Evaluation Date”). The Company presented in
      its most recently filed periodic report under the Exchange Act the conclusions
      of the certifying officers about the effectiveness of the disclosure controls
      and procedures based on their evaluations as of the Evaluation Date. Since
      the
      Evaluation Date, there have been no significant changes in the Company’s
      internal controls (as such term is defined in Item 307(b) of Regulation S-K
      under the Exchange Act) or, to the knowledge of the Company, in other factors
      that would materially affect the Company’s internal controls.

     

    
      
        
        

      

      
        13

        
          

        

      

      
        
        

      

    

     

    3.23 Employment
      Matters.
      The
      Company is in compliance with all federal, state, local and foreign laws and
      regulations respecting employment and employment practices, terms and conditions
      of employment and wages and hours except where failure to be in compliance
      would
      not have a Material Adverse Effect. There are no pending investigations
      involving the Company by the U.S. Department of Labor or any other governmental
      agency responsible for the enforcement of such federal, state, local or foreign
      laws and regulations. There is no unfair labor practice charge or complaint
      against the Company pending before the National Labor Relations Board or any
      strike, picketing, boycott, dispute, slowdown or stoppage pending or threatened
      against or involving the Company. No representation question exists respecting
      the employees of the Company, and no collective bargaining agreement or
      modification thereof is currently being negotiated by the Company. No grievance
      or arbitration proceeding is currently pending under any expired or existing
      collective bargaining agreements of the Company. No material labor dispute
      with
      the employees of the Company exists or, to the knowledge of the Company, is
      imminent.

     

    3.24  Obligations
      of Management.
      Each
      officer and key employee of the Company is currently devoting substantially
      all
      of his or her business time to the conduct of the business of the Company.
      The
      Company is not aware that any officer or key employee of the Company is planning
      to work less than full time at the Company in the future. No officer or key
      employee is currently working or, to the Company’s knowledge, plans to work for
      a competitive enterprise, whether or not such officer or key employee is or
      will
      be compensated by such enterprise.

     

    3.25 Registration
      Rights.
      Except
      as
      required pursuant to the Registration Rights Agreement and similar agreements
      dated May 4, 2005 and October 17, 2007, the Company is presently not under
      any
      obligation, and has not granted any rights, to register any of the Company’s
      presently outstanding securities or any of its securities that may hereafter
      be
      issued.

     

    3.26 Investment
      Company Status.
      The
      Company is not and upon consummation of the sale of the Common Shares will
      not
      be an “investment company,” a company controlled by an “investment company” or
      an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
      1940, as amended.

     

    3.27 No
      General Solicitation.
      Neither
      the Company nor any distributor participating on the Company’s behalf in the
      transactions contemplated hereby (if any) nor any person acting for the Company,
      or any such distributor, has conducted any “general solicitation,” as such term
      is defined in Regulation D, with respect to any of the Common Shares being
      offered hereby. Assuming the accuracy of the representations and warranties
      of
      each Investor contained in Section 2.2 hereof, the offer, sale, and issuance
      of
      the Common Shares will be exempt from the registration requirements of the
      Securities Act, and will have been registered or qualified (or are exempt from
      registration and qualification) under the registration, permit, or qualification
      requirements of all applicable state securities laws.

     

    3.28 Application
      of Takeover Protections.
      The
      Company and its board of directors have taken all necessary action, if any,
      in
      order to render inapplicable any control share acquisition, business combination
      or other similar anti-takeover provision under the laws of the state of its
      incorporation,
      the
      Company’s organizational documents and any other agreement to which the Company
      is bound,
      which is
      or could become applicable to the Investors as a result of the transactions
      contemplated by this Agreement, including, without limitation, the Company’s
      issuance of the Common Shares and the Investors’ ownership of the Common
      Shares.

     

    
      
        
        

      

      
        14

        
          

        

      

      
        
        

      

    

     

    3.29 Net
      Operating Loss Carryforward. To
      the
      best of the Company’s knowledge after performing initial research and
      calculating beneficial ownership of the Company’s securities by persons solely
      on the basis of their Exchange Act filings, (i) the Company and each of its
      Subsidiaries have not experienced, and will not experience after the issuance
      of
      stock pursuant to this Agreement, an “ownership change” within the meaning of
      Section 382 of the Internal Revenue Code (an “Ownership Change”); (ii) the
      ability of the Company and each of its Subsidiaries to use net operating losses
      realized in the current taxable year, net operating loss carryforwards, tax
      credits and other tax attributes is not, and will not after the issuance of
      stock pursuant to this Agreement, be limited by Section 382 or otherwise for
      Federal income tax purposes; (iii) the Company does not believe that it (or
      any
      of its Subsidiaries) is likely to experience an Ownership Change based upon
      the
      stock issuance pursuant to this Agreement and all other contemplated
      transactions, including, for the avoidance of doubt, contemplated transactions
      that are not yet subject to a legally binding agreement to which the Company
      (or
      any of its Subsidiaries) may be a party, including but not limited to any
      contemplated transactions involving the issuance by the Company (or any of
      its
      Subsidiaries) of its stock, options or other securities.

     

    ARTICLE
      IV

    COVENANTS

     

    4.1 Best
      Efforts.
      Each
      party will use its best efforts to satisfy in a timely fashion each of the
      conditions to be satisfied by it under Articles VI and VII of this
      Agreement.

     

    4.2 Blue
      Sky Laws.
      The
      Company will, on or before the Closing Date, take such action as it reasonably
      determines to be necessary to qualify the Common Shares for sale to the
      Investors under this Agreement under applicable securities (or “blue sky”) laws
      of the states of the United States (or to obtain an exemption from such
      qualification), and will provide evidence of any such action so taken to the
      Investors on or prior to the date of the Closing. The Company will file with
      the
      SEC a Current Report on Form 8-K disclosing this Agreement and the transactions
      contemplated hereby within four business days after the Closing Date and will
      make any required notice filings with state securities law authorities on a
      timely basis.

     

    4.3 Reporting
      Status.
      The
      Company’s Common Stock is registered under Section 12 of the Exchange Act.
      Throughout the Registration Period (as defined in the Registration Rights
      Agreement), the Company will use its best efforts to timely file all reports,
      schedules, forms, statements and other documents required to be filed by it
      with
      the SEC under the reporting requirements of the Exchange Act, and the Company
      will not terminate its status as an issuer required to file reports under the
      Exchange Act even if the Exchange Act or the rules and regulations thereunder
      would permit such termination. 

     

    
      
        
        

      

      
        15

        
          

        

      

      
        
        

      

    

     

    4.4 Use
      of
      Proceeds.
      The
      Company will use the proceeds from the sale of the Common Shares to effect
      acquisitions, to expand the Company’s wireless infrastructure and for general
      working capital.

     

    4.5 Financial
      Statements.
      The
      financial statements of the Company will be prepared in accordance with United
      States generally accepted accounting principles, consistently applied, and
      will
      fairly present in all material respects the consolidated financial position
      of
      the Company and results of its operations and cash flows for the periods then
      ended (subject, in the case of unaudited statements, to normal year-end audit
      adjustments). 

     

    4.6 .
      Solvency;
      Corporate Existence; Compliance with Law.
      The
      Company (both before and after giving effect to the transactions contemplated
      by
      this Agreement) is solvent (i.e., its assets have a fair market value in excess
      of the amount required to pay its probable liabilities on its existing debts
      as
      they become absolute and matured) and currently the Company has no information
      that would lead it to reasonably conclude that the Company would not have,
      nor
      does it intend to take any action that would impair, the ability to pay its
      debts from time to time incurred in connection therewith as such debts mature.
      The Company will conduct its business in compliance with all applicable laws,
      rules and regulations of the jurisdictions in which it is conducting business,
      including, without limitation, all applicable local, state and federal
      environmental laws and regulations, where the failure to comply with such would
      have a Material Adverse Effect.

     

    4.7 Insurance.
      The
      Company will maintain liability, casualty, and other insurance (subject to
      customary deductions and retentions) with responsible insurance companies
      against such risk of the types and in the amounts customarily maintained by
      companies of comparable size and in lines of business of the
      Company.

     

    4.8 Sales
      by Investors.
      Each
      Investor will sell any Common Shares sold by it in compliance with applicable
      prospectus delivery requirements, if any, or otherwise in compliance with the
      requirements for an exemption from registration under the Securities Act and
      the
      rules and regulations promulgated thereunder. No Investor will make any sale,
      transfer or other disposition of the Common Shares in violation of federal
      or
      state securities laws.

     

    4.9 Pledge
      of Common Shares.
      The
      Company acknowledges and agrees that the Common Shares may be pledged by an
      Investor in connection with a bona fide margin agreement or other loan or
      financing arrangement that is secured by the Common Shares. The pledge of Common
      Shares shall not be deemed to be a transfer, sale or assignment of the Common
      Shares hereunder, and no Investor effecting a pledge of Common Shares shall
      be
      required to provide the Company with any notice thereof or otherwise make any
      delivery to the Company pursuant to this Agreement; provided that an Investor
      and its pledgee shall be required to comply with the provisions of Section
      2.6
      hereof in order to effect a sale, transfer or assignment of Common Shares to
      such pledgee. The Company hereby agrees to execute and deliver such
      documentation as a pledgee of the Common Shares may reasonably request in
      connection with a pledge of the Common Shares to such pledgee by an Investor.
      

     

    4.10 Disclosure
      of Transactions and Other Material Information.
      The
      Company shall not, and shall cause each Subsidiary and each of its respective
      officers, directors, employees and agents, not to, provide any Investor with
      any
      material nonpublic information regarding the Company or any Subsidiary from
      and
      after the Closing Date without the express written consent of such Investor.
      In
      the event of a breach of the foregoing covenant by the Company, any Subsidiary,
      or each of its respective officers, directors, employees and agents, in addition
      to any other remedy provided herein or in the Transaction Documents, such
      Investor shall have the right to demand that the Company make a public
      disclosure, and if the Company fails to do so within five business days, the
      Investor may make a public disclosure, in the form of a press release, public
      advertisement or otherwise, of such material nonpublic information without
      the
      prior approval by the Company, each Subsidiary, or each of its respective
      officers, directors, employees or agents. In such event, such Investor shall
      provide a copy of such public disclosure to the Company at least one day prior
      to the dissemination of such disclosure to the public. No Investor shall have
      any liability to the Company, any Subsidiary, or any of its or their respective
      officers, directors, employees, stockholders or agents for any such disclosure
      unless such Investor acts with negligence or willful misconduct. Subject to
      the
      foregoing, neither the Company nor any Investor shall issue any press releases
      or any other public statements with respect to the transactions contemplated
      hereby without the prior approval of the other party; which approval shall
      not
      be unreasonably withheld or delayed; provided, however, that the Company shall
      be entitled, without the prior approval of any Investor, to make any press
      release or other public disclosure with respect to such transactions in a
      Current Report on Form 8-K in compliance with the requirements of the Exchange
      Act, and as may otherwise be required by applicable law and regulations
      (provided that each Investor shall be provided a copy of any proposed press
      release to be issued by the Company at least one day prior to its release).
      

     

    
      
        
        

      

      
        16

        
          

        

      

      
        
        

      

    

     

    4.11 Amendment
      to Rights Agreement. Without
      the prior written consent of the Investors (which consent shall not be
      unreasonably withheld), the Company shall not, from and after the Closing Date,
      rescind, revoke or amend the Amendment to Rights Agreement (as defined below)
      to
      decrease the percentage of Common Shares of which Steven G. Mahaylo, together
      with his Associates and Affiliates, can be the Beneficial Owner without becoming
      an Acquiring Person (as such capitalized terms are defined therein).


     

    4.12
      Investors’
      Filings.
      Each
      Investor will file all reports required to be filed by such Investor with the
      Securities and Exchange Commission under the Exchange Act or related federal
      or
      state securities laws as a result of such Investor’s ownership of Common Shares,
      including but not limited to Forms 3, 4 and 5, and will promptly provide copies
      to the Company of any Schedule 13D or G filed by such Investor.

     

    ARTICLE
      V

    TRANSFER
      AGENT INSTRUCTIONS; REMOVAL OF LEGENDS

     

    5.1 Issuance
      of Certificates.
      The
      Company shall instruct its transfer agent to issue certificates, registered
      in
      the name of each Investor or its nominee, for Common Shares in such amounts
      as
      specified from time to time by each Investor to the Company. All such
      certificates will bear the restrictive legend described in Section 2.7, except
      as otherwise specified in this Article V. Nothing in this Section 5.1 will
      affect in any way the Investors’ obligations and agreement set forth in Section
      2.7 hereof to comply with all applicable prospectus delivery requirements,
      if
      any, upon resale of the Common Shares.

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

    5.2 Unrestricted
      Common Shares.
      If,
      unless otherwise required by applicable state securities laws, (a) the resale
      of
      the Common Shares represented by a certificate has been registered under an
      effective registration statement filed under the Securities Act, (b) a holder
      of
      Common Shares provides the Company and the Transfer Agent with an opinion of
      counsel, in form, substance and scope reasonably satisfactory to the Company,
      to
      the effect that a public sale or transfer of such Common Shares may be made
      without registration under the Securities Act and such sale either has occurred
      or may occur without restriction on the manner of such sale or transfer, (c)
      such holder provides the Company and the Transfer Agent with reasonable
      assurances that such Common Shares can be sold under Rule 144, or (d) the Common
      Shares represented by a certificate can be sold without restriction as to the
      number of securities sold under Rule 144(k), the Company will permit the
      transfer of the Common Shares, and the Transfer Agent will issue one or more
      certificates, free from any restrictive legend, in such name and in such
      denominations as specified by such holder. Notwithstanding anything herein
      to
      the contrary, the Common Shares may be pledged as collateral in connection
      with
      a bona fide margin account or other lending arrangement; provided that such
      pledge will not alter the provisions of this Article V with respect to the
      removal of restrictive legends.

     

    5.3 Enforcement
      of Provision.
      The
      Company acknowledges that a breach by it of its obligations hereunder will
      cause
      irreparable harm to each Investor by vitiating the intent and purpose of the
      transaction contemplated hereby. Accordingly, the Company acknowledges that
      the
      remedy at law for a breach of its obligations under this Article V will be
      inadequate and agrees, in the event of a breach or threatened breach by the
      Company of the provisions of this Section, that each Investor will be entitled,
      in addition to all other available remedies, to an injunction restraining any
      breach and requiring immediate transfer, without the necessity of showing
      economic loss and without any bond or other security being
      required.

     

    ARTICLE
      VI

    CONDITIONS
      TO THE COMPANY’S OBLIGATION TO SELL

     

    The
      obligation of the Company to issue and sell the Common Shares to each Investor
      at the Closing is subject to the satisfaction by such Investor, on or before
      the
      Closing Date, of each of the following conditions. These conditions are for
      the
      Company’s sole benefit and may be waived by the Company at any time in its sole
      discretion:

     

    6.1 The
      Investor will have executed this Agreement and the Registration Rights Agreement
      and will have delivered those agreements to the Company.

     

    6.2 The
      Investor will have delivered the purchase price for the Common Shares to the
      Company in accordance with this Agreement.

     

    6.3 The
      representations and warranties of the Investor must be true and correct in
      all
      material respects as of the Closing Date as though made at that time (except
      for
      representations and warranties that speak as of a specific date, which
      representations and warranties must be correct as of such date). 

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

    6.4 The
      Investor will have performed and complied in all material respects with the
      covenants and conditions required by this Agreement to be performed or complied
      with by the Investor at or prior to the Closing. 

     

    6.5 No
      litigation, statute, rule, regulation, executive order, decree, ruling, or
      injunction will have been enacted, entered, promulgated, or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    ARTICLE
      VII

    CONDITIONS
      TO THE INVESTOR’S OBLIGATION TO PURCHASE

     

    The
      obligation of each Investor hereunder to purchase the Common Shares from the
      Company at the Closing is subject to the satisfaction, on or before the Closing
      Date, of each of the following conditions. These conditions are for each
      Investor’s respective benefit and may be waived by any Investor at any time in
      its sole discretion:

     

    7.1 The
      Company will have executed and delivered to the Investors this Agreement and
      the
      Registration Rights Agreement.

     

    7.2
      The
      Company will have effected an amendment to the Rights Agreement (the “Amendment
      to Rights Agreement”) in the form attached hereto as Exhibit B.

     

    7.3
      The
      Company will have delivered to the Investors duly executed certificates
      representing the Common Shares in the amounts and forms specified in Section
      1.1
      hereof.

     

    7.4
      The
      representations and warranties of the Company must be true and correct in all
      material respects as of the Closing as though made at that time (except for
      representations and warranties that speak as of a specific date, which
      representations and warranties must be true and correct as of such date), and
      the Company must have performed and complied in all material respects with
      the
      covenants and conditions required by this Agreement to be performed or complied
      with by the Company at or prior to the Closing. The Investor must have received
      a certificate or certificates dated as of the Closing Date and executed by
      the
      Chief Executive Officer or the Chief Financial Officer of the Company certifying
      as to the matters contained in this Section 7.3 and as to such other matters
      as
      may be reasonably requested by such Investor, including, but not limited to,
      the
      Company’s Articles of Incorporation, By-laws, Board of Directors’ resolutions
      relating to the transactions contemplated hereby, and the incumbency and
      signatures of each of the officers of the Company who may execute on behalf
      of
      the Company any document delivered at the Closing.

     

    7.5
      No
      litigation, statute, rule, regulation, executive order, decree, ruling, or
      injunction will have been enacted, entered, promulgated, or endorsed by or
      in
      any court or governmental authority of competent jurisdiction or any
      self-regulatory organization having authority over the matters contemplated
      hereby which prohibits the consummation of any of the transactions contemplated
      by this Agreement.

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

    7.6
      The
      shares of Common Stock must be quoted on the OTCBB, and such quotation must
      not
      have been suspended by the SEC or the
      FINRA.

     

    7.7
      The
      Investors will have received an opinion of the Company’s counsel, dated as of
      the Closing Date, in form, scope and substance reasonably satisfactory to the
      Investors.

     

    ARTICLE
      VIII

    INDEMNIFICATION

     

    8.1 Indemnification
      by Company.
      In
      consideration of each Investor’s execution and delivery of this Agreement and
      its acquisition of the Common Shares hereunder, and in addition to all of the
      Company’s other obligations under this Agreement and the Registration Rights
      Agreement, the Company will defend, protect, indemnify and hold harmless each
      Investor and each other holder of the Common Shares and all of their
      stockholders, officers, directors, employees, advisors and direct or indirect
      investors and any of the foregoing person’s agents or other representatives
      (including, without limitation, those retained in connection with the
      transactions contemplated by this Agreement) (collectively, the “Indemnitees”)
      from and against any and all actions, causes of action, suits, claims, losses,
      costs, penalties, fees, liabilities and damages, and expenses in connection
      therewith (regardless of whether any such Indemnitee is a party to the action
      for which indemnification hereunder is sought), and including reasonable
      attorneys’ fees and disbursements (the “Indemnified Liabilities”), incurred or
      suffered by an Indemnitee as a result of, or arising out of, or relating to
      (a)
      any breach of any representation or warranty made by the Company herein or
      in
      any other certificate, instrument or document contemplated hereby or thereby,
      (b) any breach of any covenant, agreement or obligation of the Company contained
      herein or in any other certificate, instrument or document contemplated hereby
      or thereby, or (c) any cause of action, suit or claim brought or made against
      such Indemnitee and arising out of or resulting from the execution, delivery,
      performance, breach or enforcement of this Agreement or the Registration Rights
      Agreement by the Company; provided, however, that, with respect to this clause
      (c), the Company shall not be liable to the extent such Indemnified Liabilities
      are finally determined by a court of competent jurisdiction to have resulted
      primarily and directly from the Investors’ negligence or willful misconduct. To
      the extent that the foregoing undertaking by the Company is unenforceable for
      any reason, the Company will make the maximum contribution to the payment and
      satisfaction of each of the Indemnified Liabilities that is permissible under
      applicable law.

     

    8.2 
      Indemnification by Investors.
      In
      consideration of the Company’s execution and delivery of this Agreement and its
      sale of the Common Shares hereunder, each of the Investors will defend, protect,
      indemnify and hold harmless the Company and each other holder of the Common
      Shares and all of their Indemnitees from and against the Indemnified
      Liabilities, incurred or suffered by an Indemnitee as a result of, or arising
      out of, or relating to (a) any breach of any representation or warranty made
      by
      such Investor herein, (b) any breach of any covenant, agreement or obligation
      of
      such Investor contained herein, or (c) any cause of action, suit or claim
      brought or made against such Indemnitee and arising out of or resulting from
      the
      execution, delivery, performance, breach or enforcement of this Agreement by
      such Investor which Indemnified Liabilities are finally determined by a court
      of
      competent jurisdiction to have resulted primarily and directly from the
      Investors’ gross negligence or willful misconduct. To the extent that the
      foregoing undertaking by the Investors is unenforceable for any reason, the
      Investors will make the maximum contribution to the payment and satisfaction
      of
      each of the Indemnified Liabilities that is permissible under applicable
      law.

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

    ARTICLE
      IX

    DEFINITIONS

     

    9.1 “Closing”
      means the closing of the purchase and sale of the Common Shares.

     

    9.2 “Closing
      Date” has the meaning set forth in Section 1.3.

     

    9.3 “Common
      Shares” has the meaning set forth in the recitals.

     

    9.4 “Common
      Stock” means the common stock, par value $0.01 per share, of the Company.


     

    9.5 “Company”
      means Internet America, Inc., a Texas corporation.

     

    9.6 “Company
      Permits” has the meaning set forth in Section 3.19.

     

    9.7 “Environmental
      Laws” has the meaning set forth in Section 3.14.

     

    9.8 “Exchange
      Act” means the Securities Exchange Act of 1934, as amended.

     

    9.9
      “FINRA” means the Financial Industry Regulatory Authority.

     

    9.10
      “Indebtedness for Borrowed Money” shall include only (i) indebtedness of the
      Company and its Subsidiaries incurred as the result of a direct borrowing of
      money, and (ii) guarantees by the Company and its Subsidiaries of indebtedness
      of third parties, and shall not include any other indebtedness including, but
      not limited to, indebtedness incurred with respect to trade accounts, equipment
      leases, and intercompany loans.

     

    9.11
      “Indemnified
      Liabilities” has the meaning set forth in Article VIII.

     

    9.12
      “Indemnitees”
      has the meaning set forth in Article VIII.

     

    9.13
      “Intellectual
      Property” has the meaning set forth in Section 3.10.

     

    9.14
      “Investors”
      means the investors, whether one or more, whose names are set forth on the
      signature pages of this Agreement, and their permitted transferees.

     

    9.15
      “Material
      Adverse Effect” means a material adverse effect on (a) the assets, liabilities,
      business, properties, operations, financial condition, prospects or results
      of
      operations of the Company and its Subsidiaries, taken as a whole, or (b) the
      ability of the Company to perform its obligations pursuant to the transactions
      contemplated by this Agreement or under the agreements or instruments to be
      entered into or filed in connection herewith; in each case other than as a
      result of any adverse change, event, or effect that is directly attributable
      to
      conditions affecting the United States economy generally unless such conditions
      adversely affect the Company in a materially disproportionate manner, and any
      adverse change, event, or effect that is directly attributable to conditions
      affecting the Company’s industry generally, unless such conditions adversely
      affect the Company in a materially disproportionate manner.

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

    9.16 “Option
      Plan” means, collectively, the Company’s 1998 Nonqualified Stock Option Plan,
      Employee and Consultant Stock Option Plan, 2004 Non-Employee Director Plan,
      and
      the 2007 Stock Option Plan, including all amendments thereto.

     

    9.17 
      “OTCBB”
      means the OTC Bulletin Board operated by the
      FINRA.

     

    9.18 “Registration
      Rights Agreement” means the Registration Rights Agreement, dated as of the date
      of this Agreement and among the parties to this Agreement, in the form attached
      hereto as Exhibit
      C.

     

    9.19 “Regulation
      D” means Regulation D as promulgated by the SEC under the Securities
      Act.

     

    9.20 “Rule
      144” and “Rule 144(k)” mean Rule 144 and Rule 144(k), respectively, promulgated
      under the Securities Act, or any successor rule.

     

    9.21 “SEC”
      means the Securities and Exchange Commission.

     

    9.22 “SEC
      Documents” has the meaning set forth in Section 3.7.

     

    9.23 “Securities
      Act” means the Securities Act of 1933, as amended, and the rules and regulations
      thereunder, or any similar successor statute.

     

    9.24 “Subsidiaries”
      means any entity in which the Company, directly or indirectly, owns capital
      stock or holds an equity or similar interest.

     

    9.25 “Transaction
      Documents” shall have the meaning set forth in Section 10.17.

     

    ARTICLE
      X

    GOVERNING
      LAW; MISCELLANEOUS

     

    10.1  Governing
      Law; Jurisdiction.
      This
      Agreement will be governed by and interpreted in accordance with the laws of
      the
      State of Texas without regard to the principles of conflict of laws. The parties
      hereto hereby submit to the jurisdiction of the United States federal and state
      courts located in the State of Texas with respect to any dispute arising under
      this Agreement, the agreements entered into in connection herewith or the
      transactions contemplated hereby or thereby.

     

    10.2  Counterparts;
      Signatures by Facsimile.
      This
      Agreement may be executed in two or more counterparts, all of which are
      considered one and the same agreement and will become effective when
      counterparts have been signed by each party and delivered to the other parties.
      This Agreement, once executed by a party, may be delivered to the other parties
      hereto by facsimile transmission of a copy of this Agreement bearing the
      signature of the party so delivering this Agreement.

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

    10.3  Headings.
      The
      headings of this Agreement are for convenience of reference only, are not part
      of this Agreement and do not affect its interpretation.

     

    10.4  Severability.
      If any
      provision of this Agreement is invalid or unenforceable under any applicable
      statute or rule of law, then such provision will be deemed modified in order
      to
      conform with such statute or rule of law. Any provision hereof that may prove
      invalid or unenforceable under any law will not affect the validity or
      enforceability of any other provision hereof.

     

    10.5  Entire
      Agreement.
      This
      Agreement and the Registration Rights Agreement (including all schedules and
      exhibits hereto and thereto) constitute the entire agreement among the parties
      hereto with respect to the subject matter hereof and thereof. There are no
      restrictions, promises, warranties or undertakings, other than those set forth
      or referred to herein or therein. This Agreement supersedes all prior agreements
      and understandings among the parties hereto with respect to the subject matter
      hereof. 

     

    10.6  Consents.
      Except
      as otherwise specifically provided herein, in each case in which approval of
      the
      Investors is required by the terms of this Agreement, such requirement shall
      be
      satisfied only upon receipt of the written consent of each Investor.


     

    10.7  Changes,
      Waivers, etc.
      Neither
      this Agreement nor any provision hereof may be
      amended, changed, waived, discharged or terminated orally, but only by a
      statement in writing signed by the party against which enforcement of the
      change, waiver, discharge or termination is sought.

     

    10.8  Notices.
      Any
      notices required or permitted to be given under the terms of this Agreement
      must
      be sent by certified or registered mail (return receipt requested) or delivered
      personally or by courier (including a recognized overnight delivery service)
      or
      by facsimile and will be effective five days after being placed in the mail,
      if
      mailed by regular U.S. mail, or upon receipt, if delivered personally, by
      courier (including a recognized overnight delivery service) or by facsimile,
      in
      each case addressed to a party. The addresses for such communications
      are:

    
       

      
        	
                If
                  to the Company:

              	 	
                Internet
                  America, Inc.

              
	 	 	
                10930
                  W. Sam Houston Pwky., N.

              
	 	 	
                Suite
                  200

              
	 	 	
                Houston,
                  Texas, 77064

              
	 	 	
                Attn:
                  William E. Ladin, Jr.

              
	 	 	
                Facsimile:
                  (281) 469-6195

              
	 	 	 
	
                With
                  a copy to:

              	
                 

              	Boyer
                & Ketchand
	 	 	
                Nine
                  Greenway Plaza, Suite 3100

              
	 	 	
                Houston,
                  Texas 77046

              
	 	 	
                Attention:
                  Rita J. Leader

              
	 	 	Fax:
                (713)
                871-2024


      

       

      If
        to an
        Investor: To the address set forth immediately below such Investor’s name on the
        signature pages hereto.

       

      
        	
                With
                  a copy to:

              	
                 

              	Skadden,
                Arps, Slate, Meagher & Flom LLP
	 	 	
                300
                  South Grand Ave., Suite 3400

              
	
                 

              	 	Los
                Angeles, CA 90071
	 	 	
                Joseph
                  J. Giunta

              
	
                 

              	 	Facsimile:
                (213)
                621-5040 


      

    

     

    Each
      party will provide written notice to the other parties of any change in its
      address.

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

    10.9  Successors
      and Assigns.
      This
      Agreement is binding upon and inures to the benefit of the parties and their
      successors and assigns. The Company will not assign this Agreement or any rights
      or obligations hereunder without the prior written consent of the Investors,
      and
      no Investor may assign this Agreement or any rights or obligations hereunder
      without the prior written consent of the Company. Notwithstanding the foregoing,
      an Investor may assign all or part of its rights and obligations hereunder
      to
      any of its “affiliates,” as that term is defined under the Securities Act,
      without the consent of the Company so long as the affiliate is an accredited
      investor (within the meaning of Regulation D under the Securities Act) and
      agrees in writing to be bound by this Agreement. This provision does not limit
      the Investor’s right to transfer the Common Shares pursuant to the terms of this
      Agreement or to assign the Investor’s rights hereunder to any such transferee
      pursuant to the terms of this Agreement.

     

    10.10  Expenses.
      Each
      party shall pay all costs and expenses that it incurs with respect to the
      negotiation, execution, delivery and performance of the Agreement and the
      Registration Rights Agreement.

     

    10.11 Attorneys’
      Fees.
      In the
      event that any suit or action is instituted to enforce any provision in this
      Agreement, the prevailing party in such dispute shall be entitled to recover
      from the losing party all fees, costs, and expenses of enforcing any right
      of
      such prevailing party under or with respect to this Agreement, including without
      limitation, such reasonable fees and expenses of attorneys and accountants,
      which shall include, without limitation, all fees, costs, and expenses of
      appeals.

     

    10.12 Third
      Party Beneficiaries.
      This
      Agreement is intended for the benefit of the parties hereto and their respective
      permitted successors and assigns, and is not for the benefit of, nor may any
      provision hereof be enforced by, any other person.

     

    10.13 Survival.
      All
      representations and warranties contained herein shall survive the execution
      and
      delivery of this Agreement, any investigation at any time made by the Investors
      or on their behalf, and the sale and purchase of the Common Shares and payment
      therefor. All statements contained in any certificate, instrument or other
      writing delivered by or on behalf of the Company pursuant hereto or in
      connection with the transactions herein contemplated (other than legal opinions)
      shall constitute representations and warranties by the Company
      hereunder.

     

    10.14 Further
      Assurances.
      Each
      party will do and perform, or cause to be done and performed, all such further
      acts and things, and will execute and deliver all other agreements,
      certificates, instruments and documents, as another party may reasonably request
      in order to carry out the intent and accomplish the purposes of this Agreement
      and the consummation of the transactions contemplated hereby.

     

    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

    10.15 No
      Strict Construction.
      The
      language used in this Agreement is deemed to be the language chosen by the
      parties to express their mutual intent, and no rules of strict construction
      will
      be applied against any party.

     

    10.16 Equitable
      Relief.
      The
      Company recognizes that, if it fails to perform or discharge any of its
      obligations under this Agreement, any remedy at law may prove to be inadequate
      relief to the Investors. The Company therefore agrees that the Investors are
      entitled to temporary and permanent injunctive relief in any such case without
      the necessity of proving actual damages.

     

    10.17 Independent
      Nature of Investors’ Obligations and Rights.
      The
      obligations of each Investor under any of this Agreement or the Registration
      Rights Agreement (collectively, the “Transaction Documents”) are several and not
      joint with the obligations of any other Investor, and no Investor shall be
      responsible in any way for the performance of the obligations of any other
      Investor under any Transaction Document. The decision of each Investor to
      purchase Common Shares pursuant to the Transaction Documents has been made
      by
      each Investor independently of any other Investor. Nothing contained herein
      or
      in any Transaction Document, and no action taken by any Investor pursuant
      thereto, shall be deemed to constitute the Investors as a partnership, an
      association, a joint venture or any other kind of entity, or create a
      presumption that the Investors are in any way acting in concert or as a group
      with respect to such obligations or the transactions contemplated by the
      Transaction Document. Each Investor shall be entitled to independently protect
      and enforce its rights, including without limitation the rights arising out
      of
      this Agreement or out of the other Transaction Documents, and it shall not
      be
      necessary for any other Investor to be joined as an additional party in any
      proceeding for such purpose. Each Investor acknowledges that no other Investor
      has acted as agent for the Investor in connection with making its investment
      hereunder and that no other Investor will be acting as agent of the Investor
      in
      connection with monitoring its investment in the Common Shares or enforcing
      its
      rights under the Transaction Documents. Each Investor has been represented
      by
      its own separate legal counsel in its review and negotiation of the Transaction
      Documents. The Company has elected to provide all Investors with the same terms
      and Transaction Documents for the convenience of the Company and not because
      it
      was required or requested to do so by the Investors.

     

    IN
      WITNESS WHEREOF, the undersigned Investors and the Company have caused this
      Agreement to be duly executed as of the date first above written.

     

    
      
        	
                COMPANY:

              
	 
	
                INTERNET
                  AMERICA, INC.

              
	 
	
                By:

              	
                /s/
                  William E. Ladin, Jr.

              
	 	
                William
                  E. Ladin, Jr., CEO

              


      

    

     

    
      
        	INVESTOR:	 
	 	 
	INVESTOR’S
                NAME: Steven G. Mihaylo, Trustee of The Steven G.
                Mihaylo Trust Agreement (As Restated), as restated on December 13,
                2001 
	 	 
	 	 
	
                By:

              	
                /s/
                  Steven G. Mihaylo

              
	
                Print
                  Name:

              	
                Steven
                  G. Mihaylo

              
	
                Title:

              	
                Trustee

              


      

    

     

    
      
        	
                Number
                  of Shares: 

              	
                4,000,000

              
	 	 
	
                Per
                  Share Price: 

              	
                $1.00
                  

              
	 	 
	
                Aggregate
                  Purchase Amount:

              	
                $
                  4,000,000.00

              


      

    

     

    INVESTOR’S
      ADDRESS:

     

    Steven
      G.
      Mihaylo, Trustee for The Steven G. Mihaylo Trust 

    P.
      O. Box
      19790

    Reno,
      Nevada 89511

     

    (any
      notice hereunder to this Investor shall include a copy to):

     

    Skadden,
      Arps, Slate, Meagher & Flom LLP

    300
      South
      Grand Ave., Suite 3400

    Los
      Angeles, CA 90071

    Attn:
      Joseph
      J.
      Giunta

     

    [Signature
      Page to Securities Purchase Agreement]

     

    
      
        
        

      

      
        25

        
          

        

      

      
        
        

      

    

     

    EXHIBIT
      A

     

    SCHEDULE
      OF INVESTORS

     

    
      
        	
                Investor

              	 	
                Common
                  Shares

              	 	
                Purchase
                  Price

              	 
	 	 	 	 	 	 
	
                Steven
                  G. Mihaylo, Trustee of

              	 	 	
                4,000,000

              	 	
                $

              	
                4,000,000.00

              	 
	
                 The
                  Steven G. Mihaylo Trust Agreement 

              	 	 	 	 	 	 	 
	
                (As
                  Restated), as restated on December 13, 2001

              	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 
	
                Total:

              	 	 	
                4,000,000

              	 	
                $

              	
                4,000,000.00

              	 


      

    

     

    
      
        
        

      

      
        26