UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
 
FORM 8-K
CURRENT REPORT
 
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 
Date of Report (Date of earliest event reported): November 1, 2011
 
INFINITE GROUP, INC.
(Exact name of Registrant as specified in its charter)
 
Delaware
 
0-21816
 
52-1490422
(State or other jurisdiction
of incorporation)
 
(Commission File Number)
 
(I.R.S. Employer
Identification No.)

60 Office Park Way
Pittsford, New York 14534
(Address of principal executive offices and Zip Code)

(585) 385-0610
(Registrant's telephone number, including area code)

N/A
(Former name or former address, if changed since last report.)
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
   o  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
   o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
    o  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d 2(b))
 
     o  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 
 
 
 
Section 1 – Registrant’s Business and Operations
 
Item 1.01                      Entry into a Material Definitive Agreement
 
On November 1, 2011, in accordance with the terms of the Settlement Agreement, dated September 6, 2011 (the “Settlement Agreement”), between Infinite Group, Inc. (the “Company”) and the Pension Benefit Guaranty Corporation (the “PBGC”), the Company received from the PBGC the executed Agreement for Appointment of Trustee and Termination of the Osley & Whitney, Inc. Retirement Plan (the "O&W Plan") (the “Trusteeship Agreement”).  The Trusteeship Agreement: (i) terminated the O&W Plan; (ii) appointed the PBGC as the statutory trustee of the O&W Plan; and (iii) established November 30, 2001 as the termination date for the O&W Plan.

On October 17, 2011, in accordance with the Settlement Agreement, the Company: (i) purchased 500,000 shares of its common stock from the O&W Plan for $130,000; and (ii) issued a promissory note in favor of the PBGC for $300,000 bearing interest at 6% per annum amortizing in quarterly payments over a seven year period (the “Note”).  The purchase price for the 500,000 shares was funded by the Company using the proceeds from the placement of a convertible note in the principal amount of $100,000 to a non-affiliated accredited investor on October 4, 2011.  The shares purchased will be retired and restored to the status of authorized but unissued shares.  All obligations of the Company under the Note are secured by a security interest in all assets of the Company, subordinate to certain pre-existing obligations, including the security interest of the lender under the Company’s credit facility.

Since the PBGC terminated the O&W Plan as of November 30, 2001, the Company has no further obligations to the O&W Plan and the PBGC other than those stated in the Settlement Agreement.  The Company will record the effects of the termination of the O&W Plan in its financial statements during the fourth quarter of 2011.
 
The foregoing summary of the Settlement Agreement, Trusteeship Agreement and the Note are qualified in their entirety by reference to the same which are attached as Exhibits 10.1, 10.2 and 10.3 hereto. A copy of the press release that the Company expects to release with respect to the foregoing is attached as Exhibit 99.1, hereto.
 
Item 9.01.                      Exhibits

(d) Exhibits

Exhibit
Number
Description
   
10.1
Settlement Agreement between the Company and the PBGC, effective as of September 1, 2011.*
   
10.2
Trusteeship Agreement between the Company and the PBGC, effective as of November 1, 2011.
   
10.3
Promissory note in favor of the PBGC in the principal amount of $300,000 bearing interest at 6% per annum
   
99.1
Press release of Infinite Group, Inc. dated November 8, 2011
   
*Filed with the Securities and Exchange Commission on September 12, 2011, as an exhibit to the Company’s Current Report on Form 8-K and incorporated herein by reference.

* * * * * *


 
2
 
 
SIGNATURE
 
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
Date: November 7, 2011       INFINITE GROUP, INC.  
       
 
/s/ James Villa
 
 
James Villa
 
 
Acting Chief Executive Officer and President
 
       
 
 
 
3
 
`                                                      


PROMISSORY NOTE

$300,000.00
 
October 17, 2011


FOR VALUE RECEIVED , INFINITE GROUP, INC. , a Delaware corporation, with an address at 60 Office Park Way, Pittsford, New York 14534 (“ IGI ”), promises to pay to the order of THE PENSION BENEFIT GUARANTY CORPORATION , a wholly-owned United States government corporation with an address at 1200 K Street, N.W., Washington D.C. 20005-4026 ( “PBGC" or the “Holder” ), in lawful money of the United States of America, the principal sum of Three Hundred Thousand Dollars ($300,000.00) pursuant to the terms of this Promissory Note (this “ Note ”), which evidences indebtedness under that certain Settlement Agreement, of even date herewith, by and between the Holder and IGI (as the same may be amended, superseded or otherwise modified from time to time, the “ Settlement Agreement ”), together with interest accruing on the outstanding principal balance from the date hereof at the rate or rates hereinafter specified.  This Note is secured by security interests in all of IGI’s assets which is evidenced by a Security Agreement and Mortgage(s)/Deed(s) of Trust (collectively with this Note and the Settlement Agreement, the “Settlement Documents” ).  Capitalized terms not defined in this Note have the definitions ascribed to them in the Settlement Agreement.  The following additional terms shall apply to this Note:

1.             Rate of Interest .    The amount of principal outstanding under this Note will bear interest at the fixed rate of 6.0% per annum (the “ Fixed Rate ”).  Interest will be calculated on the basis of a year of 365 days.

2.             Payment Terms .   The principal, together with interest at the Fixed Rate, shall be payable over seven (7) years on the 15 th day of the last month of each calendar quarter as follows:

2.1.           Commencing on December 15, 2011 and continuing thereafter until March 15, 2018, quarterly payments of principal and interest shall be payable in the specified payment amounts set forth in the amortization schedule attached hereto and incorporated herein by reference as Exhibit A (the “ Amortization Schedule ”).
 
2.2.           If any payment under this Note shall become due on a Saturday, Sunday or public holiday under the laws of the United States of America, such payment shall be made on the next succeeding business day but such extension of time shall not be included in computing interest in connection with such payment.  Payments received shall be applied in accordance with the Amortization Schedule.

3.             Prepayment .   The principal and any accrued interest may be prepaid (in whole or in part) at any time by IGI, at its option, without penalty, upon written notice to PBGC.  All prepayments shall be applied in reverse order of maturity.
 
 
 
 
 
4.             Events of Default; Remedies .   The occurrence of any Event of Default set forth in the Settlement Agreement will be deemed to be an “ Event of Default ” under this Note.  Upon the occurrence of an Event of Default: (a) the outstanding principal balance and accrued interest hereunder together with any additional amounts payable hereunder may be accelerated by Holder without demand or notice of any kind in which case all such amounts will immediately become due and payable; and (b) Holder may exercise from time to time any of the rights and remedies available under this Note, under any other Settlement Document, under applicable law, or in equity.

5.             Miscellaneous .    All notices, demands, requests, consents, approvals and other communications required or permitted hereunder must be in writing and sent in the manner provided in Section 10.2 of the Settlement Agreement.  No delay or omission on Holder’s part to exercise any right or power arising hereunder will impair any such right or power or be considered a waiver of any such right or power, nor will Holder’s action or inaction impair any such right or power.  No modification, amendment or waiver of any provision of this Note or consent to any departure by IGI therefrom will be effective unless made in a writing signed by Holder.  If any provision of this Note is found to be invalid by a court, all the other provisions of this Note will remain in full force and effect.

This Note has been delivered to and accepted by Holder and will be deemed to be made in the State of New York. this note will be interpreted and the rights and liabilities of holder determined in accordance with the laws of the State of New York , excluding its conflict of laws rules, except to any extent preempted by federal law.   IGI hereby irrevocably consents to the jurisdiction of the United States District Court for the District of Columbia; provided that nothing contained in this Note will prevent Holder from bringing any action, enforcing any award or judgment or exercising any rights against IGI, against any security, or against any property of IGI within any other county, state or other foreign or domestic jurisdiction.  IGI waives any objection based on venue or forum non conveniens with respect to any such action instituted in the United States District Court for the District of Columbia.

7.            WAIVER OF JURY TRIAL .  IGI irrevocably waives any and all rights to a trial by jury in any action, proceeding or claim of any nature relating to this note, any documents executed in connection with this note (including without limitation, any Settlement Documents) or any transaction contemplated in any of such documents.

IN WITNESS WHEREOF , intending to be legally hereby, IGI executes this Note as of the date first written above.
 
 
WITNESS:
 
BORROWER :
     
   
INFINITE GROUP, Inc.
     
/s/ James Witzel 
  By:
/s/ James Villa
 
      James Villa, Acting Chief Executive Officer and President
 
 
 
2
 
 
         
Year
   
Beginning
   
Interest
         
---Total Payment----
   
Ending
 
Year
 
Quarter
   
No
   
Balance
      6.00 %  
Principal
   
Quarter
   
Year
   
Balance
 
                                                   
                                                   
2011
    4       1       300,000       4,500       3,000       7,500             297,000  
2012
    1               297,000       4,455       3,000       7,455             294,000  
      2               294,000       4,410       3,000       7,410             291,000  
      3               291,000       4,365       3,000       7,365       29,730       288,000  
      4       2       288,000       4,320       3,000       7,320               285,000  
2013
    1               285,000       4,275       3,000       7,275               282,000  
      2               282,000       4,230       3,000       7,230               279,000  
      3               279,000       4,185       3,000       7,185       29,010       276,000  
      4       3       276,000       4,140       3,000       7,140               273,000  
2014
    1               273,000       4,095       3,000       7,095               270,000  
      2               270,000       4,050       3,000       7,050               267,000  
      3               267,000       4,005       3,000       7,005       28,290       264,000  
      4       4       264,000       3,960       3,000       6,960               261,000  
2015
    1               261,000       3,915       78,000       81,915               183,000  
      2               183,000       2,745       3,000       5,745               180,000  
      3               180,000       2,700       3,000       5,700       100,320       177,000  
      4       5       177,000       2,655       3,000       5,655               174,000  
2016
    1               174,000       2,610       3,000       5,610               171,000  
      2               171,000       2,565       3,000       5,565               168,000  
      3               168,000       2,520       3,000       5,520       22,350       165,000  
      4       6       165,000       2,475       3,000       5,475               162,000  
2017
    1               162,000       2,430       3,000       5,430               159,000  
      2               159,000       2,385       3,000       5,385               156,000  
      3               156,000       2,340       3,000       5,340       21,630       153,000  
      4       7       153,000       2,295       3,000       5,295               150,000  
2018
    1               150,000       2,250       3,000       5,250               147,000  
      2               147,000       2,205       3,000       5,205               144,000  
      3               144,000       2,160       144,000       146,160       161,910       0  
                                                                 
                                      300,000                          

 
3
 
Infinite Group, Inc. Relieved of Obligation to Act as Sponsor of the Osley & Whitney, Inc. Retirement Plan and the Related Financial Responsibilities


Pittsford, NY, November 8, 2011 - Infinite Group, Inc. (OTCBB: IMCI) today announced that on November 1, 2011, it completed an agreement with the Pension Benefit Guaranty Corporation (the “PBGC”) pursuant to which the Osley & Whitney, Inc. Retirement Plan (the "O&W Plan") was terminated effective as of November 30, 2001 and the PBGC was appointed the statutory trustee of the O&W Plan.  Since the PBGC terminated the O&W Plan as of November 30, 2001, the Company has no further obligations to the O&W Plan and the PBGC other than those stated in the Settlement Agreement with the PBGC.

Prior to December 30, 2002, the Company owned 100% of the common stock of Osley & Whitney, Inc. (O&W).  On December 30, 2002, the Company sold 100% of the O&W common stock to a third party, but continued to act as the sponsor of the O&W Plan.  Although the Company continued to act as the sponsor of the O&W Plan after the sale, during 2007 management determined that it had no legal obligation to do so.

Mr. James Villa, President, stated that "we appreciate the cooperation and assistance of the PBGC in working with us to resolve the long standing issues associated with the O&W Plan and we are very pleased with the outcome.  We will now be able to focus our efforts exclusively on growing our Company without the distractions, negative financial impact and administrative burdens associated with the O&W Plan.  We believe that this resolution with the PBGC is in the best interests of the Company, its stockholders and the O&W Plan participants.  We expect that it will help the Company avoid the ongoing expense associated with legal and other expenses to assert the Company's position advocating that it had no legal obligation to act as the sponsor of the O&W Plan and will provide the O&W Plan participants with a long-term financial and administrative resolution backed by the PBGC."

About Infinite Group, Inc.

Infinite Group, Inc. is a provider of information technology (IT) services to federal, state and local governments and commercial clients.  Its expertise includes managing leading edge operations and implementing complex programs in advanced server management, virtualization (server, desktop, application, and storage), cloud computing, network services, information security, wireless technology, human capital services, enterprise architecture, and program and project management. The Company's KeyITSupport division is a single point of contact managed information technology service provider to small and medium sized businesses. The Company is publicly traded under the symbol IMCI.  More information about the Company is available at www.IGIus.com .
 
# # #
 
This news release may include statements that may constitute “forward-looking statements,” including estimates of future business prospects or financial results, as to which there is no assurance.  Any forward-looking statements herein are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995.  There are many factors that could cause actual results of Infinite Group, Inc. to differ materially from forward-looking statements.  Please refer to a discussion of these factors in the Company’s Annual Reports on Form 10-K, Quarterly Reports on Forms 10-Q and other Securities and Exchange Commission filings, which are incorporated herein by reference.  The Company disclaims any intent or obligation to update publicly such forward-looking statements, whether as a result of new information, future events or otherwise.
 
Contact:
 
Infinite Group, Inc.
James Villa
President
585-385-0610
JVilla@IGIus.com