WARRANT EXHIBIT 99.1
THIS SECURITY HAS BEEN ACQUIRED IN A TRANSACTION NOT INVOLVING ANY PUBLIC
OFFERING AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED, SOLD OR TRANSFERRED EXCEPT IN
COMPLIANCE WITH THE ACT.
INFORMATION ANALYSIS INCORPORATED
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COMMON STOCK PURCHASE WARRANT
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Certificate No. ____
Dated as of ______________
1. Grant. For consideration of $_____________ and other value received,
Information Analysis Incorporated, a Virginia corporation (the "Corporation"),
hereby grants to _______________________ or its assigns or transferees (the
"Holder"), at the exercise price set forth in Section 3 below, the right to
purchase ______________________ shares (the "Warrant Shares") of Common Stock
(or other security issued in accordance with Section 6).
2. Exercise Period. The right to exercise this Warrant, in whole or in
part, begins on the date hereof. The right to exercise this Warrant expires on
December 31, 2004 ("Expiration Date").
3. Exercise Price. The exercise price of this Warrant is $1.00 per
share, as adjusted from time to time as hereinafter set forth (the "Exercise
Price").
4. Adjustments.
(a) Adjustment for Change in Common Stock.
(i) If the Corporation (A) pays a dividend or
makes a distribution on its Common Stock in
shares of its Common Stock, (B) subdivides
or reclassifies its outstanding shares of
Common Stock into a greater number of
shares, or (C) combines or reclassifies its
outstanding shares of Common Stock into a
smaller number of shares (each, an
"Adjustment Event"), the Exercise Price and
the number of Warrant
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Shares issuable hereunder immediately prior
to such action shall be proportionately
adjusted to reflect such Adjustment Event.
(ii) The adjustment shall become effective
immediately after the record date in the
case of a dividend or distribution and
immediately after the effective date in the
case of a subdivision, combination or
reclassification.
(iii) The adjustment shall be made successively
whenever any Adjustment Event occurs.
(b) Adjustment for Reorganization. If the Corporation
consolidates or merges with or into another Person or enters into any other
similar transaction, recapitalization or reorganization (any such action, a
"Reorganization"), there shall thereafter be deliverable, upon exercise of this
Warrant (in lieu of the number of Warrant Shares theretofore deliverable) the
number of shares of stock or other securities or property to which a holder of
the number of shares of Common Stock that would otherwise have been deliverable
upon exercise of this Warrant would have been entitled upon such Reorganization
if such Warrant has been exercised in full immediately prior to such
Reorganization.
5. Prior Notice as to Certain Events.
(a) Dividends, Distributions, Subscription Rights. If the
Corporation (i) pays any dividend or makes any other distribution, or (ii)
offers any subscription rights pro rata to the holders of its Common Stock, then
at least 15 days prior to the record date for such action, the Corporation will
send written notice (by first class mail, postage prepaid, addressed to the
Holder at its address shown on the books of the Corporation) of the dates on
which (A) the Corporation will close its books or take a record for such action
and (B) the holders of Common Stock of record will participate in such action.
(b) Reorganizations. If the Corporation (i) enters into any
Reorganization or reclassification of its capital stock, or (ii) is the subject
of a voluntary or involuntary dissolution, liquidation or winding up of the
Corporation, then at least 15 days prior to such action, the Corporation will
send written notice (by first class mail, postage prepaid, addressed to the
Holder at its address shown on the books of the Corporation) of the dates on
which (A) such action will occur and (B) the holders of Common Stock of record
may exchange their Common Stock for securities or other property deliverable
upon such action.
6. Alternate Class. In the event the Corporation consummates the
registration of any of its securities other than Common Stock (the "Alternate
Class") in accordance with the Securities Act of 1933, as amended, upon the
request of the Holder:
(a) the Corporation will issue to Holder, upon exercise of
this Warrant, the equivalent number of shares of such Alternate Class, so long
as the holders of the shares of the
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Alternate Class have all of the same rights as the holders of shares of Common
Stock, except for voting rights; and
(b) all references herein to Common Stock shall be deemed to
refer to the Alternate Class.
7. Reservation of Common Stock. The Corporation will reserve and keep
available for issuance and delivery upon the exercise of this Warrant such
number of its authorized but unissued shares of Common Stock or other securities
of the Corporation as will be sufficient to permit the exercise in full of this
Warrant. Upon issuance, each of the Warrant Shares will be validly issued, fully
paid and nonassessable, free and clear of all liens, security interests, charges
and other encumbrances or restrictions on sale and free and clear of all
preemptive rights.
8. No Voting Rights; Limitations of Liability. Prior to exercise, this
Warrant will not entitle the Holder to (a) any voting rights, or (b) other
rights as a stockholder of the Corporation not granted herein. No provision of
this Warrant, in the absence of affirmative action by the Holder to exercise
this Warrant, and no enumeration in this Warrant of the rights or privileges of
the Holder, will give rise to any liability of such Holder for the Exercise
Price.
9. Exercise Procedure. To exercise this Warrant, the Holder must
deliver to the principal office of the Corporation (prior to the Expiration
Date) this Warrant, the subscription substantially in the form of Exhibit A
attached hereto, and the Exercise Price (as adjusted pursuant to the terms
hereof). The Holder may deliver the Exercise Price by any of the following
methods, at its option: (i) in legal tender, (ii) by bank cashier's or certified
check, (iii) by wire transfer to an account designated by the Corporation, or
(iv) in accordance with Section 10. Upon exercise, the Corporation, at its sole
expense (including the payment of any documentary, stamp, issue or transfer
taxes), will issue and deliver to Holder, within 10 days after the date on which
the Holder exercises this Warrant, certificates for the Warrant Shares purchased
hereunder. The Warrant Shares shall be deemed issued, and the Holder deemed the
holder of record of such Warrant Shares, as of the opening of business on the
date on which the Holder exercises this Warrant.
10. Cashless Payment.
(a) Right to Convert. In lieu of paying the applicable
Exercise Price by legal tender, check, or wire transfer, the Holder may elect to
receive, upon exercise of this Warrant, that number of Warrant Shares equal to
the quotient obtained by dividing:
[(A-B)(X)] by (A), where:
A = the Conversion Value (as defined below) of a share of
Common Stock on the date of exercise;
B = the Exercise Price for a share of Common Stock;
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X = the number of Warrant Shares (equal to or
less than the number of Warrant Shares then
issuable hereunder) as to which this Warrant
is being exercised.
(b) Conversion Value. For purposes of this Section
10 only, the Conversion Value of a share of Common Stock means:
(i) if the Common Stock is listed on a national
securities exchange or admitted to unlisted
trading privileges on such exchange or
listed for trading on the Nasdaq National
Market System maintained by the National
Association of Securities Dealers, Inc., --
the last reported sale price of the Common
Stock on the last trading day prior to the
date of exercise of this Warrant (or the
average closing bid and asked prices for
such day if no such sale is made on such
day);
(ii) if clause (i) does not apply, and if the
prices are reported by the National
Quotation Bureau, Inc., -- the mean of the
last reported bid and asked prices reported
on the last trading day prior to the date of
exercise of this Warrant; and
(iii) in all other cases -- the per share value as
determined by the board of directors in good
faith.
11. Participation in Repurchases or Redemptions. If the Corporation
repurchases or redeems any of its securities, the Corporation will offer to
include the Holder in such repurchase or redemption, as if the Holder had
exercised this Warrant immediately prior to the event (or any record date with
respect thereto). If the Holder elects to participate in a repurchase or
redemption, this Warrant shall be modified (as of the date of such event) so
that the Holder shall be entitled to receive, upon exercise, the number of
Warrant Shares issuable hereunder less the number of Warrant Shares redeemed or
repurchased. Any such repurchases or redemptions should be net of the Exercise
Price for the Warrant Shares being deemed repurchased or redeemed.
12. Sale of Warrant or Warrant Shares. Neither this Warrant nor any of
the Warrant Shares have been registered under the Act or under the securities
laws of any state. Neither this Warrant nor any of the Warrant Shares (when
issued) may be sold, assigned, transferred, pledged or hypothecated or otherwise
disposed of except as permitted: (i) by any shareholders agreement then in
effect, (ii) by any effective registration statement under the Act and by the
securities laws of any state in question, or (iii) by an opinion of counsel
reasonably satisfactory to the Corporation stating that such registration under
the Act and registration or qualification under the securities laws of any state
is not required. Until the Warrant Shares have been registered under the Act and
registered and qualified under the securities laws of any state in question, the
Corporation shall cause each certificate evidencing any Warrant Shares to bear
the following legend:
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THE SHARES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
SECURITIES LAWS OF ANY STATE. THE SHARES MAY NOT BE OFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED OR HYPOTHECATED OR OTHERWISE DISPOSED OF
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND SUCH REGISTRATION OR
QUALIFICATION AS MAY BE NECESSARY UNDER THE SECURITIES LAWS OF ANY
STATE, OR AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT
SUCH REGISTRATION OR QUALIFICATION IS NOT REQUIRED.
13. Transfer. The Corporation will register this Warrant on its books
and keep such books at its offices. To effect a transfer permitted by Section 11
hereof, the Holder must present (either in person, or by duly authorized
attorney) written notice substantially in the form of Exhibit B attached hereto.
To prevent a transfer in violation of Section 11, the Corporation may issue
appropriate stop orders to its transfer agent.
14. Replacement of Warrant. If the Holder provides evidence that this
Warrant or any certificate or certificates representing the Warrant Shares have
been lost, stolen, destroyed or mutilated, the Corporation (at the request and
expense of the Holder) will issue a replacement warrant upon reasonably
satisfactory indemnification by the Holder (if required by the Corporation).
15. Governing Law. The laws of the Commonwealth of Virginia (other than
its conflict of law rules) govern this Warrant.
IN WITNESS WHEREOF, the Corporation has caused this Warrant to be
signed on its behalf, in its corporate name, by its President, and its corporate
seal to be hereunto affixed and the said seal to be attested by its Secretary,
as of the ____ day of _______________.
INFORMATION ANALYSIS INCORPORATED
a Virginia corporation
Attest:________________________ By:______________________________[Seal]
_________________________, _______________________________,
Secretary President
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EXHIBIT A
IRREVOCABLE SUBSCRIPTION
To: Information Analysis Incorporated
The undersigned hereby elects to exercise its right under the attached
Warrant by purchasing ____ shares of the Common Stock, and hereby irrevocably
subscribes to such issue. The certificates for such shares shall be issued in
the name of:
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(Name)
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(Address)
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(Taxpayer Number)
and delivered to:
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(Name)
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(Address)
The Exercise Price of $_______ is enclosed.
Or
In lieu of payment of the Exercise Price, the undersigned hereby
invokes the provisions of Section 10 of the Warrant.
Date:_______________
Signed: ________________________________________
(Name of Holder, Please Print)
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(Address)
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(Signature)
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EXHIBIT B
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto:
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(Name)
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(Address)
the attached Warrant, together with all right, title and interest
therein to purchase [__] shares of the Common Stock, and does hereby irrevocably
appoint _______________________ as attorney-in-fact to transfer said Warrant on
the books of Information Analysis Incorporated with full power of substitution
in the premises.
Done this ______ day of ____________ 19____.
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(Signature)
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(Name and title)
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(Address)
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