-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Bofakp8U/XoQCnOuVbQ1IpoBjYv4E3TxeCqMG+TVcXRUwXHBygkXiZjyX+lir3sA +u88yijCxkyJ91ROnrIx6Q== 0000921530-98-000008.txt : 19980126 0000921530-98-000008.hdr.sgml : 19980126 ACCESSION NUMBER: 0000921530-98-000008 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19980123 SROS: NASD GROUP MEMBERS: JOSEPH U. BARTON GROUP MEMBERS: WHITE ROCK CAPITAL MANAGEMENT LP GROUP MEMBERS: WHITE ROCK CAPITAL PARTNERS, L.P. GROUP MEMBERS: WHITE ROCK CAPITAL, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION ANALYSIS INC CENTRAL INDEX KEY: 0000803578 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 541167364 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: SEC FILE NUMBER: 005-51245 FILM NUMBER: 98512085 BUSINESS ADDRESS: STREET 1: 11240 WAPLES MILL RD #400 CITY: FAIRFAX STATE: VA ZIP: 22030 BUSINESS PHONE: 7033833000 MAIL ADDRESS: STREET 1: 2222 GALLOWS ROAD STREET 2: SUITE 300 CITY: DUNN LORING STATE: VA ZIP: 22027 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: WHITE ROCK CAPITAL MANAGEMENT LP CENTRAL INDEX KEY: 0001051272 STANDARD INDUSTRIAL CLASSIFICATION: [] FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 3131 TURLTE CREEK BLVD CITY: DALLAS STATE: TX ZIP: 75219 BUSINESS PHONE: 2149793000 MAIL ADDRESS: STREET 1: 3131 TURTLE CREEK BLVD CITY: DALLAS STATE: TX ZIP: 75219 SC 13D 1 SCHEDULE 13D RE IINFORMATION ANALYSIS INC 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 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 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 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 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 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 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 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 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 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 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 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 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 - ------------------ ----------- ----------- --------- --------- 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.
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 EX-99.A 2 EXHIBIT A - JOINT FILING AGREEMENT 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 EX-99.B 3 EXHIBIT B - SUBSCRIPTION AGREEMENT 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 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 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 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 EX-99.C 4 EXHIBIT C 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 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 -----END PRIVACY-ENHANCED MESSAGE-----