SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, For Use
of the Commission
Only (as permitted by
Rule 14a-6(e)(2)
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to Rule 14a-(11(c) or Rule 14a-12
INFINITE GROUP, INC.
------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Name of Person(s) Filing Proxy Statement, if other than the registrant)
- --------------------------------------------------------------------------------
Payment of Filing Fee (Check the appropriate box):
|X| No Fee required
<PAGE>
INFINITE GROUP, INC.
2364 Post Road
Warwick, Rhode Island 02886
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 10, 1999
To the Stockholders of
Infinite Group, Inc.
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Infinite
Group, Inc. (the "Company") will be held on December 10, 1999 at 2:30 p.m. at
Laser Fare Inc., One Industrial Drive, Smithfield, Rhode Island 02917, for the
following purposes:
1. To elect a board of four directors.
2. To consider and act upon a proposal to approve the Company's 1999 Stock
Option Plan.
3. To ratify the appointment of independent auditors for 1999.
4. To consider and take action upon such other matters as may properly
come before the meeting or any adjournments thereof.
The close of business on November 12, 1999 has been fixed as the record
date for the determination of stockholders entitled to notice of and to vote at
the Annual Meeting and any adjournment thereof.
All stockholders are cordially invited to attend the meeting. Whether or
not you expect to attend, you are requested to sign, date and return the
enclosed proxy promptly. Stockholders who execute proxies retain the right to
revoke them at any time prior to the voting thereof. A return envelope, which
requires no postage if mailed in the United States, is enclosed for your
convenience.
By Order of the Board of Directors
Daniel T. Landi, Secretary
Dated: November 15, 1999
<PAGE>
INFINITE GROUP, INC.
2364 Post Road
Warwick, Rhode Island 02886
---------------------------
PROXY STATEMENT
---------------------------
ANNUAL MEETING OF STOCKHOLDERS
This Proxy Statement is furnished in connection with the solicitation by
the Board of Directors of Infinite Group, Inc. (the "Company") of proxies in the
form enclosed for the Annual Meeting of Stockholders to be held at Laser Fare,
Inc., One Industrial Drive, Smithfield, Rhode Island 02917, on December 10,
1999, at 2:30 p.m. and for adjournment or adjournments thereof, for the purpose
set forth in the accompanying Notice of Annual Meeting of Stockholders. The
Board of Directors knows of no other business which will come before the
meeting.
All shares represented by each properly executed unrevoked proxy received
in time for the meeting will be voted as specified. In the absence of any
specification, proxies will be voted (a) for the election of the four persons
listed herein as nominees as directors, (b) in favor of the adoption of the
Company's 1999 Stock Option Plan, (c) for the ratification of auditors, and (d)
in the judgment of the Board of Directors on any other matters which may
properly come before the meeting. Any stockholder giving a proxy has the power
to revoke the same at any time before it is voted.
The approximate date on which this Proxy Statement and the accompanying
form of proxy along with the Company's 1998 Annual Report will be mailed to the
Company's stockholders is November 15, 1999. The principal executive officers of
the Company are located at 2364 Post Road, Warwick, Rhode Island 02886.
VOTING SECURITIES
Only stockholders of record at the close of business on November 2, 1999
are entitled to notice of and to vote at the Annual Meeting or any adjournment
thereof. On the record date there were issued and outstanding 2,128,540 Common
Shares. Each outstanding Common Share is entitled to one vote upon all matters
to be acted upon at the meeting.
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BENEFICIAL OWNERSHIP OF COMMON STOCK
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's officers and directors, and persons who own more than ten percent of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission
("SEC"). Officers, directors and greater than ten-percent shareholders are
required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file. Based solely on review of the copies of such forms
furnished to the Company, or written representations that no Forms 5 were
required, the Company believes that all Section 16(a) filing requirements
applicable to its officers and directors were complied with.
The following table, together with the accompanying footnotes, sets forth
information, as of November 1, 1999, regarding stock ownership of all persons
known by the Company to own beneficially 5% or more of the Company's outstanding
Common Stock, all directors and nominees, and all directors and executive
officers of the Company as a group.
Shares of Common
Stock Beneficially Percentage of
Name of Beneficial Owner(1) Owned(2) Class(3)
- ----------------------------------------- ------------------ -------------
Directors and Executive Officers:
Clifford G. Brockmyre 757,144(4) 26.2%
Daniel T. Landi 8,846(5) *
J. Terence Feeley 110,174(6) 4.9%
Bruce J. Garreau 88,500(7) 4.0%
Michael S. Smith 1,000(8) *
James P. Sherblom 90,500(9) 4.1%
William Lyons -- *
All executive officers and directors as a 1,056,164(10) 33.2%
group (7 persons)
5% Stockholders:
Northeast Hampton Holdings, LLC(11) 497,106 21.7%
1895 Mt. Hope Avenue
Rochester, NY 14620
- -------------------
* less than 1%
(1) Unless otherwise indicated below, each director, executive officer and
each 5% stockholder has sole voting and investment power with respect to
all shares beneficially owned. The address of Mr. Brockmyre is c/o the
Company, 2364 Post Road, Warwick, RI 02886.
(2) Pursuant to the rules of the Securities and Exchange Commission, shares of
Common Stock which an individual or group has a right to acquire within 60
days pursuant to the exercise of options or warrants or upon the
conversion of securities are deemed to be outstanding for the purpose of
computing the percent of ownership of such individual or group, but are
not deemed
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to be outstanding for the purpose of computing the percentage ownership of
any other person shown in the table.
(3) Assumes that all currently exercisable option or warrants or convertible
notes owned by the individual have been exercised.
(4) Includes 20,000 shares owned by Mr. Brockmyre's wife as to which shares
Mr. Brockmyre disclaims beneficial ownership, 91,076 shares subject to
currently exercisable options and 536,000 shares subject to currently
exercisable warrants.
(5) Includes 7,769 shares subject to currently exercisable options.
(6) Includes 106,923 shares subject to currently exercisable options.
(7) Includes 75,000 shares subject to currently exercisable options.
(8) Includes 333 shares subject to currently exercisable options.
(9) Includes 38,500 shares subject to currently exercisable options.
(10) Includes 856,601 shares subject to currently exercisable options, warrants
or convertible notes.
(11) Assumes that all currently exercisable options or warrants owned by
members of the group have been exercised.
(12) This information was derived from the Schedule 13D and Form 4's filed by
the reporting person.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The Summary Compensation Table below includes, for each of the fiscal
years ended December 31, 1998, 1997 and 1996 individual compensation for
services to the Company and its subsidiaries paid to: (1) the Chief Executive
Officer, and (2) the other most highly paid executive officers of the Company in
Fiscal 1998 whose salary and bonus exceeded $100,000 (together, the "Named
Executives").
<TABLE>
<CAPTION>
Name and Principal Long-Term All Other
Position Year Annual Compensation Compensation($) Compensation
- -------------------- ---- --------------------- --------------- ------------
Actual($) Deferred($)
--------- ---------
<S> <C> <C> <C> <C>
Clifford G. Brockmyre 1998 175,000 -- 339,038 --
President and Chief 1997 175,000 -- 4,038 --
Executive Officer 1996 157,500 75,000 60,000 --
J. Terence Feeley 1998 169,120 10,000 -- --
President Advanced 1997 142,230 9,500 -- --
Technology Group 1996 158,647 9,500 -- --
Daniel T. Landi 1998 110,000 -- 2,538 --
Secretary and 1997 110,000 -- 2,538 --
Corporate Controller 1996 100,000 -- -- --
</TABLE>
Employment Agreements
The Company has an employment agreement with, its President and Chief
Executive Officer, for a term expiring on June 30, 2000, which provides for an
annual salary of $175,000 and various benefits. In addition to the compensation
provided under the agreement, Mr. Brockmyre is eligible to participate in the
Company bonus plan and is eligible for other bonuses as determined in the sole
direction of the Board of Directors. The agreement also provides, among other
things, that, if Mr. Brockmyre is terminated other than for cause (which is
defined to include conviction of a crime
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involving moral turpitude, engaging in activities competitive with the Company,
divulging confidential information, dishonesty or misconduct detrimental to the
Company or breach of a material term of the agreement (collectively "Cause")),
the Company will pay to him a lump sum payment equal to the product of the sum
of (i) the highest annual rate of salary paid to Mr. Brockmyre, and (ii) the
highest annual bonus paid to or accrued to the benefit of Mr. Brockmyre during
the Employment Term multiplied by two. The agreement also provides for payments
to Mr. Brockmyre, or his estate, in the event of his death or permanent
disability.
The Company has an employment agreement with Mr. J. Terence Feeley,
President of the Advanced Technology Group, for a term expiring on July 1, 2002,
which provides for an annual salary of $150,000 and various benefits. In
addition to the compensation provided under the agreement, Mr. Feeley is
eligible to participate in the Company's bonus plan and is eligible for other
bonuses as determined in the sole direction of the Board of Directors. The
agreement also provides, among other things, that, if Mr. Feeley is terminated
other than for Cause, the Company will pay to him a lump sum payment equal to
the product of the sum of (i) the highest annual rate of salary paid to Mr.
Feeley, and (ii) the highest annual bonus paid to or accrued to the benefit of
Mr. Feeley during the Employment Term multiplied by two. The agreement also
provides for payments to Mr. Feeley, or his estate, in the event of his death or
permanent disability.
The Company has an employment agreement with Bruce J. Garreau, its Chief
Financial and Accounting Officer, for a term expiring on October 1, 2002, which
provides for an annual salary of $135,000 and various benefits including the
grant of 10,000 shares of Company common stock and 75,000 stock options
exercisable at $1.00 per share. The options vest in three equal increments of
25,000 shares upon the closing price of the Company's common stock exceeding
$3.00, $4.50 and $6.75, respectively. In addition to the compensation provided
under the agreement, Mr. Garreau is eligible to participate in the Company's
bonus plan and is eligible for other bonuses as determined in the sole direction
of the Board of Directors. The agreement also provides, among other things,
that, if Mr. Garreau is terminated other than for Cause, the Company will pay to
him a lump sum payment equal to the product of the sum of (i) the highest annual
rate of salary paid to Mr. Garreau, and (ii) the highest annual bonus paid to or
accrued to the benefit of Mr. Garreau during the Employment Term multiplied by
two. The agreement also provides for payments to Mr. Garreau, or his estate, in
the event of his death or permanent disability.
The Company has an employment agreement with Daniel T. Landi, its
Secretary and Corporate Controller, for a term expiring on October 19, 2000,
which provides for an annual salary of $110,000 and various benefits. In
addition to the compensation provided under the agreement, Mr. Landi is eligible
to participate in all executive bonus and option plans established for senior
executives of the Company.
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<PAGE>
Stock Options
The following tables show certain information with respect to stock
options granted in 1998 to Named Executives and the aggregate value at December
31, 1998 of all stock options granted to the Named Executives. All information
contained in this tables and the description of the Stock Option Plans which
follow gives effect to the one-for-five reverse stock split effected on February
16, 1999. No Options were exercised by Named Executives during 1998.
Option Grants in Last Fiscal Year
- --------------------------------------------------------------------------------
Individual Grants
Percent of
Number of Total
Shares Options/Granted Exercise
Underlying to Employees price Expiration
Name Options Granted in Fiscal Year ($/Sh) Date
- --------------------- ---------------- ---------------- --------- ----------
Clifford G. Brockmyre 2,109 1.3% $ 2.50 12/2/08
Clifford G. Brockmyre 2,109 1.3% $ 2.50 7/2/08
J. Terence Feeley 1,731 1.1% $ 2.50 12/2/08
J. Terence Feeley 1,731 1.1% $ 2.50 7/2/08
Daniel T. Landi 1,269 0.8% $ 2.50 12/2/08
Daniel T. Landi 1,269 0.8% $ 2.50 7/2/08
Aggregate 1998 Year End Option Values
- --------------------------------------------------------------------------------
Number of Shares of
Common Stock Underlying Value of Unexercised
Unexercised Options at In-The-Money Options at
12/31/98 (#) 12/31/98* ($)
Name Exercisable/Unexercisable Exercisable/Unexercisable
- --------------------- ------------------------- -------------------------
Clifford G. Brockmyre 24,346/6,831 $15,216/$4,269
J. Terence Feeley 26,924/19,590 $16,828/$12,244
Daniel T. Landi 4,769/4,077 $2,981/$1,593
- ----------
* Based on December 31, 1998 Nasdaq closing price of $1.875.
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<PAGE>
Stock Option Plans
In December 1991, the Board of Directors and stockholders of the Company
adopted a stock option plan, which was amended in April 1993 (the "1993 Stock
Option Plan"). In April 1994, the Board of Directors adopted the 1994 Stock
Option Plan which was approved and adopted by the Company's stockholders at the
1994 Annual Meeting of Stockholders. In June 1995 the Board of Directors adopted
the 1995 Stock Option Plan which was approved by the Company's stockholders at
the 1995 Annual Meeting of Stockholders. In December 1996, the Board of
Directors adopted the 1996 Stock Option Plan which was approved and adopted by
the Company's stockholders at the 1996 Annual Meeting of Stockholders. In
December 1997, the Board of Directors adopted the 1997 Stock Option Plan which
was approved and adopted by the Company's stockholders at the 1997 Annual
Meeting of Stockholders. In December 1998, the Board of Directors adopted the
1998 Stock Option Plan which was approved and adopted by the Company's
stockholder at the 1998 Annual Meeting of Stockholders. The 1993, 1994, 1995,
1996, 1997 and 1998 Option Plans are collectively referred to herein as the
"Option Plans". The 1993, 1994, 1995, 1996, 1997 and 1998 Option Plans provide
for the grant to employees, officers and consultants of options to purchase up
to 250,000, 225,000, 255,000, 400,000, 600,000 and 500,000, respectively, or an
aggregate of 2,230,000 shares of Common Stock, consisting of both incentive
stock options within the meaning of Section 422 of the United States Internal
Revenue Code of 1986 (the "Code") and non-qualified options. The Option Plans
are intended to qualify under Rule 16b-3 of the Securities Exchange Act of 1934.
Incentive stock options are issuable only to employees of the Company, while
non-qualified options may be issued to non-employees, consultants, and others,
as well as to employees of the Company.
The Option Plans are administered by the Compensation Committee of the
Board of Directors, which determines those individuals who shall receive
options, the time period during which the options may be partially or fully
exercised, the number of share of Common Stock that may be purchased under each
option, and the option price.
The per share exercise price of an incentive or non-qualified stock option
may not be less than the fair market value of the Common Stock on the date the
option is granted. The aggregate fair market value (determined as of the date
the option is granted) of the shares of Common Stock for which incentive stock
options are first exercisable by any individual during any calendar year may not
exceed $100,000. No person who owns, directly or indirectly, at the time of the
granting of an incentive stock option to him or her, more than 10% of the total
combined voting power of all classes of stock of the Company shall be eligible
to receive any incentive stock option under the Option Plans unless the option
price is at least $110% of the fair market value of the Common Stock subject to
the option, determined on the date of grant. Non-qualified options are not
subject to this limitation.
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<PAGE>
No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by him or her. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination during which to exercise the option.
Upon termination of employment of an optionee by reason of death or permanent
total disability, the option remains exercisable for one year thereafter to the
extent it was exercisable on the date of such termination. No similar limitation
applies to non-qualified options.
In April 1993, the Board of Directors and stockholders of the Company
adopted a non-discretionary non-employee directors' stock option plan (the
"Directors' Plan") that provides for the grant to non-employee directors of
non-qualified options to purchase up to 50,000 shares of Common Stock. Pursuant
to the Directors' Plan, each new non-employee director of the Company is
automatically granted, upon becoming a director, an option to purchase 2,500
shares of Common Stock at the fair market value of such shares on the grant
date. Each option vests one year from the date of grant. In addition, each
non-employee director shall automatically be granted an option to purchase 2,500
shares at the fair market value of such shares on the date of grant, on the last
day of each fiscal year during which he or she serves as a director of the
Company. Such options shall vest one year from date of grant.
Options under the Option Plans and Directors' Plan must be granted within
10 years from the effective date of each respective plan. Incentive stock
options granted under the plan cannot be exercised more than 10 years from the
date of grant, except that incentive stock options issued to greater than 10%
stockholders are limited to four-year terms. All options granted under the plans
provide for the payment of the exercise price in cash or by delivery to the
Company of shares of Common Stock already owned by the optionee having a fair
market value equal to the exercise price of the options being exercised, or by a
combination of such methods of payment. Therefore, an optionee may be able to
tender shares of Common Stock to purchase additional shares of Common Stock and
may theoretically exercise all of his stock options without making any
additional cash investment.
Any unexercised options that expire or that terminate upon an optionee's
ceasing to be affiliated with the Company become available once again for
issuance. As of September 30, 1999 the Company had outstanding incentive stock
options to purchase 504,848 shares of Common Stock under the Option Plans and
non-qualified options to purchase an aggregate of 1,500 shares of Common Stock
to Michael S. Smith, and 500 shares of Common Stock to James P. Sherblom under
the Directors' Plan. These options are exercisable at prices ranging from $1.875
to $2.50 per share.
7
<PAGE>
Compensation Committee Interlocks and Insider Participation in Compensation
Decisions
None of the directors serving on the Compensation Committee is an employee
of the Company. No director or executive officer of the Company is a director or
executive officer of any other corporation that has a director or executive
officer who is also a director of the Company.
Directors Compensation
Non-employee directors currently receive 2,500 stock options at the end of
each year of service as a director. The Company does not pay a fee to directors
for services rendered as directors. Each director is reimbursed for travel
expenses incurred in connection with attendance at meetings of the Board of
Directors and its committees.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In February 1998, the former chairman and principal shareholder of the
Company, along with related parties of the principal shareholder, sold an
aggregate of 470,044 shares of common stock of the Company to Northeast Hampton
Holdings, LLC. Also, the principal stockholder sold his interest in the above
convertible secured notes with a principal balance of $900,605 to Northeast
Hampton Holdings. Northeast Hampton Holdings, in turn, forgave $106,743 of the
notes payable as consideration for 35,581 shares of common stock issued in
connection with the exercise of stock options. The remaining $793,862 of
principal outstanding was converted into 101,355 shares of common stock at an
average conversion price of $8.15 per share.
On June 30, 1998, the Company's president and chief executive officer
loaned the Company an aggregate of $1.15 million. The note evidencing the loan
is for a term of fifteen years and bears interest at the rate of 9.0% for the
first twelve months and adjusts annually thereafter to a rate equal to the
one-year T-Bill rate plus 3.5%. The president and chief executive officer also
loaned the Company $250,000 earlier this year. In consideration for the loans,
the Company granted the lender detachable warrants to purchase 536,000 shares of
Company Common Stock exercisable at $5.60 per share. Half of the warrants are
immediately vested and, provided that the loan remains outstanding, the
remaining 50% vest in four equal allotments; six, nine, twelve, and fifteen
months from the anniversary date of the loan. In the event the loan is prepaid
within such period, any unexercisable warrants are cancelable.
In May 1998, the Company entered into an agreement with James P. Sherblom
pursuant to which Mr. Sherblom agreed to act as Senior Financial Advisor to the
Company. In consideration for such services, the Company granted to Mr. Sherblom
a non-qualified stock option to purchase 48,000 (post-split) shares of Company's
Common Stock at the fair market value on the date of the agreement. The options
vest
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with respect to 2,000 shares per month over a 24-month period. The Agreement is
terminable by either party on 30 days' notice, in which event any unvested
options would be forfeited. In October 1998, Mr. Sherblom became a Director of
the Company.
The Company believes the foregoing transactions which involved affiliates
were on terms no less favorable to the Company than could have been obtained
from unaffiliated third parties. As a matter of policy, in order to reduce the
risks of self-dealing or a breach of the duty of loyalty to the Company, all
transactions between the Company and any of its officers, directors or principal
stockholders are for bona fide purposes and are approved by a majority of the
disinterested members of the Board of Directors.
ELECTION OF DIRECTORS
At the meeting, four Directors will be elected by the stockholders to
serve until the next annual meeting or until their successors are elected and
qualified. The accompanying form of proxy will be voted for the election as
Directors of the four persons named below, unless the proxy contains contrary
instructions. Proxies cannot be voted for a greater number of persons than the
number of nominees named herein. Management has no reason to believe that any of
the nominees will not be a candidate or unable or unwilling to serve as
Directors, the proxy will be voted for the election of such person or persons as
shall be designated by the Board of Directors.
Clifford G. Brockmyre. Mr. Brockmyre, age 58, has been a director of the
Company since October 1994 and its President since October 1995. For over 27
years, Mr. Brockmyre has been involved in the tooling, machining and
manufacturing industries and was the 1992 Chairman of the 3000+ corporation
member National Tooling and Machining Association. He developed the laser
manufacturing liaison to the National Laboratories at Los Alamos, Sandia and Oak
Ridge for Laser Fare. The Department of Energy has set up Laser Fare as a model
for technology transfer under its Small Business Initiative. Mr. Brockmyre was
recently appointed by the Governor of Rhode Island to the State Economic
Advisory Council.
J. Terence Feeley. Mr. Feeley, age 49, has been a director of the Company
since March 1999 and the President of the Laser Fare -- Advanced Technology
Group since 1994. He was the co-founder, President and CEO of Laser Fare prior
to it being acquired by the Company. Mr. Feeley is the President of the Laser
Institute of America, the author of over 50 papers on laser technology and the
co-editor of three books in the area of laser based rapid manufacturing. Mr.
Feeley received a BA from the University of Rhode Island.
Michael S. Smith. Mr. Smith, age 45, became a director of the Company in
1995 and is a member of the Audit and Compensation Committee. Mr. Smith is the
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President and CEO of Micropub Systems International, Inc., a brewery system
manufacturer, and is a principal of Cambridge Capital Management Group, LLC, a
merchant banking firm. From October 1992 through January 1997, Mr. Smith was the
Managing Director of Corporate Finance of H.J. Meyers & Co. an investment
banking firm and was general counsel of such firm from May 1991 through May
1995. Mr. Smith was associated with the law firm of Harter, Secrest & Emery from
1987 until 1991. Mr. Smith received a B.A. from Cornell University and a J.D.
magna cum laude from Cornell University School of Law.
William G. Lyons III. Mr. Lyons, age 43, became a director of the Company
in December 1998. He is President of Third Generation Consultants, LLC and
Chairman of Blackstone Medical, Inc. Previously, Mr. Lyons was employed by
Brimfield Precision, Inc. from 1981 through 1998, a manufacturer of surgical
instruments and orthopedic implants, in various capacities including President
and Chief Executive Officer. Mr. Lyons received a B.S. in Mechanical Engineering
- -- Material Science from the University of Connecticut and a M.S. in Biomedical
Engineering from Hartford Graduate Center/Rensselaer Polytechnical Institute.
During the year ended December 31, 1998, the Board of Directors held 4
meetings. Each director standing for re-election attended at least 75% of such
meetings. The Board maintains an Audit Committee comprised of Messrs. Lyons,
Smith and Sherblom and a Compensation Committee comprised of Messrs. Lyons,
Smith and Sherblom.
The Audit Committee approves the selection of the Company's auditors and
meets and interacts with the auditors to discuss questions in regard to the
Company's financial reporting. The Compensation Committee evaluates the
performance of the Company's executive employees and determines the salaries and
other compensation payable to such persons. Each such Committee met twice during
the fiscal year with all members present.
The affirmative vote of holders of a plurality of the shares of Common Stock
present or represented at the Annual Meeting is required for the election of
directors.
The Company recommends a vote FOR the election of the foregoing nominees.
PROPOSAL TO APPROVE THE
COMPANY'S 1999 STOCK OPTION PLAN
On October 18, 1999, the Board of Directors approved the 1999 Stock Option
Plan (the "Plan"). The Plan will become effective upon the ratification by the
affirmative vote of the holders of a majority of the Company's outstanding
shares of Common Stock. It provides, among other matters, for incentive and/or
non-incentive
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stock options and for non-discretionary grants to non-employee directors of the
Company.
One purpose of the Plan is to provide incentives to directors and key
employees whose performance will contribute to the long-term success and growth
of the Company, to strengthen the ability of the Company to attract and retain
directors and employees of high competence, to increase the identity of
interests of such persons with those of the Company's stockholders and to help
build loyalty to the Company through recognition and the opportunity for stock
ownership. All directors and employees of the Company who are in positions which
enable them to make significant contributions to the long-term performance and
growth of the Company are eligible to receive awards under the Plan.
Pursuant to the Plan, each non-employee director upon initial election to
the Board (or upon approval of the Plan with respect to Messrs. Lyons and Smith,
current non-employee directors standing for re-election) will receive
non-qualified options to purchase 7,500 shares of Common Stock exercisable at
the fair market value on the date of grant. These options will vest one-third on
the date of grant and one-third at the end of each subsequent year of service.
In addition, each non-employee Director will receive options to purchase an
additional 5,000 shares of Common Stock on the date of the Company's annual
stockholders' meeting. Such options will have an exercise price equal to the
fair market value of the Common Stock on the date of grant and will vest
one-third upon grant and one-third on each of the first and second anniversary
of the date of grant.
The maximum aggregate number of shares as to which awards or options may
at any time be granted under the Plan is 110,000 shares.
The Option Plan is administered by the Compensation Committee of the Board
of Directors, which determines those individuals who shall receive options, the
time period during which the options may be partially or fully exercised, the
number of shares of Common Stock that may be purchased under each option, and
the option price.
Terms of Option
The Plan permits the granting of both incentive stock options and
non-qualified stock options. The option price of both incentive stock options
and non-qualified stock options must be at least equal to 100% of the fair
market value of the shares on the date of grant. The maximum term of each option
is ten years. For any participant who owns shares possessing more than 10% of
the voting rights of the Company's outstanding Common Stock, the exercise price
of any incentive stock option must be at least equal to 110% of the fair market
value of the shares subject to such option on the date of grant and the term of
the option may not be longer than four years. Options become
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<PAGE>
exercisable at such time or times as the Compensation Committee may determine at
the time it grants options.
No incentive stock option may be transferred by an optionee other than by
will or the laws of descent and distribution, and during the lifetime of an
optionee, the option will be exercisable only by him or her. In the event of
termination of employment other than by death or disability, the optionee will
have three months after such termination during which to exercise the option.
Upon termination of employment of an optionee by reason of death or permanent
total disability, the option remains exercisable for one year thereafter to the
extent it was exercisable on the date of such termination. No similar limitation
applies to non-qualified options.
Under certain circumstances involving a change in the number of
outstanding shares of Common Stock without the receipt by the Company of any
consideration therefor, such as a stock split, stock consolidation or payment of
a stock dividend, the class and aggregate number of shares of Common Stock in
respect of which Options may be granted under the Plan, the number of shares
subject to each option and the option price per share shall be proportionately
adjusted.
The Plan will terminate on October 18, 2009 and may be terminated by the
Board of Directors of the Company prior to that date.
The Company believes that the Plan should be approved because of the need
to have the ability to issue stock options to directors and key employees upon
whose performance and contribution the long-term success and growth of the
Company is dependent.
The affirmative vote of a majority of the shares of Common Stock present or
represented at the Annual Meeting is required for the approval of the 1999 Stock
Option Plan.
The Company recommends a vote FOR the approval of the
1999 Stock Option Plan.
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
The directors propose that the stockholders ratify the appointment of
Freed Maxick Sachs & Murphy, P.C. as the Company's independent auditors for
1999. Freed Maxick Sachs & Murphy, P.C. were the Company's independent auditors
for its last fiscal year. The report of Freed Maxick Sachs & Murphy, P.C. with
respect to the Company's financial statement appears in the Company's annual
report on Form 10-KSB for such year. A representative of Freed Maxick Sachs &
Murphy, P.C. will be available at the annual meeting and will have an
opportunity to make a statement if he
12
<PAGE>
desires to do so and will be available to respond to appropriate questions. In
the event the stockholders fail to ratify the appointment, the directors will
consider it a directive to consider other auditors for the subsequent year.
The affirmative vote of holders of a plurality of the shares of Common Stock
present or represented at the Annual Meeting is required for the ratification of
appointment of independent auditors.
The Company recommends a vote FOR the ratification
of appointment of independent auditors.
GENERAL
The management of the Company does not know of any matters other than
those stated in the Proxy Statement which are to be presented for action at the
meeting. If any other matters should properly come before the meeting, it is
intended that proxies in the accompanying form will be voted on any such other
matters in accordance with the judgment of the persons voting such proxies.
Discretionary authority to vote on such other matters is conferred by such
proxies upon the persons voting them.
The Company expects representatives of Freed Maxick Sachs & Murphy, P.C.,
the Company's independent auditors, to be available at the Annual meeting and to
respond to pertinent questions of stockholders.
The Company will bear the cost of preparing, assembling and mailing the
Proxy, Proxy Statement and other material which may be sent to the stockholders
in connection with this solicitation. In addition to the solicitation of proxies
by use of the mail, officers and regular employees of the Company may solicit
the return of proxies. The Company may reimburse persons holding stock in their
names or in the names of other nominees for their expenses in sending proxies
and proxy material to principals. Proxies may be solicited by mail, personal
interview, telephone and telegraph.
The Company will provide without charge to each person being solicited by
this Proxy Statement, upon the written request of any such person, a copy of the
Annual Report of the Company on Form 10-KSB for the year ended December 31, 1997
(as filed with the Securities and Exchange Commission) including the financial
statements thereto. All such requests should be directed to Infinite Group,
Inc., 2364 Post Road, Warwick, Rhode Island 02886, Att: Secretary.
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<PAGE>
All proposals of stockholders intended to be included in the proxy
statement to be presented at the 1999 Annual Meeting of Stockholders must be
received at the Company's executive offices no later than March 15, 2000 and
should be directed to the Secretary of the Company.
By Order of the Board of Directors
Daniel T. Landi, Secretary
Dated: November 15, 1999
14
<PAGE>
SOLICITED BY THE BOARD OF DIRECTORS
INFINITE GROUP, INC.
ANNUAL MEETING OF STOCKHOLDERS
December 10, 1999
PROXY
The undersigned stockholder of Infinite Group Inc. (the "Company") hereby
appoints Clifford G. Brockmyre and Kenneth S. Rose and each of them acting
singly, with power of substitution, the attorneys and proxies of the undersigned
and authorizes them to represent and vote on behalf of the undersigned, as
designated, all of the shares of capital stock of the Company that the
undersigned is entitled to vote at the Annual Meeting of Stockholders of the
Company to be held on December 10, 1999, and at any adjournment or postponement
of such meeting for the purposes identified on the reverse side of this proxy
and with discretionary authority as to any other matters that properly come
before the Annual Meeting of Stockholders of the Company, in accordance with and
as described in the Notice of Annual Meeting of Stockholders and the Proxy
Statement. This proxy when properly executed will be voted in the manner
directed herein by the undersigned stockholder. If this proxy is returned
without direction being given, this proxy will be voted FOR all proposals.
SEE REVERSE
(IMPORTANT - TO BE SIGNED AND DATED ON REVERSE SIDE)
<PAGE>
|X| Please mark votes as in this example.
The Board of Directors recommends a vote FOR proposals 1, 2, 3, 4 and 5.
FOR WITHHOLD
1. Election of four Directors: |_| |_|
Nominees:
Clifford G. Brockmyre WITHHOLD FOR NOMINEE BELOW:
J. Terence Feeley
William G. Lyons III
Michael Smith
FOR AGAINST ABSTAIN
2. Approve the Company's 1999 |_| |_| |_|
Stock Option Plan
3. Ratify the appointment of |_| |_| |_|
Freed Maxick Sachs & Murphy, P.C.
P.C. as independent auditors.
MARK HERE FOR MARK
ADDRESS CHANGE |_| HERE FOR |_|
AND NOTE BELOW COMMENTS
Please sign exactly as your name appears on stock certificate. If acting as
attorney, executor, trustee, guardian or in other representative capacity, sign
name and title. If a corporation, please sign in full corporate name by
President or other authorized officer. If a partnership, please sign in the
partnership name by an authorized person. If held jointly, both parties must
sign and date.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
Signature:____________________________________ Date:______________________
Signature:____________________________________ Date:______________________
