June 27, 2002




Mr. J. Terence Feeley 40 Charlotte Avenue

Saunderstown, Rhode Island 02864

Dear Terry:

      This letter will  acknowledge  that you have  requested  that the Board of
Directors of Infinite Group, Inc. (the "Company") agree to the early termination
of  your  employment  agreement  with  the  Company  dated  July  1,  1999  (the
"Employment Agreement") in connection with your desire to retire and that you be
retained by the Company as a consultant  in connection  with its  business.  The
Board of Directors of the Company hereby agrees to acknowledge  your  retirement
request and to retain you as a consultant in  consideration  of your obligations
hereunder and in exchange for your  execution of the Release  annexed  hereto as
Exhibit A (the "Release"), on the following terms and conditions.

      1. The Employment  Agreement is hereby  terminated and of no further force
or effect.

      2. You hereby resign from all offices which you may hold with the Company.

      3. You hereby resign as a director of the Company.

      4. You hereby resign as an officer and director of each  subsidiary of the
Company.

      5. The Company hereby retains you as a Special Consultant to its President
and Board of  Directors  and you agree to  provide  consulting  services  to the
Company during the period  commencing on the date hereof and terminating on June
30, 2004 (the "Consulting Period"). In performing such services, you will report
to the President and Chief Executive Officer and/or Chairman of the Board of the
Company.  Such  services  shall be consistent  with the services  which you have
previously provided to the Company and shall include providing the President and
Chief Executive Officer and/or Chairman with analysis and advice with respect to
those matters for which you previously had responsibility. During the Consulting
Period  you  shall  provide  such  services  at  times  and  locations  mutually
acceptable to you and the Company.

During the Consulting Period, the Company shall compensate you as follows:

<PAGE>

      (a) you shall receive a  semi-monthly  payment  commencing on June 1, 2002
and terminating on May 15, 2003 in the amount of $5,700.00.  These payments will
be  made  to you in your  capacity  as an  independent  consultant  (and  not an
employee) to the Company and will not reflect any tax or FICA withholding;

      (b) the Company shall provide you with group health benefits  through June
30, 2003 covering you and your family,  on such terms as they are generally made
available to executive officers of the Company during such period;

      (c)  the  Company  shall  reimburse  you  for  all  pre-approved  expenses
reasonably  incurred by you in connection  with your  performance  of consulting
services hereunder.

      6. (a) The  Company  hereby  acknowledges  that it  currently  owes  Donna
Feeley,  your wife, the sum of $10,000.  The Company hereby agrees to repay this
amount to her in two equal  installments  with  interest  at the rate of 10% per
annum on or before July 15, 2002,  and December  31,  2002,  respectively.  This
amount  represents all amounts,  absolute or contingent,  owed by the Company to
Donna Feeley.

            (b)  The  Company  hereby  acknowledges  that  there  are  no  loans
currently outstanding from the Company to you.

      7. The Company hereby  acknowledges  that you have been granted options to
purchase  shares of Company Common Stock under the Company's Stock Option Plans.
The Company  covenants  and agrees that you shall have ninety (90) days from the
end of the  Consulting  Period (until  September  30, 2004,  except as otherwise
provided for herein) to exercise your options with respect to these shares.  All
such options shall,  as a matter of law, be deemed  non-qualified  stock options
and, upon exercise, shall be subject to applicable tax withholding obligations.

      8. The Company  and you  acknowledge  that there is  presently a bona fide
dispute  with  respect to whether you entered  into a contract on the  Company's
behalf with the  University  of Rhode  Island  ("URI") with respect to a certain
Optimec Laser Engineered Net Shape machine known as an Optimec 750. URI contends
that you entered into a contract  with it on the  Company's  behalf and you have
contended that no such contract  exists.  In the event that the Company does not
receive documentation from URI on or before December 1, 2002, confirming that no
contract  exists and/or that the Company has no liability to URI,  then, in such
event,  upon notice to you, the Company may terminate the Consulting  Period and
its related obligations to you hereunder.

      9. (a) In consideration of the Company's execution of this Agreement,  you
hereby  agree with the  Company  that during the period  commencing  on the date
hereof and  terminating on June 30, 2005, you will not (1) solicit  proxies with
respect to any voting  securities  of the Company in  opposition to the slate of
directors  proposed  by the board of  directors  of the  Company;  (ii) become a

<PAGE>

"participant" in any "election contest" relating to the election of directors of
the Company (as such terms are used in Rule 14(a)11 of Regulation  14A under the
Securities Act of 1934); or (iii) lend your support to or authorize your name to
be used in connection with any "election contest" (whether or not the lending of
your support or the use of your name would cause you to be a "participant").  In
addition,  during the period  commencing on the date hereof and  terminating  on
June 30,  2005,  you will not  disparage or denigrate in any manner the Company,
any or its  subsidiaries  or  affiliates,  or  any  of its or  their  respective
officers or directors.

      (b) In  consideration  of the Company's  execution of this Agreement,  you
hereby agree that in connection  with the sale by you or any of your  affiliates
of shares of Company Common Stock, now owned or hereafter  acquired  ("Shares"),
except as otherwise agreed to in writing by the Company,  (i) the maximum number
of Shares  which may be sold on the  NASDAQ  Small  Cap  Market or a  subsequent
market or exchange on which the shares are listed  and/or traded (the "NSCM") on
any day shall be equal to twenty  percent  (20%) of the average of the number of
shares of Common Stock traded on the NSCM for the seven  trading days  preceding
such sale.

      10. You hereby  acknowledge  and agree that your  breach of any  provision
contained in paragraph 9 hereof  would cause  irreparable  damage to the Company
which would not be measurable; and that the Company's remedy at law for any such
breach would be inadequate and the Company shall be entitled, in addition to any
other  remedy  available to the  Company,  to temporary or permanent  injunctive
relief to enjoin any actual or threatened breach of such provision.

      11. In  consideration  of your  execution of this  Agreement,  the Company
hereby agrees with you that during the period  commencing on the date hereof and
terminating on June 30, 2005, the Company will not disparage or denigrate you in
any manner.

      12. The  Company  hereby  acknowledges  and agrees  that its breach of the
provisions  contained in paragraph 10 hereof would cause  irreparable  damage to
you which  would  not be  measurable;  and that your  remedy at law for any such
breach would be inadequate  and you shall be entitled,  in addition to any other
remedy available to you, to temporary or permanent  injunctive  relief to enjoin
any actual or threatened breach of such provision.

      13. It is specifically  acknowledged  and agreed to by the Company and you
that the  restrictions  contained in the last sentence of Paragraph  9(a) and in
Paragraph  11 shall not  restrict  either party from  testifying  truthfully  or
providing information if compelled to do so by applicable law.

      14.  Reference is made to Sections 12 and 14 of the  Employment  Agreement
wherein you have  undertaken  certain  agreements and covenants with the Company
with respect to non-competition and confidential  information.  You hereby agree
that these  provisions  are fully  incorporated  herein by  reference  and shall
survive the  termination of the Employment  Agreement and shall be in full force
and effect. You further agree that the applicable period of your covenant not to
compete shall run from the date hereof through June 30, 2004.

<PAGE>

      15. Notwithstanding anything to the contrary contained in the Release, the
Company  shall  indemnify  you with respect to any third party claim arising out
of, or related  to,  your  service as an  officer,  director  or employee of the
Company or any of its  subsidiaries to the same extent and on the same terms and
conditions  as shall  apply  from  time to time to the  Company's  then  current
officers,  directors  or  employees  under the  Company's  generally  applicable
policies regarding indemnification.

      16. All cash payments to be made hereunder  shall be net of all applicable
income and employment taxes required to be withheld therefrom.

      17. If any  disputes,  claims or  controversies  should arise  between the
parties,  the parties  shall make a good faith attempt to resolve such issues on
an informal basis between themselves. Should such efforts fail, however, any and
all disputes,  claims or controversies that may arise between the parties, their
employees or agents, relating to this Agreement or relating to or arising out of
the employment  relationship or the termination of the employment  relationship,
or where either party attempts to hold the other party,  its employees or agents
liable, shall be submitted to arbitration. This includes, but is not limited to,
claims under the Age  Discrimination  in employment  Act, Title VII of the Civil
Rights Act, the Americans with  Disabilities  Act, Sections 1981 through 1988 of
Title  42  of  the  United   States   Code,   the  Rhode   Island  laws  against
discrimination,  the  Conscientious  Employee  Protection Act, federal and state
Family and Medical Leave laws, federal and state Equal Pay laws, defamation,  as
well as any other federal, state or local law, ordinance or regulation, or based
on any public policy,  contract, tort or common law or any claim for costs, fees
or other  expenses  including  attorneys  fees.  Specifically  excluded from any
agreement to or  requirement to arbitrate are any claims by the Company that you
have violated  Sections 9 or 14 of this  Agreement or any claims by you that the
Company has violated Section 11 of this Agreement.

            The  parties  agree  that such  arbitration  shall be their sole and
exclusive remedy.  The parties understand that other options such as federal and
state and  judicial  remedies  exist and that  regardless  of the  nature of the
dispute or claim,  the parties  agree to resolve  such  dispute or claim only by
arbitration and are waiving their rights to obtain any legal or equitable relief
from a court or agency.

            The arbitration shall be pursuant to the Federal Arbitration Act and
shall be  arbitrated by a single  arbitrator  in  accordance  with the rules for
employment  disputes of the American  Arbitration  Association.  The  arbitrator
shall have the  authority  to award any type of legal or  equitable  relief that
would be  available  in a court of  competent  jurisdiction  to the extent  such
relief is available under law. The fees pertaining to the arbitration, including
the AAA's  administrative  fees and the  arbitrator's fee shall be split between
the parties, subject to reallocation by the arbitrator in the award.

            The parties agree that any arbitration  claim will be timely only if
brought within the time which an  administrative  charge or complaint would have
to be filed if the  claim is one which  could be filed  with an  agency.  If the

<PAGE>

arbitration  claim is one which  raises an issue that might have been brought in
court,  then the  arbitration  claim  must be filed  within  the time set by the
appropriate statute of limitations.

      18. In  consideration  of the Company's  execution of this Agreement,  you
hereby agree and acknowledge  that the name "Laser Fare",  and any derivative or
variation  thereof,  is the  exclusive  property of the Company and shall not be
used by you or any  entity  with  which  you are  affiliated  in any  manner  or
respect.

      19. In  consideration  of the Company's  execution of this Agreement,  you
hereby  acknowledge  and represent to the Company that Schedule A annexed hereto
contains a list of all  contracts  which you have  entered into on behalf of the
Company,  or any of its affiliates or subsidiaries,  which either require future
performance by the Company or pursuant to which the Company has any liability.

      20.  Miscellaneous.  This  Agreement  may be  amended  only  by a  written
instrument signed by you and the Company. Except for separate agreements between
you  and  the  Company  specifically  mentioned  herein,  this  Agreement  shall
constitute the entire agreement  between the Company and you with respect to its
subject  matter.  The Separation  Agreement and Release shall be governed by the
laws of the State of Rhode Island, other than the provisions thereof relating to
conflict of laws.  This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective  successors,  heirs and assigns. This
Agreement  may be  executed  in  counterparts,  each of which shall be deemed an
original but all of which together shall constitute one and the same instrument.
In the event  that any of the  terms and  conditions  of this  Agreement  are or
become invalid or unenforceable, the remaining provisions shall remain in force.
Any notices to be given and any payments to be made hereunder shall be delivered
in hand or sent by registered mail, return receipt requested,  to the respective
party at (i) the Company's  headquarters,  if notice shall be to the Company, or
(ii) your address of permanent residence as listed on the Company's records from
time to time or to such other  address  as either  such  party  shall  direct in
accordance with the requirements of this Section 20.

      This  Agreement  shall  become  effective  on  the  seventh  calendar  day
following the date on which you sign the release provided that, in the event you
exercise your  revocation  right under the release,  this Agreement shall become
null and void, ab initio.

<PAGE>

      Please acknowledge your  understanding,  acceptance and agreement with the
foregoing by signing this letter at the designated location below.

                                          Sincerely,

                                          Infinite Group, Inc

                                          By:
                                             ---------------------------------
                                             Clifford G. Brockmyre
                                             President  and  Chief   Executive

Officer
Agreed to and Accepted:

----------------------------
J. Terence Feeley

Solely with respect to Section 6 hereof:

----------------------------
Donna Feeley


<PAGE>

                                    EXHIBIT A

                     RELEASE OF CLAIMS BY J. TERENCE FEELEY

      (i) In consideration of the payments and other  consideration set forth in
the annexed letter agreement (the  "Agreement"),  the receipt and sufficiency of
which you hereby  acknowledge,  on behalf of yourself,  your family, your heirs,
executors,   administrators,   successors  and  assigns,   you  irrevocably  and
unconditionally  release, acquit and forever discharge the Company, and its past
and present  employees,  directors,  officers,  agents,  stockholders,  parents,
subsidiaries,  affiliates,  successors,  predecessors and assigns  (collectively
referred  to  as   "Releasees"),   from  any  and  all  claims,   controversies,
liabilities,  demands,  causes of action, debts,  obligations,  promises,  acts,
agreements,  rights of  contribution  and/or  indemnification,  and  damages  of
whatever  kind or nature,  whether known or unknown,  suspected or  unsuspected,
foreseen or unforeseen,  liquidated or contingent, actual or potential, joint or
individual,  that you now have or may have against the  Releasees to the date of
this  Release of Claims  ("Release").  Such  released  claims  include,  without
limitation,  any and all claims related to all aspects of your  employment  with
The Company or your separation from that employment  including,  but not limited
to, claims for breach of contract,  employment discrimination under Title VII of
the Civil  Rights Act of 1964,  as amended,  the Civil  Rights Act of 1991,  the
Equal Pay Act of 1963, the Americans with Disabilities Act of 1990, the Employee
Retirement Income Security Act of 1974, the Age Discrimination in Employment Act
of 1967, as amended, the Older Workers Benefit Protection Act of 1990, the Civil
Rights Act of 1866, the Family and Medical Leave Act of 1993, or under any other
federal,  state,  local or  municipal  laws,  rules or  regulations,  including,
without  limitation,  the laws of the State of Rhode Island,  as well as any and
all  claims  arising  out of,  based  upon or  relating  to your  employment  or
termination of your employment with the Company,  and all claims for punitive or
compensatory damages.

      (ii) You  acknowledge  and agree that in  consideration  for the  payments
provided to you by the Company in the  Agreement,  this  Release  constitutes  a
knowing and  voluntary  waiver of all rights or claims you may have  against The
Company  including,  but not limited to, all rights or claims  arising under the
Age Discrimination in Employment Act of 1967. You further  acknowledge and agree
that you have signed this Release freely and  voluntarily  and without duress or
coercion,  and with full knowledge of its  significance  and consequences and of
the rights relinquished, surrendered, released and discharged.

      (iii)  You  acknowledge  and  agree  that the  payments  set  forth in the
Agreement as consideration  for this Release is in addition to anything of value
to which you are otherwise entitled by law or the Releasees' policies.

      (iv) You acknowledge and agree that you have carefully read and understand
the terms of this Release, all of which have been fully explained to you.

      (v) You acknowledge that the Company has advised you to consult with legal
counsel or a representative  of your choice before signing this Release and that
you had a fair opportunity to do so.

<PAGE>

      (vi) You understand that, by signing this Release, you do not waive rights
or claims that (a) you have under the Agreement, or (b) may arise after the date
you execute this Release.

      (viii) You acknowledge  that you may revoke this Release in writing at any
time during the seven (7)  calendar  days  following  the date on which you sign
this  Release,  and  the  Separation  Payment  set  forth  in  Section  1 of the
Separation Agreement and the terms of this Release, and the Agreement, shall not
be effective or enforceable  until such seven-day  revocation period has expired
without your exercising your revocation right.

Dated:                                     Signed:
       --------------------                       -----------------------------
                                                  J. Terence Feeley