INFINITE GROUP, INC.

2009 STOCK OPTION PLAN
 
1.           PURPOSES. The purposes of this Stock Option Plan (the “Plan”) are
to attract and retain the best qualified personnel for positions of substantial
responsibility, to provide additional incentive to the Employees of the Company
or its Subsidiaries, if any (as defined in Section 2 below), as well as other
individuals who perform services for the Company or its Subsidiaries, and to
promote the success of the Company’s business.

Options granted hereunder may be either “incentive stock options” as defined in
Section 422A of the Internal Revenue Code, or “non-qualified stock options,” at
the discretion of the Board and as reflected in the terms of the written
instrument evidencing an Option.

 
2.
DEFINITIONS.  As used herein, the following definitions shall apply:

(a)           “Board” shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.

(b)           “Common Stock” shall mean the Common Stock of the Company, par
value $.001 per share.

(c)           “Company” shall mean Infinite Group, Inc., a Delaware corporation.

(d)           “Committee” shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one is
appointed.

(e)           “Continuous Status as an Employee” shall mean the absence of any
interruption or termination of service as an Employee.  Continuous Status as an
Employee shall not be considered interrupted in the case of sick leave, military
leave, or any other leave of absence approved by the Board.

(f)           “Employee” shall mean any person, including officers and
directors, employed by the Company or any Parent or Subsidiary of the
Company.  The payment of a director’s fee by the Company shall not be sufficient
to constitute “employment” by the Company.

(g)           “Exchange Act” shall mean the Securities Exchange Act of 1934, as
amended.

(h)           “Incentive Stock Option” shall mean a stock option intended to
qualify as an incentive stock option within the meaning of Section 422A of the
Internal Revenue Code of 1986, as amended.

 
 

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(i)           “Non-qualified Stock Option” shall mean a stock option not
intended to qualify as an Incentive Stock Option.

(j)           “Option” shall mean a stock option granted pursuant to the Plan.

(k)           “Optioned Stock” shall mean the Common Stock subject to an Option.

(l)           “Optionee” shall mean an Employee or other person who receives an
Option.

(m)           “Parent” shall mean a “parent corporation”, whether now or
hereafter existing, as defined in Section 425(e) of the Internal Revenue Code of
1986, as amended.

(n)           “Securities Act” shall mean the Securities Act of 1933, as
amended.

(o)           “SEC” shall mean the Securities and Exchange Commission.

(p)           “Share” shall mean a share of Common Stock, as adjusted in
accordance with Section 11 of the Plan.

(q)           “Subsidiary” shall mean a “subsidiary corporation”, whether now or
hereafter existing, as defined in Section 425(f) of the Internal Revenue Code of
1986, as amended.

 
3.
STOCK.

Subject to the provisions of Section 11 of the Plan, the maximum aggregate
number of shares which may be optioned and sold under the Plan is four million
(4,000,000) shares of authorized, but unissued, or reacquired $.001 par value
Common Stock.  If an Option should expire or become unexercisable for any reason
without having been exercised in full, the unpurchased Shares which were subject
thereto shall, unless the Plan shall have been terminated, shall become
available for further grant under the Plan.

 
4.
ADMINISTRATION.

(a)           Procedure. The Company’s Board of Directors may appoint a
Committee to administer the Plan.  The Committee shall consist of not less than
two members of the Board of Directors who shall administer the Plan on behalf of
the Board of Directors, subject to such terms and conditions as the Board of
Directors may prescribe.  Once appointed, the Committee shall continue to serve
until otherwise directed by the Board of Directors.  From time to time the Board
of Directors may increase the size of the Committee and appoint additional
members thereof, remove members (with or without cause), and appoint new members
in substitution therefore, fill vacancies however caused, or remove all members
of the Committee and thereafter directly administer the Plan.

 
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If a majority of the Board of Directors is eligible to be granted Options or has
been eligible at any time within the preceding year, a Committee must be
appointed to administer the Plan.  The Committee must consist of not less than
two members of the Board of Directors, all of whom are “non-employee directors”
as defined in Rule 16b-3 of the General Rules and Regulations promulgated under
the Exchange Act.

(b)      Powers of the Board.  Subject to the provisions of the Plan, the Board
shall have the authority, in its discretion: (i) to grant Incentive Stock
Options, in accordance with Section 422A of the Internal Revenue Code of 1986,
as amended, or to grant Non-Qualified Stock Options; (ii) to determine, upon
review of relevant information and in accordance with Section 8(a) of the Plan,
the fair market value of the Common Stock; (iii) to determine the exercise price
per share of Options to be granted, which exercise price shall be determined in
accordance with Section 8(a) of the Plan; (iv) to determine the persons to whom,
and the time or times at which, Options shall be granted and the number of
shares to be represented by each Option; (v) to interpret the Plan; (vi) to
prescribe, amend and rescind rules and regulations relating to the Plan; (vii)
to determine the terms and provisions of each Option granted (which need not be
identical) and, with the consent of the holder thereof, modify or amend each
Option; (viii) to accelerate or defer (with the consent of the Optionee) the
exercise date of any Option; (ix) to authorize any person to execute on behalf
of the Company any instrument required to effectuate the grant of an Option
previously granted by the Board; and (x) to make all other determinations deemed
necessary or advisable for the administration of the Plan.

(c)      Effect of the Board’s Decision.  All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees and any
other holders of any Options granted under the Plan.

5.            ELIGIBILITY.  Incentive Stock Options may be granted only to
Employees.  Nonqualified Stock Options may be granted to Employees as well as
directors (subject to the limitations set forth in Section 4), independent
contractors and agents, as determined by the Board.  Any person who has been
granted an Option may, if he is otherwise eligible, be granted an additional
Option or Options.

No Incentive Stock Option may be granted to an Employee if, as the result of
such grant, the aggregate fair market value (determined at the time each Option
was granted) of the Shares with respect to which such Incentive Stock Options
are exercisable for the first time by such Employee during any calendar year
(under all such plans of the Company and any Parent and Subsidiary) shall exceed
One Hundred Thousand Dollars ($100,000).

 
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The Plan shall not confer upon any Optionee any right with respect to
continuation of employment by the Company, nor shall it interfere in any way
with his right or the Company’s right to terminate his employment at any time.

6.             TERM OF PLAN. The Plan shall become effective upon the earlier to
occur of (i) its adoption by the Board of Directors, or (ii) its approval by
vote of a majority of the outstanding shares of the Company entitled to vote on
the adoption of the Plan.  The Plan shall continue in effect for a period of ten
(10) years from the effective date of the Plan, unless sooner terminated
pursuant to Section 13 of the Plan.

7.             TERM OF OPTION. The term of each Option shall be ten (10) years
from the date of the grant thereof, or such shorter term as may be provided in
the instrument evidencing the Option.  However, in the case of an Incentive
Stock Option granted to an Employee who, immediately before the Incentive Stock
Option is granted, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or Subsidiary,
the term of the Incentive Stock Option shall be five (5) years from the date of
grant thereof or such shorter time as may be provided in the instrument
evidencing the Option.

 
8.
EXERCISE PRICE AND CONSIDERATION.

(a)           The per Share exercise price for the Shares to be issued pursuant
to the exercise of an Option shall be such price as is determined by the Board,
but shall be subject to the following:

(i)  In the case of an Incentive Stock Option

(A)  granted to an Employee who, immediately before the grant of such Incentive
Stock Option, owns stock representing more than ten percent (10%) of the voting
power of all classes of stock of the Company or any Parent or Subsidiary, the
per Share exercise price shall be no less than 110% of the fair market value per
Share on the date of the grant; or, as the case may be

(B)   granted to an Employee not subject to the provisions of Section
8(a)(i)(A), the per Share exercise price shall be no less than one hundred
percent (100%) of the fair market value per Share on the date of the grant.

(ii)  In the case of a Non-qualified Stock Option, the per Share exercise price
shall be no less than one hundred percent (100%) of the fair market value per
Share on the date of the grant.

(b)           The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid and
asked prices or, if applicable, the closing price of the Common Stock on the
date of the grant, as reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System or, in the event the Common Stock is listed
on a stock exchange, the fair market value per Share shall be the closing price
on the exchange on the date of the grant of the Option, as reported in the Wall
Street Journal.

 
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(c)           The consideration to be paid for the Shares to be issued upon the
exercise of an Option or in payment of any withholding taxes thereon, including
the method of payment, shall be determined by the Board and may consist entirely
of (i) cash, check or promissory note; (ii) other Shares of Common Stock owned
by the Employee that has a fair market value on the date of surrender equal to
the aggregate exercise price of the Shares as to which said Option shall be
exercised; (iii) an assignment by the Employee of the net proceeds to be
received from a registered broker upon the sale of the Shares or the proceeds of
a loan from such broker in such amount; or (iv) any combination of such methods
of payment, or such other consideration and method of payment for the issuance
of Shares to the extent permitted under Delaware law and meeting rules and
regulations of the SEC to plans meeting the requirements of Section 16(b)(3) of
the Exchange Act.

 
9.
EXERCISE OF OPTION.

(a)           Procedure for Exercise; Rights as a Stockholder.  Any Option
granted hereunder shall be exercisable at such times and subject to such
conditions as may be determined by the Board, including performance criteria
with respect to the Company and/or the Optionee, as shall be permissible under
the terms of the Plan.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such exercise
has been given to the Company in accordance with the terms of the instrument
evidencing the Option by the person entitled to exercise the Option and full
payment for the Shares with respect to which the Option is exercised has been
received by the Company.  Full payment may, as authorized by the Board, consist
of any consideration and method of payment allowable under Section 8(c)of the
Plan; it being understood that the Company shall take such action as may be
reasonably required to permit use of an approved payment method.  Until the
issuance, which in no event will be delayed more than thirty (3) days from the
date of the exercise of the Option, (as evidenced by the appropriate entry on
the books of the Company or of a duly authorized transfer agent of the Company)
of the stock certificate evidencing such Shares, no right to vote or receive
dividends or any other rights as a stockholder shall exist with respect to the
Optioned Stock, notwithstanding the exercise of the Option.  No adjustment will
be made for a dividend or other right for which the record date is prior to the
date the sock certificate is issued, except as provided in the Plan.

Exercise of an Option in any manner shall result in a decrease in the number of
Shares which thereafter may be available, both for purposes of the Plan and for
the sale under the Option, by the number of Shares as to which the Option is
exercised.

 
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(b)           Termination of Status as an Employee.  If an Employee ceases to
serve as an Employee, he may, but only within thirty (30) days (or such other
period of time not exceeding three (3) months as is determined by the Board)
after the date he ceases to be an Employee of the Company, exercise his Option
to the extent that he was entitled to exercise it as of the date of such
termination.  To the extent that he was not entitled to exercise the Option at
the date of such termination, or if he does not exercise such option (which he
was entitled to exercise) within the time period specified herein, the Option
shall terminate.  Notwithstanding the provisions of this Section 9(b), in the
event that the Employee’s employment is terminated “for cause,” as such term is
defined and interpreted by the courts of the State of New York, the Employee’s
right to exercise his Option shall expire on the date of his termination.

(c)           Notwithstanding the provisions of Section 9(b) above, in the event
an Employee is unable to continue his employment with the Company as a result of
his total and permanent disability (as defined in Section 105(d)(4) of the
Internal Revenue Code of 1986, as amended), he may, but only with three (3)
months (or such other period of time not exceeding twelve (12) months as is
determined by the Board) from the date of disability, exercise his Option to the
extent he was entitled to exercise it at the date of such disability.  To the
extent that he was not entitled to exercise the Option at the date of
disability, or if he does not exercise such Option (which he was entitled to
exercise) within the time specified herein, the Option shall terminate.

(d)           Death of Optionee.  In the event of the death of an Optionee:

(i)  during the term of the Option who is at the time of his death an Employee
of the Company and who shall have been in Continuous Status as an Employee since
the date of the grant of the Option, the Option may be exercised, at any time
within twelve (12) months following the date of death, by the Optionee’s estate
or by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that would have
accrued had the Optionee continued living one (1) month after the date of death;
or

(ii)  within thirty (30) days (or such other period of time not exceeding three
(3) months as is determined by the Board) after the termination Continuous
Status as an Employee, the Option may be exercised, at any time within three (3)
months following the date of death, by the Optionee’s estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but only to
the extent of the right to exercise that had accrued at the date of termination.

10.          NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold,
pledged, assigned, hypothecated or disposed of in any manner other than by will
or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.

 
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11.          ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER. Subject to
any required action by the stockholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split or the payment of a stock dividend with
respect to the Common Stock or any other increase or decrease in the number of
issued shares of Common Stock effected without receipt of consideration by the
Company; provided, however, that conversion of any convertible securities of the
Company shall not be deemed to have been “effected without receipt of
consideration.”  Such adjustment shall be made by the Board, whose determination
in that respect shall be final, binding and conclusive.  Except as expressly
provided herein, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall affect, and no
adjustment by reason thereof shall be made with respect to, the number or price
of shares of Common Stock subject to an Option.

In the event of the proposed dissolution or liquidation of the Company, or in
the event of a proposed sale of all or substantially all of the assets of the
Company, or the merger of the Company with or into another corporation, the
Board of Directors of the Company shall, as to outstanding Options, either (i)
make appropriate provision for the protection of any such outstanding Options by
the substitution on an equitable basis of appropriate stock of the Company or of
the merged, consolidated or otherwise reorganized corporation which will be
issuable in respect to one share of Common Stock of the Company; provided, only
that the excess of the aggregate fair market value of the shares subject to the
Options immediately after such substitution over the market price thereof is not
more than the excess of the aggregate fair market value of the shares subject to
such Options immediately before such substitution over the purchase price
thereof, or (ii) upon written notice to an Optionee, provide that all
unexercised Options must be exercised within a specified number of days of the
date of such notice or they will be terminated.  In any case, the Board of
Directors may, in its discretion, advance the lapse of any waiting or
installment period and exercise dates.

12.          TIME FOR GRANTING OPTIONS.  The date of grant of an Option shall,
for all purposes, be the date on which the Board makes the determination
granting such Option.  Notice of the determination shall be given to each person
to whom an Option is so granted within a reasonable time after the date of such
grant.

13.          AMENDMENT AND TERMINATION OF THE PLAN.

(a)           The Board may amend or terminate the Plan from time to time in
such respects as the Board may deem advisable; provided, however, that the
following revisions or amendments shall require the approval of the holders of a
majority of the outstanding shares of the Company entitled to vote:

 
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(i)  any increase in the number of Shares subject to the Plan, other than in
connection with an adjustment under Section 11 of the Plan;

(ii)  any change in the designation of the class of persons eligible to be
granted Options; or

(iii)  any material increase in the benefits accruing to participants under the
Plan.

(b)           Stockholder Approval.  If any amendment requiring stockholder
approval under Section 13(a) of the Plan is made, such stockholder approval
shall be solicited as described in Section 17(a) of the Plan.

(c)           Effect of Amendment or Termination.  Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the Optionee and
the Company.

14.          CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act,
the Exchange Act, the rules and regulations promulgated thereunder, and the
requirements of any stock exchange upon which the Shares may then be listed, and
shall be further subject to the approval of counsel for the Company with respect
to such compliance.

As a condition to the exercise of an Option, the Company may require the person
exercising such Option to represent and warrant at the time of any such exercise
that the Shares are being purchased only for investment and without any present
intention to sell or distribute such Shares if, in the opinion of counsel for
the Company, such a representation is required by, or appropriate under, any of
the aforementioned relevant provisions of law.

15.          RESERVATION OF SHARES. The Company shall be under no obligation to
reserve shares of capital stock to fill Options.  The grant of Options to
Employees hereunder shall not be construed to constitute the establishment of a
trust of such shares and no particular shares shall be identified as optioned
and reserved for Employees hereunder.  The Company shall be deemed to have
complied with the terms of the Plan if, at the time of issuance and delivery
pursuant to the exercise of an Option, it has a sufficient number of shares
authorized and unissued or in its treasury which may then be appropriated and
issued for purposes of the Plan, irrespective of the date when such shares were
authorized.

16.          OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

 
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17.          STOCKHOLDER APPROVAL. Continuation of the Plan shall be subject to
approval by the stockholders of the Company within twelve (12) months before or
after the date the Plan is adopted.  If such stockholder approval is obtained at
a duly held stockholders’ meeting, it may be obtained by the affirmative vote of
the holders of a majority of the outstanding shares of the Company present or
represented and entitled to vote thereon.  The approval of such stockholders of
the Company shall be (1) solicited substantially in accordance with Section
14(a) of the Exchange Act and the rules and regulations promulgated thereunder,
or (2) solicited after the Company has furnished in writing to the holders
entitled to vote substantially the same information concerning the Plan as that
which would be required by the rules and regulations in effect under Section
14(a) of the Exchange Act at the time such information is furnished.

18.          OTHER PROVISIONS.  The Stock Option Agreement authorized under the
Plan shall contain such other provisions, including without limitation
restrictions upon the exercise of the Option, as the Board of Directors of the
Company shall deem advisable.  Any Incentive Stock Option Agreement shall
contain such limitations and restrictions upon the exercise of the Incentive
Stock Options as shall be necessary in order that such Option will be an
Incentive Stock Option as defined in Section 422A of the Internal Revenue Code
of 1986, as amended.

19.          INDEMNFICATION OF BOARD.  In addition to such other rights of
indemnification as they may have as directors or as members of the Board, the
members of the Board shall be indemnified by the Company against the reasonable
expenses, including attorneys fees actually and necessarily incurred in
connection with the defense of any action, suit or proceeding, or in connection
with any appeal therein, to which they or any of them may be a party by reason
of any action taken or failure to act under or in connection with the Plan or
any Option granted thereunder, and against all amounts paid by them in
settlement thereof (provided such settlement is approved by independent legal
counsel selected by the Company) or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, except in relation to matters as to
which it shall be adjudged in such action, suit or proceeding that such Board
member is liable for negligence or misconduct in the performance of his duties,
provided that within 60 days after the institution of any such action, suit or
proceeding a Board member shall, in writing, offer the Company the opportunity,
at its own expense, to handle and defend the same.

20.          OTHER COMPENSATION PLANS.  The adoption of the Plan shall not
affect any other stock option or incentive or other compensation plans in effect
for the Company or any Subsidiary, nor shall the Plan preclude the Company from
establishing any other forms of incentive or other compensation for employees
and directors of the Company or any Subsidiary.

21.          SINGULAR, PLURAL; GENDER.  Whenever used herein, nouns in the
singular shall include the plural, and masculine pronoun shall include the
feminine gender.

 
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22.          HEADINGS, ETC., NO PART OF PLAN.  Headings of Articles and Sections
hereof are inserted for convenience and reference; they constitute no part of
the Plan.

Adopted by the Board of Directors:  February 3, 2009

 
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