UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. )*
INFORMATION ANALYSIS INCORPORATED
--------------------------------------------
(Name of Issuer)
Common Stock, $0.001 par Value
--------------------------------------------
(Title of Class of Securities)
456696103
--------------------
(CUSIP Number)
Stephen M. Vine, Esq.
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
590 Madison Avenue
New York, New York 10022
(212) 872-1000
--------------------------------------------
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
January 13, 1998
--------------------
(Date of Event which Requires Filing
of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(b)(3) or (4), check the following box [_].
Note: Six copies of this statement, including all exhibits, should be filed with
the Commission. See Rule 13d- 1(a) for other parties to whom copies are to be
sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter disclosure
provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Continued on following page(s)
Page 1 of 21 Pages
Exhibit Index: Page 14
<PAGE>
Page 2 of 21 Pages
SCHEDULE 13D
CUSIP No. 456696103
1 Name of Reporting Person
I.R.S. Identification No. of Above Persons (ENTITIES ONLY)
White Rock Capital, Inc.
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF; WC
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Texas
7 Sole Voting Power
Number of 6,400
Shares
Beneficially 8 Shared Voting Power
Owned By 371,100
Each
Reporting 9 Sole Dispositive Power
Person 6,400
With
10 Shared Dispositive Power
371,100
11 Aggregate Amount Beneficially Owned by Each Reporting Person
377,500
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [_]
13 Percent of Class Represented By Amount in Row (11)
5.75%
14 Type of Reporting Person*
CO; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 3 of 21 Pages
SCHEDULE 13D
CUSIP No. 456696103
1 Name of Reporting Person
I.R.S. Identification No. of Above Persons (ENTITIES ONLY)
White Rock Capital Management, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Texas
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 371,100
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
371,100
11 Aggregate Amount Beneficially Owned by Each Reporting Person
371,100
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [x]
13 Percent of Class Represented By Amount in Row (11)
5.65%
14 Type of Reporting Person*
PN; IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 4 of 21 Pages
SCHEDULE 13D
CUSIP No. 456696103
1 Name of Reporting Person
I.R.S. Identification No. of Above Persons (ENTITIES ONLY)
White Rock Capital Partners, L.P.
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
WC
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
Texas
7 Sole Voting Power
Number of 67,000
Shares
Beneficially 8 Shared Voting Power
Owned By 0
Each
Reporting 9 Sole Dispositive Power
Person 67,000
With
10 Shared Dispositive Power
0
11 Aggregate Amount Beneficially Owned by Each Reporting Person
67,000
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [x]
13 Percent of Class Represented By Amount in Row (11)
1.03%
14 Type of Reporting Person*
PN; IV
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 5 of 21 Pages
SCHEDULE 13D
CUSIP No. 456696103
1 Name of Reporting Person
I.R.S. Identification No. of Above Persons (ENTITIES ONLY)
Thomas U. Barton
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 377,500
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
377,500
11 Aggregate Amount Beneficially Owned by Each Reporting Person
377,500
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [_]
13 Percent of Class Represented By Amount in Row (11)
5.75%
14 Type of Reporting Person*
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 6 of 21 Pages
SCHEDULE 13D
CUSIP No. 456696103
1 Name of Reporting Person
I.R.S. Identification No. of Above Persons (ENTITIES ONLY)
Joseph U. Barton
2 Check the Appropriate Box If a Member of a Group*
a. [_]
b. [x]
3 SEC Use Only
4 Source of Funds*
AF
5 Check Box If Disclosure of Legal Proceedings Is Required Pursuant to
Items 2(d) or 2(e) [_]
6 Citizenship or Place of Organization
United States
7 Sole Voting Power
Number of 0
Shares
Beneficially 8 Shared Voting Power
Owned By 377,500
Each
Reporting 9 Sole Dispositive Power
Person 0
With
10 Shared Dispositive Power
377,500
11 Aggregate Amount Beneficially Owned by Each Reporting Person
377,500
12 Check Box If the Aggregate Amount in Row (11) Excludes Certain
Shares* [_]
13 Percent of Class Represented By Amount in Row (11)
5.75%
14 Type of Reporting Person*
IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
<PAGE>
Page 7 of 21 Pages
This Statement on Schedule 13D relates to shares of Common
Stock, $0.01 par value per share (the "Shares"), of Information Analysis
Incorporated (the "Issuer"). This Statement is being filed by the Reporting
Persons (as defined herein) to report recent acquisitions of Shares of the
Issuer as a result of which certain of the Reporting Persons may be deemed to be
the beneficial owners of more than 5% of the outstanding Shares.
Item 1. Security and Issuer.
This Statement relates to the Shares. The address of the
principal executive offices of the Issuer is 11240 Waples Mill Road, Suite 400,
Fairfax, Virginia 22030.
Item 2. Identity and Background.
This Statement is filed on behalf of White Rock Capital,
Inc., a Texas corporation ("White Rock, Inc."), White Rock Capital Management,
L.P., a Texas limited partnership ("White Rock Management"), White Rock Capital
Partners, L.P., a Texas limited partnership ("White Rock Partners"), Thomas U.
Barton and Joseph U. Barton (collectively, the "Reporting Persons").
This Statement on Schedule 13D relates to Shares that were
acquired by White Rock Management on behalf of certain institutional clients
(the "White Rock Clients"), pursuant to separate investment advisory contracts
(collectively, the "White Rock Contracts"). This Statement also relates to
Shares held for the accounts of White Rock Partners and White Rock, Inc.
The general partner of White Rock Partners is White Rock
Capital Management, the general partner of which is White Rock, Inc. Each of
White Rock (as defined herein), White Rock Partners, White Rock Management and
White Rock, Inc. is engaged in the investment and investment management
business. Thomas U. Barton and Joseph U. Barton, both of whom are United States
citizens, are the shareholders of White Rock, Inc. The principal occupation of
each of Thomas U. Barton and Joseph U. Barton is their position as the general
partners of White Rock Capital, L.P., a Texas limited partnership ("White Rock")
at White Rock's principal office. The principal business address of each of
White Rock, White Rock Partners, White Rock Management, White Rock, Inc., Thomas
U. Barton and Joseph U. Barton is 3131 Turtle Creek Boulevard, Suite 800,
Dallas, Texas 75219.
During the past five years, none of the Reporting Persons,
and, to the best of the Reporting Persons' knowledge, any other person
identified in response to this Item 2 has been (a) convicted in a criminal
proceeding, or (b) a party to any civil proceeding as a result of which he has
been subject to a judgment, decree or final order enjoining future violations
of, or prohibiting or mandating activities subject to, federal or state
securities laws, or finding any violation with respect to such laws.
Item 3. Source and Amount of Funds or Other Consideration.
White Rock Management expended approximately $1,438,627 of
the working capital of the White Rock Clients to purchase the Shares reported
herein as being acquired within the last 60 days in the open market. White Rock
Management expended approximately $290,873 of the working capital of White Rock
Partners to purchase the Shares reported herein as being acquired within the
last 60 days in the open market.
<PAGE>
Page 8 of 21 Pages
On January 7, 1998 certain of the Reporting Persons entered
into a subscription agreement (the "Subscription Agreement"), a form of which is
attached hereto as Exhibit B and incorporated herein by reference in response to
this Item 3, pursuant to which White Rock Management expended approximately
$1,975,600 of the working capital of the White Rock Clients, White Rock Partners
expended approximately $462,000 of its working capital and White Rock, Inc.
expended approximately $70,400 of its working capital to purchase an aggregate
of 228,000 Shares (the "Restricted Shares"). The Restricted Shares were acquired
from the Issuer in a transaction not involving a public offering and may not be
resold without registration under the Securities Act of 1933, as amended (the
"Securities Act"), and applicable state securities laws, unless an exemption
from such registration is available. The Subscription Agreement sets forth
additional limitations and procedures pertaining to the disposition of the
Restricted Shares, all of which are incorporated herein by reference.
The above description of the terms of the Subscription
Agreement is qualified in its entirety by the terms thereof.
The Shares held by the Reporting Persons for the accounts of
the White Rock Clients, by White Rock Partners and by White Rock, Inc. may be
held through margin accounts maintained with brokers, which extend margin credit
as and when required to open or carry positions in their margin accounts,
subject to applicable federal margin regulations, stock exchange rules and such
firm's credit policies. The Shares which may be held in the margin accounts are
pledged as collateral security for the repayment of debit balances in the
respective accounts.
Item 4. Purpose of Transaction.
All of the Shares reported herein as having been acquired
for or disposed of from the accounts of the White Rock Clients, White Rock
Partners and White Rock, Inc. were acquired or disposed of for investment
purposes. Neither the White Rock Clients, the Reporting Persons nor, to the best
of their knowledge, any of the other individuals identified in response to Item
2, has any plans or proposals that relate to or would result in any of the
transactions described in subparagraphs (a) through (j) of Item 4 of Schedule
13D.
The Reporting Persons reserve the right to acquire, or cause
to be acquired, additional securities of the Issuer, to dispose, or cause to be
disposed of, such securities at any time or to formulate other purposes, plans
or proposals regarding the Issuer or any of its securities, to the extent deemed
advisable in light of general investment and trading policies of the Reporting
Persons, and/or the White Rock Clients, market conditions or other factors.
Item 5. Interest in Securities of the Issuer.
(a) (i) White Rock Management may be deemed the beneficial
owner of 371,100 Shares (approximately 5.65% of the total number of Shares
outstanding). This number consists of (1) 304,100 Shares held for the accounts
of the White Rock Clients and (2) 67,000 Shares held for the account of White
Rock Partners.
(ii) Each of Thomas U. Barton, Joseph U. Barton and
White Rock, Inc. may be deemed the beneficial owner of 377,500 Shares
(approximately 5.75% of the total number of Shares outstanding). This number
consists of (1) 304,100 Shares held for the accounts of the White Rock Clients,
(2) 67,000 Shares held for the account of White Rock Partners and (3) 6,400
Shares held for the account of White Rock, Inc.
<PAGE>
Page 9 of 21 Pages
(iii)White Rock Partners may be deemed the beneficial
owner of the 67,000 Shares held for its account (approximately 1.03% of the
total number of Shares outstanding).
(b) (i) Each of White Rock Management (pursuant to the
White Rock Contracts), White Rock, Inc. (as the general partner of White Rock
Management), Thomas U. Barton (as a shareholder of White Rock, Inc.) and Joseph
U. Barton (as a shareholder of White Rock, Inc.) is currently vested with shared
power to direct the voting and disposition of the 304,100 Shares held for the
accounts of the White Rock Clients.
(ii) Each of White Rock Management (as the general
partner of White Rock Partners), White Rock, Inc. (as the general partner of
White Rock Management), Thomas U. Barton (as a shareholder of White Rock, Inc.)
and Joseph U. Barton (as a shareholder of White Rock, Inc.) may be deemed to
have shared power to direct the voting and disposition of the 67,000 Shares held
for the account of White Rock Partners.
(iii)Each of Thomas U. Barton (as a shareholder of
White Rock, Inc.) and Joseph U. Barton (as a shareholder of White Rock, Inc.)
may be deemed to have shared power to direct the voting and disposition of the
6,400 Shares held for the account of White Rock, Inc.
(iv) White Rock Partners has the sole power to direct
the voting and disposition of the 67,000 Shares held for its account.
(v) White Rock, Inc. has the sole power to direct the
voting and disposition of the 6,400 Shares held for its account.
(c) Except as described in Item 3 and Item 6, and for
the transactions disclosed on Annex A hereto, all of which were effected in the
over-the-counter market in routine brokerage transactions, unless otherwise
noted, there have been no transactions with respect to the Shares since November
24, 1997 (60 days prior to the date hereof) by any of the Reporting Persons.
(d) (i) The shareholders or partners of each of the White
Rock Clients have the right to participate in the receipt of dividends from, or
proceeds from the sale of, the Shares, held by the respective White Rock Client
in accordance with their partnership or ownership interests in the respective
White Rock Client.
(ii) The shareholders of White Rock, Inc. have the
right to participate in the receipt of dividends from, or proceeds from the sale
of, the Shares, held by White Rock, Inc. in accordance with their ownership
interests in White Rock, Inc.
(iii)The partners of White Rock Partners have the
right to participate in the receipt of dividends from, or proceeds from the sale
of, the Shares held by White Rock Partners in accordance with their partnership
interests in White Rock Partners.
(e) Not applicable.
<PAGE>
Page 10 of 21 Pages
Item 6. Contracts, Arrangements, Understandings in Relationship with
Respect to Securities of the Issuer.
In connection with its acquisition of securities reported
herein, the Subscription Agreement, attached hereto as Exhibit B is incorporated
herein by reference in response to this Item 6.
On January 9, 1998, certain of the Reporting Persons entered
into an amendment to the Subscription Agreement (the "Amendment"), a form of
which is attached hereto as Exhibit C and incorporated herein by reference in
response to this Item 6. Pursuant to Section 3 of the Amendment, the Issuer
shall use its best efforts to cause the Restricted Shares to be registered with
the Securities and Exchange Commission (the "Commission) on or before the 45th
day after the Issuer first accepts a subscription in the offering for which this
Subscription Agreement is being tendered through the filing of a registration
statement on Form S-3 or such other form as may be available to the Issuer. If
the registration statement is not declared effective by the Commission on or
before such date, then on that date, and every 30th day thereafter, the Issuer
shall issue to the undersigned a quantity of Restricted Shares equal to 5% of
the Restricted Shares subscribed for by the undersigned without additional
consideration provided, however that the aggregate number of Restricted Shares
which the Issuer shall be obligated to issue under this section 3 shall not
exceed 20% of the total shares which the respective Reporting Person purchases
thereunder.
From time to time, each of the Reporting Persons may lend
portfolio securities to brokers, banks or other financial institutions. These
loans typically obligate the borrower to return the securities, or an equal
amount of securities of the same class, to the lender and typically provide that
the borrower is entitled to exercise voting rights and to retain dividends
during the term of the loan. From time to time to the extent permitted by
applicable laws, each of such persons or entities may borrow the Shares for the
purpose of effecting, and may effect, short sale transactions, and may purchase
securities for the purpose of closing out short positions in such securities.
Except as set forth herein, the Reporting Persons do not
have any contracts, arrangements, understandings or relationships with respect
to any securities of the Issuer.
<PAGE>
Page 11 of 21 Pages
Item 7. Material to be Filed as Exhibits.
A. Joint Filing Agreement dated January 23, 1998 by and
among White Rock Partners, White Rock Management, White Rock, Inc., Thomas U.
Barton and Joseph U. Barton.
B. Form of Subscription Agreement.
C. Form of Amendment to Subscription Agreement.
<PAGE>
Page 12 of 21 Pages
SIGNATURES
After reasonable inquiry and to the best of my knowledge and
belief, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: January 23, 1998 WHITE ROCK CAPITAL PARTNERS, L.P.
By: White Rock Capital Management, L.P.
Its General Partner
By: White Rock Capital, Inc.
Its General Partner
By: /S/ THOMAS U. BARTON
-----------------------------
Thomas U. Barton
President
WHITE ROCK CAPITAL MANAGEMENT. L.P.
By: White Rock Capital, Inc.
Its General Partner
By: /S/ THOMAS U. BARTON
----------------------------------
Thomas U. Barton
President
WHITE ROCK CAPITAL, INC.
By: /S/ THOMS U. BARTON
---------------------------------------
Thomas U. Barton
President
/S/ THOMAS U. BARTON
--------------------------------------------
Thomas U. Barton
/S/ JOSEPH U. BARTON
--------------------------------------------
Joseph U. Barton
<PAGE>
<TABLE>
<CAPTION>
Page 13 of 21 Pages
ANNEX A
RECENT TRANSACTIONS IN THE COMMON STOCK OF
INFORMATION ANALYSIS, INC.
Date of Nature of Number of Price Per
For the Account of Transaction Transaction Shares Share
- ------------------ ----------- ----------- --------- ---------
<S> <C> <C> <C> <C>
White Rock Clients/1/ 12/17/97 BUY 10,000 $12.875
12/17/97 BUY 35,000 $12.875
12/30/97 BUY 10,000 $10.808
12/30/97 BUY 20,000 $10.808
12/30/97 BUY 49,500 $10.808
1/09/98 BUY 10,000 $11.00/2/
1/09/98 BUY 16,600 $11.00/2/
1/09/98 BUY 89,000 $11.00/2/
1/13/98 BUY 64,000 $11.00/2/
White Rock Partners/1/ 12/17/97 BUY 10,000 $12.875
12/30/97 BUY 15,000 $10.808
1/09/98 BUY 42,000 $11.00/2/
White Rock, Inc. 1/14/98 BUY 6,400 $11.00/2/
/1/ Transactions effected at the direction of White Rock Management.
/2/ Purchase of Restricted Shares pursuant to the Subscription Agreement. Effected at the direction of White
Rock Management.
</TABLE>
<PAGE>
Page 14 of 21 Pages
EXHIBIT INDEX
Page No.
--------
A. Joint Filing Agreement dated January 23, 1998 by and
among White Rock Capital Partners, L.P., White Rock
Capital Management, L.P., White Rock Capital, Inc.,
Thomas U. Barton and Joseph U. Barton......................... 15
B. Form of Subscription Agreement................................ 16
C. Form of Amendment to Subscription Agreement................... 20
Page 15 of 21 Pages
EXHIBIT A
JOINT FILING AGREEMENT
The undersigned hereby agree that the statement on Schedule
13D with respect to the Common Stock of Information Analysis Incorporated dated
January 23, 1998 is, and any amendments thereto signed by each of the
undersigned shall be, filed on behalf of us pursuant to and in accordance with
the provisions of Rule 13d-1(f) under the Securities Exchange Act of 1934.
Date: January 23, 1998 WHITE ROCK CAPITAL PARTNERS, L.P.
By: White Rock Capital Management, L.P.
Its General Partner
By: White Rock Capital, Inc.
Its General Partner
By: /S/ THOMAS U. BARTON
-----------------------------
Thomas U. Barton
President
WHITE ROCK CAPITAL MANAGEMENT. L.P.
By: White Rock Capital Inc.
Its General Partner
By: /S/ THOMAS U. BARTON
----------------------------------
Thomas U. Barton
President
WHITE ROCK CAPITAL, INC.
By: /S/ THOMS U. BARTON
---------------------------------------
Thomas U. Barton
President
/S/ THOMAS U. BARTON
--------------------------------------------
Thomas U. Barton
/S/ JOSEPH U. BARTON
--------------------------------------------
Joseph U. Barton
Page 16 of 21 Pages
EXHIBIT B
SUBSCRIPTION AGREEMENT
Mr. Richard DeRose
Executive Vice President
Information Analysis Incorporated
11240 Waples Mill Road
Suite 400
Fairfax, VA 22030
Dear Mr. DeRose:
In connection with the offering by Information Analysis Incorporated
("IAI") of a minimum of 227,273 and a maximum of 454,545 shares of its $.01 par
value Common Stock (the "Shares"), the undersigned hereby purchases that number
of Shares and hereby tenders the amount in payment thereof set forth on the
Signature Page to this Agreement.
1. Representations, Warranties and Covenants of the Purchaser.
------------------------------------------------------------
The undersigned (jointly and severally if more than one) hereby represents,
warrants and covenants as follows:
a. The undersigned acknowledges receipt of a copy of the
Investor Qualification Questionnaire attached hereto as Exhibit A. The
undersigned has received, and has had an opportunity to review, all of IAI's
current annual, quarterly and periodic reports filed with the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934 (the "1934
Act Reports.") The undersigned further acknowledges that the undersigned has
read the Investor Qualification Questionnaire, and the 1934 Act Reports and has
relied solely upon the information contained therein and upon investigations
made by the undersigned in making the decision to purchase the Shares hereunder.
b. The undersigned has adequate means of providing for the
undersigned's current needs and possible personal contingencies and has no need
for liquidity in this investment and the undersigned can bear the economic risk
and/or entire loss of any investment in the Shares. The undersigned's commitment
to illiquid investments is reasonable in relation to the undersigned's net
worth.
c. The undersigned is acquiring the Shares without relying
upon any sales literature, prospectus, or other written materials other than the
1934 Act Reports including the exhibits thereto, and has investigated to the
undersigned's satisfaction the nature and risks inherent in this investment, and
has relied solely on the investigations made by the undersigned in making the
decision to invest in the Shares.
d. The undersigned is acquiring the Shares in good faith
solely for the undersigned's own account, for investment purposes and not with a
view to resale, fractionalization, disposition or distribution of all or any
part thereof. The undersigned will be the sole party in interest in this
investment and will be vested with all legal and equitable rights in the Shares.
The undersigned is aware that there are legal and practical limits on the
undersigned's ability to sell or dispose of the Shares, and, therefore, that the
undersigned must bear the economic risk of the investment for an indefinite
period of time.
e. The undersigned recognizes that a purchase of the Shares
involves investment risks and the undersigned has taken full cognizance of and
understands all of the risk factors related to the purchase of the Shares.
<PAGE>
Page 17 of 21 Pages
f. The undersigned understands that the Shares are being
offered and sold in reliance on specific exemptions from the registration
requirements of federal and applicable state securities laws and that the
representations, warranties, agreements, acknowledgments and understandings set
forth herein are necessary in order to determine the applicability of such
exemptions.
If the undersigned is purchasing the Shares subscribed for hereby
in a fiduciary capacity, the above representations and warranties shall be
deemed to have been made on behalf of the person or persons for whom the
undersigned is so purchasing.
2. Acknowledgments and Indemnity of the Purchaser. The
-----------------------------------------------------
undersigned understands, recognizes and acknowledges that:
a. This subscription may be accepted or rejected by IAI in
whole or in part in its sole and absolute discretion. In the event that the
offer to sell the Shares is terminated or in the event that any subscription is
rejected by IAI in whole or in part for any reason, the undersigned shall have
no claim of any kind against IAI or any officer, director, or agent of IAI,
including, without limitation, any claim as to any ownership interest in IAI.
b. No federal or state agency has recommended or endorsed
the purchase of the Shares.
c. The Shares have not been registered under the Securities
Act of 1933, as amended (the "1933 Act"), or any applicable state securities
laws by reason of exemptions from the registration requirements of the 1933 Act
and such laws, and may not be sold, pledged, assigned, or otherwise disposed of
in the absence of an effective registration statement under the 1933 Act unless
an exemption from such registration is available.
d. The undersigned will not attempt to sell, transfer,
assign, pledge, or otherwise dispose of all or any portion of the undersigned's
Shares, unless registration of the Shares occurs.
e. The undersigned has been provided with such information
as has been requested. In addition, the undersigned has at all times been given
the opportunity to obtain additional information necessary to verify the
accuracy of the information received and the opportunity to ask questions of,
and receive answers from, IAI concerning the terms and conditions of the sale of
the Shares and the nature and prospects of IAI's operations.
f. The offer to sell the Shares was communicated to the
undersigned directly by IAI or its representative, and not through any form of
general advertising or solicitation such as advertisements or other
communications in newspapers, magazines or other media, broadcast on radio or
television, seminars or promotional meetings or any generally circulated letter,
circular or other written communication.
g. The undersigned agrees to indemnify IAI, its respective
officers, directors, shareholders, employees, and their attorneys and agents,
and hold each of them harmless from and against any and all loss, damage,
liability or expense, including costs and reasonable attorneys' fees, to which
any such persons may be put or may incur by reason of or in connection with any
misrepresentation made by the undersigned, any breach of the undersigned's
representations and warranties or the undersigned's failure to fulfill any of
its covenants or agreements under this Subscription Agreement. This Subscription
Agreement and the representations and warranties contained herein shall be
binding upon the heirs, executors, administrators, successors and assigns of the
undersigned.
2
<PAGE>
Page 18 of 21 Pages
h. If the undersigned is a corporation, partnership or
trust, the undersigned (i) is authorized and duly qualified to purchase and hold
the Shares; (ii) has its principal place of business as set forth in the
signature page hereof; and, (iii) at IAI's request, will execute and deliver
such other and further instruments as IAI shall designate with respect to the
power, authority, capacity and rights of the undersigned.
i. The undersigned understands and agrees that the
representations and warranties made herein do not in any way constitute a
waiver, as set forth in section 14 of the 1933 Act, of rights with respect to
any provision of the 1933 Act or the rules and regulations of the Commission.
3. Best Efforts Registration Obligation of IAI; Issuance of
--------------------------------------------------------------
Additional Shares. IAI agrees that it shall use its best efforts to cause the
- ------------------
Shares purchased by the Undersigned to be registered by the Securities and
Exchange Commission on or before February 23, 1998 through the filing of a
registration statement on Form S-3 or such other form as may be available to
IAI. If the registration statement is not declared effective by the Securities
and Exchange Commission on or before February 23, 1998 then on that date, and on
every 30th day after February 23, 1998, IAI shall issue to the undersigned a
quantity of shares equal to 5% of the Shares subscribed for by the undersigned
without additional consideration provided, however that the aggregate number of
shares which IAI shall be obligated to issue under this section 3 shall not
exceed 20% of the total shares which the undersigned purchases hereunder.
4. Miscellaneous. The undersigned and IAI agree that:
-------------
a. The minimum number of Shares subscribed for by the
undersigned and other purchasers in the offering shall be 227,273 for which
payment shall be made in full in cash by the undersigned to IAI not later than
January 7, 1998. The undersigned and other purchasers in the offering shall have
the right, but not the obligation, to purchase up to an additional 227,272
Shares on or before February 6, 1998. Any purchase of additional Shares shall be
for installments of at least 45,455 shares for which payment shall be made in
full in cash at the price per share shown on the Signature Page to this
Agreement. All purchases of additional Shares shall be governed by the terms and
conditions of this Agreement.
b. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Virginia.
c. The provisions of this Agreement may not be modified or
waived except in writing signed by the party to be charged.
d. This Agreement and the rights, powers and duties set
forth herein shall, except as set forth herein, bind and inure to the benefit of
the heirs, executors, administrators, legal representatives, successors and
assigns of the parties hereto.
e. The undersigned understands that it may not assign any of
its rights or participation in and under this Agreement without the prior
written consent of IAI and any attempted assignment without such consent shall
be void and without effect.
IN WITNESS WHEREOF, the undersigned has executed the signature page
attached hereto.
3
<PAGE>
Page 19 of 21 Pages
Signature Page to Subscription Agreement
----------------------------------------
The undersigned hereby subscribes for the number of Shares designated
below and hereby tenders payment in the amount of $11.00 for each share.
NUMBER OF SHARES SUBSCRIBED FOR: ___________
INDIVIDUAL INVESTOR(S)
(If Shares are to be held
in joint ownership, all
owners must sign.)
----------------------------
Signature
----------------------------
Signature
NON-INDIVIDUAL INVESTOR
-----------------------------
Name of Entity
-----------------------------
Address of Entity
By:__________________________
Signature
Name:________________________
Title:_______________________
Subscription Accepted:
INFORMATION ANALYSIS INCORPORATED
By:_________________________ Date: _____________, 1998
(Title)_____________________
4
Page 20 of 21 Pages
EXHIBIT C
TO: ___________________
RE: Amendment to Subscription Agreement
-----------------------------------
This acknowledges receipt of your Subscription Agreement to purchase
shares in a private placement of the common stock, $.01 par value per share, of
Information Analysis Incorporated ("IAI").
This Amendment to Subscription Agreement modifies the Subscription
Agreement. All capitalized terms shall have the meanings ascribed to them in the
Subscription Agreement. IAI proposes to amend the Subscription Agreement as
follows:
1) The maximum number of Shares offered is changed to 545,455
2) Section 3 is deleted and in lieu thereof the following is
inserted:
3) Best Efforts Registration Obligation of IAI; Issuance of
-----------------------------------------------------------------
Additional Shares. IAI agrees that it shall use its best efforts
------------------
to cause the Shares purchased by the undersigned to be registered
by the Securities and Exchange Commission on or before the 45th
day after the date IAI first accepts a subscription in the
offering for which this Subscription Agreement is being tendered
through the filing of a registration statement on Form S-3 or
such other form as may be available to IAI. If the registration
statement is not declared effective by the Securities and
Exchange Commission on or before such date, then on that date,
and every 30th day thereafter, IAI shall issue to the undersigned
a quantity of Shares equal to 5% of the Shares subscribed for by
the undersigned without additional consideration provided,
however that the aggregate number of Shares which IAI shall be
obligated to issue under this section 3 shall not exceed 20% of
the total shares which the undersigned purchases hereunder.
4) Section 4(a) is deleted and in lieu thereof the following is
inserted:
4. Offering Minimum and Maximum; Minimum Purchase. The
-----------------------------------------------------
undersigned and IAI agree that:
(a)
(i) The minimum number of Shares which must be issued in the
offering to which this Subscription Agreement relates shall be
227,273 (the "Offering Minimum"). Pending receipt of the Offering
Minimum all funds received shall be held by IAI in a segregated
account. In addition to the Offering Minimum, IAI shall have the
right to issue an additional 318,182 Shares, said Shares and the
Offering Minimum constituting a total of 545,455 Shares. The
offering of Shares shall expire on February 6, 1998 (the
"Termination Date"). If subscriptions for the Offering Minimum
are not received by IAI on or before the Termination Date, all
subscription funds will be returned to subscribers without
interest.
(ii) If IAI receives subscriptions for the Offering Minimum or
more Shares prior to the Termination Date, IAI may accept such
subscriptions as IAI in its sole discretion deems appropriate.
<PAGE>
Page 21 of 21 Pages
Please acknowledge receipt and acceptance of this Amendment to
Subscription Agreement by signing this document and returning it to the
undersigned via facsimile.
Sincerely yours,
INFORMATION ANALYSIS INCORPORATED
By:
-----------------------------
Richard S. DeRose
Executive Vice President
Seen and accepted:
Subscriber
- --------------------------
Print Name
- --------------------------
(Title) (If applicable)
- --------------------------
Signature
2
