Unassociated Document


    

      EXECUTION
        COPY

       

      ESCROW
        AGREEMENT

       

      THIS
        ESCROW AGREEMENT (“Agreement”)
        is
        made and entered into as of the 16th day of June, 2008, by and among JPMorgan
        Chase Bank, N.A., a national banking association (the “Escrow
        Agent”),
        Harris & Harris Group, Inc., a New York corporation (the “Company”),
        and
        ThinkPanmure, LLC (the “Placement
        Agent”).

       

      Background
        

       

      WHEREAS,
        the Company proposes to issue and sell an aggregate of up to 2,545,000 shares
        of
        its common stock, $0.01 par value per share (the "Shares")
        for an
        aggregate of up to $15,651,750, all as described in the Company's registration
        statement on Form N-2 (Registration No. 333-138996) filed with the Securities
        and Exchange Commission (which together with all amendments and supplements
        thereto, is referred to herein as the "Registration
        Statement");
        

       

      WHEREAS,
        the Shares are being offered by the Company to purchasers identified by the
        Placement Agent, pursuant to the terms of the Placement Agency Agreement
        (the
“Placement
        Agency Agreement”)
        dated
        June 16, 2008, by and between the Company and the Placement Agent, and the
        subscription agreements (collectively, the “Subscription
        Agreements”)
        dated
        the date hereof between the Company and each purchaser named therein (each
        a
“Purchaser,”
and
        collectively, the “Purchasers”);
        

       

      WHEREAS,
        unless the transactions contemplated by the Subscription Agreements and the
        Placement Agency Agreement have been abandoned pursuant to the terms thereof,
        or
        unless otherwise agreed to by the Company and the Placement Agent, the closing
        of the purchase and sale of the Shares shall take place on June 20, 2008
        (the
“Closing
        Date”);

       

      WHEREAS,
        with respect to all subscription payments received from the Purchasers, the
        Company and the Placement Agent propose to establish an escrow account with
        the
        Escrow Agent in the name of the Company at 4 New York Plaza, 21st
        Floor,
        New York, New York 10004; and

       

      WHEREAS,
        upon execution of the Subscription Agreements by the Company, the Escrow
        Agent
        is willing to receive and disburse the proceeds from the offering of the
        Shares
        in accordance herewith. The Escrow Agent's duties are limited to this Agreement
        and shall only act in accordance with the terms and conditions contained
        herein.

       

      Terms

       

      NOW,
        THEREFORE, in consideration of the mutual agreements contained herein and
        other
        good and valuable consideration, the receipt and sufficiency of which are
        hereby
        acknowledged, the parties hereto agree as follows:

       

      1. Establishment
        of Escrow.
        The
        Escrow Agent hereby agrees to establish a non-interest bearing trust account
        pursuant to Rule 15c-2-4 promulgated by the Securities and Exchange Commission
        under the Securities Exchange Act of 1934, as amended (the "Escrow
        Account"),
        for
        the deposit with the Escrow Agent of the Escrowed Funds (defined below) and
        to
        receive and disburse the Escrowed Funds in accordance with the terms and
        conditions of this Agreement. 

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      2. Deposit
        of Escrowed Funds.
        The
        Company and the Placement Agent hereby appoint the Escrow Agent as their
        escrow
        agent for the purposes set forth herein, and the Escrow Agent hereby accepts
        such appointment under the terms and conditions set forth herein. The Placement
        Agent is hereby directed by the Company to instruct each Purchaser for the
        Shares identified on Exhibit
        A
        attached
        hereto to wire to the Escrow Agent immediately available funds of such Purchaser
        delivered in payment for the Shares such Purchaser agrees to purchase (the
        “Escrowed
        Funds”).
        Upon
        receipt of Escrowed Funds from each Purchaser, the Escrow Agent shall credit
        such Escrowed Funds to an Escrow Account held by the Escrow Agent. The wire
        instructions to which each Purchaser shall wire or deposit such funds are
        set
        forth in the notice provision for the Escrow Agent in Section 10 to this
        Agreement and in Exhibit A to the Subscription Agreements.

       

      3. Acceptance.
        Upon
        receipt of the Escrowed Funds, the Escrow Agent shall acknowledge such receipt
        in writing (which may be via electronic mail) to the Company and the Placement
        Agent and shall hold and disburse the same pursuant to the terms and conditions
        of this Agreement. The Escrow Agent shall have no duty to verify whether
        the
        amounts and property delivered comport with the requirements of any other
        agreement. 

       

      4. List
        of Purchasers.
        Exhibit
        A
        hereto
        contains the name of, the address of record, the number of Shares subscribed
        for
        by, and the subscription amount to be delivered to the Escrow Agent on behalf
        of
        each Purchaser whose funds are being deposited. The Escrow Agent shall notify
        the Placement Agent and the Company of any discrepancy between the subscription
        amounts set forth on any list delivered pursuant to this Section 4 and the
        subscription amounts received by the Escrow Agent. The Escrow Agent is
        authorized
        to revise such list to reflect the actual subscription amounts received and
        the
        release of any subscription amounts pursuant to Section 5.

       

      5. Withdrawal
        of Subscription Amounts.

       

      (a) If
        the Escrow Agent shall receive a notice, substantially in the form of
Exhibit
        B
        hereto (an “Offering
        Termination Notice”)
        from the Company, the Escrow Agent shall promptly after receipt of such Offering
        Termination Notice, and in no event more than five (5) business days thereafter,
        send to each Purchaser listed on the list held by the Escrow Agent pursuant
        to
        Section 4 whose total subscription amount shall not have been released pursuant
        to paragraph (b) or (c) of this Section 5, in the manner set forth in paragraph
        (d) of this Section 5, a check to the order of such Purchaser in the amount
        of
        the remaining subscription amount held by the Escrow Agent on behalf of such
        Purchaser as set forth on such list held by the Escrow Agent. The Escrow
        Agent
        shall notify the Company and the Placement Agent of the distribution of such
        funds to the Purchasers. 

       

      (b) In
        the event that (i) the Shares have been subscribed for and funds in respect
        thereof shall have been deposited with the Escrow Agent in accordance with
        this
        Agreement on or before the Closing Date and (ii) no Offering Termination
        Notice
        shall have been delivered to the Escrow Agent, the Company and the Placement
        Agent shall deliver to the Escrow Agent a joint notice, not more than three
        (3)
        business days prior to the Closing Date, substantially in the form of
Exhibit
        C
        hereto (a “Closing
        Notice”),
        designating the proceeds which are to be distributed on such Closing Date,
        and
        identifying the Purchasers and the number of Shares to be sold to each thereof
        on such Closing Date. The Escrow Agent, after receipt of such Closing Notice,
        on
        such Closing Date, shall pay to the Company, the Placement Agent and its
        counsel
        (if applicable), by wire transfer of immediately available funds and otherwise
        in the manner specified in such Closing Notice, an amount equal to the aggregate
        of the subscription amounts paid by the Purchasers identified in such Closing
        Notice for the Shares to be sold on such Closing Date as set forth on the
        list
        held by the Escrow Agent pursuant to Section 4.

       

       


      
        
          
          

        

        
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      (c) If
        at any time and from time to time prior to the release of any Purchaser’s total
        subscription amount pursuant to paragraph (a) or (b) of this Section 5 from
        the
        Escrow Account, the Company shall deliver to the Escrow Agent a notice,
        substantially in the form of Exhibit
        D
        hereto (a “Subscription
        Termination Notice”),
        to the effect that any or all of the subscriptions of such Purchaser have
        been
        rejected by the Company (a “Rejected
        Subscription”),
        the Escrow Agent, promptly after receipt of such Subscription Termination
        Notice, shall promptly send to such Purchaser, in the manner set forth in
        paragraph (d) of this Section 5, a check to the order of such Purchaser in
        the
        amount of such Rejected Subscription amount.

       

      (d) For
        the purposes of this Section 5, any check that the Escrow Agent shall be
        required to send to any Purchaser shall be sent to such Purchaser by first
        class
        mail, postage prepaid, at such Purchaser’s address furnished to the Escrow Agent
        pursuant to Section 4.

       

      6. Escrow
        Agent; Duties and Liabilities.

       

      (a) It
        is expressly understood and agreed by the parties that (i) the duties of
        the
        Escrow Agent, as herein specifically provided, are purely ministerial in
        nature;
        (ii) the Escrow Agent shall not have any duty to deposit the Escrowed Funds
        except as provided herein, (iii) the Escrow Agent shall not be responsible
        or
        liable in any manner whatsoever for, or have any duty to inquire into, the
        sufficiency, correctness, genuineness or validity of the notices it receives
        hereunder, or the identity, authority or rights of any of the parties; (iv)
        the
        Escrow Agent shall have no duties or responsibilities in connection with
        the
        Escrowed Funds, other than those specifically set forth in this Agreement;
        (v)
        the Escrow Agent shall not incur any liability in acting in good faith upon
        any
        signature, written notice, request, waiver, consent, receipt, or any other
        paper
        or document believed by the Escrow Agent to be genuine and to have been signed
        or sent by the proper parties, without further inquiry or
        investigation;
        (vi) the Escrow Agent may assume that any person purporting to have authority
        to
        give notices on behalf of any of the parties in accordance with the provisions
        hereof has been duly authorized to do so; (vii) the Escrow Agent shall incur
        no
        liability whatsoever except for such resulting from its fraud, willful
        misconduct or gross negligence, so long as the Escrow Agent has acted in
        good
        faith in the performance of its duties hereunder; (viii) the Escrow Agent
        agrees
        that all property held by the Escrow Agent under this Agreement shall be
        segregated from all other property held by the Escrow Agent and shall be
        identified as being held in connection with this Agreement; and (ix) upon
        the
        Escrow Agent’s performance of its obligations under Section 5 hereof, the Escrow
        Agent shall be relieved of all liability, responsibility and obligation with
        respect to the Escrowed Funds or arising out of or under this
        Agreement.

       

      (b) The
        Escrow Agent shall not be under any obligation to take any legal action in
        connection with this Agreement or towards its enforcement or performance,
        or to
        appear in, prosecute or defend any action or legal proceeding, or to file
        any
        return, or pay or withhold any income or other tax payable with respect to
        any
        Escrowed Funds
        or the disbursement thereof, or any payment of or in respect of which shall
        constitute a Loss under Section 7 below.

       

      (c) In
        the event of any disagreement relating to the Escrowed Funds or the disbursement
        thereof resulting in adverse claims or demands being made in connection with
        the
        Escrowed Funds or in the event that the Escrow Agent is in doubt as to what
        action it should take hereunder, the Escrow Agent shall be entitled to retain
        the Escrowed Funds, but only to the extent of the Escrowed Funds in controversy,
        until the Escrow Agent shall have received (i) a final non-appealable order
        of a
        court of competent jurisdiction regarding the proper disposition; or (ii)
        a
        joint letter of instruction from the Company and the Placement Agent directing
        delivery of the Escrowed Funds, in which event the Escrow Agent shall disburse
        the Escrowed Funds in accordance with such order or letter. Any court order
        shall be accompanied by a legal opinion by counsel for the presenting party
        satisfactory to the Escrow Agent to the effect that the order is final and
        non-appealable. The Escrow Agent shall act on such court order and legal
        opinion
        without further question. If a proceeding for such determination is not begun
        and diligently continued, the Escrow Agent may make an ex parte application,
        or
        bring any appropriate action, for leave to deposit the Escrowed Funds in
        the
        Supreme Court of the State of New York, County of New York seeking such
        determination or such declaratory relief as the Escrow Agent shall deem
        reasonably necessary under the circumstances, and the parties each hereby
        irrevocably consent to the entering of such an ex parte order pursuant to
        all
        applicable laws, rules and procedures of the State of New York and such court.
        The Escrow Agent shall be reimbursed by the Company, for all of the Escrow
        Agent’s reasonable costs and expenses of such action or proceeding, including,
        without limitation, reasonable attorneys’ fees and disbursements. This Section
        6(c) shall survive any termination of this Agreement or the resignation or
        removal of the Escrow Agent in accordance with Section 6(h) below. 

       

       


      
        
          
          

        

        
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      (d) The
        Escrow Agent does not have any interest in the Escrowed Funds deposited
        hereunder and is serving as escrow agent only and having only possession
        thereof. 

       

      (e) None
        of the provisions of this Agreement shall require the Escrow Agent to expend
        or
        risk its own funds or otherwise to incur any liability, financial or otherwise,
        in the performance of any of its duties hereunder, or in the exercise of
        any of
        its rights or powers if it shall have reasonable grounds for believing that
        repayment of such funds or indemnity satisfactory to it against such risk
        or
        liability is not assured to it.

       

      (f) The
        Escrow Agent may consult with independent counsel and the advice or any opinion
        of counsel shall be full and complete authorization and protection in respect
        of
        any action reasonably taken or omitted by it hereunder in accordance with
        such
        advice or opinion of counsel.

       

      (g) The
        Escrow Agent may at any time resign by giving thirty (30) days' prior written
        notice of resignation to the Company and the Placement Agent. Upon receiving
        such notice of resignation, the Company and the Placement Agent shall promptly
        appoint a successor and, upon the acceptance by the successor of such
        appointment and transfer of all Escrowed Funds to such successor, release
        the
        resigning Escrow Agent from its obligations hereunder (other than obligations
        and liabilities arising by reason of the prior fraud, willful misconduct
        or
        gross negligence of the Escrow Agent) by written instrument, a copy of which
        instrument shall be delivered to the resigning Escrow Agent and the successor.
        If no successor shall have been so appointed and have accepted appointment
        within forty-five (45) days after the giving of such notice of resignation,
        the
        resigning Escrow Agent may petition any court of competent jurisdiction for
        the
        appointment of a successor.

       

      The
        Company and the Placement Agent may at any time, by issuing a joint written
        instruction to the Escrow Agent, terminate the appointment of the Escrow
        Agent.
        Such joint written instruction shall specify the date upon which such
        termination shall take effect. Thereafter, the Escrow Agent shall have no
        further obligation hereunder (other
        than obligations and liabilities arising by reason of the prior fraud, willful
        misconduct or gross negligence of the Escrow Agent) except
        to hold the Escrowed Funds as depository. The Company and the Placement Agent
        agree that in the event of such termination, they will cooperate with each
        other
        to jointly appoint a banking corporation, trust company or attorney as successor
        Escrow Agent. The Escrow Agent shall refrain from taking any action until
        receiving written instructions jointly signed by the Company and the Placement
        Agent designating the successor Escrow Agent.


      
        
          
          

        

        
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      (h) Any
        partnership or other similar entity into which the Escrow Agent may be merged
        or
        converted or with which it may be consolidated, or any partnership, corporation
        or other similar entity resulting from any merger, conversion or consolidation
        to which the Escrow Agent shall be a party, or any partnership, corporation
        or
        other similar entity succeeding to the business of the Escrow Agent shall
        be the
        successor of the Escrow Agent hereunder without the execution or filing of
        any
        paper with any party hereto or any further act on the part of any of the
        parties
        hereto except where an instrument of transfer or assignment is required by
        law
        to effect such succession, anything herein to the contrary
        notwithstanding.

       

      (i) No
        printed or other matter in any language which mentions the Escrow Agent’s name
        or the rights, powers, or duties of the Escrow Agent shall be issued by the
        other parties hereto or on such parties’ behalf unless the Escrow Agent shall
        first have given its specific written consent thereto. The Escrow Agent hereby
        consents to the use of its name and the reference to the escrow arrangement
        in
        the Subscription Agreements, the Placement Agency Agreement, the Registration
        Statement and any other documents related thereto.

       

      7. Indemnification
        of Escrow Agent.
        The Company hereby agrees to indemnify and hold the Escrow Agent harmless
        from
        any and all liabilities, obligations, damages, losses, claims, encumbrances,
        costs or expenses (including reasonable attorneys’ fees and expenses) (any or
        all of the foregoing herein referred to as a “Loss”)
        arising hereunder or under or with respect to the Escrowed Funds, except
        for
        Losses resulting from (a)
        fraud, willful misconduct or gross negligence of the Escrow Agent,
        or (b) its following any instructions or other directions from the Company,
        to
        the extent that its following any such instruction or direction is expressly
        forbidden by the terms hereof.
        If any such action shall be brought against the Escrow Agent, it shall notify
        the Company. Anything
        in this Agreement to the contrary notwithstanding, in no event shall the
        Escrow
        Agent be liable for special, indirect or consequential loss or damage of
        any
        kind whatsoever (including but not limited to lost profits), even if the
        Escrow
        Agent has been advised of the likelihood of such loss or damage and regardless
        of the form of action.

       

      The
        parties hereto acknowledge that the foregoing indemnities shall survive the
        resignation or the removal of the Escrow Agent or the termination of this
        Agreement.

       

      8. Fees.
        The Company agrees to pay the Escrow Agent the administration fee of $2,500,
        which shall be paid by the Company within two (2) business days following
        the
        execution of this Agreement or as otherwise agreed to by the Company and
        the
        Escrow Agent.

       

      9. Security
        Procedures.
        In the event funds transfer instructions are given (other than in writing
        at the
        time of execution of this Agreement, as indicated in Schedule
        1
        attached hereto), whether in writing, by telecopier or otherwise, the Escrow
        Agent is authorized to seek confirmation of such instructions by telephone
        call-back to the person or persons designated on Schedule
        2
        hereto, and the Escrow Agent may rely upon the confirmation of anyone purporting
        to be the person or persons so designated. The individuals authorized to
        give
        and confirm funds transfer instructions may be changed only in a writing
        actually received and acknowledged by the Escrow Agent. The Escrow Agent
        and the
        beneficiary’s bank in any funds transfer may rely solely upon any account
        numbers or similar identifying numbers provided by the Company or the Placement
        Agent to identify (a) the beneficiary, (b) the beneficiary’s bank, or (c) an
        intermediary bank. The Escrow Agent may apply any of the Escrowed funds for
        any
        payment order it executes using any such identifying number, even when its
        use
        may result in a person other than the beneficiary being paid, or the transfer
        of
        funds to a bank other than the beneficiary’s bank or an intermediary bank
        designated. The parties to this Agreement acknowledge that these security
        procedures are commercially reasonable. All funds transfer instructions must
        include the signature of the person(s) authorizing said funds transfer, which
        shall be an individual who is designated to give funds transfer instructions
        as
        designated in Schedule
        2.

       

       


      
        
          
          

        

        
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      10. Notices.
        Any notice or demand desired or required to be given hereunder shall be in
        writing and deemed given when sent by facsimile transmission with receipt
        confirmed to the telephone number below and addressed as follows:

       

      
        	 	
                a.

              	
                If
                  to the Escrow Agent, to:

              


      

       

      JPMorgan
        Chase Bank, N.A.

      Escrow
        Services

      4
        New York Plaza, 21st
        Floor

      New
        York, NY 10004

      Facsimile:
        (212)623-6168

      Attention:
        Chris Vetri/Debbie DeMarco

      


      with
        wire transfers to:

      


      JPMorgan
        Chase Bank

      ABA
        #             

      Account
        No.:             

      Account
        Name: Harris & Harris Group Subscription

      Attention:
        Chris Vetri

      


      
        	 	
                b.

              	
                If
                  to the Company, to:

              


      

       

      Harris
        & Harris Group, Inc.

      111
        West
        57th Street

      New
        York,
        New York 10019

      Attention:
        General Counsel 

      Facsimile
        No.: 212-582-9563

       

      with
        copies to: 

       

      Skadden,
        Arps, Slate, Meagher & Flom LLP

      Four
        Times Square

      New
        York,
        New York 10036

      Attention:
        Richard T. Prins, Esq.

      Facsimile
        No.: 212-735-2000

      


      
        	 	
                c.

              	
                If
                  to the Placement Agent, to:

              


      

       


      
        
          
          

        

        
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      ThinkPanmure,
        LLC 

      600
        Montgomery St., 8th Floor

      San
        Francisco, CA 94111

      Facsimile:
        (415) 249-0975

      Attention:
        Ted Mitchell

      


      with
        copies to: 

      


      Goodwin
        Procter LLP

      The
        New
        York Times Building

      620
        Eighth Avenue

      New
        York,
        New York 10018

      Facsimile
        No.: 212-355-3333

      Attention:
        Michael D. Maline, Esq.

      


      or
        to such other address or account information as hereafter shall be designated
        in
        writing by the applicable party to the other parties hereto. In the event
        that
        the Escrow Agent, in its sole discretion, shall determine that an emergency
        exists, the Escrow Agent may use such other means of communication as the
        Escrow
        Agent deems appropriate. For the purposes of this Agreement, “business day”
shall mean any day other than a Saturday, Sunday or any other day on which
        the
        Escrow Agent located at the notice address set forth in this section is
        authorized or required by law or executive order to remain closed.

       

      11. Entire
        Agreement.
        This Agreement and any exhibits and schedules hereto constitute the entire
        agreement between the parties hereto pertaining to the subject matters hereof,
        and supersede all negotiations, preliminary agreements and all prior and
        contemporaneous discussions and understandings of the parties in connection
        with
        the subject matters hereof. Any exhibits and schedules hereto are hereby
        incorporated into and made a part of this Agreement.

       

      12. Amendments.
        No amendment, waiver, change or modification of any of the terms, provisions
        or
        conditions of this Agreement shall be effective unless made in writing and
        signed by all parties or by their duly authorized agents. Waiver of any
        provision of this Agreement shall not be deemed a waiver of future compliance
        therewith and such provision shall remain in full force and effect.

       

      13. Severability.
        In the event any provision of this Agreement is held invalid, illegal or
        unenforceable, in whole or in part, the remaining provisions of this Agreement
        shall not be affected thereby and shall continue to be valid and
        enforceable.

       

      14. Governing
        Law.
        This Agreement shall be governed and construed in accordance with the laws
        of
        the State of New York without regard to any applicable principles of conflicts
        of law.

       

      15. Submission
        to Jurisdiction.
        ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY BE BROUGHT
        IN
        THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES OF AMERICA FOR
        THE
        SOUTHERN DISTRICT OF NEW YORK, AND, BY EXECUTION AND DELIVERY OF THIS AGREEMENT,
        EACH PARTY HERETO HEREBY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY,
        GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF THE AFORESAID COURTS AND
        APPELLATE COURTS FROM ANY THEREOF. EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS
        TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN ANY
        ACTION
        OR PROCEEDING BY THE MAILING OF COPIES THEREOF TO SUCH PARTY BY REGISTERED
        OR
        CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO SUCH PARTY,
        AT ITS
        ADDRESS SPECIFIED HEREIN. EACH PARTY HERETO HEREBY IRREVOCABLY WAIVES ANY
        OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF
        VENUE
        OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
        HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
        JURISDICTIONS.

       

       


      
        
          
          

        

        
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      16. Headings
        and Captions.
        The titles or captions of paragraphs in this Agreement are provided for
        convenience of reference only, and shall not be considered a part hereof
        for
        purposes of interpreting or applying this Agreement, and such titles or captions
        do not define, limit, extend, explain or describe the scope or extent of
        this
        Agreement or any of its terms or conditions.

       

      17. Gender
        and Number.
        Words and phrases herein shall be construed as in the singular or plural
        number
        and as masculine, feminine or neuter gender, according to the
        context.

       

      18. Counterparts.
        This Agreement may be executed in any number of counterparts, each of which
        shall be deemed to be an original, but all of which together shall constitute
        one and the same instrument. Facsimiles may also be deemed originals for
        the
        purpose of this Agreement. 

       

      19. Binding
        Effect on Successors and Assigns.
        This Agreement shall be binding upon and shall inure to the benefit of the
        parties hereto and their respective legal representatives, heirs, successors
        and
        assigns, and the subscribers of the Shares. Nothing in this Agreement, express
        or implied, is intended to confer upon any party, other than the parties
        hereto
        (and their respective legal representatives, heirs, successors and assigns),
        any
        rights, remedies, obligations or liabilities.

       

      19. Account
        Opening Information.
        To help the government fight the funding of terrorism and money laundering
        activities, Federal law requires all financial institutions to obtain, verify,
        and record information that identifies each person who opens an account.
        When an
        account is opened, the Escrow Agent will ask for information that will allow
        it
        to identify relevant parties. Upon execution of this Agreement, each party
        shall
        provide the Escrow Agent with a fully executed W-8 or W-9 Internal Revenue
        Service form, which shall include their Tax Identification Number (TIN) as
        assigned by the Internal Revenue Service.

       

      20. Force
        Majeure.
        In the event that any party or the Escrow Agent is unable to perform its
        obligations under the terms of this Agreement because of acts of God, war,
        terrorism, fire, floods, electrical outages, strikes, equipment or transmission
        failure or damage reasonably beyond its control, or other cause reasonably
        beyond its control, the Escrow Agent shall not be liable for damages to the
        other parties for any damages resulting from such failure to perform otherwise
        from such causes. Performance under this Agreement shall resume when the
        Escrow
        Agent is able to perform substantially.

       

      21. Termination.
        Upon delivery of the Escrowed Funds to the Company, or the Purchasers pursuant
        to Section 5 hereof, by the Escrow Agent, this Agreement shall terminate,
        subject to the provisions of Section 7 hereof.

       

       


      
        
          
          

        

        
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      IN
        WITNESS WHEREOF, the parties hereto have executed this Escrow Agreement as
        of
        the date first above written.


       

      
        	
                ESCROW
                  AGENT:

              	
                COMPANY:

              
	 	 
	
                JPMORGAN
                  CHASE BANK, N.A.

              	
                HARRIS
                  & HARRIS GROUP, INC.

              
	
                 

                 

                By:
                  _/s/Debra
                  A. DeMarco________

                Name: Debra
                  A. DeMarco

                Title: Vice
                  President

              	
                 

                 

                By:
                  /s/Douglas
                  W. Jamison_______

                Name:
                   Douglas
                  W. Jamison

                Title:
                  President 

              
	 	 
	
                PLACEMENT
                  AGENT:

              	 
	 	 
	
                THINKPANMURE,
                  LLC

              	 
	
                 

                 

                By:
                  _/s/Ted
                  Mitchell_____________

                Name: Ted
                  Mitchell

                Title: Partner

              	
                 

              
	 	 
	 	 
	 	 


      

       


      
        
          
          

        

        
          -9-

          
            

          

        

        
          
          

        

      


      EXHIBIT
        A

       

      SUMMARY
        OF ESCROWED FUNDS TO BE RECEIVED


       

      
        	
                Name
                  and Address of Purchaser

              	
                Number
                  of

                Shares

              	
                Subscription

                Amount

              	
                Receipt
                  Confirmed

                by
                  Escrow Agent

              


      

       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        B

       

      FORM
        OF OFFERING TERMINATION NOTICE


      


      ____________
        __, 2008

      


      JPMorgan
        Chase Bank, N.A.

      Escrow
        Services

      4
        New York Plaza, 21st
        Floor

      New
        York, NY 10004

      Attention:
        _______________

      


      Dear
        Sir or Madam:

      


      Pursuant
        to Section 5(a) of the Escrow Agreement dated as of ____________, 2008 (the
        “Escrow
        Agreement”)
        by and among ThinkPanmure, LLC, Harris & Harris Group, Inc. (the
“Company”)
        and you, the Company hereby notifies you of the termination of the offering
        of
        the Shares (as that term is defined in the Escrow Agreement) and directs
        you to
        make payments to the Purchasers as provided for in Section 4(a) of the Escrow
        Agreement.

       

      


      Very
        truly yours,

       

      HARRIS
        & HARRIS GROUP, INC.

       

      By:                        

      Name:

      Title:


       


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        C

       

      FORM
        OF CLOSING NOTICE

      ________________,
        2008

      


      JPMorgan
        Chase Bank, N.A.

      Escrow
        Services

      4
        New York Plaza, 21st
        Floor

      New
        York, NY 10004

      Attention:
        _______________

      


      Dear
        Sir or Madam:

      


      Pursuant
        to Section 5(b) of the Escrow Agreement dated as of _________, 2008 (the
        “Escrow
        Agreement”),
        by and among ThinkPanmure, LLC (the “Placement
        Agent”),
        Harris & Harris Group, Inc. (the “Company”)
        and you, the Company hereby certifies that it has received subscriptions
        for the
        Shares (as that term is defined in the Escrow Agreement) and the Company
        will,
        subject to and in accordance with the terms of the Placement Agency Agreement
        and the Subscription Agreements, as defined in the Escrow Agreement, sell
        and
        deliver Shares to the Purchasers thereof at a closing to be held on
        ____________, 2008 (the “Closing
        Date”).
        The names of the Purchasers concerned, the number of Shares subscribed for
        by
        each of such Purchasers and the related subscription amounts are set forth
        on
Schedule
        A
        annexed hereto.

       

      Please
        accept these instructions as standing instructions for the closing to be
        held on
        the Closing Date. The parties hereto certify that their instructions may
        be
transmitted
        to you via facsimile.

       

      We
        hereby request that the aggregate subscription amount be paid as
        follows:

       

      1.
        To the Company, $_________, pursuant to the following wire transfer
        instructions:

       

      Bank:
        __________

      ABA
        Number: __________

      Account
        Number: __________

      Account
        Name: __________

      Attention:
        _____________

      Reference:
        _____________

      


      2.
        To the Placement Agent, $_________, pursuant to the following wire transfer
        instructions:

       

      Bank:
        __________

      ABA
        Number: __________

      Account
        Number: __________

      Account
        Name: __________ 

      Attention:
        _____________

      Reference:
        __________

      



      
        
          
          

        

        
          C-1

          
            

          

        

        
          
          

        

      


      3.
        To JPMorgan Chase Bank, N.A. as Escrow Agent, $2,500, pursuant to the following
        wire transfer instructions:

       


      Bank:
        JPMorgan Chase Bank, N.A.

      ABA
        Number: ________________

      Account
        Number: ____________________

      Account
        Name: ____________________

      Attention:
        ____________________

      Reference:
        Escrow Agent Fees

      


      These
        instructions may be executed in any number of counterparts, each of which
        shall
        be deemed to be an original, and all of which together shall constitute one
        and
        the same instrument.

       

      [Signatures
        on following page]


      
        
          
          

        

        
          C-2

          
            

          

        

        
          
          

        

      


      


      Very
        truly yours,

       

      HARRIS
        & HARRIS GROUP, INC.


       

      By:                        

      Name:
        

      Title:
        

       

      THINKPANMURE,
        LLC


       

      By:                        

      Name:

      Title:


       


      
        
          
          

        

        
          C-3

          
            

          

        

        
          
          

        

      


      SCHEDULE
        A

       

      
        
          	
                  Name
                    of Purchaser

                	
                  Number
                    of

                  Shares

                	
                  Subscription

                  Amount

                


        

      


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      EXHIBIT
        D

       

      FORM
        OF SUBSCRIPTION TERMINATION NOTICE

      


      ________________,
        2008

      


      JPMorgan
        Chase Bank, N.A.

      Escrow
        Services

      4
        New York Plaza, 21st
        Floor

      New
        York, NY 10004

      Attention:
        _______________

      


      Dear
        Sir or Madam:

      


      Pursuant
        to Section 5(c) of the Escrow Agreement dated as of _________, 2008 (the
        “Escrow
        Agreement”),
        by and among ThinkPanmure, LLC, Harris & Harris Group, Inc. (the
“Company”)
        and you, the Company hereby notifies you that the following subscription(s)
        have
        been rejected:

       

      
        	
                Name
                  of

                PURCHASER

              	 	
                Number
                  of Subscribed

                SHARES
                  REJECTED

              	 	
                Dollar
                  Amount of

                REJECTED
                  SUBSCRIPTION

              
	 	 	 	 	 


      

      


      


      Very
        truly yours,

       

      HARRIS
        & HARRIS GROUP, INC.


      


      By:                    

      Name:

      Title:



      
        
          
          

        

        
          D-1

          
            

          

        

        
          
          

        

      


      SCHEDULE
        1


      


      Name
        of Company: Harris & Harris Group, Inc.

      Wiring
        Instructions:

      


      Bank
        Name: 
        ___________ 

      ABA
        Number: 
        ___________ 

      Account
        Number: 
        ___________ 

      Account
        Name:  ___________ 

      For
        Further Credit:  ___________ 

      


      Name
        of Placement Agent: ThinkPanmure, LLC

      Wiring
        Instructions:

      


      Bank
        Name:  ___________ 

      ABA
        Number:  ___________ 

      Account
        Number:  ___________ 

      Account
        Name:  ___________ 

      For
        Further Credit:  ___________ 


      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

      


      SCHEDULE
        2

      


      Telephone
        Number(s) for Person(s) 

      Designated
        to Give and Confirm Funds Transfer Instructions

      


      If
        to Company:

      


      
        	 	
                Name

              	 	
                Telephone
                  Number

              	
              	
                Signature
                  Specimen

              
	 	 	 	 	 	 
	
                1.

              	
                Daniel
                  Wolfe

              	 	
                (212)
                  582-0900

              	
              	
                /s/
                  Daniel Wolfe

              
	 	 	 	 	 	 
	
                2.

              	
                Sandra
                  Forman

              	 	
                (212)
                  582-0900

              	
              	
                /s/
                  Sandra Forman

              
	 	 	 	 	 	 
	
                3.

              	
                Patricia
                  Egan

              	 	
                (212)
                  582-0900

              	
              	
                /s/
                  Patricia Egan

              
	 	 	 	 	 	 
	
                If
                  to Placement Agent:

              	 	 	 	 
	 	 	 	 	 	 
	 	
                Name

              	 	
                Telephone
                  Number

              	
              	
                Signature
                  Specimen

              
	 	 	 	 	 	 
	
                1.

              	
                Ted
                  Mitchell

              	 	
                (415)
                  249-6388

              	
              	
                /s/
                  Ted Mitchell

              
	 	 	 	 	 	 
	
                2.

              	
                 

              	 	 	 	 
	 	 	 	 	 	 
	
                3.

              	 	 	 	 	 


      

      


      Telephone
        call backs shall be made to both Company and the Placement Agent if joint
        instructions are required pursuant to the agreement. All
        funds transfer instructions must include the signature of the person(s)
        authorizing said funds transfer.

       

      Periodically,
        you may issue payment orders to us to transfer funds by federal funds wire.
        We
        review the orders to determine compliance with the governing documentation
        and
        to confirm signature by the appropriate party, in accordance with the above
        list. Bank policy requires that, where practicable, we undertake callbacks
        to a
        party other than the individual who signed the payment order to verify the
        authenticity of the payment order.

       

      Inasmuch
        as you are the only employee in your office who can confirm wire transfers,
        we
        will call you to confirm any federal funds wire transfer payment order
        purportedly issued by you. Your continued issuance of payment orders to us
        and
        confirmation in accordance with this procedure will constitute your agreement
        (1) to the callback security procedure outlined herein and (2) that the security
        procedure outlined herein constitutes a commercially reasonable method of
        verifying the authenticity of payment orders. Moreover, you agree to accept
        any
        risk associated with a deviation from this bank policy.