LOAN AGREEMENT
INFINITE GROUP, INC., a Delaware corporation, with its principal office at
0000 Xxxx Xxxx, Xxxxxxx, XX 00000 (hereinafter referred to as "Borrower"), and
XXXXXXXX X. XXXXXXXXX, having an address at 000 Xxxx Xxxxx Xxxx, Xxxxxxxxxx, XX
00000 (hereinafter referred to as "Lender"), hereby enter into this Loan
Agreement ("Agreement") dated as of June 26, 1998.
SECTION 1. CERTAIN DEFINITIONS
1.1 The following terms used in this Agreement will have the meanings
given below:
Claims and Expenses Any and all claims, lawsuits of any kind,
judgments, losses, damages, liabilities,
penalties, costs and reasonable expenses
arising out of transactions contemplated
under this Agreement or under the Collateral
Documents, including all "Legal Costs and
Expenses" (defined below) incurred in
connection therewith.
Collateral Documents The Note and the Warrant.
Loan Defined in Section 2.1.
Loan Amount $1,150,000.00.
Loan Closing and the
Loan Closing Date Defined in Section 2.2.
Legal Costs and Expenses Any and all reasonable attorneys' fees and
disbursements, court costs and other
litigation expenses.
Maturity Date June 26, 2008.
Note Defined in Section 2.2.
Shares Borrower's shares of common stock, par value
$.001 per share.
Warrant The warrant to be issued to the Lender
pursuant to Section 3 of this Agreement.
SECTION 2. THE LOAN
2.1 Simultaneously with the execution of this Agreement, Lender is making
a loan (the "Loan") to Borrower in the principal amount of $1,150,000 US
Dollars, receipt of which is hereby acknowledged by Borrower.
2.2 The Loan is evidenced by a promissory note ("the Note") made by
Borrower payable to Lender, which is being executed and delivered to Lender
contemporaneously herewith (such loan and delivery being hereinafter called the
"Loan Closing" and the date thereof being hereinafter called the "Loan Closing
Date"). A copy of the Note is attached to this Agreement as Exhibit 1.
2.3 The Note is payable in accordance with its provisions which include,
inter alia:
(a) interest at the rate of 9% per annum on the unpaid balance of
the Note adjusted as described on Rider A hereto (the "Interest Rate
Adjustment");
(b) equal monthly payments of $10,838.23 commencing on July 1, 1998
and on the first day of each month thereafter to and including June 1, 2008
(which monthly payments shall include both principal and interest), adjusted
annually to give effect to the Interest Rate Adjustment;
(c) a final payment equal to all unpaid principal and accrued
interest payable on June 26, 2008;
(d) the right to Borrower, exercisable at any time prior to the
Maturity Date to prepay, without penalty, all or part (each such payment being a
minimum of $10,000 or covering the unpaid balance of the Note) of the unpaid
principal amount and accrued interest thereon of the Note; and
(e) the principal of the Note and accrued interest thereon shall
become immediately due and payable upon the occurrence of an Event of Default.
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2.4 The obligation of Lender to make the Loan shall be conditioned on the
satisfaction of Lender that the representations and warranties of Borrower
contained in this Agreement and in the Collateral Documents are true, complete
and correct. Borrower understands and agrees that any investigation by Lender
shall in no way limit the responsibility of the Borrower for such
representations and warranties being true, complete and correct.
2.5 Notwithstanding any provision in this Agreement or in the Note, in no
event shall the interest rate applicable to the Loan exceed that permitted by
the laws or governmental regulations applicable to Lender, Borrower or the Loan
that limit rates of interest that may be charged or collected by Lender. If any
payment hereunder or under the Note shall be found to constitute a payment of
interest in excess of that permitted under the laws or governmental regulations
applicable to Lender, Borrower or the Loan that limit rates of interest that may
be charged or collected by Lender, then the amount of such excess payment shall
be refunded to Borrower.
SECTION 3. WARRANT
3.1 Simultaneously with the Closing hereunder Borrower has delivered to
Lender a warrant, a copy of which is attached hereto as Exhibit 3 (the
"Warrant"), to purchase up to 2,680,000 Shares, at an exercise price equal to
$1.12 per share.
3.2 In the event of any change in the number of outstanding Shares by
reason of any reclassification, recapitalization, split-up, combination, merger,
exchange of Shares, stock dividend or the like, which has occurred prior to the
issuance date of any of the Warrant referred to in Section 3.1, the number of
Shares to which such Warrant shall apply and the price per share at which such
Warrant shall be exercisable shall be correspondingly adjusted.
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SECTION 4. USE OF PROCEEDS
4.1. The proceeds of the Loan will be used by Borrower for working capital
purposes.
SECTION 5. CLOSING DOCUMENTS
5.1 Simultaneously with the execution and delivery of this Agreement, the
Loan is being funded and Borrower is delivering or has delivered to Lender the
following documents, duly executed and (where required) witnessed or notarized:
(a) the Note;
(b) Secretary's Certificate of Borrower as to resolutions of its
Board of Directors authorizing (i) the borrowing hereunder, (ii) the issuance of
the Warrants, and (iii) the execution and delivery of this Agreement, the
Collateral Documents and the transactions contemplated hereby and thereby; and
(c) the Warrant.
SECTION 6. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
6.1 To induce Lender to make the Loan hereunder, Borrower represents and
warrants to and agrees with Lender that:
(a) Borrower is a corporation duly and validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
in such other jurisdictions where the ownership of property or the nature of the
business conducted by it requires such qualification, except insofar as the
failure to so qualify would not materially and adversely affect Borrower.
(b) Borrower has the requisite corporate authority and power to
enter into this Agreement, to borrow money as contemplated hereby, to issue the
Note and the Warrant and to execute and deliver each of those documents required
and described in this Agreement. The execution and delivery of this Agreement,
the Collateral Documents and the Warrant have been duly authorized by Borrower
and this Agreement, the Collateral Documents and the Warrants are enforceable
against Borrower in accordance with their terms.
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SECTION 7. CERTAIN AFFIRMATIVE COVENANTS
7.1 So long as any amount due to Lender pursuant to the Note, this
Agreement or any of the other Collateral Documents is outstanding, the Borrower
will do and comply with the following:
(a) Borrower will promptly make all payments of the principal and
interest on the Note when due; and
(b) Borrower will comply with the terms and conditions of this
Agreement and of those contained in each Collateral Document.
SECTION 8. CERTAIN NEGATIVE COVENANTS
8.1 So long as any amount due to Lender pursuant to the Note, this
Agreement or any of the other Collateral Documents is outstanding, except with
the prior written consent of Lender (whose consent, except as otherwise
indicated below, may be refused without explanation and without any legal
recourse by Borrower), Borrower will not:
(a) engage in any line of business materially different from those
which Borrower is now engaged in; or
(b) become a party to any merger or consolidation with any
corporation, company or entity of any kind whatsoever, or sell substantially all
of its assets, or otherwise liquidate or dispose of its business.
SECTION 9. IRREGULAR PAYMENT
9.1 Lender may accept late payments and partial payments even though
marked "payment in full" or words of similar import, without losing any of its
rights under this Agreement or under the Note.
SECTION 10. DELAY IN ENFORCEMENT
10.1 Lender may delay in enforcing its rights under this Agreement or a
Collateral Document without losing or prejudicing such rights.
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SECTION 11. NO BROKER
11.1 Borrower represents and warrants to Lender that it has not dealt with
any broker or finder, whether or not licensed, in connection with this Agreement
or the loan transactions under this Agreement. Lender represents and warrants
that it has not dealt with any broker or finder.
SECTION 12. LOAN EXPENSES
12.1 Borrower agrees and acknowledges that Lender is simultaneously
entering into a series of loan agreements with First National Bank of New
England and Borrower agrees to pay, promptly after demand is made, all
reasonable out-of-pocket expenses incurred by Lender in connection with the
making, amending, perfection, enforcement or payment or liquidation of such loan
agreements and the Loan which is the subject of this Agreement, including (but
not limited to) Lender's legal fees and disbursements, title fees, title
insurance fees, bank consultant fees, appraisal fees, mortgage recording fees
and mortgage taxes, bank attorneys' fees and any other expense incurred, or to
be incurred by Lender in connection with his loans from First National Bank of
New England the proceeds of which are being used to fund the Loan.
SECTION 13. NOTICES
13.1 Unless otherwise expressly provided elsewhere in this Agreement, any
notice, request, consent, election, demand or other communication ("notice") to
be given or made by the parties under this Agreement must be in writing and
either:
(a) delivered by hand, telecopier or overnight delivery by Federal
Express or other recognized carrier; or
(b) sent by certified or registered mail, return receipt requested,
postage prepaid.
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13.2 Each notice to be given to Lender or Borrower will be addressed to it
at its address set forth in the preamble on page 1 of this Agreement.
13.3 A copy of each notice must be sent simultaneously and in like manner
to:
Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
Fax: 000-000-0000
13.4 Borrower and Lender may, by notice to the others, change the address
to which future notices are to be sent or add or change a person to whom a
notice or a copy of a notice is to be sent.
13.5 Unless otherwise provided elsewhere in this Agreement, each notice
shall be considered to be given on:
(a) the date delivered by hand or telecopier (unless it is not a
business day or is not received before 5:30 P.M., in which case the notice shall
be considered given on the next business day after being sent);
(b) the next business day after being sent by overnight courier;
(c) the third full business day following the date of mailing
postage prepaid in the United States Mail.
However, a notice of a change of address of person pursuant to Section 13.4
shall not be deemed given until received.
13.6 A notice that is mailed must be deposited into an official mail
depository maintained by the United States Postal Service or (if mailed outside
the United States) by an equivalent postal authority.
13.7 Failure to accept a notice is deemed receipt of it and does not
invalidate the notice or excuse the performance of an obligation.
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SECTION 14. ENTIRE AGREEMENT
14.1 All prior and contemporaneous statements, representations, promises,
understandings, agreements, projections and opinions, whether written or oral
made to each other with regard to this transaction, are merged in this Agreement
and the Collateral Documents. This Agreement and the Collateral Documents
constitute the entire agreement of the parties.
SECTION 15. CHANGES AND WAIVERS
15.1 A provision of this Agreement will be considered to have been changed
or waived only if the change or waiver is expressly made in writing signed by
the party to be charged.
15.2 The failure to insist on strict performance of any provision will not
mean that the provision has been waived or that the right to insist thereafter
on strict performance of that or any other provision has been waived.
SECTION 16. PARTIES TO COOPERATE
16.1 Each party will reasonably cooperate with the other to close the
transactions that are the subject of this Agreement.
16.2 In furtherance of such cooperation, each party will obtain, execute
and deliver such documents as are in its possession or control and are
reasonably necessary in order to close or effectuate or confirm any provisions
of this Agreement.
SECTION 17. GOVERNING LAW
17.1 The laws of the State of Rhode Island will govern this Agreement and
the interpretation and enforcement of its provisions, without regard to legal
principles of conflict of laws.
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SECTION 18. WAIVER OF JURY TRIAL; VENUE
18.1 THE BORROWER AND THE LENDER EACH WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE COLLATERAL DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF
ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, RELATED PERSON,
PARTICIPANT, OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS,
OR OTHERWISE. BORROWER AND LENDER EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY COLLATERAL DOCUMENT OR ANY PROVISIONS
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE COLLATERAL
DOCUMENTS.
18.2 THE BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST THE LENDER ANY
CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE COLLATERAL DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY.
18.3 WITH RESPECT TO ANY CLAIM OR ACTION ARISING UNDER THIS AGREEMENT OR
THE COLLATERAL DOCUMENTS, THE BORROWER HEREBY (A) IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF RHODE ISLAND AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE STATE OF RHODE ISLAND, AND (B) IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
COLLATERAL DOCUMENTS BROUGHT IN ANY SUCH COURT, IRREVOCABLY WAIVES ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY WAIVES THE RIGHT TO
OBJECT, WITH RESPECT TO SUCH CLAIM, SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING
IN THIS AGREEMENT WILL BE DEEMED TO PRECLUDE THE LENDER FROM BRINGING AN ACTION
OR PROCEEDING IN RESPECT HEREOF IN ANY OTHER JURISDICTION.
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SECTION 19. INVALID PROVISIONS SEVERED
19.1 The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity of the other provisions, which shall be enforced
to the fullest extent permitted by law.
SECTION 20. CAPTIONS; EXHIBITS; AND GRAMMAR
20.1 The paragraph captions are for convenience only. They are not part of
the text of this Agreement and are not to be used to interpret its provisions.
20.2 All Schedules and Exhibits to this Agreement are incorporated in, and
are part of, this Agreement as fully as though set forth herein.
20.3 The use of the singular includes the plural and the use of any gender
includes any other gender whenever required by the sense of this Agreement.
SECTION 21. REIMBURSEMENT FOR ENFORCEMENT
21.1 In the event Borrower fails to perform any of its obligations under
this Agreement or under any Collateral Document, then Borrower shall pay any and
all Claims and Expenses incurred by the Lender in enforcing or establishing its
rights hereunder or thereunder.
SECTION 22. NO NEGATIVE CONSTRUCTION AGAINST DRAFTING PARTY
22.1 The parties acknowledge that they are sophisticated and are
represented by experienced, knowledgeable attorneys. The parties agree that the
normal rules of construction to resolve ambiguities against the party whose
counsel drafted this Agreement shall not be followed in the interpretation of
this Agreement. Consequently, no negative inference or interpretation shall be
made by a court in enforcing the provisions of this Agreement against the party
whose attorney drafted this Agreement.
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SECTION 23. NO OTHER PARTIES
23.1 The representations, warranties and agreements of Borrower contained
herein are intended solely for the benefit of Lender and/or its assignees, and
shall confer no rights hereunder, whether legal or equitable, in any other third
person, and no other person shall be entitled to rely thereon.
SECTION 24. COUNTERPARTS
24.1 This Agreement may be signed in counterpart, each of which will be
deemed an original document. All counterparts will constitute one document which
may be sufficiently evidenced by one such counterpart. Each counterpart will be
binding on the signatory to such counterpart notwithstanding that it is not
signed by both signatories to this Agreement.
SECTION 24. INDEMNIFICATION
24.1 Borrower agrees to indemnify Lender, its officers, directors,
principals and affiliates from and against any Claims and Expenses incurred or
suffered by them or any of them arising out of the transactions contemplated
hereunder, except for any of the foregoing which are solely the result of
Lender's gross negligence or willful misconduct.
SECTION 25. SUCCESSORS AND ASSIGNS
25.1 This Agreement shall bind Borrower and its successors.
25.2 This Agreement shall be binding upon and shall inure to the benefit
of Lender, its successors and assigns.
SECTION 26. LENDER'S RIGHT TO TRANSFER AND ASSIGN
26.1 Lender has the right, in its sole and absolute discretion, without
consent or affecting the obligations of Borrower, to transfer and assign
participation interests in its rights under this Agreement and the Collateral
Documents.
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IN WITNESS WHEREOF Borrower and Lender have executed this Agreement and
affixed their seals as of the date first above stated.
INFINITE GROUP, INC.
By:
---------------------------------
Xxxxxx Xxxxx, Chief Financial
Officer
------------------------------------
XXXXXXXX X. XXXXXXXXX
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RIDER A
INTEREST RATE ADJUSTMENT
The interest rate under this Loan Agreement and the Note shall be fixed
for twelve (12) months from the date of this Agreement. The rate shall adjust
annually thereafter on each one (1) year anniversary to a rate, determined by
Lender, of the one-year Treasury Xxxx Index plus three and one-half percent (3
1/2%). The rate hereunder shall not increase by more than two percent (2%) in
any year and more than six percent (6%) over the life of the Loan. Each year
Lender shall adjust the monthly payment to reamortize the loan over the original
term of one hundred and twenty (120) months.
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LOAN AGREEMENT
INFINITE GROUP, INC., a Delaware corporation, with its principal office at
0000 Xxxx Xxxx, Xxxxxxx, XX 00000 (hereinafter referred to as "Borrower"), and
XXXXXXXX X. XXXXXXXXX, having an address at 000 Xxxx Xxxxx Xxxx, Xxxxxxxxxx, XX
00000 (hereinafter referred to as "Lender"), hereby enter into this Loan
Agreement ("Agreement") dated as of April 15, 1998.
SECTION 1. CERTAIN DEFINITIONS
1.1 The following terms used in this Agreement will have the meanings
given below:
Claims and Expenses Any and all claims, lawsuits of any kind,
judgments, losses, damages, liabilities,
penalties, costs and reasonable expenses
arising out of transactions contemplated
under this Agreement or under the Collateral
Documents, including all "Legal Costs and
Expenses" (defined below) incurred in
connection therewith.
Collateral Documents The Note.
Loan Defined in Section 2.1.
Loan Amount $250,000.00.
Loan Closing and the
Loan Closing Date Defined in Section 2.2.
Legal Costs and Expenses Any and all reasonable attorneys' fees and
disbursements, court costs and other
litigation expenses.
Maturity Date April 14, 1999.
Note Defined in Section 2.2.
SECTION 2. THE LOAN
2.1 Simultaneously with the execution of this Agreement, Lender is making
a loan (the "Loan") to Borrower in the principal amount of $250,000 US Dollars,
receipt of which is hereby acknowledged by Borrower.
2.2 The Loan is evidenced by a promissory note ("the Note") made by
Borrower payable to Lender, which is being executed and delivered to Lender
contemporaneously herewith (such loan and delivery being hereinafter called the
"Loan Closing" and the date thereof being hereinafter called the "Loan Closing
Date"). A copy of the Note is attached to this Agreement as Exhibit 1.
2.3 The Note is payable in accordance with its provisions which include,
inter alia:
(a) interest at the rate of 9% per annum on the unpaid balance of
the Note;
(b) equal monthly payments of $1,406.55, plus any amounts due on the
revolving credit facilities in the aggregate principal amount of $50,000.00
between Lender and Bank of Western Massachusetts, commencing on May 1, 1998 and
on the first day of each month thereafter to and including April 1, 1999 (which
monthly payments shall include both principal and interest);
(c) a final payment equal to all unpaid principal and accrued
interest payable on April 14, 1999;
(d) the right to Borrower, exercisable at any time prior to the
Maturity Date to prepay, without penalty, all or part (each such payment being a
minimum of $1,000 or covering the unpaid balance of the Note) of the unpaid
principal amount and accrued interest thereon of the Note; and
(e) the principal of the Note and accrued interest thereon shall
become immediately due and payable upon the occurrence of an Event of Default.
2.4 The obligation of Lender to make the Loan shall be conditioned on the
satisfaction of Lender that the representations and warranties of Borrower
contained in this
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Agreement and in the Collateral Documents are true, complete and correct.
Borrower understands and agrees that any investigation by Lender shall in no way
limit the responsibility of the Borrower for such representations and warranties
being true, complete and correct.
2.5 Notwithstanding any provision in this Agreement or in the Note, in no
event shall the interest rate applicable to the Loan exceed that permitted by
the laws or governmental regulations applicable to Lender, Borrower or the Loan
that limit rates of interest that may be charged or collected by Lender. If any
payment hereunder or under the Note shall be found to constitute a payment of
interest in excess of that permitted under the laws or governmental regulations
applicable to Lender, Borrower or the Loan that limit rates of interest that may
be charged or collected by Lender, then the amount of such excess payment shall
be refunded to Borrower.
SECTION 3. USE OF PROCEEDS
3.1. The proceeds of the Loan will be used by Borrower for working capital
purposes.
SECTION 4. CLOSING DOCUMENTS
4.1 Simultaneously with the execution and delivery of this Agreement, the
Loan is being funded and Borrower is delivering or has delivered to Lender the
following documents, duly executed and (where required) witnessed or notarized:
(a) the Note; and
(b) a Secretary's Certificate of Borrower as to resolutions of its
Board of Directors authorizing (i) the borrowing hereunder, and (ii) the
execution and delivery of this Agreement, the Collateral Documents and the
transactions contemplated hereby and thereby.
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SECTION 5. REPRESENTATIONS, WARRANTIES AND AGREEMENTS
5.1 To induce Lender to make the Loan hereunder, Borrower represents and
warrants to and agrees with Lender that:
(a) Borrower is a corporation duly and validly existing and in good
standing under the laws of the State of Delaware and is qualified to do business
in such other jurisdictions where the ownership of property or the nature of the
business conducted by it requires such qualification, except insofar as the
failure to so qualify would not materially and adversely affect Borrower.
(b) Borrower has the requisite corporate authority and power to
enter into this Agreement, to borrow money as contemplated hereby, to issue the
Note and to execute and deliver each of those documents required and described
in this Agreement. The execution and delivery of this Agreement and the
Collateral Documents have been duly authorized by Borrower and this Agreement
and the Collateral Documents are enforceable against Borrower in accordance with
their terms.
SECTION 6. CERTAIN AFFIRMATIVE COVENANTS
6.1 So long as any amount due to Lender pursuant to the Note, this
Agreement or any of the other Collateral Documents is outstanding, the Borrower
will do and comply with the following:
(a) Borrower will promptly make all payments of the principal and
interest on the Note when due; and
(b) Borrower will comply with the terms and conditions of this
Agreement and of those contained in each Collateral Document.
SECTION 7. CERTAIN NEGATIVE COVENANTS
7.1 So long as any amount due to Lender pursuant to the Note, this
Agreement or any of the other Collateral Documents is outstanding, except with
the prior written consent of Lender (whose consent, except as otherwise
indicated below, may be refused without explanation and without any legal
recourse by Borrower), Borrower will not:
(a) engage in any line of business materially different from those
which Borrower is now engaged in; or
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(b) become a party to any merger or consolidation with any
corporation, company or entity of any kind whatsoever, or sell substantially all
of its assets, or otherwise liquidate or dispose of its business.
SECTION 8. IRREGULAR PAYMENT
8.1 Lender may accept late payments and partial payments even though
marked "payment in full" or words of similar import, without losing any of its
rights under this Agreement or under the Note.
SECTION 9. DELAY IN ENFORCEMENT
9.1 Lender may delay in enforcing its rights under this Agreement or a
Collateral Document without losing or prejudicing such rights.
SECTION 10. NO BROKER
10.1 Borrower represents and warrants to Lender that it has not dealt with
any broker or finder, whether or not licensed, in connection with this Agreement
or the loan transactions under this Agreement. Lender represents and warrants
that it has not dealt with any broker or finder.
SECTION 11. LOAN EXPENSES
11.1 Borrower agrees to pay, promptly after demand is made, all reasonable
out-of-pocket expenses incurred by Lender in connection with the making,
amending, perfection, enforcement or payment or liquidation of the Loan which
are the subject of this Agreement, including (but not limited to) Lender's legal
fees and disbursements, title fees, title insurance fees and any other expense
incurred, or to be incurred by Lender in connection with his loans from the Bank
of Western Massachusetts, the proceeds of which are being used to fund the Loan.
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SECTION 12. NOTICES
12.1 Unless otherwise expressly provided elsewhere in this Agreement, any
notice, request, consent, election, demand or other communication ("notice") to
be given or made by the parties under this Agreement must be in writing and
either:
(a) delivered by hand, telecopier or overnight delivery by Federal
Express or other recognized carrier; or
(b) sent by certified or registered mail, return receipt requested,
postage prepaid.
12.2 Each notice to be given to Lender or Borrower will be addressed to it
at its address set forth in the preamble on page 1 of this Agreement.
12.3 A copy of each notice must be sent simultaneously and in like manner
to:
Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxxxxx X. Xxxx, Esq.
Fax: 000-000-0000
12.4 Borrower and Lender may, by notice to the others, change the address
to which future notices are to be sent or add or change a person to whom a
notice or a copy of a notice is to be sent.
12.5 Unless otherwise provided elsewhere in this Agreement, each notice
shall be considered to be given on:
(a) the date delivered by hand or telecopier (unless it is not a
business day or is not received before 5:30 P.M., in which case the notice shall
be considered given on the next business day after being sent);
(b) the next business day after being sent by overnight courier;
(c) the third full business day following the date of mailing
postage prepaid in the United States Mail.
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However, a notice of a change of address of person pursuant to Section 12.4
shall not be deemed given until received.
12.6 A notice that is mailed must be deposited into an official mail
depository maintained by the United States Postal Service or (if mailed outside
the United States) by an equivalent postal authority.
12.7 Failure to accept a notice is deemed receipt of it and does not
invalidate the notice or excuse the performance of an obligation.
SECTION 13. ENTIRE AGREEMENT
13.1 All prior and contemporaneous statements, representations, promises,
understandings, agreements, projections and opinions, whether written or oral
made to each other with regard to this transaction, are merged in this Agreement
and the Collateral Documents. This Agreement and the Collateral Documents
constitute the entire agreement of the parties.
SECTION 14. CHANGES AND WAIVERS
14.1 A provision of this Agreement will be considered to have been changed
or waived only if the change or waiver is expressly made in writing signed by
the party to be charged.
14.2 The failure to insist on strict performance of any provision will not
mean that the provision has been waived or that the right to insist thereafter
on strict performance of that or any other provision has been waived.
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SECTION 15. PARTIES TO COOPERATE
15.1 Each party will reasonably cooperate with the other to close the
transactions that are the subject of this Agreement.
15.2 In furtherance of such cooperation, each party will obtain, execute
and deliver such documents as are in its possession or control and are
reasonably necessary in order to close or effectuate or confirm any provisions
of this Agreement.
SECTION 16. GOVERNING LAW
16.1 The laws of the State of Rhode Island will govern this Agreement and
the interpretation and enforcement of its provisions, without regard to legal
principles of conflict of laws.
SECTION 17. WAIVER OF JURY TRIAL; VENUE
17.1 THE BORROWER AND THE LENDER EACH WAIVE THEIR RESPECTIVE RIGHTS TO A
TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR
RELATED TO THIS AGREEMENT, THE COLLATERAL DOCUMENTS, OR THE TRANSACTIONS
CONTEMPLATED HEREBY OR THEREBY, IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF
ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY, RELATED PERSON,
PARTICIPANT, OR ASSIGNEE, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS,
OR OTHERWISE. BORROWER AND LENDER EACH AGREE THAT ANY SUCH CLAIM OR CAUSE OF
ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY. WITHOUT LIMITING THE
FOREGOING, THE PARTIES FURTHER AGREE THAT THEIR RESPECTIVE RIGHT TO A TRIAL BY
JURY IS WAIVED BY OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR
OTHER PROCEEDING WHICH SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR
ENFORCEABILITY OF THIS AGREEMENT OR ANY COLLATERAL DOCUMENT OR ANY PROVISIONS
HEREOF OR THEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT AND THE COLLATERAL
DOCUMENTS.
17.2 THE BORROWER AGREES THAT IT WILL NOT ASSERT AGAINST THE LENDER ANY
CLAIM FOR CONSEQUENTIAL, INCIDENTAL, SPECIAL OR PUNITIVE DAMAGES IN CONNECTION
WITH THIS AGREEMENT OR ANY OF THE
8
COLLATERAL DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY.
17.3 WITH RESPECT TO ANY CLAIM OR ACTION ARISING UNDER THIS AGREEMENT OR
THE COLLATERAL DOCUMENTS, THE BORROWER HEREBY (A) IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF RHODE ISLAND AND THE UNITED
STATES DISTRICT COURT LOCATED IN THE STATE OF RHODE ISLAND, AND (B) IRREVOCABLY
WAIVES ANY OBJECTION WHICH IT MAY HAVE AT ANY TIME TO THE LAYING OF VENUE OF ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE
COLLATERAL DOCUMENTS BROUGHT IN ANY SUCH COURT, IRREVOCABLY WAIVES ANY CLAIM
THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN
BROUGHT IN AN INCONVENIENT FORUM AND FURTHER IRREVOCABLY WAIVES THE RIGHT TO
OBJECT, WITH RESPECT TO SUCH CLAIM, SUIT, ACTION OR PROCEEDING BROUGHT IN ANY
SUCH COURT, THAT SUCH COURT DOES NOT HAVE JURISDICTION OVER SUCH PARTY. NOTHING
IN THIS AGREEMENT WILL BE DEEMED TO PRECLUDE THE LENDER FROM BRINGING AN ACTION
OR PROCEEDING IN RESPECT HEREOF IN ANY OTHER JURISDICTION.
SECTION 18. INVALID PROVISIONS SEVERED
18.1 The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity of the other provisions, which shall be enforced
to the fullest extent permitted by law.
SECTION 19. CAPTIONS; EXHIBITS; AND GRAMMAR
19.1 The paragraph captions are for convenience only. They are not part of
the text of this Agreement and are not to be used to interpret its provisions.
19.2 All Schedules and Exhibits to this Agreement are incorporated in, and
are part of, this Agreement as fully as though set forth herein.
19.3 The use of the singular includes the plural and the use of any gender
includes any other gender whenever required by the sense of this Agreement.
9
SECTION 20. REIMBURSEMENT FOR ENFORCEMENT
20.1 In the event Borrower fails to perform any of its obligations under
this Agreement or under any Collateral Document, then Borrower shall pay any and
all Claims and Expenses incurred by the Lender in enforcing or establishing its
rights hereunder or thereunder.
SECTION 21. NO NEGATIVE CONSTRUCTION AGAINST DRAFTING PARTY
21.1 The parties acknowledge that they are sophisticated and are
represented by experienced, knowledgeable attorneys. The parties agree that the
normal rules of construction to resolve ambiguities against the party whose
counsel drafted this Agreement shall not be followed in the interpretation of
this Agreement. Consequently, no negative inference or interpretation shall be
made by a court in enforcing the provisions of this Agreement against the party
whose attorney drafted this Agreement.
SECTION 22. NO OTHER PARTIES
22.1 The representations, warranties and agreements of Borrower contained
herein are intended solely for the benefit of Lender and/or its assignees, and
shall confer no rights hereunder, whether legal or equitable, in any other third
person, and no other person shall be entitled to rely thereon.
SECTION 23. COUNTERPARTS
23.1 This Agreement may be signed in counterpart, each of which will be
deemed an original document. All counterparts will constitute one document which
may be sufficiently evidenced by one such counterpart. Each counterpart will be
binding on the signatory to such counterpart notwithstanding that it is not
signed by both signatories to this Agreement.
10
SECTION 24. INDEMNIFICATION
24.1 Borrower agrees to indemnify Lender, its officers, directors,
principals and affiliates from and against any Claims and Expenses incurred or
suffered by them or any of them arising out of the transactions contemplated
hereunder, except for any of the foregoing which are solely the result of
Lender's gross negligence or willful misconduct.
SECTION 25. SUCCESSORS AND ASSIGNS
25.1 This Agreement shall bind Borrower and its successors.
25.2 This Agreement shall be binding upon and shall inure to the benefit
of Lender, its successors and assigns.
SECTION 26. LENDER'S RIGHT TO TRANSFER AND ASSIGN
26.1 Lender has the right, in its sole and absolute discretion, without
consent or affecting the obligations of Borrower, to transfer and assign
participation interests in its rights under this Agreement and the Collateral
Documents.
IN WITNESS WHEREOF Borrower and Lender have executed this Agreement and
affixed their seals as of the date first above stated.
INFINITE GROUP, INC.
By:
---------------------------------
Xxxxxx Xxxxx, Chief Financial
Officer
------------------------------------
XXXXXXXX X. XXXXXXXXX
11
PROMISSORY NOTE
$1,150,000.00 Warwick, RI
June 26, 1998
INFINITE GROUP, INC., a Delaware corporation (the "Maker"), FOR VALUE
RECEIVED, hereby promises to pay to the order of XXXXXXXX X. XXXXXXXXX (the
"Holder"), at the office of the Maker at 0000 Xxxx Xxxx, Xxxxxxx, XX 00000, the
principal amount of ONE MILLION ONE HUNDRED FIFTY THOUSAND DOLLARS
($1,150,000.00) in lawful money of the United States of America. The unpaid
principal balance of this Note shall bear interest at the rate of nine (9%)
percent per annum adjusted as described on Rider A hereto. Interest and
principal on the Note shall be payable as follows:
(i) $10,838.23 on the first day of each month beginning in August
1998 through and including June 2008 (which payments represent
interest only), adjusted as described on Rider A hereto.
(ii) the remaining unpaid principal and accrued interest shall be
payable on June 26, 2008.
Upon the occurrence of any "Event of Default" (as defined in the Loan
Agreement referred to below), the amounts then due and payable under this Note
(including the entire principal and accrued interest if such payments are
accelerated at the election of the Holder) shall bear interest equal to the
lesser of (a) the maximum amount permitted to be charged under applicable law or
(b) fifteen percent (15%) per annum from the due date thereof until paid in
full.
If this Note, or any payment hereunder, falls due on a Saturday, Sunday or
a Rhode Island public holiday, this Note shall be made on the next succeeding
business day and such additional time shall be included in the computation of
any interest payable hereunder.
If any payment due hereunder is not paid when due, the Maker agrees to pay
all reasonable costs of collection, including reasonable attorney's fees, all of
which shall be added to the amount due hereunder. In addition, if this Note is
referred by Holder to any attorney for collection, the Maker shall pay all
reasonable attorney fees incurred by Holder therefor.
This Note is referred to in, and arises out of the transactions
contemplated by, a loan agreement (the "Loan Agreement"), dated as of June 26,
1998 by and among the Maker and the Holder. This Note is subject to the terms
and conditions of the Loan Agreement.
The Maker may prepay, without penalty, all or part (each such payment
being a minimum of $10,000 or covering the unpaid balance on the Note) of the
unpaid principal amount of this Note and accrued interest thereon.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE LOAN
AGREEMENT), THEN, AND IN ANY SUCH EVENT, THE HOLDER, BY WRITTEN NOTICE TO THE
MAKER, MAY DECLARE THE ENTIRE BALANCE OF THE UNPAID PRINCIPAL OF AND ACCRUED
INTEREST ON THIS NOTE TO BE DUE, WHEREUPON THE SAME AND ANY OTHER AMOUNTS DUE
HEREUNDER SHALL IMMEDIATELY BECOME DUE AND PAYABLE WITHOUT PRESENTATION, DEMAND,
PROTEST OR OTHER NOTICE OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY
THE MAKER.
This Note has been executed and delivered and shall be construed and
enforced in accordance with the laws of the State of Rhode Island, including,
but not limited to, matters of construction, validity and performance.
INFINITE GROUP, INC.
By:
---------------------------------
Xxxxxx Xxxxx, Chief Financial
Officer
2
RIDER A
INTEREST RATE ADJUSTMENT
The interest rate under this Note shall be fixed for twelve (12) months
from the date of the Note. The rate shall adjust annually thereafter on each one
(1) year anniversary to a rate, determined by Lender, of the one-year Treasury
Xxxx Index plus three and one-half percent (3 1/2%). The rate hereunder shall
not increase by more than two percent (2%) in any year and more than six percent
(6%) over the life of the Loan. Each year lender shall adjust the monthly
payment to reamortize the loan over the original term of one hundred and twenty
(120) months.
3
PROMISSORY NOTE
$250,000.00 Warwick, RI
April 15, 1998
INFINITE GROUP, INC., a Delaware corporation (the "Maker"), FOR VALUE
RECEIVED, hereby promises to pay to the order of XXXXXXXX X. XXXXXXXXX (the
"Holder"), at the office of the Maker at 0000 Xxxx Xxxx, Xxxxxxx, XX 00000, the
principal amount of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) in lawful
money of the United States of America. The unpaid principal balance of this Note
shall bear interest at the rate of nine (9%) percent per annum. Interest and
principal on the Note shall be payable as follows:
(i) $1,406.55, plus any amounts due on the revolving credit
facilities in the aggregate principal amount of $50,000.00 between
Lender and Bank of Western Massachusetts, on the first day of each
month beginning in May 1998 through and including March 1999 (which
payments represent both interest and principal); and
(ii) the remaining unpaid principal and accrued interest shall be
payable on April 14, 1999.
Upon the occurrence of any "Event of Default" (as defined in the Loan
Agreement referred to below), the amounts then due and payable under this Note
(including the entire principal and accrued interest if such payments are
accelerated at the election of the Holder) shall bear interest equal to the
lesser of (a) the maximum amount permitted to be charged under applicable law or
(b) fifteen percent (15%) per annum from the due date thereof until paid in
full.
If this Note, or any payment hereunder, falls due on a Saturday, Sunday or
a Rhode Island public holiday, this Note shall be made on the next succeeding
business day and such additional time shall be included in the computation of
any interest payable hereunder.
If any payment due hereunder is not paid when due, the Maker agrees to pay
all reasonable costs of collection, including reasonable attorney's fees, all of
which shall be added to the amount due hereunder. In addition, if this Note is
referred by Holder to any attorney for collection, the Maker shall pay all
reasonable attorney fees incurred by Holder therefor.
This Note is referred to in, and arises out of the transactions
contemplated by, a loan agreement (the "Loan Agreement"), dated as of April 15,
1998 by and among the Maker and the Holder. This Note is subject to the terms
and conditions of the Loan Agreement.
The Maker may prepay, without penalty, all or part (each such payment
being a minimum of $1,000 or covering the unpaid balance on the Note) of the
unpaid principal amount of this Note and accrued interest thereon.
UPON THE OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE LOAN
AGREEMENT), THEN, AND IN ANY SUCH EVENT, THE HOLDER, BY WRITTEN NOTICE TO THE
MAKER, MAY DECLARE THE ENTIRE BALANCE OF THE UNPAID PRINCIPAL OF AND ACCRUED
INTEREST ON THIS NOTE TO BE DUE, WHEREUPON THE SAME AND ANY OTHER AMOUNTS DUE
HEREUNDER SHALL IMMEDIATELY BECOME DUE AND PAYABLE WITHOUT PRESENTATION, DEMAND,
PROTEST OR OTHER NOTICE OF ANY KIND, ALL OF WHICH ARE HEREBY EXPRESSLY WAIVED BY
THE MAKER.
This Note has been executed and delivered and shall be construed and
enforced in accordance with the laws of the State of Rhode Island, including,
but not limited to, matters of construction, validity and performance.
INFINITE GROUP, INC.
By:
---------------------------------
Xxxxxx Xxxxx, Chief Financial
Officer
2
THIS WARRANT MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT AS
SPECIFIED IN SECTION 11 HEREOF. NEITHER THE RIGHTS REPRESENTED BY THIS WARRANT
NOR THE SHARES ISSUABLE UPON THE EXERCISE HEREOF (COLLECTIVELY, THE
"SECURITIES") HAVE BEEN REGISTERED FOR OFFER OR SALE UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR APPLICABLE STATE LAW, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED, ABSENT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT, OR UNLESS THE COMPANY SHALL HAVE
RECEIVED AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR
SALE IN WHOLE OR IN PART NOR THE WARRANT EXERCISED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SECTION 2 AND SECTION 11 HEREOF.
INFINITE GROUP, INC.
WARRANT TO PURCHASE 2,680,000 SHARES OF COMMON STOCK
JUNE 30, 1998
Infinite Group, Inc. a Delaware corporation (the "Company"), hereby
certifies that, for value received, Xxxxxxxx X. Xxxxxxxxx, the registered holder
hereof, or its registered assigns ("Investor"), is entitled, subject to the
terms set forth below, to purchase from the Company upon surrender of this
Warrant, at any time or times on or after June 30, 1998 but not after 5:00 P.M.,
New York time, on the Expiration Date (as defined herein), Two Million Six
Hundred and Eighty Thousand (2,680,000) fully paid nonassessable shares (the
"Warrant Shares") of Common Stock (as defined herein) of the Company (as
adjusted from time to time as provided in this Warrant) at an initial purchase
price of U.S. $1.12 per share in lawful money of the United States. This Warrant
shall be exercisable as follows: (a) with respect to 1,340,000 Warrant Shares
from and after the date hereof; (b) with respect to an additional 335,000
Warrant Shares from and after December 31, 1998, provided that the Company shall
not have repaid its loan of even date hereof to Investor (the "Loan") by such
date; (c) with respect to an additional 335,000 Warrant shares from and after
March 31, 1999, provided that the Company shall not have repaid the Loan by such
date; (d) with respect to an additional 335,000 Warrant shares from and after
June 30, 1999, provided that the Company shall not have repaid the Loan by such
date; (e) with respect to an additional 335,000 Warrant shares from and after
September 30, 1999, provided that the Company shall not have repaid the Loan by
such date;
Section 1. (a) Definitions. The following words and terms as used in this
Warrant shall have the following meanings:
"Common Stock" means (a) the Company's common stock and (b) any capital
stock into which such "Common Stock" shall have been changed or any capital
stock resulting from a reclassification of such "Common Stock."
"Expiration Date" means June 30, 2003.
"Warrant Exercise Price" shall initially be U.S. $1.12 per share and shall
be adjusted and readjusted from time to time to the extent as provided for in
this Warrant.
(b) Other Definitional Provisions. (i) Except as otherwise specified
herein, all references herein (A) to any person other than the Company, shall be
deemed to include such person's successors and assigns, (B) to the Company shall
be deemed to include the Company's successors and (C) to any applicable law
defined or referred to herein, shall be deemed references to such applicable law
as the same may have been or may be amended or supplemented from time to time.
(ii) When used in this Warrant, the words "herein," "hereof," and
"hereunder," and words of similar import, shall refer to this Warrant as a whole
and not to any provision of this Warrant, and the words "Section," "Schedule,"
and "Exhibit" shall refer to Sections of, and Schedules and Exhibits to, this
Warrant unless otherwise specified.
(iii) Whenever the context so requires the neuter gender includes the
masculine or feminine, and the singular number includes the plural, and vice
versa.
Section 2. Exercise of Warrant. (a) Subject to the terms and conditions
hereof, this Warrant may be exercised, in whole or in part, at any time during
normal business hours on or after the opening of business on the date hereof and
prior to the close of business on the Expiration Date. The rights represented by
this Warrant may be exercised by the holder hereof then registered on the books
of the Company, in whole or from time to time in part (except that this Warrant
shall not be exercisable as to a fractional share) by (i) delivery of a written
notice, in the form of the Subscription Notice attached as Exhibit A hereto, of
such holder's election to exercise this Warrant, which notice shall specify the
number of Warrant Shares to be purchased, (ii) payment to the Company of an
amount equal to the Warrant Exercise Price multiplied by the number of Warrant
Shares as to which the Warrant is being exercised (plus any applicable issue or
transfer taxes) in cash or by certified or official bank check or otherwise as
permitted by Section 2(c) hereof, for the number of Warrant Shares as to which
this Warrant shall have been exercised, and (iii) the surrender of this Warrant,
properly endorsed, at the principal office of the Company in Warwick, Rhode
Island (or at such other agency or office of the Company as the Company may
designate by notice to the holder hereof); provided, that if such Warrant Shares
are to be issued in any name other than that of the registered holder of this
Warrant, such issuance shall be deemed a transfer and the provisions of Section
11 shall be applicable. In the event of any exercise of the rights represented
by this Warrant in compliance with this Section 2(a), a certificate or
certificates for the Warrant Shares so purchased, registered in the name of, or
as directed by, the holder, shall
2
be delivered to, or as directed by such holder within a reasonable time, not
exceeding 15 days, after such rights shall have been so exercised.
(b) Unless the rights represented by this Warrant shall have expired or
have been fully exercised, the Company shall issue a new Warrant identical in
all respects to the Warrant exercised except (x) it shall represent rights to
purchase the number of Warrant Shares purchasable immediately prior to such
exercise under the Warrant exercised, less the number of Warrant Shares with
respect to which such Warrant was exercised, and (y) the holder thereof shall be
deemed to have become the holder of record of such Warrant Shares immediately
prior to the close of business on the date on which the Warrant was surrendered
and payment of the amount due in respect of such exercise and any applicable
taxes was made, irrespective of the date of delivery of such share certificate,
except that, if the date of such surrender and payment is a date when the stock
transfer books of the Company are properly closed, such person shall be deemed
to have become the holder of such Warrant Shares at the opening of business on
the next succeeding date on which the stock transfer books are open.
(c) Payment of the Warrant Exercise Price may be made, where permitted by
law, by any of the following methods:
(1) In cash or by certified or official bank check;
(2) by the Company's cancellation of indebtedness of the Company to the
holder of the Warrant;
(3) by waiver of compensation due or accrued to holder of the Warrant for
services rendered;
(4) provided that a public market for the Company's stock exists, through
a "same day sale" commitment from the holder of the Warrant and a broker-dealer
that is a member of the National Association of Securities Dealers, Inc. (an
"NASD Dealer") whereby the holder of the Warrant irrevocably elects to exercise
the Warrant and to sell a portion of the Warrant Shares so purchased to pay for
the exercise price and whereby the NASD Dealer irrevocably commits upon receipt
of such Warrant Shares to forward the exercise price directly to the Company; or
(5) provided that a public market for the Company's stock exists, through
a "margin" commitment from the holder of the Warrant and an NASD Dealer whereby
the holder of the Warrant irrevocably elects to exercise this Warrant and to
pledge the Warrant Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the exercise price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Warrant
Shares to forward the exercise price directly to the Company.
Section 3. Covenants as to Common Stock. The Company covenants and agrees
that all Warrant Shares which may be issued upon the exercise of the rights
represented by this
3
Warrant will, upon issuance, be validly issued, fully paid and nonassessable.
The Company further covenants and agrees that during the period within which the
rights represented by this Warrant may be exercised, the Company will at all
times have authorized and reserved a sufficient number of shares of Common Stock
to provide for the exercise of the rights then represented by this Warrant.
Section 4. Adjustment of Warrant Exercise Price Upon Stock Splits.
Dividends. Distributions and Combinations; and Adjustment of Number of Shares.
(a) In case the Company shall at any time subdivide its outstanding shares of
Common Stock into a greater number of shares or issue a stock dividend or make a
distribution with respect to outstanding shares of Common Stock payable in
Common Stock, the Warrant Exercise Price in effect immediately prior to such
subdivision or stock dividend or distribution shall be proportionately reduced
and, conversely, in case the outstanding shares of Common Stock of the Company
shall be combined into a smaller number of shares, the Warrant Exercise Price in
effect immediately prior to such combination shall be proportionately increased
in each case by multiplying the then effective Warrant Exercise Price by a
fraction, the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
action, and the product so obtained shall thereafter be the Warrant Exercise
Price.
(b) Upon each adjustment of the Warrant Exercise Price as provided above
in this Section 4, the registered holder of this Warrant shall thereafter be
entitled to purchase, at the Warrant Exercise Price resulting from such
adjustment, the number of shares obtained by multiplying the Warrant Exercise
Price in effect immediately prior to such adjustment by the number of shares
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Warrant Exercise Price after such adjustment.
Section 5. Notice of Adjustment of Warrant Exercise Price and Sale of
Company. Upon any adjustment of the Warrant Exercise Price, the Company shall
give notice thereof to the registered holder of this Warrant, which notice shall
state the Warrant Exercise Price in effect after such adjustment and the
increase, or decrease, if any, in the number of shares purchasable at the
Warrant Exercise Price upon the exercise of this Warrant, setting forth in
reasonable detail the method of calculation and the facts upon which such
calculation is based. In the event of a merger, consolidation or reorganization
of the Company with or into another corporation or corporations in which the
Company is not the surviving entity (other than a mere reincorporation
transaction), a sale of all or substantially all of the assets of the Company,
or a transaction in which the Company issues shares representing more than fifty
percent (50%) of the voting power in the Company immediately after giving effect
to such transaction, the Company shall give notice thereof to the registered
holder of this Warrant at least three (3) business days prior to the
consummation of such transaction.
Section 6. Computation of Adjustments. Upon each computation of an
adjustment in the Warrant Exercise Price and the number of shares which may be
subscribed for and purchased upon exercise of this Warrant, the Warrant Exercise
Price shall be computed to the
4
nearest cent (i.e., fractions of .5 of a cent, or greater, shall be rounded to
the next highest cent) and the number of shares which may be subscribed for and
purchased upon exercise of this Warrant shall be calculated to the nearest whole
share (i.e., fractions of less than one half of a share shall be disregarded and
fractions of one half of a share, or greater, shall be treated as being a whole
share).
Section 7. No Change in Warrant Terms on Adjustments. Irrespective of any
adjustment in the Warrant Exercise Price or the number of shares of Common Stock
issuable upon exercise hereof, this Warrant, whether theretofore or thereafter
issued or reissued, may continue to express the same price and number of shares
as are stated herein and the Warrant Exercise Price and such number of shares
specified herein shall be deemed to have been so adjusted.
Section 8. Taxes. The Company shall not be required to pay any tax or
taxes attributable to the initial issuance of the Warrant Shares or any transfer
involved in the issue or delivery of any certificates for Warrant Shares of
Common Stock in a name other than that of the registered holder hereof or upon
any transfer of this Warrant.
Section 9. Warrant Holder Not Deemed a Shareholder. No holder, as such, of
this Warrant shall be entitled to vote or receive dividends or be deemed the
holder of shares of the Company for any purpose, nor shall anything contained in
this Warrant be construed to confer upon the holder hereof, as such, any of the
rights of a shareholder of the Company or any right to vote, give or withhold
consent to any corporate action (whether any reorganization, issue of stock,
reclassification of stock, consolidation, merger, conveyance or otherwise),
receive notice of meetings, receive dividends or subscription rights, or
otherwise, prior to the issuance to the holder of this Warrant of the Warrant
Shares which he is then entitled to receive upon the due exercise of this
Warrant.
Section 10. No Limitation on Corporate Action. No provisions of this
Warrant and no right or option granted or conferred hereunder shall in any way
limit, affect or abridge the exercise by the Company of any of its corporate
rights or powers to recapitalize, amend its Certificate of Incorporation,
reorganize, consolidate or merge with or into another corporation, or to
transfer all or any part of its property or assets, or the exercise of any other
of its corporate rights and powers.
Section 11. Transfer; Opinions of Counsel: Restrictive Legends.
(a) Prior to any sale, transfer or other disposition of this Warrant or
the Warrant Shares, the holder thereof will give ten (10) business days' notice
to the Company of such holder's intention to effect such transfer. Each such
notice shall describe the manner and circumstances of the proposed transfer and,
if such transfer is not registered under the Securities Act of 1933, as amended
("Securities Act"), shall be accompanied by an opinion, addressed to the Company
and reasonably satisfactory in form and substance to it, of counsel (reasonably
satisfactory to the Company) for such holder, stating whether, in the opinion of
5
such counsel, such transfer will be a transaction exempt from registration under
the Securities Act.
(b) If such sale, transfer or other disposition may in the opinion of such
counsel be effected without registration under the Securities Act, such holder
shall thereupon be entitled to the terms of the notice delivered by such holder
to the Company. If in the opinion of such counsel such transfer may not be
effected without registration under the Securities Act, such holder shall not be
entitled to so transfer this Warrant, or the Warrant Shares unless the Company
shall have filed a registration statement relating to such proposed transfer and
such registration statement has become effective under the Securities Act;
provided, however, notwithstanding the foregoing, the Company shall under no
circumstances be obligated to file such a registration statement relating to the
transfer of this Warrant or the Warrant Shares.
(c) Any Warrant Shares issued pursuant to the exercise of this Warrant may
bear one or more of the legends in similar form to the legend set forth on this
Warrant.
Section 12. Exchange of Warrant. This Warrant is exchangeable upon the
surrender hereof by the holder hereof at such officer or agency of the Company,
for new Warrants of like tenor representing in the aggregate the right to
subscribe for and purchase the number of shares which may be subscribed for and
purchased hereunder from time to time me after giving effect to all the
provisions hereof, each of such new Warrants to represent the right to subscribe
for and purchase such number of shares as shall be designated by said holder
hereof at the time of such surrender.
Section 13. Lost,. Stolen, Mutilated or Destroyed Warrant. If this Warrant
is lost, stolen, mutilated or destroyed, the Company shall, on such terms as to
indemnity or otherwise as it may in its discretion impose (which shall, in the
case of a mutilated Warrant, include the surrender thereof), issue a new Warrant
of like denomination and tenor as the Warrant so lost, stolen, mutilated or
destroyed. Any such new Warrant shall constitute an original contractual
obligation of the Company, whether or not the allegedly lost, stolen, mutilated
or destroyed Warrant shall be at any time enforceable by anyone.
Section 14. Representations of Holder. The holder of this Warrant, by the
acceptance hereof, represents that it is acquiring this Warrant for its own
account for investment and not with a view to, or sale in connection with, any
distribution hereof or of any of the shares of Common Stock or other securities
issuable upon the exercise thereof, nor with any present intention of
distributing any of the same. Investor represents that it is an "accredited
investor" as such term is defined under Regulation D of the Securities Act. Upon
exercise of this Warrant, the holder will confirm in writing, in form reasonably
satisfactory to the Company, the holder's investment intent.
Section 15. Notice. All notices and other communications under this
Warrant shall (a) be in writing (which shall include communications by
telecopy), (b) be (i) sent by registered or certified mail, postage prepaid,
return receipt requested, by telecopier, or (ii) delivered by
6
hand, (c) be given at the following respective addresses and telecopier numbers
and to the attention of the following persons:
(i) if to the Company, to it at:
Infinite Group, Inc.
0000 Xxxx Xxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
with a copy to:
Morse, Zelnick, Rose & Lander, LLP
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Attention: Xxxxxxx X. Xxxx, Esq.
Telephone: (000) 000-0000
Telecopier: (000) 000-0000
(ii) if to Investor, to it at the address set forth below
Investor's signature on the signature page hereof;
or at such other address or telecopier number or to the attention of such other
person as the party to whom such information pertains may hereafter specify for
the purpose in a notice to the other specifically captioned "Notice of Change of
Address", and (d) be effective or deemed delivered or furnished (i) if given by
mail, on the fifth Business Day after such communication is deposited in the
mail, addressed as above provided, (ii) if given by telecopier, when such
communication is transmitted to the appropriate number determined as above
provided in this Section and the appropriate answer back is received or receipt
is otherwise acknowledged, and (iii) if given by hand delivery, when left at the
address of the addressee addressed as above provided, except that notices of a
change of address, telecopier or telephone number, shall not be deemed
furnished, until received.
Section 16. Registration Rights.
(a) The Company shall be obligated to the owners of the Warrants and the
Warrant Shares, to file a Registration Statement as follows:
Whenever during the four-year period beginning on June 30, 1999 and ending
on June 30, 2003 the Company proposes to file with the Commission a Registration
Statement (other than as to securities issued pursuant to an employee benefit
plan or as to a transaction subject to Rule 145 promulgated under the Act or
which a Form S-4 Registration Statement could be used), it shall, at least ten
(10) days prior to each filing, give written notice of such proposed filing to
the Warrantholder and each holder of Warrant Shares, at their respective
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addresses as they appear on the records of the Company, and shall offer to
include and shall include in such filing any proposed disposition of the Warrant
Shares upon receipt by the Company, not less than five (5) days prior to the
proposed filing date, of a request therefor setting forth the facts with respect
to such proposed disposition and all other information with respect to such
person reasonably necessary to be included in such Registration Statement. In
the event that the managing underwriter, if any, for said offering advises the
Company in writing that the inclusion of such securities in the offering would
be detrimental to the offering, the Company shall have no obligation to include
such securities in such registration statement.
(b) Except as set forth in the last sentence of this paragraph, all fees,
disbursements and out-of-pocket expenses (other than Warrantholder's brokerage
fees and commissions and legal fees of counsel to the Warrantholder, if any) in
connection with the filing of any Registration Statement under this Section 16
(or obtaining the opinion of counsel and any no-action position of the
Commission with respect to sales under Rule 144) and in complying with
applicable securities and Blue Sky laws shall be borne by the Company. The
Company at its expense will supply any Warrantholder and any holder of Warrant
Shares with copies of such Registration Statement and the prospectus included
therein and other related documents and opinions and no-action letters in such
quantities as may be reasonably requested by the Warrantholder or holder of
Warrant Shares.
Section 17. Indemnification. In the event any of the Warrant Shares (for
purposes of this Section 17, the "Registrable Securities") are included in a
Registration Statement filed by the Company with the Securities and Exchange
Commission (a "Registration Statement"):
(a) To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, employees, agents and each person who
control any Investor within the meaning of the 1933 Act or the Securities
Exchange Act of 1934, as amended (the "1934 Act"), if any, (each, an
"Indemnified Person"), against any joint or several losses, claims, damages,
liabilities or expenses (collectively, together with actions, proceedings or
inquiries by any regulatory or self-regulatory organization, whether commenced
or threatened, in respect thereof, "Claims") to which any of them may become
subject insofar as such Claims arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or the omission or alleged omission to state therein a material fact
required to be stated or necessary to make the statements therein not
misleading, (ii) any untrue statement or alleged untrue statement of a material
fact contained in any preliminary prospectus if used prior to the effective date
of such Registration Statement, or contained in the final prospectus (as amended
or supplemented, if the Company files any amendment thereof or supplement
thereto with the SEC) or the omission or alleged omission to state therein any
material fact necessary to make the statements made therein, in light of the
circumstances under which the statements therein were made, not misleading, or
(iii) any violation or alleged violation by the Company of the 1933 Act, the
1934 Act, any other law, including, without limitation, any state securities
law, or any rule or regulation thereunder relating to the offer or sale of the
Registrable Securities (the matters in the foregoing clauses (i) through (iii)
being, collectively, "Violations"). Subject to the restrictions set forth in
Section 17(c) with respect to
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the number of legal counsel, the Company shall reimburse the Investors and each
such underwriter or controlling person, promptly as such expenses are incurred
and are due and payable, for any reasonable legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 17(a): (i) shall not apply
to a Claim arising out of or based upon a Violation which occurs in reliance
upon and in conformity with information furnished in writing to the Company by
any Indemnified Person expressly for use in connection with the preparation of
the Registration Statement or any such amendment thereof or supplement thereto;
(ii) shall not apply to amounts paid in settlement of any Claim if such
settlement is effected without the prior written consent of the Company, which
consent shall not be unreasonably withheld; and (iii) with respect to any
preliminary prospectus, shall not inure to the benefit of any Indemnified Person
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented, if such corrected prospectus was timely made
available to the Indemnified Person by the Company, and the Indemnified Person
was promptly advised in writing not to use the incorrect prospectus prior to the
use giving rise to a Violation and such Indemnified Person, notwithstanding such
advice, used it. Such indemnity shall remain in full force and effect regardless
of any investigation made by or on behalf of the Indemnified Person and shall
survive any permitted transfer of the Registrable Securities by the Investor
pursuant to this Warrant.
(b) In connection with any Registration Statement of the Company in which
an Investor is participating, each such Investor agrees severally and not
jointly to indemnify, hold harmless and defend, to the same extent and in the
same manner set forth in Section 17(a), the Company, each of its directors, each
of its officers who signs the Registration Statement, each person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act, and any
other stockholder selling securities pursuant to the Registration Statement or
any of its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the 1933 Act or the 1934 Act (collectively, an
"Indemnified Party"), against any Claim to which any of them may become subject,
under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim arises out
of or is based upon any Violation, in each case to the extent (and only to the
extent) that such Violation occurs in reliance upon and in conformity with
written information furnished to the Company by such Investor expressly for use
in connection with such Registration Statement; and subject to Section 17(c)
such Investor will reimburse any legal or other expenses (promptly as such
expenses are incurred and are due and payable) reasonably incurred by them in
connection with investigating or defending any such Claim; provided, however,
that the indemnity agreement contained in this Section 17(b) shall not apply to
amounts paid in settlement of any Claim if such settlement is effected without
the prior written consent of such Investor, which consent shall not be
unreasonably withheld; provided, further, however, that the Investor shall be
liable under this Warrant for only that amount as does not exceed the net
proceeds to such Investor as a result of the sale of Registrable Securities
pursuant to such Registration Statement. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of such
Indemnified Party and shall survive the transfer of the Registrable Securities
by the Investors pursuant to this Warrant. Notwithstanding anything to the
contrary contained herein, the indemnification
9
agreement contained in this Section 17(b) with respect to any preliminary
prospectus shall not inure to the benefit of any Indemnified Party if the untrue
statement or omission of material fact contained in the preliminary prospectus
was corrected on a timely basis in the prospectus, as then amended or
supplemented.
(c) Promptly after receipt by an Indemnified Person or Indemnified Party
under this Section 17 of notice of the commencement of any action (including any
governmental action), such Indemnified Person or Indemnified Party shall, if a
Claim in respect thereof is to be made against any indemnifying party under this
Section 17, deliver to the indemnifying party a written notice of the
commencement thereof, and the indemnifying party shall have the right to
participate in, and, to the extent the indemnifying party so desires, jointly
with any other indemnifying party similarly noticed, to assume control of the
defense thereof with counsel mutually satisfactory to the indemnifying party and
the Indemnified Person or the Indemnified Party, as the case may be; provided,
however, that an Indemnified Person or Indemnified Party shall have the right to
retain its own counsel with the fees and expenses to be paid by the indemnifying
party, if, in the reasonable opinion of counsel retained by the indemnifying
party, the representation by such counsel of the Indemnified Person or
Indemnified Party and the indemnifying party would be inappropriate due to
actual or potential differing interests between such Indemnified Person or
Indemnified Party and any other party represented by such counsel in such
proceeding. The indemnifying party shall pay for only one separate legal counsel
for the Indemnified Persons or the Indemnified Parties, as applicable, and such
legal counsel shall be selected by Investors holding a majority-in-interest of
the Registrable Securities included in the Registration Statement to which the
Claim relates (with the approval of the Initial Investor if it holds Registrable
Securities included in such Registration Statement), if the Investors are
entitled to indemnification hereunder, or the Company, if the Company is
entitled to indemnification hereunder, as applicable. The failure to deliver
written notice to the indemnifying party within a reasonable time of the
commencement of any such action shall not relieve such indemnifying party of any
liability to the Indemnified Person or Indemnified Party under this Section 17,
except to the extent that the indemnifying party is actually prejudiced in its
ability to defend such action.
Section 18. Miscellaneous. This Warrant and any term hereof may be
changed, waived, discharged, or terminated only by an instrument in writing
signed by the party or holder hereof against which enforcement of such change,
waiver, discharge or termination is sought.
The headings in this Warrant are for purposes of reference only and shall
not limit or otherwise affect the meaning hereof This Warrant shall be governed
by and interpreted under the laws of the State of New York.
Section. 19. Date. The date of this Warrant is June 30, 1998. This
Warrant, in all events, shall be wholly void and of no effect after the close of
business on the Expiration Date, except that notwithstanding any other
provisions hereof, the provisions of Section 11 shall
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continue in full force and effect after such date as to any Warrant Shares or
other securities issued upon the exercise of this Warrant.
INFINITE GROUP, INC.
By:
---------------------------------
Name: Xxxxxx Xxxxx
Title: Chief Financial Officer
AGREED TO AND ACCEPTED
-------------------------------------
Xxxxxxxx X. Xxxxxxxxx
Address: 000 Xxxx Xxxxx Xxxx
Xxxxxxxxxx, XX, 00000
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EXHIBIT A TO WARRANT
SUBSCRIPTION FORM
TO BE EXECUTED BY THE REGISTERED HOLDER IF SUCH REGISTERED HOLDER DESIRES TO
EXERCISE THIS WARRANT
INFINITE GROUP, INC.
The undersigned hereby exercises the right to purchase Warrant Shares
covered by this Warrant according to the conditions thereof and herewith makes
payment of U.S. $___________, the aggregate Warrant Exercise Price of such
Warrant Shares in full.
The undersigned represents that it is purchasing the Warrant Shares for
its own account for investment and not with a view to, or sale in connection
with, any distribution hereof, nor with any present intention of distributing
the same. The undersigned represents that it is an "accredited investor" as such
term is defined under Regulation D of the Securities Act of 1933, as amended
("Securities Act"). The Warrant Shares may not be sold, pledged, transferred,
hypothecated, or otherwise disposed of except pursuant to an effective
registration thereof under the Securities Act, or unless the Company shall have
received an opinion of counsel satisfactory to the Company that such
registration is not required.
INVESTOR
By:
------------------------------
Name:
----------------------------
Title:
---------------------------
Address:
-------------------------
---------------------------------
---------------------------------
Number of Warrant Shares Being Purchased:
---------------------------------
Dated:___________, _____.
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