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Unassociated Document

    EXHIBIT
      4.2

     

    REGISTRATION
      RIGHTS AGREEMENT

     

    This
      Registration Rights Agreement (the “Agreement”)
      is
      made and entered into as of October 17, 2007 (the “Effective
      Date”)
      among
      Internet America, Inc., a Texas corporation (the “Company”),
      the
      parties set forth on Exhibit
      A
      attached
      hereto (each, an “Investor”
and
      collectively, the “Investors”).

    

    R
      E C I T A L S:

    

    A.  The
      Investors have purchased the Shares pursuant to that certain Purchase Agreement
      (the “Purchase
      Agreement”)
      dated
      October 17, 2007 by and between the Company and each of the
      Investors.

    

    B. The
      Company and the Investors desire to set forth the registration rights to be
      granted by the Company to the Investors. The execution of this Agreement is
      a
      condition to the closing under the Purchase Agreement.

    

    NOW,
      THEREFORE,
      in
      consideration of the mutual promises, representations, warranties, covenants,
      and conditions set forth herein, in the Stock Purchase Agreements, or otherwise,
      the parties mutually agree as follows: 

    

    A
      G R E E M E N T:

    

    1. Certain
      Definitions.
      As used
      in this Agreement, the following terms shall have the following respective
      meanings:

    

    “Blackout
      Period”
means,
      with respect to a registration, a period in each case commencing on the day
      immediately after the Company notifies the Investors that they are required,
      pursuant to Section 4(f), to suspend offers and sales of Registrable Securities
      during which the Company, in the good faith judgment of its Board of Directors,
      determines (because of the existence of, or in anticipation of, any acquisition,
      financing activity, or other transaction involving the Company, or the
      unavailability for reasons beyond the Company’s control of any required
      financial statements, disclosure of information which is in its best interest
      not to publicly disclose, or any other event or condition of similar
      significance to the Company) that the registration and distribution of the
      Registrable Securities to be covered by such registration statement, if any,
      would be seriously detrimental to the Company and its shareholders and ending
      on
      the earlier of (1) the date upon which the material non-public information
      commencing the Blackout Period is disclosed to the public or ceases to be
      material and (2) such time as the Company notifies the selling Holders that
      the
      Company will no longer delay such filing of the Registration Statement and
      recommences taking steps to make such Registration Statement effective or allows
      sales pursuant to such Registration Statement to resume.

    

    “Business
      Day”
means
      any day of the year, other than a Saturday, Sunday, or other day on which the
      Commission is required or authorized to close.

    

    “Closing
      Date”
means
      such time as is mutually agreed between the Company and the Investors for the
      closing of the sale referred to in Recital A above.

    

    “Commission”
means
      the Securities and Exchange Commission or any other federal agency at the time
      administering the Securities Act.

    

    “Common
      Stock”
means
      the common stock, $0.01 par value, of the Company and any and all shares of
      capital stock or other equity securities of: (i) the Company which are added
      to
      or exchanged or substituted for the Common Stock by reason of the declaration
      of
      any stock dividend or stock split, the issuance of any distribution or the
      reclassification, readjustment, recapitalization or other such modification
      of
      the capital structure of the Company; and (ii) any other corporation, now or
      hereafter organized under the laws of any state or other governmental authority,
      with which the Company is merged, which results from any consolidation or
      reorganization to which the Company is a party, or to which is sold all or
      substantially all of the shares or assets of the Company, if immediately after
      such merger, consolidation, reorganization or sale, the Company or the
      stockholders of the Company own equity securities having in the aggregate more
      than 50% of the total voting power of such other corporation.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    “Exchange
      Act”
means
      the Securities Exchange Act of 1934, as amended, and the rules and regulations
      of the Commission promulgated thereunder.

    

    “Family
      Member”
means
      (a) with respect to any individual, such individual’s spouse, any descendants
      (whether natural or adopted), any trust all of the beneficial interests of
      which
      are owned by any of such individuals or by any of such individuals together
      with
      any organization described in Section 501(c)(3) of the Internal Revenue Code
      of
      1986, as amended, the estate of any such individual, and any corporation,
      association, partnership or limited liability company all of the equity
      interests of which are owned by those above described individuals, trusts or
      organizations and (b) with respect to any trust, the owners of the beneficial
      interests of such trust.

    

    “Form
      S-1”
means
      such form under the Securities Act as in effect on the date hereof.

     

    “Holder”
means
      each Investor or any successor or Permitted Assignee of a Investor, who acquires
      rights in accordance with this Agreement with respect to the Registrable
      Securities directly or indirectly from an Investor, including from any Permitted
      Assignee.

    

    “Inspector”
means
      any attorney, accountant, or other agent retained by a Investor for the purposes
      provided in Section 4(j).

    

    “Permitted
      Assignee”
means
      (a) with respect to a partnership, its partners or former partners in
      accordance with their partnership interests, (b) with respect to a
      corporation, its shareholders in accordance with their interest in the
      corporation, (c) with respect to a limited liability company, its members
      or former members in accordance with their interest in the limited liability
      company, (d) with respect to an individual party, any Family Member of such
      party, (e) an entity that is controlled by, controls, or is under common control
      with a transferor, or (f) a party to this Agreement.

    

    The
      terms
“register,”
      “registered,”
and
      “registration”
refers
      to a registration effected by preparing and filing a registration statement
      in
      compliance with the Securities Act, and the declaration or ordering of the
      effectiveness of such registration statement.

    

    “Registrable
      Securities”
means
      the Underlying Shares as defined in the Purchase Agreement. 

     

    “Registration
      Statement”
means
      the registration statement required to be filed by the Company pursuant to
      Section 3(a).

    

    “Securities
      Act”
means
      the Securities Act of 1933, as amended, or any similar federal statute
      promulgated in replacement thereof, and the rules and regulations of the
      Commission thereunder, all as the same shall be in effect at the
      time.

    

    “Shares”
means
      all shares of Series A Preferred Stock of the Company, par value $0.01 per
      share, that are issued and sold pursuant to the Purchase Agreement.

    .1  

     

    “SEC
      Effective Date”
means
      the date the Registration Statement is declared effective by the
      Commission.

    

    “Underlying
      Shares”
means
      all Underlying Shares (as defined in the Purchase Agreement) issuable upon
      conversion of the Shares.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    2. Term.
      This
      Agreement shall continue in full force and effect for a period of two (2) years
      from the Effective Date, unless terminated sooner hereunder.

    

    3. Registration.

    

    (a) Piggyback
      Registration.
      If the
      Company shall determine to register for sale for cash any of its Common Stock,
      for its own account or for the account of others (other than the Holders),
      other
      than (i) a registration relating solely to employee benefit plans or securities
      issued or issuable to employees, consultants (to the extent the securities
      owned
      or to be owned by such consultants could be registered on Form S-8) or any
      of
      their Family Members (including a registration on Form S-8), (ii) a registration
      relating solely to a Commission Rule 145 transaction, a registration on Form
      S-4
      in connection with a merger, acquisition, divestiture, reorganization, or
      similar event, or (iii) a registration in which the only Common Stock being
      registered is Common Stock issuable upon conversion of debt securities that
      are
      also being registered, the Company shall promptly give to the Holders written
      notice thereof (and in no event shall such notice be given less than 20 calendar
      days prior to the filing of such registration statement), and shall, subject
      to
      Section 3(b), include in such registration (and any related qualification under
      blue sky laws or other compliance) (a “Piggyback
      Registration”),
      all
      of the Registrable Securities specified in a written request or requests, made
      within 10 calendar days after receipt of such written notice from the Company,
      by any Holder or Holders. However, the Company may, without the consent of
      the
      Holders, withdraw such registration statement prior to its becoming effective
      if
      the Company or such other shareholders have elected to abandon the proposal
      to
      register the securities proposed to be registered thereby. 

     

    (b) Underwriting.
      If a
      Piggyback Registration is for a registered public offering involving an
      underwriting, the Company shall so advise the Holders in writing or as a part
      of
      the written notice given pursuant to Section 3(a). In such event the right
      of
      any Holder to registration pursuant to Section 3(a) shall be conditioned upon
      such Holder’s participation in such underwriting and the inclusion of such
      Holder’s Registrable Securities in the underwriting to the extent provided
      herein. All Holders proposing to distribute their securities through such
      underwriting shall (together with the Company and any other shareholders of
      the
      Company distributing their securities through such underwriting) enter into
      an
      underwriting agreement in customary form with the underwriter or underwriters
      selected for such underwriting by the Company or selling shareholders, as
      applicable. Notwithstanding any other provision of this Section 3(b), if the
      underwriter or the Company determines that marketing factors require a
      limitation of the number of shares to be underwritten, the underwriter may
      exclude some or all Registrable Securities from such registration and
      underwriting. The Company shall so advise all Holders (except those Holders
      who
      failed to timely elect to distribute their Registrable Securities through such
      underwriting or have indicated to the Company their decision not to do so),
      and
      the number of shares of Registrable Securities that may be included in the
      registration and underwriting, if any, shall be allocated among such Holders
      as
      follows: 

    

    (i) 
In
      the
      event of a Piggyback Registration that is initiated by the Company, the number
      of shares that may be included in the registration and underwriting shall be
      allocated (i) first, to the Company, (ii) second, subject to obligations and
      commitments existing as of the date hereof, to the Holders, who have requested
      to sell in the registration, on a pro rata basis according to the number of
      shares requested to be included, and (iii) third, to all other selling
      shareholders on a pro rata basis according to the number of shares requested
      to
      be included; and

    

    (ii)  
       In
      the
      event of a Piggyback Registration that is initiated by the exercise of demand
      registration rights by a shareholder or shareholders of the Company (other
      than
      the Holders), then the number of shares that may be included in the registration
      and underwriting shall be allocated (i) first, to such selling shareholders
      who
      exercised such demand, (ii) second, subject to obligations and commitments
      existing as of the date hereof, to the Holders, who have requested to sell
      in
      the registration, on a pro rata basis according to the number of shares
      requested to be included, and (iii) third, to all other selling shareholders
      on
      a pro rata basis according to the number of shares requested to be
      included.

    

    No
      Registrable Securities excluded from the underwriting by reason of the
      underwriter’s marketing limitation shall be included in such registration. If
      any Holder disapproves of the terms of any such underwriting, such Holder may
      elect to withdraw therefrom by written notice to the Company and the
      underwriter. The Registrable Securities and/or other securities so withdrawn
      from such underwriting shall also be withdrawn from such registration;
provided,
      however,
      that,
      if by the withdrawal of such Registrable Securities a greater number of
      Registrable Securities held by other Holders may be included in such
      registration (up to the maximum of any limitation imposed by the underwriters),
      then the Company shall offer to all Holders who have included Registrable
      Securities in the registration the right to include additional Registrable
      Securities pursuant to the terms and limitations set forth herein in the same
      proportion used above in determining the underwriter limitation.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (c) Right
      to Terminate Registration. The
      Company shall have the right to terminate or withdraw any registration initiated
      by it under this Section 3 prior to the effectiveness of such registration
      whether or not any Holder has elected to include securities in such
      registration. The registration expenses of such withdrawn registration shall
      be
      borne by the Company in accordance with Section 6 hereof.

    

    4. Registration
      Procedures.
      In the
      case of each registration, qualification, or compliance effected by the Company
      pursuant to Section 3 hereof, the Company will keep each Holder including
      securities therein reasonably advised in writing (which may include e-mail)
      as
      to the initiation of each registration, qualification, and compliance and as
      to
      the completion thereof. With respect to any registration statement filed
      pursuant to Section 3, the Company will use its commercially reasonable best
      efforts to:

     

    (a) prepare
      and file with the Commission with respect to such Registrable Securities, a
      registration statement on Form S-1, or any other form for which the Company
      then
      qualifies or which counsel for the Company shall deem appropriate, and which
      form shall be available for the sale of the Registrable Securities in accordance
      with the intended method(s) of distribution thereof, and use its commercially
      reasonable efforts to cause such registration statement to become and remain
      effective at least for a period ending with the first to occur of (i) the sale
      of all Registrable Securities covered by the registration statement, (ii) the
      availability under Rule 144 for the Holder to immediately, freely resell without
      restriction all Registrable Securities covered by the registration statement,
      (iii) 90 days after a Piggyback Registration is declared effective by the
      Commission (in each case, the“Effectiveness
      Period”);
      provided
      that no
      later than two business days before filing with the Commission a registration
      statement or prospectus or any amendments or supplements thereto, the Company
      shall (i) furnish to one special counsel (“Holders
      Counsel”)
      selected by the Company for the benefit of the Holders (which Holders Counsel
      initially shall be Charles D. Powell of Fulbright &
Jaworski L.L.P., Houston, Texas), copies of all such documents proposed to
      be filed (excluding any exhibits other than applicable underwriting documents),
      in substantially the form proposed to be filed, which documents shall be subject
      to the review of such Holders Counsel, and (ii) notify each Holder of
      Registrable Securities covered by such registration statement of any stop order
      issued or threatened by the Commission and take all reasonable actions required
      to prevent the entry of such stop order or to remove it if entered;

    

    (b) if
      a
      registration statement is subject to review by the Commission, promptly respond
      to all comments and diligently pursue resolution of any comments to the
      satisfaction of the Commission;

    

    (c) prepare
      and file with the Commission such amendments and supplements to such
      registration statement and the prospectus used in connection therewith as may
      be
      necessary to keep such registration statement effective during the Effectiveness
      Period (but in any event at least until expiration of the 90-day period referred
      to in Section 4(3) of the Securities Act and Rule 174, or any successor thereto,
      thereunder, if applicable), and comply with the provisions of the Securities
      Act
      with respect to the disposition of all securities covered by such registration
      statement during such period in accordance with the intended method(s) of
      disposition by the sellers thereof set forth in such registration
      statement;

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d) furnish,
      without charge, to each Holder of Registrable Securities covered by such
      registration statement (i) a reasonable number of copies of such registration
      statement (including any exhibits thereto other than exhibits incorporated
      by
      reference), each amendment and supplement thereto as such Holder may request,
      (ii) such number of copies of the prospectus included in such registration
      statement (including each preliminary prospectus and any other prospectus filed
      under Rule 424 under the Securities Act) as such Holders may request, in
      conformity with the requirements of the Securities Act, and (iii) such other
      documents as such Holder may reasonably request in order to facilitate the
      disposition of the Registrable Securities owned by such Holder, but only during
      the Effectiveness Period;

    

    (e) use
      its
      commercially reasonable best efforts to register or qualify such Registrable
      Securities under such other applicable securities or blue sky laws of such
      jurisdictions as any Holder of Registrable Securities covered by such
      registration statement reasonably requests as may be necessary for the
      marketability of the Registrable Securities (such request to be made by the
      time
      the applicable registration statement is deemed effective by the Commission)
      and
      do any and all other acts and things which may be reasonably necessary or
      advisable to enable such Holder to consummate the disposition in such
      jurisdictions of the Registrable Securities owned by such Holder; provided
      that the
      Company shall not be required to (i) qualify generally to do business in any
      jurisdiction where it would not otherwise be required to qualify but for this
      paragraph (e), (ii) subject itself to taxation in any such jurisdiction, or
      (iii) consent to general service of process in any such
      jurisdiction;

    

    (f) as
      promptly as practicable after becoming aware of such event, notify each Holder
      of such Registrable Securities at any time when a prospectus relating thereto
      is
      required to be delivered under the Securities Act of the happening of any event
      which comes to the Company’s attention if as a result of such event the
      prospectus included in such registration statement contains an untrue statement
      of a material fact or omits to state any material fact required to be stated
      therein or necessary to make the statements therein not misleading and the
      Company shall promptly prepare and furnish to such Holder a supplement or
      amendment to such prospectus (or prepare and file appropriate reports under
      the
      Exchange Act) so that, as thereafter delivered to the purchasers of such
      Registrable Securities, such prospectus shall not contain an untrue statement
      of
      a material fact or omit to state any material fact required to be stated therein
      or necessary to make the statements therein not misleading, unless suspension
      of
      the use of such prospectus otherwise is authorized herein or in the event of
      a
      Blackout Period, in which case no supplement or amendment need be furnished
      (or
      Exchange Act filing made) until the termination of such suspension or Blackout
      Period; 

    

    (g) comply,
      and continue to comply during the period that such registration statement is
      effective under the Securities Act, in all material respects with the Securities
      Act and the Exchange Act and with all applicable rules and regulations of the
      Commission with respect to the disposition of all securities covered by such
      registration statement, and make available to its security holders, as soon
      as
      reasonably practicable, an earnings statement covering the period of at least
      12
      months, but not more than 18 months, beginning with the first full calendar
      month after the SEC Effective Date, which earnings statement shall satisfy
      the
      provisions of Section 11(a) of the Securities Act.

    

    (h) as
      promptly as practicable after becoming aware of such event, notify each Holder
      of Registrable Securities being offered or sold pursuant to the Registration
      Statement of the issuance by the Commission of any stop order or other
      suspension of effectiveness of the Registration Statement at the earliest
      possible time;

    

    (i) permit
      the Holders of Registrable Securities being included in the Registration
      Statement and their legal counsel, at such Holders’ sole cost and expense
      (except as otherwise specifically provided in Section 6) to review and have
      a
      reasonable opportunity to comment on the Registration Statement and all
      amendments and supplements thereto at least two Business Days prior to their
      filing with the Commission;

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (j)
       make
      available for inspection by any Holder and any Inspector retained by such
      Holder, at such Holder’s sole expense, all Records as shall be reasonably
      necessary to enable such Holder to exercise its due diligence responsibility,
      and cause the Company’s officers, directors, and employees to supply all
      information which such Holder or any Inspector may reasonably request for
      purposes of such due diligence; provided,
      however, that
      such
      Holder shall hold in confidence and shall not make any disclosure of any record
      or other information which the Company determines in good faith to be
      confidential, and of which determination such Holder is so notified at the
      time
      such Holder receives such information, unless (i) the disclosure of such record
      is necessary to avoid or correct a misstatement or omission in the Registration
      Statement and a reasonable time prior to such disclosure the Holder shall have
      informed the Company of the need to so correct such misstatement or omission
      and
      the Company shall have failed to correct such misstatement of omission, (ii)
      the
      release of such record is ordered pursuant to a subpoena or other order from
      a
      court or governmental body of competent jurisdiction or (iii) the information
      in
      such record has been made generally available to the public other than by
      disclosure in violation of this or any other agreement. The Company shall not
      be
      required to disclose any confidential information in such records to any
      Inspector until and unless such Inspector shall have entered into a
      confidentiality agreement with the Company with respect thereto, substantially
      in the form of this Section 4(j), which agreement shall permit such Inspector
      to
      disclose records to the Holder who has retained such Inspector. Each Holder
      agrees that it shall, upon learning that disclosure of such Records is sought
      in
      or by a court or governmental body of competent jurisdiction or through other
      means, give prompt notice to the Company and allow the Company, at the Company’s
      expense, to undertake appropriate action to prevent disclosure of, or to obtain
      a protective order for, the records deemed confidential. The Company shall
      hold
      in confidence and shall not make any disclosure of information concerning a
      Holder provided to the Company pursuant to this Agreement unless (i) disclosure
      of such information is necessary to comply with federal or state securities
      laws, (ii) disclosure of such information to the Staff of the Division of
      Corporation Finance is necessary to respond to comments raised by the Staff
      in
      its review of the Registration Statement, (iii) disclosure of such information
      is necessary to avoid or correct a misstatement or omission in the Registration
      Statement, (iv) release of such information is ordered pursuant to a subpoena
      or
      other order from a court or governmental body of competent jurisdiction, or
      (v)
      such information has been made generally available to the public other than
      by
      disclosure in violation of this or any other agreement. The Company agrees
      that
      it shall, upon learning that disclosure of such information concerning a Holder
      is sought in or by a court or governmental body of competent jurisdiction or
      through other means, give prompt notice to such Holder and allow such Holder,
      at
      such Holder’s expense, to undertake appropriate action to prevent disclosure of,
      or to obtain a protective order for, such information;

    

    (k) use
      its
      best efforts to cause all the Registrable Securities covered by the Registration
      Statement to be listed or quoted on the principal securities market on which
      securities of the same class or series issued by the Company are then listed
      or
      traded;

    

    (l) provide
      a
      transfer agent and registrar, which may be a single entity, for the Registrable
      Securities at all times;

    

    (m) cooperate
      with the Holders of Registrable Securities being offered pursuant to the
      Registration Statement to facilitate the timely preparation and delivery of
      certificates (not bearing any restrictive legends) representing Registrable
      Securities to be offered pursuant to the Registration Statement and enable
      such
      certificates to be in such denominations or amounts as the Holders may
      reasonably request and registered in such names as the Holders may request;
      and

    

    (n) take
      all
      other reasonable actions necessary to expedite and facilitate disposition by
      the
      Holders of the Registrable Securities pursuant to the Registration
      Statement.

    

    5. Suspension
      of Offers and Sales.
      Each
      Holder of Registrable Securities agrees that, upon receipt of any notice from
      the Company of the happening of any event of the kind described in Section
      4(f)
      hereof or of the commencement of an Blackout Period, such Holder shall
      discontinue disposition of Registrable Securities pursuant to the registration
      statement covering such Registrable Securities until such Holder’s receipt of
      the copies of the supplemented or amended prospectus contemplated by Section
      4(f) hereof or notice of the end of the Blackout Period, and, if so directed
      by
      the Company, such Holder shall deliver to the Company (at the Company’s expense)
      all copies (including, without limitation, any and all drafts), other than
      permanent file copies, then in such Holder’s possession, of the prospectus
      covering such Registrable Securities current at the time of receipt of such
      notice.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    6. Registration
      Expenses.
      The
      Company shall pay all expenses in connection with any registration, including,
      without limitation, all registration, filing, stock exchange and NASD fees,
      printing expenses, all fees and expenses of complying with securities or blue
      sky laws, the fees and disbursements of counsel for the Company and of its
      independent accountants, and the reasonable fees and disbursements of a Holders
      Counsel; provided that, in any underwritten registration, each party shall
      pay
      for its own underwriting discounts and commissions and transfer taxes. Except
      as
      provided above in this Section 6 and Section 9, the Company shall not be
      responsible for the expenses of any attorney or other advisor employed by a
      Holder of Registrable Securities.

    

    7. Assignment
      of Rights.
      No
      Holder may assign its rights under this Agreement to any party without the
      prior
      written consent of the Company; provided,
      however,
      that a
      Holder may assign its rights under this Agreement without such restrictions
      to a
      Permitted Assignee as long as (a) such transfer or assignment is effected in
      accordance with applicable securities laws; (b) such transferee or assignee
      agrees in writing to become subject to the terms of this Agreement; and (c)
      the
      Company is given written notice by such Holder of such transfer or assignment,
      stating the name and address of the transferee or assignee and identifying
      the
      Registrable Securities with respect to which such rights are being transferred
      or assigned.

    

    8. Information
      by Holder.
      The
      Holder or Holders of Registrable Securities included in any registration shall
      furnish to the Company such information regarding such Holder or Holders and
      the
      distribution proposed by such Holder or Holders as the Company may request
      in
      writing.

    

    9. Indemnification.

    

    (a) In
      the
      event of the offer and sale of Registrable Securities held by Holders under
      the
      Securities Act, the Company shall, and hereby does, indemnify and hold harmless,
      to the fullest extent permitted by law, each Holder, its directors, officers,
      partners, each other person who participates as an underwriter in the offering
      or sale of such securities, and each other person, if any, who controls or
      is
      under common control with such Holder or any such underwriter within the meaning
      of Section 15 of the Securities Act, against any losses, claims, damages or
      liabilities, joint or several, and expenses to which the Holder or any such
      director, officer, partner or underwriter or controlling person may become
      subject under the Securities Act or otherwise, insofar as such losses, claims,
      damages, liabilities or expenses (or actions or proceedings, whether commenced
      or threatened, in respect thereof) arise out of or are based upon any untrue
      statement or alleged untrue statement of any material fact contained in any
      registration statement under which such shares were registered under the
      Securities Act, any preliminary prospectus, final prospectus or summary
      prospectus contained therein, or any amendment or supplement thereto, or any
      omission or alleged omission to state therein a material fact required to be
      stated therein or necessary to make the statements therein in light of the
      circumstances in which they were made not misleading, and the Company shall
      reimburse the Holder, and each such director, officer, partner, underwriter
      and
      controlling person for any legal or any other expenses reasonably incurred
      by
      them in connection with investigating, defending or settling any such loss,
      claim, damage, liability, action or proceeding; provided that the foregoing
      shall not apply to, and the Company shall not be liable, in any such case (i)
      to
      the extent that any such loss, claim, damage, liability (or action or proceeding
      in respect thereof) or expense arises out of or is based upon an untrue
      statement or alleged untrue statement in or omission or alleged omission from
      such registration statement, any such preliminary prospectus, final prospectus,
      summary prospectus, amendment or supplement in reliance upon and in conformity
      with written information furnished to the Company through an instrument duly
      executed by or on behalf of such Holder specifically stating that it is for
      use
      in the preparation thereof, (ii) provided that the Company has complied with
      its
      obligations hereunder to furnish such Holder with copies of the applicable
      prospectus, if the person asserting any such loss, claim, damage, liability
      (or
      action or proceeding in respect thereof) who purchased the Registrable
      Securities that are the subject thereof did not receive a copy of an amended
      preliminary prospectus or the final prospectus (or the final prospectus as
      amended or supplemented) at or prior to the written confirmation of the sale
      of
      such Registrable Securities to such person because of the failure of such Holder
      or underwriter to so provide such amended preliminary or final prospectus and
      the untrue statement or alleged untrue statement or omission or alleged omission
      of a material fact made in such preliminary prospectus was corrected in the
      amended preliminary or final prospectus (or the final prospectus as amended
      or
      supplemented), or (iii) provided that the plan of distribution mechanics
      described in the applicable prospectus are, in form and substance, reasonable
      and customary for transactions of this type, to the extent that the Holders
      failed to comply with the terms of such plan of distribution mechanics. Such
      indemnity shall remain in full force and effect regardless of any investigation
      made by or on behalf of the Holders, or any such director, officer, partner,
      underwriter or controlling person and shall survive the transfer of such shares
      by the Holder.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) As
      a
      condition to including any Registrable Securities to be offered by a Holder
      in
      any registration statement filed pursuant to this Agreement, each such Holder
      agrees to be bound by the terms of this Section 9 and to indemnify and hold
      harmless, to the fullest extent permitted by law, the Company, its directors
      and
      officers, and each other person, if any, who controls the Company within the
      meaning of Section 15 of the Securities Act, legal counsel and accountants
      for
      the Company, any underwriter, any other Holder selling securities in such
      registration statement and any controlling person within the meaning of the
      Securities Act of any such underwriter or other Holder, against any losses,
      claims, damages or liabilities, joint or several, to which the Company or any
      such director or officer or controlling person may become subject under the
      Securities Act or otherwise, insofar as such losses, claims, damages or
      liabilities (or actions or proceedings, whether commenced or threatened, in
      respect thereof) arise out of or are based upon (i) an untrue statement or
      alleged untrue statement in or omission or alleged omission from such
      registration statement, any preliminary prospectus, final prospectus or summary
      prospectus contained therein, or any amendment or supplement thereto, if such
      statement or alleged statement or omission or alleged omission was made in
      reliance upon and in conformity with written information about such Holder
      as a
      Holder of the Company furnished to the Company, (ii) provided that the Company
      has complied with its obligations hereunder to furnish such Holder with copies
      of the applicable prospectus, if the person asserting any such loss, claim,
      damage, liability (or action or proceeding in respect thereof) who purchased
      the
      Registrable Securities that are the subject thereof did not receive a copy
      of an
      amended preliminary prospectus or the final prospectus (or the final prospectus
      as amended or supplemented) at or prior to the written confirmation of the
      sale
      of such Registrable Securities to such person because of the failure of such
      Holder or underwriter to so provide such amended preliminary or final prospectus
      and the untrue statement or alleged untrue statement or omission or alleged
      omission of a material fact made in such preliminary prospectus was corrected
      in
      the amended preliminary or final prospectus (or the final prospectus as amended
      or supplemented), or (iii) provided that the plan of distribution mechanics
      described in the applicable prospectus are, in form and substance, reasonable
      and customary for transactions of this type, to the extent that the Holders
      failed to comply with the terms of such plan of distribution mechanics. Such
      indemnity shall remain in full force and effect regardless of any investigation
      made by or on behalf of the Holders, or any such director, officer, partner,
      underwriter or controlling person and shall survive the transfer of such shares
      by the Holder, and such Holder shall reimburse the Company, and each such
      director, officer, legal counsel and accountants, underwriter, other Holder,
      and
      controlling person for any legal or other expenses reasonably incurred by them
      in connection with investigating, defending, or settling and such loss, claim,
      damage, liability, action, or proceeding; provided,
      however,
      that
      such indemnity agreement found in this Section 9(b) shall in no event exceed
      the
      gross proceeds from the offering received by such Holder. Such indemnity shall
      remain in full force and effect, regardless of any investigation made by or
      on
      behalf of the Company or any such director, officer or controlling person and
      shall survive the transfer by any Holder of such shares.

    

    (c) Promptly
      after receipt by an indemnified party of notice of the commencement of any
      action or proceeding involving a claim referred to in Section 9(a) or (b) hereof
      (including any governmental action), such indemnified party shall, if a claim
      in
      respect thereof is to be made against an indemnifying party, give written notice
      to the indemnifying party of the commencement of such action; provided that
      the
      failure of any indemnified party to give notice as provided herein shall not
      relieve the indemnifying party of its obligations under Section 9(a) or (b)
      hereof, except to the extent that the indemnifying party is actually prejudiced
      by such failure to give notice. In case any such action is brought against
      an
      indemnified party, unless in the reasonable judgment of counsel to such
      indemnified party a conflict of interest between such indemnified and
      indemnifying parties may exist or the indemnified party may have defenses not
      available to the indemnifying party in respect of such claim, the indemnifying
      party shall be entitled to participate in and to assume the defense thereof,
      with counsel reasonably satisfactory to such indemnified party and, after notice
      from the indemnifying party to such indemnified party of its election so to
      assume the defense thereof, the indemnifying party shall not be liable to such
      indemnified party for any legal or other expenses subsequently incurred by
      the
      latter in connection with the defense thereof, unless in such indemnified
      party’s reasonable judgment a conflict of interest between such indemnified and
      indemnifying parties arises in respect of such claim after the assumption of
      the
      defenses thereof or the indemnifying party fails to defend such claim in a
      diligent manner, other than reasonable costs of investigation. Neither an
      indemnified nor an indemnifying party shall be liable for any settlement of
      any
      action or proceeding effected without its consent. No indemnifying party shall,
      without the consent of the indemnified party, consent to entry of any judgment
      or enter into any settlement, which does not include as an unconditional term
      thereof the giving by the claimant or plaintiff to such indemnified party of
      a
      release from all liability in respect of such claim or litigation.
      Notwithstanding anything to the contrary set forth herein, and without limiting
      any of the rights set forth above, in any event any party shall have the right
      to retain, at its own expense, counsel with respect to the defense of a
      claim.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (d)  In
      the
      event that an indemnifying party does or is not permitted to assume the defense
      of an action pursuant to Section 9(c) or in the case of the expense
      reimbursement obligation set forth in Section 9(a) and (b), the indemnification
      required by Section 9(a) and (b) hereof shall be made by periodic payments
      of
      the amount thereof during the course of the investigation or defense, as and
      when bills received or expenses, losses, damages, or liabilities are
      incurred.

    

    (e) If
      the
      indemnification provided for in this Section 9 is held by a court of competent
      jurisdiction to be unavailable to an indemnified party with respect to any
      loss,
      liability, claim, damage or expense referred to herein, the indemnifying party,
      in lieu of indemnifying such indemnified party hereunder, shall (i) contribute
      to the amount paid or payable by such indemnified party as a result of such
      loss, liability, claim, damage or expense as is appropriate to reflect the
      proportionate relative fault of the indemnifying party on the one hand and
      the
      indemnified party on the other (determined by reference to, among other things,
      whether the untrue or alleged untrue statement of a material fact or omission
      relates to information supplied by the indemnifying party or the indemnified
      party and the parties’ relative intent, knowledge, access to information and
      opportunity to correct or prevent such untrue statement or omission), or (ii)
      if
      the allocation provided by clause (i) above is not permitted by applicable
      law
      or provides a lesser sum to the indemnified party than the amount hereinafter
      calculated, not only the proportionate relative fault of the indemnifying party
      and the indemnified party, but also the relative benefits received by the
      indemnifying party on the one hand and the indemnified party on the other,
      as
      well as any other relevant equitable considerations. No indemnified party guilty
      of fraudulent misrepresentation (within the meaning of Section 11(f) of the
      Securities Act) shall be entitled to contribution from any indemnifying party
      who was not guilty of such fraudulent misrepresentation.

    

    (f) Other
      Indemnification.
      Indemnification similar to that specified in the preceding subsections of this
      Section 9 (with appropriate modifications) shall be given by the Company and
      each Holder of Registrable Securities with respect to any required registration
      or other qualification of securities under any federal or state law or
      regulation or governmental authority other than the Securities Act.

    

    10. Rule
      144 Reporting.
      With a
      view to making available to the Holders the benefits of certain rules and
      regulations of the Commission which may permit the sale of the Registrable
      Securities to the public without registration, the Company agrees to use its
      reasonable efforts to:

    

    (a)
       Make
      and
      keep public information available, as those terms are understood and defined
      in
      Rule 144 or any similar or analogous rule promulgated under the Securities
      Act, at all times after the effective date of the first registration filed
      by
      the Company for an offering of its securities to the general
      public;

    

    (b) 
      File
      with the Commission, in a timely manner, all reports and other documents
      required of the Company under the Exchange Act; and

    

    (c) 
      So long
      as a Holder owns any Registrable Securities, furnish to such Holder forthwith
      upon request: a written statement by the Company as to its compliance with
      the
      reporting requirements of said Rule 144 of the Securities Act, and of the
      Exchange Act (at any time after it has become subject to such reporting
      requirements); a copy of the most recent annual or quarterly report of the
      Company; and such other reports and documents as a Holder may reasonably request
      in availing itself of any rule or regulation of the Commission allowing it
      to
      sell any such securities without registration.

    

    11. Miscellaneous

    

    (a) Governing
      Law.
      This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Texas and the United States of America, both substantive and remedial.
      Any
      judicial proceeding brought against either of the parties to this agreement
      or
      any dispute arising out of this Agreement or any matter related hereto shall
      be
      brought in the courts of the State of Texas, Harris County, or in the United
      States District Court for the Southern District of Texas and, by its execution
      and delivery of this agreement, each party to this Agreement accepts the
      jurisdiction of such courts. The foregoing consent to jurisdiction shall not
      be
      deemed to confer rights on any person other than the parties to this
      Agreement.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (b) Successors
      and Assigns.
      Except
      as otherwise provided herein, the provisions hereof shall inure to the benefit
      of, and be binding upon, the successors, Permitted Assigns, executors and
      administrators of the parties hereto. In the event the Company merges with,
      or
      is otherwise acquired by, a direct or indirect subsidiary of a publicly traded
      company, the Company shall condition the merger or acquisition on the assumption
      by such parent company of the Company’s obligations under this Agreement.

    

    (c) Entire
      Agreement.
      This
      Agreement constitutes the full and entire understanding and agreement between
      the parties with regard to the subjects hereof.

    

    (d) Notices,
      etc.
      All
      notices or other communications which are required or permitted under this
      Agreement shall be in writing and sufficient if delivered by hand, by facsimile
      transmission, by registered or certified mail, postage pre-paid, by electronic
      mail, or by courier or overnight carrier, to the persons at the addresses set
      forth below (or at such other address as may be provided hereunder), and shall
      be deemed to have been delivered as of the date so delivered: 

     

    
 

    
      	
               If
                to the
                Company:  

            	Internet America, Inc.
	 	10930 W. Sam Houston Pkwy, North
	 	Suite
              200
	 	Houston, Texas 77064
	 	 
	
              With
                a copy to:

            	Mayer Brown LLP
	 	700 Louisiana, Suite 3600
	 	Houston, Texas 77002-2730
	 	Attn: Robert F. Gray, Jr.
	 	Facsimile: (713) 238-4600
	 	 
	
              If
                to an Investor:

            	To the address set forth immediately
              below
              such Investor’s name on the signature pages to the Subscription Agreement
              delivered by such Investor to the Company on or prior to the date
              hereof.

    

      

    
      	
               With
                a copy to: 

            	Fulbright &
              Jaworski L.L.P.
	 	1301
              McKinney St., Ste 5100
	 	Houston, Texas 77010
	 	Attention:
              Charles D. Powell
	 	Facsimile: (713)
              651-5246

    

     

    or
      at
      such other address as any party shall have furnished to the other parties in
      writing.

    

    (e) Delays
      or Omissions.
      No
      delay or omission to exercise any right, power or remedy accruing to any Holder
      of any Registrable Securities, upon any breach or default of the Company under
      this Agreement, shall impair any such right, power or remedy of such Holder
      nor
      shall it be construed to be a waiver of any such breach or default, or an
      acquiescence therein, or of or in any similar breach or default thereunder
      occurring; nor shall any waiver of any single breach or default be deemed a
      waiver of any other breach or default theretofore or thereafter occurring.
      Any
      waiver, permit, consent or approval of any kind or character on the part of
      any
      Holder of any breach or default under this Agreement, or any waiver on the
      part
      of any Holder of any provisions or conditions of this Agreement, must be in
      writing and shall be effective only to the extent specifically set forth in
      such
      writing. All remedies, either under this Agreement, or by law or otherwise
      afforded to any holder, shall be cumulative and not alternative.

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    (f) Counterparts.
      This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      enforceable against the parties actually executing such counterparts, and all
      of
      which together shall constitute one instrument.

    

    (g) Severability.
      In the
      case any provision of this Agreement shall be invalid, illegal or unenforceable,
      the validity, legality and enforceability of the remaining provisions shall
      not
      in any way be affected or impaired thereby.

    

    (h) Amendments.
      The
      provisions of this Agreement may be amended at any time and from time to time,
      and particular provisions of this Agreement may be waived, with and only with
      an
      agreement or consent in writing signed by the Company and by the holders of
      a
      majority of the number of shares of Registrable Securities outstanding as of
      the
      date of such amendment or waiver. The Investors acknowledge that by the
      operation of this Section 10(h), the holders of a majority of the outstanding
      Registrable Securities may have the right and power to diminish or eliminate
      all
      rights of the Investors under this Agreement.

    

    [Signature
      Pages Follow]

    

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    This
      Registration Rights Agreement is hereby executed as of the date first above
      written.

    
      	 	 	 
	 	COMPANY:
	 	 
	 	Internet America,
              Inc.
	 
 	 
 	 
 
	 	By:  	/s/ William
              E
              . Ladin   
	 	
              
William
              E. Ladin
	 	Chairman
              and Chief Executive Officer

    

     

    [Investor
      Signature Pages Follow] 

    
      
        
           

          

        

        
        

      

      
        
        

        
          

        

      

      
        
        

        
          

        

      

    

    
      	 	 	 
	 	INVESTOR:
	 
 	 
 	 
 
	
            	  	 
	 	Name
	 	 
	 	  
	 	Signature

    

    
      
         

        

        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    EXHIBIT
      A TO THE REGISTRATION RIGHTS AGREEMENT INTENTIONALLY
      OMITTED.

     

     

     

    -2-Unassociated Document

    EXHIBIT
      4.3

     

    STATEMENT
      OF RESOLUTION

    OF

    SERIES
      A PREFERRED STOCK

    

    TO
      THE SECRETARY OF STATE

    OF
      THE STATE OF TEXAS

    Pursuant
      to Article 2.13 of the Texas Business Corporation Act, Internet America, Inc.,
      a
      corporation organized and existing under the laws of the State of Texas (the
      “Corporation”), submits the following statement for the purpose of establishing
      and designating a series of shares and fixing and determining the preferences,
      limitations and relative rights thereof:

     

    1.     The
      name
      of the Corporation is Internet America, Inc.

     

    2.     The
      following resolution, establishing and designating a series of shares and fixing
      and determining the preferences, limitations and relative rights thereof, was
      duly adopted by the Board of Directors of the Corporation on October 11,
      2007.

     

    WHEREAS,
      Article
      IV of the Articles of Incorporation, as amended, of the Corporation (the
      "Articles of Incorporation") provides for a class of authorized shares known
      as
      "Common Stock, comprising 45,000,000 shares, with a par value of $.01 per share
      (the “Common Stock”), issuable from time to time, and for a class of authorized
      shares known as “Preferred Stock”, comprising 5,000,000 shares, with a par value
      of $.01 per share, issuable from time to time in one or more
      series;

     

    WHEREAS,
      pursuant to Article IV of the Articles of Incorporation, the Board of Directors
      of the Corporation is authorized to fix and determine the preferences,
      limitations and relative rights of any wholly unissued series of Preferred
      Stock, and to fix the number of shares constituting such series, and to increase
      or decrease the number of shares of an such series (but not below the number
      of
      shares then outstanding); and

     

    WHEREAS,
      it is
      the desire of the Board of Directors of the Corporation, pursuant to its
      authority as aforesaid, to establish, designate and issue an additional series
      of such Preferred Stock and to fix and determine the preferences, limitations
      and relative rights relating thereto;

     

    NOW,
      THEREFORE, BE IT RESOLVED,
      that
      the Board of Directors does hereby establish and designate a series of Preferred
      Stock of the Corporation and does hereby fix and determine the preferences,
      limitations and relative rights relating to said series of Preferred Stock,
      as
      follows:

    

    Series
      A Preferred Stock

    

    
      	1.  	
              Designation
                and Number of Shares.
                There shall be a series of preferred stock that shall be designated
                as
                “Series A Preferred Stock” and the number of shares constituting such
                series shall be 4,000,000. Such number of shares may be increased
                or
                decreased by resolution of the Board; provided,
                however,
                that no decrease shall reduce the number of shares of the Series
                A
                Preferred Stock to less than the number of shares then issued and
                outstanding plus the number of shares issuable upon exercise of
                outstanding rights, options or warrants or upon conversion of outstanding
                securities issued by the
                Corporation.

            

    

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

    
      	2.  	
              Rank.
                The Series A Preferred Stock shall rank senior to the Common Stock
                with
                respect to the payment of dividends and as to the distribution of
                assets
                upon a liquidation, dissolution or winding up of the
                Corporation.

            

    

     

    
      	3.  	
               Dividends
                and Distribution.

            

    

     

    
      	(a)  	
              The
                holders of Series A Preferred Stock shall be entitled to receive
                out of
                the assets of the Corporation, when and if declared by the Board
                out of
                funds legally available for that purpose, cumulative preferred cash
                dividends at a rate per annum of 10% for each share of the Series
                A
                Preferred Stock. Such dividends shall be cumulative from the date
                the
                Series A Preferred Stock is issued to the holder (the “Issue Date”) and
                shall be payable in arrears, when and as declared by the Board, on
                March
                31, June 30, September 30 and December 31 of each year (each such
                date
                being referred to herein as a “Dividend Payment Date”), commencing on the
                first Dividend Payment Date following the Issue Date; provided,
                however,
                that if any Dividend Payment Date shall not be a Business Day, then
                the
                Dividend Payment Date shall be on the next succeeding day that is
                a
                Business Day. The period from the Issue Date to the next Dividend
                Payment
                Date and each quarterly period between consecutive Dividend Payment
                Dates
                shall hereinafter be referred to as “Dividend Periods.” “Business Day”
                means any day except Saturday, Sunday and any day which shall be
                a legal
                holiday or a day which banking institutions in Houston, Texas generally
                are authorized or required by law or other governmental actions to
                close.

            

    

     

    
      	(b)  	
              If,
                on any Dividend Payment Date, the Corporation fails to pay dividends,
                then
                until the dividends that were scheduled to be paid on such date are
                paid,
                such dividends shall cumulate. 

            

    

     

    
      	(c)  	
              Dividends
                on account of arrears for any past Dividend Periods may be declared
                and
                paid at any time, without reference to any Dividend Payment Date,
                to
                holders of record on a date designated by the Board, not exceeding
                30 days
                preceding the payment date thereof, as may be fixed by the
                Board.

            

    

     

    
      	(d)  	
              The
                Corporation may not declare a dividend or distribution on the Common
                Stock
                unless it first declares a dividend or distribution on the Series
                A
                Preferred Stock. 

            

    

     

    
      	(e)  	
              The
                Board may fix a record date for the determination of the holders
                of shares
                of Series A Preferred Stock entitled to receive payment of a dividend
                or
                distribution declared thereon, which record date shall be no more
                than 60
                days prior to the date fixed for the payment
                thereof.

            

    

     

    
      	4.  	
              Voting
                Rights.
                The holders of the Series A Preferred Stock shall vote (on an as-converted
                basis) together with the Common Stock, and not as a separate class,
                except:

            

    

     

    
      	(a)  	
              as
                provided under “Certain Restrictions” below;
                or

            

    

     

    
      	(b)  	
              as
                required by law.

            

    

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    
      	5.  	
              Certain
                Restrictions.

            

    

     

    
      	(a)  	
              Whenever
                quarterly dividends or other dividends or distributions payable on
                the
                Series A Preferred Stock are in arrears, thereafter and until all
                accrued
                and unpaid dividends and distributions, whether or not declared,
                on shares
                of the Series A Preferred Stock outstanding shall have been paid
                in full,
                the Corporation shall not:

            

    

     

    
      	(i)  	
              Declare
                or pay dividends on, make any other distributions on, or redeem or
                purchase or otherwise acquire for consideration any shares of stock
                ranking junior (either as to dividends or upon liquidation, dissolution
                or
                winding up of the Corporation) to the Series A Preferred
                Stock;

            

    

     

    
      	(ii)  	
              Declare
                or pay dividends on or make any other distributions on any shares
                of stock
                ranking on a parity (either as to dividends or upon the liquidation,
                dissolution or winding up of the Corporation) with the Series A Preferred
                Stock, except dividends paid ratably with the Series A Preferred
                Stock and
                all such parity stock on which dividends are payable or in arrears
                in
                proportional to the total amounts to which the holders of all such
                shares
                are then entitled; or

            

    

     

    
      	(iii)  	
              Purchase
                or otherwise acquire for consideration any shares of Series A Preferred
                Stock, or any shares of stock ranking on a parity with the Series
                A
                Preferred Stock, except in accordance with a purchase offer made
                in
                writing or by publication (as determined by the Board) to all holders
                of
                Series A Preferred Stock, or to such holders and holders of any such
                shares ranking on a parity therewith, upon such terms as the Board,
                after
                consideration of the respective annual dividend rates and other relative
                rights and preferences of the respective series and classes shall
                determine in good faith will result in fair and equitable treatment
                among
                the respective series or classes.

            

    

     

    
      	(b)  	
              So
                long as any shares of Series A Preferred Stock are outstanding, the
                Corporation shall not, without the prior written consent of the holders
                of
                at least 66.66% of the Series A Preferred Stock, either directly
                or by
                amendment, merger, consolidation or otherwise:

            

    

     

    
      	(i)  	
              amend,
                alter, or repeal any provision of the Articles of Incorporation or
                Bylaws
                of the Corporation relating to the Series A Preferred Stock;
                or

            

    

     

    
      	(ii)  	
              create
                or authorize the creation of or issue any other security convertible
                into
                or exercisable for any equity security, having rights, preferences
                or
                privileges senior to or on parity with the Series A Preferred Stock,
                or
                increase the authorized number of shares of Series A Preferred
                Stock.

            

    

     

    
      	6.  	
              Liquidation
                Preference.

            

    

     

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    
      	(a)  	
              In
                the event of any liquidation of the Corporation, after payment or
                provision by the Corporation of the debts and other liabilities of
                the
                Corporation, each holder shall be entitled to receive an amount in
                case
                for each share of the then outstanding Series A Preferred Stock held
                by
                such holder equal to $.586 per share, plus an amount equal to all
                accrued
                but unpaid dividends thereon, whether or not earnings are available
                in
                respect of such dividends or such dividends have been declared, to
                and
                including, the date full payment is tendered to the holders with
                respect
                to such liquidation, and no more (such amount being referred to herein
                as
                the “Liquidation Preference”), before any distribution shall be made to
                the holders of any Common Stock upon the liquidation of the
                Corporation.

            

    

     

    
      	(b)  	
              In
                the case the assets of the Corporation available for payment to the
                holders upon a liquidation are insufficient to pay the full Liquidation
                Preference on all outstanding shares of the Series A Preferred Stock,
                then
                the entire assets of the Corporation available for payment to the
                holders
                will be distributed ratably. 

            

    

     

    
      	(c)  	
              Written
                notice of any liquidation of the Corporation, stating a payment date
                and
                the place where the distributable amounts shall be payable, shall
                be given
                by mail, postage prepaid, not less than 30 days prior to the payment
                date
                stated therein, to the holders of record at their respective addresses
                as
                the same shall appear on the books of the
                Corporation.

            

    

     

    
      	7.  	
              Reacquired
                Shares.
                Any shares of the Series A Preferred Stock purchased or otherwise
                acquired
                by the Corporation in any manner whatsoever shall be retired promptly
                upon
                the acquisition thereof. All such shares shall upon retirement become
                authorized but unissued shares of preferred stock and may be reissued
                as
                part of a new series of preferred stock to be created by resolution
                or
                resolutions of the Board, subject to any conditions and restrictions
                on
                issuance set forth herein.

            

    

     

    
      	8.  	
              Conversion
                Rights.

            

    

     

    
      	(a)  	
              Optional
                Conversion. The
                Series A Preferred Stock shall be convertible, without the payment
                of any
                additional consideration, into an equal number of fully paid and
                nonassessable shares of Common Stock, at the option of the holder
                at any
                time, subject to adjustments for stock dividends, splits, combinations
                and
                similar events and as described below under “Anti-dilution
                Provisions.” 

            

    

     

    
      	(b)  	
              Mandatory
                Conversion.
                In
                the event that the per share trading price of the Common Stock is
                equal to
                or greater than $3.00 per share for 90 consecutive trading days,
                the
                Series A Preferred Stock shall convert, automatically, without any
                further
                action on the part of the holders thereof and whether or not the
                certificates representing such shares are surrendered to the Corporation
                or its transfer agent and without the payment of any additional
                consideration, into an equal number of fully paid and nonassessable
                shares
                of Common Stock, subject to adjustments for stock dividends, splits,
                combinations and similar events and as described below under
                “Anti-dilution Provisions.” 

            

    

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    
      	(c)  	
              Conversion
                Procedure.
                The holder of any shares of Series A Preferred Stock may exercise
                the
                conversion right specified in Section 8(a) hereof, or may receive
                a
                certificate representing the shares of Common Stock into which such
                shares
                were converted automatically pursuant to Section 8(b) hereof, by
                surrendering to the Corporation or the transfer agent of the Corporation
                the certificate(s) representing the share(s) of Series A Preferred
                Stock
                to be converted, accompanied by written notice specifying the number
                of
                such shares to be converted. If the certificates representing such
                shares
                of Series A Preferred Stock are to be issued in a name other than
                the name
                on the face of the certificates representing such shares of Series
                A
                Preferred Stock, such certificates shall be accompanied by such evidence
                of assignment and such evidence of the signatory’s authority with respect
                thereto. Conversions shall be deemed to have been effected with respect
                to
                conversions pursuant to (i) Section 8(a) hereof on the date when
                the
                notice of an election to convert pursuant to Section 8(a) hereof
                and the
                certificates representing the shares being converted are actually
                received
                by the Corporation or any transfer agent of the Corporation and (ii)
                Section 8(b) on the 90th
                day referred to therein. Such date that the conversion shall be deemed
                to
                be effective shall be referred to herein as the “Conversion Date.”
                

            

    

     

    
      	(d)  	
              As
                promptly as possible after the Conversion Date, upon surrender by
                the
                holder thereof of the certificate(s) formerly representing the shares
                of
                Series A Preferred Stock, the Corporation shall issue and deliver
                to or
                upon the written order of such holder a certificate or certificates
                for
                the number of shares of Common Stock to which such holder is entitled
                upon
                such conversion. The person in whose name the certificate(s) for
                shares of
                Common Stock to be issued shall be deemed to have become a holder
                of
                record of such shares of Common Stock on the applicable Conversion
                Date.

            

    

     

    
      	(e)  	
              Upon
                conversion of only a portion of the shares covered by a certificate
                representing shares of Series A Preferred Stock surrendered for conversion
                pursuant to Section 8(a) hereof, the Corporation shall issue and
                deliver
                to or upon the written order to the holder of the certificate so
                surrendered for conversion, at the expense of the Corporation, a
                new
                certificate representing the number of shares of Series A Preferred
                Stock
                representing the unconverted portion of the certificate so surrendered.
                

            

    

     

    
      	(f)  	
              The
                Corporation covenants and agrees
                that:

            

    

     

    
      	(i)  	
              The
                shares of Common Stock issuable upon any conversion of any shares
                of
                Series A Preferred Stock will be deemed to have been issued to the
                Person
                exercising such conversion rights set forth herein on the Conversion
                Date,
                and the Person exercising such conversion rights will be deemed for
                all
                purposes to have become the record holder of such shares of Common
                Stock
                on the Conversion Date. “Person” means an individual or entity of any
                kind;

            

    

     

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    
      	(ii)  	
              All
                shares of Common Stock which may be issued upon any conversion of
                any
                Series A Preferred Stock will, upon issuance, be fully paid and
                non-assessable and free from all taxes, liens and charges with respect
                to
                the issue thereof;

            

    

     

    
      	(iii)  	
              The
                Corporation will take all such action as may be necessary to assure
                that
                all shares of Common Stock issuable upon conversion of shares of
                Series A
                Preferred Stock may be issued without violation of any applicable
                law or
                regulation or any requirements of any domestic securities exchange,
                if
                any, upon which the outstanding Common Stock is listed at the time
                of such
                delivery;

            

    

     

    
      	(iv)  	
              The
                Corporation will at all times reserve and keep available, out of
                its
                authorized but unissued shares of Common Stock or out of shares of
                Common
                Stock held in its treasury, the full number of shares of Common Stock
                into
                which all shares of the Series A Preferred Stock having conversion
                privileges from time to time outstanding are convertible;
                and

            

    

     

    
      	(v)  	
              The
                Corporation will at no time close its transfer books against the
                transfer
                of the Series A Preferred Stock or of any shares of Common Stock
                issued or
                issuable upon the conversion of the Series A Preferred Stock in any
                manner
                which interferes with the timely conversion of the Series A Preferred
                Stock.

            

    

     

    
      	9.  	
              Anti-Dilution
                Provisions.

            

    

     

    
      	(a)  	
              In
                the event that the Corporation issues additional securities the conversion
                price shall be adjusted in accordance with the following
                formula:

            

    

     

    
      	 	 	 	 

      	 	CP2 	  = CP1	*
              (A+B) / (A+C)

      	 	 	
            	 

      	 	CP2 	
              =

            	New Series A Conversion Price

      	 	 	 	 

      	 	CP1 	
              =

            	Series A Conversion Price in effect immediately
              prior to
              new issue

      	 	 	 	 

      	 	
              A

            	
              =

            	
              Number
                of shares of Common Stock deemed to be outstanding immediately prior
                to
                new issue (includes all shares of outstanding common stock, all shares
                of
                outstanding preferred stock on an as-converted basis, and all outstanding
                options on an as-exercised basis; and does not include any convertible
                securities converting into this round of financing)
                

            

      	 	 	 	 

    

    
      	 	
              B

            	 	
              =

            	
              Aggregate
                consideration received by the Corporation with respect to the new
                issue
                divided by CP1

            

      	 	 	 	 	 

      	 	C	 	=	Number of shares of stock issued in the subject
              transaction.

    

     

    
      	(b)  	
              The
                following issuances shall not trigger anti-dilution
                adjustment:

            

    

     

    
      	(i)  	
              securities
                issuable upon conversion of any of the Series A Preferred Stock,
                or as a
                dividend or distribution on the Series A Preferred
                Stock;

            

    

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

    
      	(ii)  	
              securities
                issued upon the conversion of any currently outstanding debenture,
                warrant, option, or other convertible
                security;

            

    

     

    
      	(iii)  	
              Common
                Stock issuable upon a stock split, stock dividend, or any subdivision
                of
                shares of Common Stock;

            

    

     

    
      	(iv)  	
              shares
                of Common Stock (or options to purchase such shares of Common Stock)
                issued or issuable to employees or directors of, or consultants to,
                the
                Corporation pursuant to any plan approved by the Corporation’s Board,
                including the Series A Director, but in no event exceeding 1,000,000
                shares; 

            

    

     

    
      	(v)  	
              shares
                of Common Stock issued or issuable to banks, equipment lessors pursuant
                to
                a debt financing, equipment leasing or real property leasing transaction
                approved by the Board of the
                Corporation;

            

    

     

    
      	(vi)  	
              shares
                of Common Stock issued or issuable pursuant to an acquisition of
                another
                corporation or other business entity by the Corporation, or formation
                of a
                joint venture, in each instance expressly approved by the Board of
                the
                Corporation; and

            

    

     

    
      	(vii)  	
              shares
                of Common Stock issued to suppliers of goods or services pursuant
                to
                transactions approved by the Board of the
                Corporation.

            

    

     

    
      	10.  	
              No
                Redemption.
                Except as expressly set forth herein, the shares of the Series A
                Preferred
                Stock shall not be subject to redemption by the
                Corporation.

            

    

     

    
      	11.  	
              Fractional
                Shares.
                The Series A Preferred Stock may not be issued in fractions of a
                share.

            

    

     

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        -9-

        
          

        

      

      
        
        

        
          

        

      

    

    IN
      WITNESS WHEREOF, the undersigned has executed this Statement of Resolution
      on
      behalf of the Corporation as of this 15th day of October, 2007.

     

    
      	 	 	 
	 	INTERNET
              AMERICA, INC.
	 
 	 
 	 
 
	 	By:  	/s/ William
              E. Ladin, Jr. 
	 	
              
Name: William
              E. Ladin, Jr.
	 	Title:Chairman
              and Chief Executive  Officer

      
        
          

          
          

        

        
          -10-

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