INFINITE GROUP, INC. Stock Option Agreement Date:September 5, 2013

1.  

(a)  

This option shall become effective on the date of grant. One fifth (100,000) of the underlying shares shall vest on this date hereof; and

(b)  

the remaining shall vest, provided the Optionee is then an Affiliate (as set forth in Section 7(a) below) as follows:

●  

for an additional one fifth of the underlying shares (100,000) on or after the date one year from the date hereof; and

●  

for an additional one fifth (100,000) of the underlying shares on or after the date two years from the date hereof; and

●  

for an additional one fifth (100,000) of the underlying shares on or after the date three years from the date hereof; and

●  

for the remaining one fifth (100,000) of the underlying shares on or after the date four years from the date hereof.

(c)  

This option shall expire ten years from the date hereof (the “Expiration Date”).

2.  

(a)  

If there is any stock dividend, stock split, or combination of shares of Common Stock, the number and amount of shares then subject to this option shall be proportionately and appropriately adjusted; no change shall be made in the aggregate Exercise Price to be paid for all shares subject to this option, but the aggregate Exercise Price shall be allocated among all shares subject to this option after giving effect to the adjustment.

(b)  

If there is any other change in the Common Stock, including recapitalization, reorganization, sale of exchange of assets, exchange of shares, offering of subscription rights, or a merger or consolidation in which the Company is the surviving corporation, an adjustment, if any, shall be made in the shares then subject to this option as the Board of Directors of the Company (the “Board”) may deem equitable.  Failure of the Board to provide for an adjustment pursuant to this subparagraph prior to the effective date of any Company action referred to herein shall be conclusive evidence that no adjustment is required in consequence of such action.

(c)  

If the Company is merged into or consolidated with any other corporation, or if it sells all or substantially all of its assets to any other corporation, then either (i) the Company shall cause provisions to be made for the continuance of this option after such event, or for the substitution for this option of an option covering the number and class of securities which the Optionee would have been entitled to receive in such merger or consolidation by virtue of such sale if the Optionee had been the holder of record of a number of shares of Common Stock of the Company equal to the number of shares covered by the unexercised portion of this option, or (ii) the Company shall give to the Optionee written notice of its election not to cause such provision to be made and this option shall become exercisable in full (or, at the election of the optionee, in part) at any time during a period of 20 days, to be designated by the Company, ending not more than 10 days prior to the effective date of the merger, consolidation or sale, in which case this option shall not be exercisable to any extent after such 20 day period.  In no event, however, shall this option be exercisable after the Expiration Date.

3.  

4.  

5.  

6.  

7.  

(a)  

This option shall be exercisable by written notice of such exercise, in the form prescribed by the Board, to the Secretary or Treasurer of the Company at its principal office.  The notice shall specify the number of shares of Common Stock for which the option is being exercised (which number, if less than all of the shares then subject to exercise, shall be at least 1,000 or a multiple thereof) and shall be accompanied by payment (i) in cash or by check in the amount equal to the Exercise Price multiplied by the number of shares to be purchased upon exercise, or (ii) in such other manner as the Board shall deem acceptable.  No shares shall be delivered upon exercise of any option until all laws, rules and regulations which the Board may deem applicable have been complied with.

(b)

Notwithstanding the provision of this Section 7:

8.  

 

(a)

The Optionee shall, so long as he is an Affiliate and for a period of 12 months after the Termination Date, he will not engage in any competitive activities including the following:

(i)  

hiring, offering to hire, enticing away or in any other manner persuading or attempting to persuade any officer, employee or agent of the Company to discontinue his relationship with the Company without the written permission of the Company unless the Optionee clearly establishes that the relationship was initiated by the other party thereto;

(ii)  

Directly or indirectly soliciting, diverting, taking away or attempting to solicit, divert, or take away any business of the Company.  The term “business” shall mean actual or proposed contracts or arrangements for products or services of the Company and any reasonable extension or continuation of the business of the Company as constituted as of the Termination Date.

 

(b)

The Optionee shall not make or permit to be made, except in pursuance of his duties and for the sole use and account of the Company or its nominees, any copies, abstracts or summaries of any Company reports, papers, documents or programs, whether made by him or by others.

 

(c)

The Optionee shall keep confidential and not disclose to others, except as required by his service as an Affiliate or by law, any matter or thing ascertained by him through his association with the Company, not otherwise publicly known, the disclosure of which might possibly be contrary to the best interest of any person, firm, or entity doing business with the Company, or of the Company.