-----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, WfLD4RFQd4+BGS1ufS2PqghTqDVQwB2bTa+ovTX8zRQtyLIiAx+jyhtdlxXMC1S0 3JGe19P6XVkEoLdU41in9Q== 0001005477-98-000185.txt : 19980211 0001005477-98-000185.hdr.sgml : 19980211 ACCESSION NUMBER: 0001005477-98-000185 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19980210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFINITE MACHINE CORP CENTRAL INDEX KEY: 0000884650 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 521490422 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: SEC FILE NUMBER: 333-45993 FILM NUMBER: 98529922 BUSINESS ADDRESS: STREET 1: 300 METRO CENTER BLVD STREET 2: 923 INCLINE WAY 8 CITY: WARWICK STATE: RI ZIP: 02886 BUSINESS PHONE: 7028314680 MAIL ADDRESS: STREET 1: 300 METRO CENTER BLVD STREET 2: 923 INCLINE WAY 8 CITY: WARWICK STATE: RI ZIP: 02886 S-3 1 FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1998 REGISTRATION NO. 333- ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------------- FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- INFINITE GROUP, INC. (Exact Name of Registrant as Specified in Its Charter) Delaware 52-1490422 (State or Other Jurisdiction (I.R.S. Employer of Incorporation or Identification Organization) Number) Clifford G. Brockmyre Infinite Group, Inc. 300 Metro Center Boulevard Warwick, RI 02886 (401) 737-7900 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Executive Offices) ---------------- Clifford G. Brockmyre Infinite Group, Inc. 300 Metro Center Boulevard Warwick, RI 02886 (401) 737-7900 (Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service) Please send copies of all correspondence to: Kenneth S. Rose, Esq. Morse, Zelnick, Rose & Lander, LLP 450 Park Avenue New York, New York 10022-2605 Telephone No. (212) 838-5030 Fax No. (212) 838-9190 Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement becomes effective. ---------------- If the only securities being registered on this Form are to be offered pursuant to dividend or interest reinvestment plans, please check the following box . If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box . CALCULATION OF REGISTRATION FEE
================================================================================================================== Title of Each Amount to be Proposed Proposed Amount of Class of Securities Registered Maximum Maximum Registration Fee To be Registered Offering Price Aggregate Offering Per Share (1) Price (1) - ------------------------------------------------------------------------------------------------------------------ Common Stock 1,923,077 $1.3125 $2,524,039 $744.59 $.001 par value ==================================================================================================================
(1) Estimated solely for purposes of calculating the registration fee pursuant to Rule 457. Pursuant to Rule 457(c), based upon the average of the high and low sales prices of the Common Stock on the NASDAQ SmallCap System on February 3, 1998 of $1.3125. The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. ================================================================================ SUBJECT TO COMPLETION, DATED FEBRUARY 10, 1998 PROSPECTUS 1,923,077 Shares INFINITE GROUP, INC. Common Stock, $.001 Par Value ---------------- This Prospectus relates to the public offering of shares (the "Shares") of Common Stock (the "Common Stock") of Infinite Group, Inc. (the "Company") which may be offered by certain stockholders (collectively the "Selling Stockholders"). Sales of the Shares may be effected from time to time in transactions (which may include block transactions) on the Nasdaq SmallCap Market, in negotiated transactions, or a combination of such methods of sale, at fixed prices which may be changed, at market prices prevailing at the time of sale or at negotiated prices. None of the Selling Stockholders has entered into agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their Shares. The Selling Stockholders may effect such transactions by selling their Shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions or commissions from the Selling Stockholders and/or the purchasers of the Shares for whom such broker/dealers may act as agents or to whom they sell as principals, or both (which compensation as to a particular broker/dealer might be in excess of customary commissions). See "Plan of Distribution." None of the proceeds from the sale of the Shares by the Selling Stockholders will be received by the Company. ---------------- THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. See "Risk Factors" at page 5. ---------------- The Shares are traded over-the-counter and are quoted through the National Association of Securities Dealers Automated Quotation System ("NASDAQ") on the SmallCap Market System under the symbol "IMCI." On February 3, 1998, the last sales price of the Shares on the NASDAQ SmallCap System was $1.3125. ---------------- The Selling Stockholders and any broker-dealers or agents that participate with the Selling Stockholders in the distribution of the Shares may be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act of 1933, as amended (the "Securities Act"). The Selling Stockholders may agree to indemnify any agent, dealer, or broker-dealer that participates in transactions involving sales of the securities against certain liabilities, including liabilities arising under the Securities Act. ---------------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. The date of this Prospectus is , 1998. No person has been authorized to give any information or to make any representations other than those contained in this prospectus in connection with the offering made hereby, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company or by any other person. Neither the delivery of this prospectus nor any sale made hereunder shall, under any circumstances, create any implication that information herein is correct as of any time subsequent to the date hereof. This prospectus does not constitute an offer to sell or a solicitation of an offer to buy the shares to any person or by anyone in any jurisdiction in which such offer or solicitation may not lawfully be made. 2 AVAILABLE INFORMATION The Company is subject to the informational and reporting requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance therewith, files reports, proxy statements and other information with the Securities and Exchange Commission (the "Commission"). Such reports, proxy statements and other information filed with the Commission by the Company may be inspected and copied at the public reference facilities maintained by the Commission at its principal offices at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511, and 7 World Trade Center, Suite 1300, New York, New York 10048. Such reports, proxy statements and other information may also be obtained from the web site that the Commission maintains at http://www.sec.gov. Copies of these materials can also be obtained at prescribed rates from the Public Reference Section of the Commission at its principal offices in Washington, D.C., set forth above. The Company has filed a Registration Statement on Form S-3 (including all amendments and supplements thereto, the "Registration Statement") with the Commission under the Securities Act with respect to the Shares offered hereby. This Prospectus, which forms a part of the Registration Statement, does not contain all of the information set forth in the Registration Statement and the exhibits filed therewith, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. Statements contained herein concerning the provisions of such documents are not necessarily complete and, in each instance, reference is made to the Registration Statement or to the copy of such document filed as an exhibit to the Registration Statement or otherwise filed with the Commission. Each such statement is qualified in its entirety by such reference. Copies of the Registration Statement and the exhibits thereto can be obtained upon payment of a fee prescribed by the Commission or may be inspected free of charge at the public reference facilities and regional offices referred to above. REPORTS TO SECURITY HOLDERS The Company intends to furnish to its stockholders annual reports containing audited financial statements. In addition, the Company is required to file periodic reports on Forms 8-K, 10-QSB and 10-KSB with the Commission and make such reports available to its stockholders. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The following documents filed by the Company with the Commission are incorporated in this Prospectus by reference: (1) Annual Report on Form 10-KSB, as amended (the "Form 10-KSB") for the fiscal year ended December 31, 1996 filed pursuant to the Exchange Act; (2) Quarterly Reports on Form 10-QSB, as amended for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, filed pursuant to the Exchange Act; and (3) Proxy Statement dated November 13, 1997, filed pursuant to Section 14 of the Exchange Act. 3 Each document filed subsequent to the date of this Prospectus pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of this offering shall be deemed to be incorporated in this Prospectus by reference and to be a part hereof from the date of the filing of such documents. Any statement contained in a document incorporated or deemed to be incorporated herein by reference shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. The Company will provide without charge to each person, including any beneficial owner, to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any document incorporated by reference in this Prospectus (other than exhibits unless such exhibits are specifically incorporated by reference in such documents). Requests should be directed to Infinite Group, Inc. 300 Metro Center Boulevard Warwick, RI 02886 (401) 737-7900 Attention: Daniel Landi, Secretary. FORWARD-LOOKING STATEMENTS Certain statements made in or incorporated by reference to this Registration Statement on Form S-3 are "forward-looking statements" (within the meaning of the Private Securities Litigation Reform Act of 1995) regarding the plans and objectives of management for future operations. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. The forward-looking statements made in or incorporated by reference to this Form are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the growth and expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements made in or incorporated by reference to this Form will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements made in or incorporated by reference to this Form, particularly in view of the Company's early stage of operations, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. 4 PROSPECTUS SUMMARY The following summary is qualified in its entirety by reference to the more detailed information appearing elsewhere in this Prospectus and the documents incorporated herein by reference. Investors should carefully consider the information set forth under "Risk Factors" prior to making an investment in the shares offered hereby. THE COMPANY The Company was organized pursuant to the laws of the State of Delaware on October 14, 1986. On January 7, 1998, the Company changed its name to Infinite Group, Inc. from Infinite Engines Corp. Its executive offices are located 300 Metro Center Boulevard, Warwick, Rhode Island 02886; telephone number and its telephone number is (401) 737-7900. THE OFFERING Securities offered hereby.........................1,923,077 shares. Common Stock outstanding after this Offering .....12,492,581 shares. NASDAQ Symbol ....................................IMCI Use of Proceeds ..................................None of the proceeds from the sale of Common Stock offered hereby will be received by the Company. Risk Factors .....................................An investment in the Securities offered hereby is speculative and involves a high degree of risk. This Prospectus contains forward-looking information which involves risk and uncertainties. The Company's actual results could differ materially from those anticipated by such forward-looking information as a result of various factors, including those discussed under "Risk Factors" in this Prospectus. See "Risk Factors." 5 RISK FACTORS An investment in the securities offered hereby is highly speculative and subject to a high degree of risk and only those who can bear the risk of the entire loss of their investment should participate. Prospective investors should carefully consider the following factors, in analyzing this offering. Accumulated Deficit; Working Capital Deficit; Independent Auditor's Report Comments Regarding Company's Ability to Continue as a Going Concern; Need For Additional Financing At September 30, 1997, the Company had an accumulated deficit of $15,792,356. The Company also experienced approximately $2,818,012 and $4.9 million of operating losses, respectively, during the nine months ended September 30, 1997 and the year ended December 31, 1996. No assurance can be given that the Company will not continue to incur operating losses. Further, the report of the Company's independent auditors in connection with the Company's consolidated financial statements at December 31, 1996 contains an explanatory paragraph as to the Company's ability to continue as a going concern. Among the factors cited by the independent auditors as raising substantial doubt as to the Company's ability to continue as a going concern are that the Company has suffered recurring losses during the last three years aggregating to approximately $8,250,000. There can be no assurance that the Company will ever have significant revenues or achieve profitable operations. The Company requires additional working capital to fund its operations. There is no assurance that the Company will be successful in its capital raising efforts, the failure of which may require the Company to scale back its operations. The Company current working capital will, in management's belief, be adequate to fund operations at current levels for six months following the date of this Prospectus. Possibility of Delays or Inability to Sell and Deliver Initial Product and Proposed Products The Company has been engaged in product development since its formation in October 1986. Potential investors should be aware of the problems, delays, expenses and difficulties encountered in product development, many of which may be beyond the Company's control. These include, but are not limited to, unanticipated problems relating to product development, testing, regulatory compliance, manufacturing delays and costs, the competitive and regulatory environment in which the Company plans to operate, marketing problems and additional costs and expenses that may exceed current estimates. There can be no assurance that the Company's products or services will prove to be commercially viable or can be successfully marketed, or that the Company will ever achieve significant revenues. Liquidity Problems; Additional Financing Requirements The Company currently lacks the liquid assets to discharge its operating expenses. In the past the Company has met its capital and operating requirements through public and private sales of equity and through borrowings from a shareholder and unaffiliated lenders. The Company's continued operations will depend upon revenues, if any, from operations and the availability of equity or debt financing. The Company has no commitments for additional financing. Further, there can be no assurance that the Company will be able to generate levels of revenues and cash flows sufficient to fund operations or that the Company will be able to obtain additional financing on satisfactory terms, if at all. If such be the case the Company would be forced to curtail or even suspend its remaining operations. 6 Vulnerability of Service Businesses The Company's sole revenues are generated by the services offered by the Company's divisions, namely, laser contract material processing services and laser consulting services. Most of these services are being rendered under short-term contracts which can be terminated or not renewed by the party or parties receiving the services. In addition, the business of providing services is always subject to interruptions by external factors, such as customer's eliminating products, unavailability of materials or customer's developing internal capacity to perform specialized laser services, which can further impair revenues. For all of these reasons there can be no assurance that the Company's revenues from its service businesses will improve or even that its existing revenues will be maintained. Uncertainty of Laser Business The Company's current laser business is subject to a number of risks including the need for additional financing to fund acquisitions and expansion, technical obsolescence of its processes and equipment, increased competition and dependence upon, and need for, qualified personnel. There is no assurance that the Company's current laser business will operate profitable in future periods. Dependence Upon, and Need for, Key Personnel; Possible Adverse Effect if Key Personnel Are Not Retained The Company's success will depend, in large part, on its continued ability to attract and retain highly qualified engineering, marketing and business personnel. Competition for qualified personnel may be intense and the Company will be required to compete for such personnel with companies having substantially greater financial and other resources. The Company's inability to attract and retain such personnel could have a material adverse effect upon its business. Further, the Company is dependent on certain management personnel for the operation and development of its business, particularly Clifford G. Brockmyre, the President, Chief Executive Officer and a principal beneficial shareholder of the Company. The Company does not maintain key man insurance on the life of Mr. Brockmyre, or any of its other officers or employees. The loss or a reduction in the time devoted by Mr. Brockmyre to the Company's business could have a material adverse effect on the Company's business. Intense Competition and Rapid Technological Change The Company is engaged in rapidly evolving and highly competitive fields. Competition is intense and expected to increase. Most of the companies in competition with the Company have substantially greater capital resources, research and development staffs, facilities and experience in the furnishing of services. These companies, or others, could undertake extensive research and development in laser technology and related fields which could result in technological changes not yet adopted by the Company. There can be no assurance that the Company's competitors will not succeed in developing technologies in these fields which will enable them to offer laser services more advanced and less costly than any offered by the Company or which could render the Company's technologies obsolete. 7 Lack of Patent Protection; Patent Infringement The Company holds no patents for its technology or products. The Company employs various methods, including confidentiality agreements with employees to protect its proprietary know-how. Such methods may not afford complete protection, however, and there can be no assurance that these agreements will not be breached, that the Company would have adequate remedies for any breach or that the Company's trade secrets will not otherwise become known to or independently developed by competitors. If patent applications are filed by the Company, there can be no assurance that any patents will be granted, or that if granted such patents would provide the Company with meaningful protection from competition. In addition, there can be no assurance that the application of the Company's technologies will not infringe upon the patent rights of others. The Company has not conducted any patent searches or obtained an opinion of patent counsel regarding its technologies. The Company may be forced to expend substantial resources if it is required to defend against any such infringement claims. Control of the Company The officers, directors and principal shareholders of the Company control an aggregate of approximately 58.4% of the Company's outstanding Shares, and thus are effectively able to elect all of the Company's directors and to control the affairs of the Company. Loss Carryforward At December 31, 1996, the Company had approximately $3,854,000 in available net operating losses for federal tax reporting purposes which may be carried forward to offset future years taxable income subject to certain limitations. Due to a greater than 50% change in stock ownership during 1993 the utilization of net operating loss carryforward generated to the date of such change is limited. Moreover, other shareholder changes including the possible issuance by the Company of additional shares in one or more financings may further limit the utilization of the operating loss carryforward. Issuance of Preferred Stock Barriers to Takeover. The Board of Directors may issue one or more series of Preferred Stock without any action on the part of the stockholders of the Company, the existence and/or terms of which may adversely affect the rights of holders of Common Stock. Further, the issuance of Preferred Stock may be used as an "anti-takeover" device without further action on the part of the stockholders. Issuance of Preferred Stock, which may be accomplished through a public offering or a private placement to parties favorable to current management, may dilute the voting power of holders of Common Stock (such as by issuing Preferred Stock with super voting rights) and may render more difficult the removal of current management, even if such removal may be in the stockholders' best interest. Absence of Dividends. The Company does not expect to pay cash or stock dividends on its Common Stock in the foreseeable future. To the extent the Company has earnings in the future, it intends to retain such earnings in the business operations of the Company. Limitation on Director Liability. As permitted by the Delaware General Corporation Law ("DGCL"), the Company's Certificate of Incorporation limits the liability of directors to the Company or its shareholders for monetary damages for breach of a director's fiduciary duty, except for liability in four specific instances. These are for (i) any breach of the director's duty of loyalty to the Company or its shareholders, (ii) acts or omissions not in good faith or which involve intentional misconduct or 8 knowing violations of law, (iii) unlawful payments of dividends or unlawful stock purchases or redemption's as provided in Section 174 of the Delaware General Corporation Law, or (iv) any transaction from which the director derived an improper personal benefit. As a result of the Company's charter provision and the DGCL, shareholders may have more limited rights to recover against directors for breach of fiduciary duty. Delaware Anti-Takeover Statute; Issuance of Preferred Stock; Barriers to Takeover. The Company is a Delaware corporation and is subject to the prohibitions imposed by Section 203 of the DGCL, which is generally viewed as an anti-takeover statute. In general, this statute prohibits the Company from entering into certain business combinations without the approval of its Board of Directors and, as such, could prohibit or delay mergers or other attempted takeovers or changes in control with respect to the Company. Such provisions may discourage attempts to acquire the Company. In addition, the Company's authorized capital consists of thirty-one million shares of capital stock of which thirty million shares are designated as Common Stock and one million shares are designated as Preferred Stock. No class other than the Common Stock is currently designated and there is no current plan to designate or issue any such securities. The Board of Directors, without any action by the Company's shareholders, is authorized to designate and issue shares in such classes or series (including classes or series of Preferred Stock) as it deems appropriate and to establish the rights, preferences and privileges of such shares, including dividends, liquidation and voting rights. The rights of holders of Preferred Stock and other classes of Common Stock that may be issued, may be superior to the rights granted to the holders of the existing classes of Common Stock. Further, the ability of the Board of Directors to designate and issue such undesignated shares could impede or deter an unsolicited tender offer or takeover proposal regarding the Company and the issuance of additional shares having preferential rights could adversely affect the voting power and other rights of holders of Common Stock. Issuance of Preferred Stock, which may be accomplished through a public offering or a private placement to parties favorable to current management, may dilute the voting power of holders of Common Stock (such as by issuing Preferred Stock with super voting rights) and may render more difficult the removal of current management, even if such removal may be in the stockholders' best interests. Any such issuance of Preferred Stock could prevent the holders of Common Stock from realizing a premium on their shares. "Penny Stock" Regulations May Impose Certain Restrictions on Marketability of Securities. The Commission has adopted regulations which generally define "penny stock" to be any equity security that has a market price (as defined) of less than $5.00 per share, subject to certain exceptions. If the Securities offered hereby are removed from listing on NASDAQ at any time following the Effective Date, the Securities may become subject to rules that impose additional sales practice requirements on broker-dealers who sell such Securities to persons other than established customers and accredited investors (generally, those persons with assets in excess of $1,000,000 or annual income exceeding $200,000, or $300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of the Securities and have received the purchaser's written consent to the transaction prior to the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the rules require the delivery, prior to the transaction, of a risk disclosure document mandated by the Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative, current quotations for the securities and, if the broker-dealer is the sole market-maker, the broker-dealer must disclose this fact and the broker-dealer's presumed control over the market. Finally, monthly statements must be sent disclosing recent price information for the penny stock held in the account and information on the limited market in penny stocks. Consequently, the 9 "penny stock" rules may restrict the ability of broker-dealers to sell the Securities and may affect the ability of purchasers in this offering to sell the Securities in the secondary market. Risks Associated with Forward-Looking Statements Included in this Prospectus. This Prospectus contains certain forward-looking statements regarding the plans and objectives of management for future operations. The forward-looking statements included herein are based on current expectations that involve numerous risks and uncertainties. The Company's plans and objectives are based, in part, on assumptions involving the continued expansion of business. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond the control of the Company. Although the Company believes that its assumptions underlying the forward-looking statements are reasonable, any of the assumptions could prove inaccurate and, therefore, there can be no assurance that the forward-looking statements included in this Prospectus will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, particularly in view of the Company's early stage operations, the inclusion of such information should not be regarded as a representation by the Company or any other person that the objectives and plans of the Company will be achieved. THE COMPANY The following is a brief summary of the Company's business. Reference is made to the information contained in Item 1 of the Company's Annual Report on Form 10-KSB for the year ended December 31, 1996, as amended, and the financial statements and notes contained therein, for a more thorough presentation of the Company's business and financial condition. Such report is incorporated herein by reference. Infinite Group, Inc., (the "Company") does business in the fields of laser material processing, advanced manufacturing methods, and laser-application technology. Laser Fare is the main operating subsidiary, which is wholly owned and was acquired in July 1994 for stock. Additionally, Infinite has two operating divisions of Laser Fare, the Advance Technology Group ("ATG"), engaged in contract research and development, and ExpressTool Corp., ("ExpressTool"), created to exploit new rapid tooling technology. The Company is also the largest shareholder of Spectra Science, which was formed in August 1996. Laser Fare Laser Fare operations continue to be profitable. While primarily engaged in contract laser material processing, Laser Fare develops new applications for industrial lasers. The facility's 18 high powered lasers are capable of performing a wide variety of manufacturing processes and is capable of laser operations requiring four and five-axis manipulation. Approximately 75% of Laser Fare's sales comes from customers in the medical device, aerospace and power generation industries. Customers include General Electric, United Technologies, Allied Signal, Polaroid, Stryker Medical and Center Laboratories. Laser Fare also provides a variety of value-add services, that include assembly, heat treating, coating, testing, and inspection. In addition to an expected twenty percent growth rate from established customers, it is anticipated that new customers will increase their activity in last quarter of 1997. On October 23, 1997, Laser Fare was awarded a two-year contract in excess of $5 million by Dey Laboratories to manufacture and supply for retail and hospital customers, Astech Peak Flow Meters which measures lung capacity for asthma patients. Laser Fare has sufficient facilities and 10 equipment to support planned near-term expansion, as well as expand the scope of services it provides to existing and new customers. ExpressTool ExpressTool is a business unit being formed to commercialize proprietary technology. This technology permits molds for plastic injection moldings to be more productive than molds made by conventional techniques. On October 17, 1997, ExpressTool was awarded a contract in excess of $450,000 by Magnetec(R) Corporation, a wholly-owned subsidiary of Transact Technologies Inc., (NASDAQ-TACT), to produce components for a new generation of high speed printers. ExpressTool will utilize several of its proprietary technologies in rapid tooling to accelerate Magnetec's(R) product introduction. ExpressTool is building molds, using its proprietary processes, for a number of Fortune 500 industrial companies. Its technical capabilities allow molds, mold cavities and other types of tools to be made more rapidly than is possible with traditional methods. It has been found that the ExpressTool's molds permit more rapid molding cycles than conventional tools, a major benefit for the user. The technology was developed over the last few years under a collaborative R&D agreement with a major industrial company. Laser Fare has exclusive rights to the technology for all industries other than the markets its industrial partner competes in. Management is currently searching for organizations having the needed capabilities that can be combined, through acquisition or some other business arrangement, to integrate ExpressTool's new technology with established infrastructure and business base. Advanced Technology Group During the third quarter ending September 30, 1997, Laser Fare's Advanced Technology Group, ("ATG"), continued work on a $500,000 follow-on contract by the United States Air Force/Phillips Laboratory, Kirtland AFB, New Mexico. The contract is focusing on the commercialization of high power diode lasers for direct materials processing applications. A major part of this Phase II Small Business Technology Transfer (STTR) program involves the transfer and commercialization of high power, high brightness diode laser technology, jointly developed by Laser Fare and the A. F. Yoffe Technical Institute, St. Petersburg, Russia. Work on this contract is progressing on schedule and may lead to the introduction of high power high brightness lasers in a wide range of commercial applications including marking, micro-welding, micro-machining, desktop machining and rapid prototyping. This work is also providing the Advanced Technology Group with increasing access to novel solid state laser technology within the Commonwealth of Independent States (former Soviet Union). During the period, the Advanced Technology Group entered into a six month phase one contractual relationship with Molecular Geodesics Inc. ("MGI"), of Cambridge, MA. MGI was awarded a $6.4 million Defense Advanced Research Project Administration (DARPA) contract to develop "bioskins" for the 21st Century soldier for protection against chemical and biological weapons. ATG will use rapid prototyping techniques to fabricate structures for these "bioskins". Under this phase I contract, ATG will receive $5000 a month for their services, and was also given ten thousand stock options in Molecular Geodesics Inc. Spectra Science Infinite Machines owns 2.9 million shares of Spectra Science stock and is the largest shareholder in this development stage company. Spectra Science was created to commercialize technology licensed from Brown University on an exclusive worldwide basis. The LaserPaint(TM) technology allows common, disordered materials to be generators of laser light. Spectra is currently 11 focusing its efforts on three areas: Photodynamic Therapy (PDT); Identification and Coding; and Document Security. In PDT, which is emerging as a treatment modality for a number of cancers, the LaserPaint(TM) technology addresses the industry's need for a tunable, low cost and disposable excitation source of laser light. Spectra Science received positive results from a first round of invivo tests performed at the Ontario Cancer Institute. The tests were aimed at comparing the efficacy of Spectra's low-cost disposable light source with a costly, high-maintenance dye laser now used in photodynamic therapy with the only FDA approved product. In the area of coding, Spectra has developed a nylon thread-based label to be used in conjunction with LaserPaint(TM) for the rental garment and linen industry. Spectra successfully debuted its patented laser thread identification system at the "Clean Show '97", the biennial meeting of the World Educational Congress for Laundering and Drycleaning, in Las Vegas, Nevada. Spectra's breakthrough technology is the solution to an annual billion-dollar problem in both the textile rental and industrial linen industries. Attendees included linen and garment manufacturers and distributors as well as institutional and industrial users and launderers. Significant orders are anticipated in 1998. Document security processes using LaserPaint(TM) technology have resulted in Spectra Science signing a licensing and Research & Development agreement with Crane & Company Inc., manufacturer of U. S. currency paper. RECENT DEVELOPMENTS Change in Officers. Effective January 1, 1998, Clifford G. Brockmyre was appointed to the position of Chief Executive Officer of the Company. USE OF PROCEEDS All 1,923,077 Shares offered hereby are being registered for the account of the Selling Stockholders. The Company will not receive any of the proceeds from the sale of the Shares. 12 SELLING STOCKHOLDERS The following table shows the names of the Selling Stockholders, the Shares owned beneficially by each of them, as of February 4, 1998, the number of shares that may be offered by each of them pursuant to this Prospectus and the number of Shares and percentage of outstanding Shares to be owned by each of them after the completion of this Offering, assuming all of the Shares being offered are sold. None of the Selling Stockholders were an officer or director of the Company or, to the knowledge of the Company, had any material relationship with the Company within the past three years.
Selling Stockholder Shares Number of Shares to be Percentage of Shares ------------------- Owned (1) Shares that May Owned Owned --------- Be Sold After the -------------------- --------------- Offering ------------ After Before the The Offering Offering ------------ ---------- Clearwater Fund IV LLC 2,787,077 1,923,077 864,000 6.91 27.31 --------- ------- ---- -----
(1) Of this amount, 2,590,077 shares are held of record by Clearwater Fund IV, LLC and the remaining 197,000 shares are held of record by Clearwater Offshore Fund LLP. The manager member of Clearwater Fund IV, LLC is Hans F. Heye who is also the President of Clearwater Futures, Inc. who is the trading manager of Clearwater Offshore Fund LLP. As a result, Clearwater Fund IV, LLC may be deemed to be the beneficial owner of the shares held by Clearwater Offshore Fund LLP. PLAN OF DISTRIBUTION Sales of the Shares may be effected from time to time in transactions (which may include block transactions) on the Nasdaq SmallCap Market, in negotiated transactions, or a combination of such methods of sale, at fixed prices which may be changed, at market prices prevailing at the time of sale, or at negotiated prices. None of the Selling Stockholders has entered into agreements, understandings or arrangements with any underwriters or broker-dealers regarding the sale of their Shares. The Selling Stockholders may effect transactions by selling their Shares directly to purchasers or to or through broker-dealers, which may act as agents or principals. Such broker-dealers may receive compensation in the form of discounts, concessions, or commissions from the Selling Stockholders and/or the purchasers of the Shares for whom such broker-dealers may act as agents or to whom they sell as principal, or both (which compensation as to a particular broker-dealer might be in excess of customary commissions). The Selling Stockholders and any broker-dealers that act in connection with the sale of the Shares might be deemed to be "underwriters" within the meaning of Section 2(11) of the Securities Act. The Selling Stockholders may agree to indemnify any agent, dealer or broker-dealer that participates in transactions involving sales of the securities against certain liabilities, including liabilities arising under the Securities Act. The Company has agreed to keep the Registration Statement, of which this Prospectus is a part, effective until all the Shares are sold or can be sold freely under an appropriate exemption from the securities laws of the United States and the states, without limitation. 13 In order to comply with the applicable securities laws of certain states, if any, the Shares will be offered or sold through registered or licensed brokers or dealers in those states. In addition, in certain states the Shares may not be offered or sold unless they have been registered or qualified for sale in such states or an exemption from such registration or qualification requirement is available and such offering or sale is in compliance therewith. Under applicable rules and regulations under the Exchange Act, any person engaged in a distribution of the Shares may not simultaneously engage in market making activities with respect to such securities for a period beginning when such person becomes a distribution participant and ending upon such person's completion of participation in a distribution, including stabilization activities in the Common Stock to effect syndicate covering transactions, to impose penalty bids or to effect passive market making bids. In addition and without limiting the foregoing, in connection with transactions in the Shares, the Selling Stockholders will be subject to applicable provisions of the Exchange Act and the rules and regulations thereunder, including, without limitation, Rule 10b-5 and, insofar as the Selling Stockholders are distribution participants, Regulation M and Rules 100, 101, 102, 103, 104 and 105 thereof. All of the foregoing may affect the marketability of the Shares. The Company will pay all of the expenses, including, but not limited to, fees and expenses of compliance with state securities or "blue sky" laws, incident to the registration of the Shares other than selling commissions. The expenses payable by the Company are estimated to be $10,000. CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION Limitation of Director Liability; Indemnification The Company's Certificate of Incorporation provides that a director of the Company will not be personally liable to the Company or its stockholders for monetary damages for breach of the fiduciary duty of care as a director, including breaches which constitute gross negligence. By its terms and in accordance with the Delaware General Corporation Law, however, this provision does not eliminate or limit the liability of a director of the Company (i) for breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law (relating to unlawful payments or dividends or unlawful stock repurchases or redemptions), (iv) for any improper benefit or (v) for breaches of a director's responsibilities under the Federal securities laws. The Company' Certificate of Incorporation also provides that each director or officer of the Corporation serving as a director or officer shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law, against all expense liability and loss (including attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith. Section 203 of Delaware General Corporation Law The Company is governed by the provisions of Section 203 of the General Corporation Law of Delaware, an anti-takeover law enacted in 1988. In general, the law prohibits a Delaware public corporation from engaging in a "business combination" with an "interested stockholder" for a period of three years after the date of the transaction in which the person became an interest stockholder, unless 14 it is approved in a prescribed manner. As a result of Section 203, potential acquirors of the Company may be discouraged from attempting to effect acquisition transactions with the Company thereby possibly depriving holders of the Company's Securities of certain opportunities to sell or otherwise dispose of such securities at above-market prices pursuant to such transactions. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. LEGAL MATTERS The validity of the securities offered hereby will be passed upon for the Company by Morse, Zelnick, Rose & Lander, LLP, 450 Park Avenue, New York, New York 10022. EXPERTS The financial statements of the Company for the year ended December 31, 1996 incorporated in this Prospectus by reference to the Form 10-KSB have been so incorporated in reliance on the report of Freed Maxick Sachs & Murphy, PC independent accountants, given on the authority of such firms as experts in accounting and auditing. TRANSFER AGENT The Transfer Agent and Registrar for the Shares is American Stock Transfer Company, 40 Wall Street, 46th Floor, New York, New York 10005. 15 No dealer, salesperson or any other person has been authorized to give any information or to make any representation not contained in this Prospectus with respect to the offering made hereby. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any of the securities offered hereby to any person or by anyone in any jurisdiction in which such offer or solicitation may not lawfully be made. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the information set forth herein or in the business of the Company since the date hereof. ---------------------- TABLE OF CONTENTS Page Available Information ...................................................... 3 Reports to Security Holders ................................................ 3 Incorporation of Certain Documents by Reference ............................................................. 3 Prospectus Summary ......................................................... 4 Forward-Looking Statements ................................................. 4 Risk Factors ............................................................... 6 The Company ................................................................ 10 Recent Developments ........................................................ 13 Use of Proceeds ............................................................ 13 Selling Stockholders ....................................................... 13 Plan of Distribution ....................................................... 14 Certain Provisions of the Certificate of Incorporation and By-Laws ............................................. 15 Legal Matters .............................................................. 16 Experts .................................................................... 16 Transfer Agent ............................................................. 16 1,923,077 Shares of Common Stock INFINITE GROUP, INC. ---------------------- PROSPECTUS ---------------------- , 1998 16 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution Expenses in connection with the issuance and distribution of the securities being registered hereunder other than underwriting commissions and expenses, are estimated below. The Selling Stockholders will not pay any of these expenses. SEC Registration Fee $ 745 Printing expenses $ 300* Accounting fees and expenses $ 2,000* Legal fees and expenses $ 5,000* Miscellaneous expenses $ 1,955* Total $10,000* ======= * estimated Item 15. Indemnification of Directors and Officers Sections 145 of the Delaware General Corporation Law grants to the Company the power to indemnify the officers and directors of the Company, under certain circumstances and subject to certain conditions and limitations as stated therein, against all expenses and liabilities incurred by or imposed upon them as a result of suits brought against them as such officers and directors if they act in good faith and in a manner they reasonably believe to be in or not opposed to the best interests of the Company and, with respect to any criminal action or proceeding, have no reasonable cause to believe their conduct was unlawful. The Company's certificate of incorporation provides as follows: "NINTH: A director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. TENTH: (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer, of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the II-1 Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that, except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the General Corporation Law requires, the payment of such expenses incurred by a director or officer (in his or her capacity as a director or officer and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) Right of Claimant to Bring Suit. If a claim under paragraph (a) of this Section is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard or conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the II-2 Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law." Item 16. Exhibits Exhibit No. Description 4.1 Securities Purchase Agreement* 5.1 Opinion of Morse, Zelnick, Rose & Lander, LLP as to legality of the securities being registered.* 23.1 Freed Mexick Sachs & Murphy, PC* 23.2 Consent of Morse, Zelnick, Rose & Lander, LLP (included in Exhibit 5.1) 24.1 Power of Attorney (included in signature page) - ---------- * Filed herewith. Item 17. Undertakings A. The undersigned Registrant hereby undertakes to: (1) File, during any period in which it offers or sells securities, a post-effective amendment to this registration statement to: (i) Include any additional or changed material information on the plan of distribution. (2) For determining liability under the Securities Act, treat each post-effective amendment as a new registration statement of the securities offered, and the offering of the securities at that time to be the initial bona fide offering. (3) File a post-effective amendment to remove from registration any of the securities that remain unsold at the end of the offering. B. Insofar as indemnification for liabilities arising under the Securities Act of 1933 (the "Act") may be permitted to directors, officers and controlling persons of the small business issuer pursuant to the foregoing provisions, or otherwise, the small business issuer has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the small business issuer of expenses incurred or paid by a director, officer or controlling person of the small business issuer in the successful defense of any action, suit of proceeding) is asserted by such director, officer, or controlling person in connection with the securities being registered, the small business issuer will, unless in the opinion of its counsel the matter has been settled by controlling II-3 precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in Act and will be governed by the final adjudication of such issue. II-4 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized in Warick, Rhode Island on the 6th day of February, 1998. INFINITE GROUP, INC. By: /s/ Clifford Brockmyre ------------------------------------ Clifford Brockmyre President and Chief Executive Officer KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Clifford Brockmyre, Kenneth S. Rose, or either one of them, his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all pre- or post-effective amendments to this Registration Statement, and to file the same with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or either of them, or their or his substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on February 6, 1998. Signatures Title - ---------- ----- /s/ Clifford Brockmyre President, Chief Executive Officer - ----------------------- and Director Clifford Brockmyre /s/ Daniel Landi Chief Financial Officer (principal - ----------------------- financial and accounting officer) Daniel Landi /s/ Carl C. Conway Director - ----------------------- Carl C. Conway /s/ Robert Sherwood Director - ----------------------- Robert Sherwood /s/ Michael Smith Director - ----------------------- Michael Smith II-5 EX-4.1 2 SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT SECURITIES PURCHASE AGREEMENT (this "Agreement"), dated as of September __, 1997 by and among Infinite Machines Corp., a Delaware corporation, with headquarters located at 300 Metro Center Blvd., Warwick, RI, 02886 (the "Company"), and the undersigned (the "Buyer"). WHEREAS: A. The Company and the Buyer are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Sections 4(2) and 4(6) under the Securities Act of 1933, as amended (the "1933 Act") and/or Rule 506 promulgated under Regulation D ("Regulation D") by the United States Securities and Exchange Commission (the "SEC"); B. The Buyer wishes to purchase, in the amounts and upon the terms and conditions stated in this Agreement, shares of the Company's common stock, par value $.001 per share ("IMCI Common Stock"), and receive an assignment of the Company's right to purchase shares of Spectra Science Corporation. ("Spectra") Series B Convertible Preferred Stock ("Spectra Preferred Stock") and warrants for the purchase of shares of Spectra Common Stock; and C. Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement (the "Registration Rights Agreement") pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and the rules and regulations promulgated thereunder, and applicable state securities laws. NOW THEREFORE, the Company and the Buyer hereby agree as follows: 1. PURCHASE AND SALE OF IMCI COMMON STOCK, SPECTRA PREFERRED STOCK AND THE WARRANTS. a. Purchase of IMCI Common Stock. The Company shall issue and sell to the Buyer and the Buyer shall purchase 1,923,077 shares of IMCI Common Stock for an aggregate purchase price of $1,900,000. b. Assignment and Purchase of Spectra Preferred Stock. For ten ($10) dollars, the Company shall sell and assign to the Buyer and the Buyer shall purchase the Company's entire subscription interest to purchase 763,498 shares of Spectra Preferred Stock with an aggregate purchase price of $1,145,247. c. Assignment and Purchase of Warrants. For ten ($10) dollars the Company shall sell and assign to the Buyer and the Buyer shall purchase the Company's entire right to receive warrants for the purchase of 190,874 shares of Spectra Common Stock with an exercise price of $4.00 per share (the "Warrants") for a purchase price of zero dollars. d. Form of Payment. The Buyer shall pay the purchase price for the shares of IMCI Common Stock and the shares of Spectra Preferred Stock (the "Purchase Price") by wire transfer of immediately available United States Dollars to the Company on the Closing Date (as defined below). The Company shall promptly deliver a stock certificate, duly executed on behalf of the Company, representing 1,923,077 shares of IMCI Common Stock (the "IMCI Stock Certificate"). The Company shall make all reasonable efforts to cause Spectra to promptly deliver (i) a stock certificate representing 763,498 shares of Spectra Preferred Stock, duly executed on behalf of Spectra (the "Spectra Stock Certificate") and (ii) a warrant certificate representing the Warrants, duly executed on behalf of Spectra (the "Warrant Certificate"). e. Closing Date. The date and time of the issuance and sale of the shares of IMCI Common Stock, and the sale of the shares of Spectra Preferred Stock and the Warrants shall be 5:00 p.m. Eastern Standard Time on September 18, 1997 (the "Closing Date"). 2. BUYER'S REPRESENTATIONS AND WARRANTIES The Buyer represents and warrants to the Company that: a. Non-Distribution. The Buyer is purchasing the shares of IMCI Common Stock for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof except pursuant to sales registered under the 1933 Act. b. Accredited Investor Status. The Buyer is an "accredited investor" as that term is defined in Rule 501(a)(3) of Regulation D. c. Reliance on Exemptions. The Buyer understands that the IMCI Common Stock, the assignment of its right to purchase shares of Spectra Preferred Stock and its right to receive Warrants (collectively, unless the context otherwise requires, together with the Spectra Preferred Stock and the Warrants, the "Securities") are being offered and sold to it in reliance on specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the truth and accuracy of, and the Buyer's compliance with, the representations, warranties, agreements, acknowledgments and understandings of the Buyer set forth herein in order to determine the availability of such exemptions and the eligibility of the Buyer to acquire the Securities. d. Information. The Buyer and its advisors, if any, have been furnished with all materials relating to the business, finances and operations of the Company and Spectra and 2 materials relating to the offer and sale of the Securities which have been requested by the Buyer. The Buyer and its advisors, if any, have been afforded the opportunity to ask questions of the Company and have received complete and satisfactory answers to any such inquiries. The Buyer understands that its investment in the Securities involves a high degree of risk. The Buyer has sought such accounting, legal and tax advice as it has considered necessary to an informed investment decision with respect to its acquisition of the Securities. e. Governmental Review. The Buyer understands that no United States federal or state agency or any other government or governmental agency has passed on or made any recommendation or endorsement of the Securities or the fairness or suitability of the investment in the Securities, nor have such authorities passed upon or endorsed the merits of the offering of the Securities. f. Transfer or Resale. The Buyer understands that (i) except as provided in the Registration Rights Agreement and the Amended and Restated Registration Rights Agreement of Spectra, the Securities, the shares of Spectra Common Stock receivable by the Buyer upon exercise of the Warrants (the "Exercise Shares"), and the Damage Shares (as that term is defined in the Registration Rights Agreement) have not been and are not being registered under the 1933 Act or any state securities laws, and may not be transferred unless (a) subsequently registered thereunder, or (b) the Buyer shall have delivered to the Company an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, to the effect that the securities to be sold or transferred may be sold or transferred pursuant to an exemption from such registration; (ii) any sale of such securities made in reliance on Rule 144 promulgated under the 1933 Act may be made only in accordance with the terms of said Rule and further, if said Rule is not applicable, any resale of such securities under circumstances in which the seller (or the person through whom the sale is made) may be deemed to be an underwriter (as that term is defined in the 1933 Act) may require compliance with some other exemption under the 1933 Act or the rules and regulations of the SEC thereunder; and (iii) neither the Company nor any other person is under any obligation to register such securities (other than pursuant to the Registration Rights Agreement and the Amended and Restated Registration Rights Agreement of Spectra) under the 1933 Act or any state securities laws or to comply with the terms and conditions of any exemption thereunder. g. Legends. The Buyer understands that unless, and until such time as the Securities, the Exercise Shares and the Damage Shares have been registered under the 1933 Act as contemplated by the Registration Rights Agreement, the certificates representing such securities shall bear a restrictive legend in substantially the following form (and a stop-transfer order may be placed against transfer of such certificates): THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE 3 SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED OR APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IN FORM, SUBSTANCE AND SCOPE REASONABLY ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR APPLICABLE STATE SECURITIES LAWS. ANY SUCH SALE, ASSIGNMENT OR TRANSFER MUST ALSO COMPLY WITH OR BE EXEMPT FROM APPLICABLE STATE SECURITIES LAWS. The legend set forth above as it appears on the IMCI Stock Certificate and on any certificate representing the Damage Shares shall be removed and the Company shall issue a certificate without such legend to the holder of such shares of IMCI Common Stock or the Damage Shares upon which it is stamped, if, unless otherwise required by federal or state securities laws, (a) the sale of such shares of IMCI Common Stock or the Damage Shares is registered under the 1933 Act, or (b) in connection with a sale transaction, such holder provides the Company with an opinion of counsel, in form, substance and scope reasonably acceptable to the Company, to the effect that a public sale or transfer of the shares of IMCI Common Stock or the Damage Shares may be made without registration under the 1933 Act, or (c) such holder provides the Company with reasonable assurances that the shares of IMCI Common Stock or Damage Shares can be sold pursuant to Rule 144 under the 1933 Act (or a successor rule thereto) without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold. h. Authorization; Enforcement. This Agreement has been duly and validly authorized, executed and delivered on behalf of the Buyer and is a valid and binding agreement of the Buyer enforceable in accordance with its terms, subject as to enforceability to general principles of equity and to bankruptcy, insolvency, moratorium, and other similar laws affecting the enforcement of creditors' rights generally. i. Residency. The Buyer is a resident of that country specified in its address on the signature page hereof. 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to the Buyer that: a. Organization and Qualification. The Company and each of its subsidiaries are corporations duly organized and existing in good standing under the laws of the jurisdiction in which they are incorporated, except, in the case of any such subsidiaries, as would not have a Material Adverse Effect (as defined below), and have the requisite corporate power to own 4 their properties and to carry on their business as now being conducted. The Company and each of its subsidiaries are duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted by it makes such qualification necessary and where the failure so to qualify would have a Material Adverse Effect. "Material Adverse Effect" means any material adverse effect on the operations, properties or financial condition of the Company and its subsidiaries taken as a whole. b. Authorization; Enforcement. (i) The Company has the requisite corporate power and authority to enter into and perform this Agreement and the Registration Rights Agreement, and to issue the aforementioned shares of IMCI Common Stock and the Damage Shares in accordance with the terms hereof and thereof, (ii) the execution and delivery of this Agreement by the Company and the consummation by it of the transactions contemplated hereby have been duly authorized by the Company's Board of Directors and no further consent or authorization of the Company, its Board of Directors, or its stockholders is required, (iii) this Agreement and the Registration Rights Agreement have been duly executed and delivered by the Company, and (iv) this Agreement and the Registration Rights Agreement constitute the valid and binding obligations of the Company enforceable against the Company in accordance with their terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies or by other equitable principles of general application. c. Capitalization. As of August 6, 1997, the authorized capital stock of the Company consists of (i) 20,000,000 shares of Common Stock of which 10,241,121 shares were issued and outstanding, and (ii) 1,000,000 shares of Series preferred stock, $.01 par value per share ("Preferred Stock") of which no shares were issued and outstanding. All of such outstanding shares have been validly issued and are fully paid and nonassessable. No shares of IMCI Common Stock or Preferred Stock are subject to preemptive rights or any other similar rights of the stockholders of the Company. Except as disclosed in Schedule 3(c), as of the effective date of this Agreement, (i) there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company or any of its subsidiaries, or arrangements by which the Company or any of its subsidiaries is or may become bound to issue additional shares of capital stock of the Company or any of its subsidiaries, (ii) there are no outstanding debt securities, and (iii) there are no agreements or arrangements under which the Company or any of its subsidiaries is obligated to register the sale of any of its or their securities under the 1933 Act (except the Registration Rights Agreement). The Company has furnished to the Buyer true and correct copies of the Company's Articles of Incorporation, as amended, as in effect on the date hereof ("Articles of Incorporation") and the Company's Bylaws, as in effect on the date hereof (the "Bylaws"). d. Issuance of Securities. The Company has assigned to the Buyer its right to purchase and receive the aforementioned Spectra Preferred Stock and Warrants which assignment 5 constitutes the Company's entire interest in Spectra Preferred Stock and related Warrants. The aforementioned shares of IMCI Common Stock are duly authorized, validly issued and non-assessable, and free from all taxes, liens and charges with respect to the issue thereof. The Company knows of no reason that the aforementioned shares of Spectra Preferred Stock, Warrants and Exercise Shares when issued will not: be duly authorized and, upon issuance in accordance with the terms thereof, validly issued, fully paid and non-assessable, and free from all taxes, liens and charges with respect to the issue thereof. The Damage Shares, if any, will be duly authorized, validly issued, fully paid and non-assessable, and free from all taxes, liens and changes with respect to the issue thereof. e. No Conflicts. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated hereby will not (i) result in a violation of the Articles of Incorporation or Bylaws or (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which the Company or any of its subsidiaries is a party, or result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its subsidiaries or by which any property or asset of the Company or any of its subsidiaries is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect). The business of the Company or its subsidiaries is not being conducted, and shall not be conducted through the Registration Period (as defined herein), in violation of any law, ordinance, regulation of any governmental entity, except for possible violations which either singly or in the aggregate do not have a Material Adverse Effect. The Company is not required to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under this Agreement in accordance with the terms hereof, except as required under the 1933 Act and any applicable state securities laws which have been or shall be duly made. f. SEC Documents, Financial Statements. The Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the reporting requirements of the Securities Exchange Act of 1934, as amended (the "1934 Act") (all of the foregoing filed prior to the date hereof and all exhibits included therein and financial statements and schedules thereto and documents (other than exhibits) incorporated by reference therein, being hereinafter referred to herein as the "SEC Documents"). As of their respective 6 dates, the SEC Documents complied in all material respects with the requirements of the 1934 Act and the rules and regulations of the SEC promulgated thereunder applicable to the SEC Documents, and none of the SEC Documents (as amended) contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. As of their respective dates, the financial statements of the Company included in the SEC Documents complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the SEC with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles, consistently applied, during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto, or (ii) in the case of unaudited interim statements, to the extent they may exclude footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of its operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments). No other information provided by or on behalf of the Company to the Buyer and referred to in Section 2(d) of this Agreement contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in the light of the circumstance under which they are or were made, not misleading. g. Absence of Certain Changes. Since June 30, 1997 there has been no material adverse change and no material adverse development in the business, properties, operations, financial condition, results of operations or prospects of the Company. h. Absence of Litigation. Except as set forth in its Form 10-Q for the quarter ended June 30, 1997, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board or body pending or, to the knowledge of the Company, threatened against or affecting the Company, wherein an unfavorable decision, ruling or finding would have a Material Adverse Effect or which would adversely affect the validity or enforceability of, or the authority or ability of the Company to perform its obligations under, this Agreement or any of the documents contemplated herein. 4. COVENANTS. a. Best Efforts. The parties shall use their best efforts timely to satisfy each of the conditions described in Sections 6 and 7 of this Agreement. b. Form D. The Company agrees to file a Form D with respect to the Securities as required under Regulation D and to provide a copy thereof to the Buyer promptly after such filing. c. Reporting Status. Until the earlier of (i) the date as of which the Investor (as that term is defined in the Registration Rights Agreement) may sell all of the aforementioned shares of IMCI Common Stock and the Damage Shares without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto), or (ii) the date on which the Investor has sold all the aforementioned shares of IMCI Common Stock and the Damage Shares (the "Registration Period"), the Company shall file all reports required to be filed with the SEC pursuant to the 1934 Act, and the Company shall not terminate its status as an issuer required 7 to file reports under the 1934 Act even if the 1934 Act or the rules and regulations thereunder would permit such termination. d. Use of Proceeds. The Company will use the proceeds from the sale of the Securities for the Company's internal working capital purposes and shall not, directly or indirectly, use such proceeds for any loan to or investment in any other corporation, partnership, enterprise or other person except as the Company's board of directors deems necessary in order to develop and commercialize the Company's technology. e. Financial Information. The Company agrees to send the following reports to the Buyer during the Registration Period: (i) within five (5) days after the filing thereof with the SEC, a copy of its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and any Current Reports on Form 8-K; and (ii) within one day after release thereof, copies of all press releases issued by the Company or any of its subsidiaries. f. Reservation of Shares. The Company shall at times have authorized, and reserved for the purpose of issuance, a sufficient number of shares of IMCI Common Stock and, when required, to provide for the issuance of the Damage Shares. g. Listing. The Company shall promptly secure the listing of the aforementioned shares of IMCI Common Stock and, if and when issued, the Damage Shares upon each national securities exchange or automated quotation system, if any, upon which shares of IMCI Common Stock are then listed (subject to official notice of issuance) and shall maintain, so long as any other shares of IMCI Common Stock shall be so listed, such listing of all shares of IMCI Common Stock from time to time issuable under the terms of this Agreement and the Registration Rights Agreement. 5. TRANSFER AGENT INSTRUCTIONS. The Company shall instruct its transfer agent to issue certificates, registered in the name of the Buyer or its nominee, for the Damage Shares, if any, in such amounts as specified from time to time by the Buyer to the Company. Prior to registration of the aforementioned shares of IMCI Common Stock and the Damage Shares pursuant to an effective registration statement, all such certificates shall bear the restrictive legend specified in Section 2(g) of this Agreement. The Company shall provide instructions and opinions of counsel to its transfer agent in accordance with Section 5(l) of the Registration Rights Agreement. The Company warrants that no instruction other than such instructions referred to in this Section 5, and stop transfer instructions to give effect to Section 2(f) hereof, in the case of the shares of IMCI Common Stock and the Damage Shares, prior to registration of the shares of IMCI Common Stock and the Damage Shares under the 1933 Act, will be given by the Company to its transfer agent and that the aforementioned shares of IMCI Common Stock and the Damage Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement and the Registration Rights Agreement. Nothing in this Section 8 shall affect in any way the Buyer's obligations and agreement to comply with all applicable securities laws upon resale of the Registrable Securities. If the Buyer provides the Company with an opinion of counsel, reasonably satisfactory in form, scope and substance to the Company, that registration of a resale by the Buyer of any of the shares of IMCI Common Stock and the Damage Shares is not required under the 1933 Act, the Company shall permit the transfer, and promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by the Buyer. 6. CONDITIONS TO THE COMPANY'S OBLIGATION TO SELL AND ASSIGN. The obligation of the Company hereunder to sell and assign IMCI Common Stock, the Company's right to purchase shares Spectra Preferred Stock and its right to receive Warrants, is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Company's sole benefit and may be waived by the Company at any time in its sole discretion: a. The parties shall have executed this Agreement and the Registration Rights Agreement, the Assignment (described in Section 7(d) below) and delivered the same to each other. b. The Buyer shall have delivered the Purchase Price to the Company by wire transfer of immediately available funds pursuant to the wiring instructions provided by the Company. c. The representations and warranties of each Buyer shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations. and warranties that speak as of a specific date), and the Buyer shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Buyer at or prior to the Closing Date. 7. CONDITIONS TO THE BUYER'S OBLIGATION TO PURCHASE. The obligation of the Buyer to purchase the Securities is subject to the satisfaction, at or before the Closing Date, of each of the following conditions, provided that these conditions are for the Buyer's sole benefit and may be waived by the Buyer at any time in its sole discretion: a. The parties shall have executed this Agreement and the Registration Rights Agreement, and delivered the same to each other. b. Until the Closing Date, the IMCI Common Stock shall be authorized for quotation on the Small Cap Market of the National Association of Securities Dealers Automated Quotation ("NASDAQ") System ("NASDAQ SmallCap") and trading in the Common Stock on NASDAQ SmallCap shall not have been suspended by the SEC or NASDAQ. 9 c. The representations and warranties of the Company shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time (except for representations and warranties that speak as of a specific date) and the Company shall have performed, satisfied and complied in all material respects with the covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date. The Buyer shall have received a certificate, executed by the Chief Executive Officer of the Company, dated as of the Closing Date, to the foregoing effect and as to such other matters as may be reasonably requested by the Buyer. d. The parties shall have executed and delivered the Assignment in form, scope and substance reasonably satisfactory to the Buyer. e. The Company shall have executed and delivered the IMCI Stock Certificate. f. Spectra shall have executed and delivered the Spectra Certificate and the Warrants to the Buyer (which, although a condition to the completion of this transaction, shall be delivered within 3 days of the execution of this Agreement). 8. GOVERNING LAW: MISCELLANEOUS. a. Governing Law. This Agreement shall be governed by and interpreted in accordance with the laws of the State of New York without regard to the principles of conflict of laws. b. Counterparts. This Agreement may be executed in two or more identical counterparts, all of which shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party. In the event any signature page is delivered by facsimile transmission, the party using such means of delivery shall cause four (4) additional original executed signature pages to be physically delivered to the other party within five (5) days of the execution and delivery hereof. c. Headings. The headings of this Agreement are for convenience of reference and shall not form part of, or affect the interpretation of, this Agreement. d. Severability. If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction. e. Entire Agreement: Amendments. This Agreement and the instruments referenced herein contain the entire understanding of the parties with respect to the matters covered herein 10 and therein and, except as specifically set forth herein or therein, neither the Company nor any Buyer makes any representation, warranty, covenant or undertaking with respect to such matters. No provision of this Agreement may be waived or amended other than by an instrument in writing signed by the party to be charged with enforcement. f. Notices. Any notices required or permitted to be given under the terms of this Agreement shall be sent by mail or delivered personally or by courier and shall be effective five days after being placed in the mail, if mailed, certified or registered, return receipt requested, or upon receipt, if delivered personally or by courier or by telefacsimile, in each case addressed to a party. The addresses for such communications shall be: If to the Company: 300 Metro Center Blvd. Warwick, RI 02886 Telephone: (702) 831-4680 Telecopy: Attention: Clifford G. Brockmyre With copy to: Morse, Zelnick, Rose & Lander, LLP 450 Park Avenue New York, NY 10022-2605 Telephone: (212) 838-5030 Telecopy: (212) 838-9190 Attention: Kenneth S. Rose, Esq. If to the Buyer, at the addresses on the signature page. With copy to: Rosenman & Colin LLP 575 Madison Avenue New York, NY 10022 Telephone: (212) 940-8873 Telecopy: (212) 940-8776 Attention: Todd J. Emmerman, Esq. Each party shall provide notice to the other party of any change in address. 11 g. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. Neither the Company nor the Buyer shall assign this Agreement or any rights or obligations hereunder without the prior written consent of the other (which consent may be withheld for any reason in the sole discretion of the party from whom consent is sought). Notwithstanding the foregoing, a Buyer may assign its rights hereunder to any of its "affiliates," as that term is defined under the 1934 Act, without the consent of the Company, provided, however, that any such assignment shall not release such Buyer of its obligations hereunder unless such obligations are assumed by such affiliate and the Company has consented to such assignment and assumption. h. Third Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other person. i. Survival. The representations and warranties of the Company and the Buyer contained in Sections 2 and 3 and the agreements and covenants set forth in Sections 4, 5, 8(g), 8(h), 8(k) and 8(l), and this subsection shall survive the closing. Each party which constitutes the Buyer shall be responsible only for its own representations, warranties, agreements and covenants hereunder. k. Publicity. The Company and the Buyer shall have the right to approve before issuance any press releases or any other public statements with respect to the transactions contemplated hereby; provided, however, that the Company shall be entitled, without the prior approval of the Buyer, to make any press release with respect to such transactions as is required by applicable law and regulations (although the Buyer shall be consulted by the Company in connection with any such press release prior to its release and shall be provided with a copy thereof). l. Further Assurances. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. m. Termination. In the event that the closing shall not have occurred on or before five (5) days from the date hereof, this Agreement shall terminate at the close of business on such date. 12 IN WITNESS WHEREOF, the Buyer and the Company have caused this Securities Purchase Agreement to be duly executed as of the date first written above. INFINITE MACHINES CORP. By: ------------------------ Name: ---------------------- Its: ----------------------- CLEARWATER FUND IV LLC By: ------------------------ Name: ---------------------- Its: ----------------------- Address: c/o Clearwater Funds 611 Druid Road East Suite 200 Clearwater, FL 33756 13 EX-5.1 3 CONSENT OF COUNSEL EXHIBIT 5.1 MORSE, ZELNICK, ROSE & LANDER A LIMITED LIABILITY PARTNERSHIP 450 PARK AVENUE NEW YORK, NEW YORK 10022-2605 212 838 1177 FAX 212 838 9190 February 6, 1998 Infinite Group, Inc. 300 Metro Center Boulevard Warwick, Rhose Island 02886 Re: Registration Statement on Form S-3 Dear Sirs: We have acted as counsel to Infinite Group, Inc., a Delaware corporation (the "Company"), in connection with the preparation of a registration statement on Form S-3 (the "Registration Statement") filed with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Act"), to register the sale by certain selling stockholders of 1,923,077 shares of Common Stock, par value $.001 per share (the "Common Stock"), of the Company. In this regard, we have reviewed the Certificate of Incorporation of the Company, as amended, resolutions adopted by the Company's Board of Directors, resolutions adopted by the Company's Shareholders, the Registration Statement, the other exhibits to the Registration Statement and such other records, documents, statutes and decisions as we have deemed relevant in rendering this opinion. Based upon the foregoing we are of the opinion that: Each share of Common Stock included in the Registration Statement has been duly and validly issued and is fully paid and non-assessable. We hereby consent to the use of this opinion as Exhibit 5A to the Registration Statement. In giving this opinion, we do not hereby admit that we are acting within the category of persons whose consent is required under Section 7 of the Act or the rules and regulations of the SEC thereunder. Very truly yours, /s/ Morse, Zelnick, Rose & Lander, LLP ---------------------------------- Morse, Zelnick, Rose & Lander, LLP EX-23.1 4 INDEPENDENT AUDITOR'S CONSENT EXHIBIT 23.1 INDEPENDENT AUDITOR'S CONSENT We hereby consent to the incorporation by reference in this Registration Statement on Form S-3 of our report, dated April 1, 1997, except for Note 18 which is dated May 21, 1997, which appears in the Annual Report on Form 10-KSB, as amended, of Infinite Group, Inc. (formerly Infinite Machines Corp.) for the year ended December 31, 1996. We also consent to the reference to us under the heading "Experts" in such Registration Statement. /s/ FREED, MAXICK, SACHS & MURPHY, PC ------------------------------------- FREED, MAXICK, SACHS & MURPHY, PC February 4, 1998 Buffalo, New York -----END PRIVACY-ENHANCED MESSAGE-----