AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 10, 1998
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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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)
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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.
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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
<TABLE>
<CAPTION>
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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)
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<S> <C> <C> <C> <C>
Common Stock 1,923,077 $1.3125 $2,524,039 $744.59
$.001 par value
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</TABLE>
(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.
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<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 10, 1998
PROSPECTUS
1,923,077 Shares
INFINITE GROUP, INC.
Common Stock, $.001 Par Value
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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.
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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
See "Risk Factors" at page 5.
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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.
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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.
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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.
<PAGE>
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.
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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.
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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.
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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."
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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.
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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.
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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
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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
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"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
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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
<PAGE>
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
<PAGE>
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.
<TABLE>
<CAPTION>
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
------------ ----------
<S> <C> <C> <C> <C> <C>
Clearwater Fund IV LLC 2,787,077 1,923,077 864,000 6.91 27.31
--------- ------- ---- -----
</TABLE>
(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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
<PAGE>
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
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.
<PAGE>
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
<PAGE>
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
<PAGE>
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
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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
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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
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<PAGE>
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
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<PAGE>
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
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<PAGE>
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.
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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
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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.
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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.
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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
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
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
