AGREEMENT,  effective as of August 1, 1996,  between The MicroCap Fund,  Inc., a
Maryland corporation (the "Company"), and ___________ (the "Indemnitee").

                  WHEREAS,  it is essential to the Company to attract and
retain as directors  and officers the most capable persons available;

                  WHEREAS, Indemnitee is a director or officer of the Company;

                  WHEREAS,   both  the  Company  and  Indemnitee  recognize  the
increased risk of litigation and other claims being asserted  against  directors
and officers of public companies in today's environment;

                  WHEREAS, the Company's Board of Directors and stockholders
 have approved a plan of liquidation of the Company;

                  WHEREAS,  certain  directors  and  officers are the subject of
actual  or  potential  regulatory  or  court  proceedings  instituted  or  to be
instituted by the Securities and Exchange  Commission arising out of relating to
the  proceedings  currently  entitled In the Matter of  Commonwealth  Associates
Growth Fund, Inc. (NY-6290) (the "Proceedings");

                  WHEREAS,  the  By-laws of the  Company  require the Company to
indemnify and advance  expenses to its directors and officers to the full extent
permitted  by law and the  Indemnitee  has  continued  to serve as a director or
officer  of  the  Company,  notwithstanding  the  pendency  or  threat  of  such
Proceedings in part in reliance on such By-laws;

                  WHEREAS,  in recognition of Indemnitee's  need for substantial
protection against personal  liability on the aforesaid By-laws,  and in part to
provide  Indemnitee  with specific  contractual  assurance  that the  protection
promised by such By-laws will be available to Indemnitee  (regardless  of, among
other  things,  any  amendment to or revocation of such By-laws or any change in
the composition of the Company's  Board of Directors or transaction  relating to
the  Company),  the  Company  wishes  to  provide  in  this  Agreement  for  the
indemnification  of and the  advancing of expenses to  Indemnitee to the fullest
extent (whether  partial or complete)  permitted by law and as set forth in this
Agreement,  and,  to the  extent  insurance  is  maintained,  for the  continued
coverage of Indemnitee  under the Company's  directors' and officers'  liability
insurance policy;

                  NOW, THEREFORE, in consideration of the premises set out above
and for other good and valuable  consideration,  the receipt and  sufficiency of
which are hereby  acknowledged,  and intending to be legally  bound hereby,  the
parties hereto agree as follows:

                  Certain Definitions:

                  Claim: any threatened,  pending or completed  action,  suit or
                  proceeding,   or  any   inquiry  or   investigation,   whether
                  instituted by the Company or any other party,  that Indemnitee
                  in good faith  believes  might lead to the  institution of any
                  such action,  suit or  proceeding,  whether  civil,  criminal,
                  administrative, investigative or other.

                  Disabling Conduct:  any action or failure of action on the 
                  part of the Indemnitee constituting willful misfeasance, bad
                  faith, gross negligence or reckless disregard of the duties
                  involved in the conduct of his office;

                  Expenses:   include  attorneys'  fees  and  all  other  costs,
                  expenses and  obligations  paid or incurred in connection with
                  investigating,  defending, being a witness in or participating
                  in (including on appeal), or preparing to defend, be a witness
                  in or participate in, any Claim relating to any  Indemnifiable
                  Event and any such costs, expenses and obligations incurred by
                  the  Indemnitee  in  successfully  establishing  his  right to
                  indemnification  hereunder or to a payment under any insurance
                  policy maintained by the Company.

                  Indemnifiable  Event:  any event or occurrence  related to the
                  fact that Indemnitee is or was a director,  officer, employee,
                  agent or fiduciary of the Company, or is or was serving at the
                  request  of the  Company  as a  director,  officer,  employee,
                  trustee,   agent  or   fiduciary   of   another   corporation,
                  partnership,  joint venture,  employee  benefit plan, trust or
                  other enterprise, or by reason of anything done or not done by
                  Indemnitee in any such  capacity  other than any such event or
                  occurrence constituting or arising out of Disabling Conduct on
                  the part of the  Indemnitee  and other  than any such event or
                  occurrence  arising  out of,  related to or  constituting  any
                  Claim  initiated by  Indemnitee  unless the Board of Directors
                  has authorized or consented to the initiation of such Claim.

                  Independent  Legal Counsel:  an attorney or firm of attorneys,
                  selected by the Company and approved by the Indemnitee (or, if
                  there is more than one Indemnitee with respect to a particular
                  Indemnifiable  Event, a majority of such  Indemnitees),  whose
                  approval may not be unreasonably withheld.

                  Reviewing Party: (i) any appropriate person or body consisting
                  of a member or members  of the  Company's  Board of  Directors
                  appointed  by the Board who is not an  "interested  person" of
                  the Company as that term is used in the Investment Company Act
                  of 1940 and the rules,  regulations  and releases  promulgated
                  thereunder  and is not a party  to the  particular  Claim  for
                  which   Indemnitee   is  seeking   indemnification,   or  (ii)
                  Independent Legal Counsel.

                  Voting Securities:  any securities of the Company which vote
                  generally in the election of directors.

                  Basic  Indemnification  Arrangement.  In the event  Indemnitee
was,  is or  becomes  a party to or  witness  or  other  participant  in,  or is
threatened to be made a party to or witness or other  participant in, a Claim by
reason of (or arising in part out of) an Indemnifiable  Event, the Company shall
indemnify,  defend and hold harmless  Indemnitee to the fullest extent permitted
by law as soon as  practicable  but in any event no later than thirty days after
written  demand  is  presented  to the  Company,  against  any and all  Expenses
(subject  to  requirements  relating to advances  set forth  below),  judgments,
fines,  penalties  and  amounts  paid in  settlement  (including  all  interest,
assessments  and other charges paid or payable in connection  with or in respect
of such Expenses (subject to requirements relating to advances set forth below),
judgments,  fines, penalties or amounts paid in settlement) of such Claim. If so
requested by Indemnitee,  the Company shall advance  (within thirty days of such
request) any and all Expenses to Indemnitee (an "Expense Advance").

                   Reserves.  The Company  shall from time to time  estimate its
potential obligations under this Agreement and all other similar indemnification
agreements in light of all  proceedings  known or threatened and shall set aside
and  segregate,  in addition to any reserves or accruals for other  obligations,
expenses and  liabilities,  whether  matured or contingent,  of the Company,  an
amount  sufficient in the  reasonable  judgment of the Board of Directors or the
trustee of any  liquidating  trust holding assets of the Company for the Company
to discharge its  obligations  under this  Agreement and such other  agreements;
provided,  however,  that the aggregate  amount  reserved in connection with the
Proceedings  (including  amounts  reserved  under this Agreement and all similar
indemnification  agreements)  shall not be less than the excess of $250,000 over
any indemnification  payments incurred and made hereunder in connection with the
Proceedings  from and after the date hereof (the "Minimum  Reserve"),  except as
agreed by the  Indemnitee  and each  indemnitee  under any  similar  agreements;
provided,   further,   that  the  Minimum  Reserve  shall  be  released  upon  a
determination  by the Board of  Directors  of the  Company or the trustee of any
liquidating  trust  holding  assets of the Company that there is no  substantial
likelihood that further indemnification  payments will be required in connection
with the Proceeings.

                  Within 30 days after the date this Agreement is executed,  the
Company shall establish an escrow account  pursuant to an escrow agreement to be
entered into between the Company and an escrow  agent (the  "Agent"),  and shall
deliver $250,000 in cash and/or cash  equivalents  (the "Escrowed  Assets") into
such escrow  account.  The Escrowed  Assets will be held by the Agent to provide
for the Company's  obligations  under this Agreement  arising in connection with
the Proceedings;  provided,  however,  that no indemnification  payment shall be
made hereunder out of the Escrowed Assets unless and until a determination shall
have been made by the Board of  Directors  of the  Company or the trustee of any
liquidating  trust  holding  assets of the  Company  that  such  indemnification
payment is permitted under this Agreement;  provided, further, that the Escrowed
Assets shall be released upon a  determination  by the Board of Directors of the
Company or the trustee of any  liquidating  trust holding  assets of the Company
that there is no substantial  likelihood that further  indemnification  payments
will be required in connection with the Proceedings.

                  Partial  Indemnity,  Etc. If Indemnitee is entitled  under any
provision  of this  Agreement  to  indemnification  by the Company for some or a
portion  of the  Expenses,  judgments,  fines,  penalties  and  amounts  paid in
settlement of a Claim but not, however, for all of the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion thereof to which
Indemnitee is entitled.

                  Burden of Proof. In connection with any  determination  by the
Reviewing  Party  or  otherwise  as to  whether  Indemnitee  is  entitled  to be
indemnified  hereunder  the  burden  of  proof  shall  be on the  Indemnitee  to
establish that Indemnitee is so entitled.

                  No   Presumptions.   For  purposes  of  this  Agreement,   the
termination  of any claim,  action,  suit or  proceeding,  by  judgment,  order,
settlement  (whether with or without court  approval) or  conviction,  or upon a
plea of nolo contendere, or its equivalent,  shall not create a presumption that
Indemnitee  did not  meet  any  particular  standard  of  conduct  or  have  any
particular  belief or that a court has determined  that  indemnification  is not
permitted by applicable  law. In addition,  neither the failure of the Reviewing
Party  to  have  made a  determination  as to  whether  Indemnitee  has  met any
particular  standard  of conduct  or had any  particular  belief,  nor an actual
determination  by the Reviewing  Party that Indemnitee has not met such standard
of  conduct  or did not have such  belief,  prior to the  commencement  of legal
proceedings  by Indemnitee to secure a judicial  determination  that  Indemnitee
should be indemnified under applicable law shall be a defense to such proceeding
or create a presumption  that Indemnitee has not met any particular  standard of
conduct or did not have any particular belief.

                  Nonexclusivity,  Etc. The rights of the  Indemnitee  hereunder
shall be in addition to any other  rights  Indemnitee  may have,  subject to the
Investment  Company  Act  of  1940  and  the  rules,  regulations  and  releases
promulgated  thereunder,  under the  Company's  By-laws or the Maryland  General
Corporation  Law or  otherwise.  To the  extent  that a change  in the  Maryland
General  Corporation  Law  (whether  by statute or  judicial  decision)  and the
Investment  Company  Act  of  1940  (or  the  rules,  regulations  and  releases
promulgated  thereunder) permits greater indemnification by agreement than would
be afforded currently under the Company's By-laws and this Agreement,  it is the
intent of the parties hereto that  Indemnitee  shall enjoy by this Agreement the
greater benefits so afforded by such change.

                  Liability  Insurance.  To the extent the Company  maintains an
insurance  policy or  policies  providing  directors'  and  officers'  liability
insurance, Indemnitee shall be covered by such policy or policies, in accordance
with its or their terms, to the maximum extent of the coverage available for any
Company director or officer.

                  Amendments,  Etc. No supplement,  modification or amendment of
this  Agreement  shall be  binding  unless  executed  in  writing by both of the
parties  hereto.  No waiver of any of the provisions of this Agreement  shall be
deemed or shall constitute a waiver of any other  provisions  hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.

                  Subrogation. In the event of payment under this Agreement, the
Company  shall be  subrogated to the extent of such payment to all of the rights
of recovery of  Indemnitee,  who shall execute all papers  required and shall do
everything that may be necessary to secure such rights,  including the execution
of such documents  necessary to enable the Company  effectively to bring suit to
enforce such rights.

                  No  Duplication  of Payments.  The Company shall not be liable
under  this  Agreement  to make any  payment in  connection  with any Claim made
against  Indemnitee to the extent  Indemnitee  has otherwise  actually  received
payment  (under  any  insurance  policy,  By-law or  otherwise)  of the  amounts
otherwise indemnifiable hereunder.

                  Binding Effect,  Etc. This Agreement shall be binding upon and
inure to the  benefit  of and be  enforceable  by the  parties  hereto and their
respective  successors,  assigns,  including any direct or indirect successor by
purchase, merger,  consolidation or otherwise to all or substantially all of the
business and/or assets of the Company,  spouses,  heirs,  executors and personal
and legal representatives. This Agreement shall continue in effect regardless of
whether  Indemnitee  continues to serve as an officer or director of the Company
or of any other enterprise at the Company's request.

                  Severability.  The  provisions  of  this  Agreement  shall  be
severable  in the  event  that  any  of the  provisions  hereof  (including  any
provision within a single section,  paragraph or sentence) is held by a court of
competent  jurisdiction to be invalid,  void or otherwise  unenforceable  in any
respect,  and the validity  and  enforceability  of any such  provision in every
other  respect and of the  remaining  provisions  hereof shall not be in any way
impaired and shall remain enforceable to the fullest extent permitted by law.

         14.      Exhibit. Attached hereto as Exhibit A is the form of Escrow
 Agreement required by Section 3 hereof.

         15.      Governing Law.  This Agreement shall be governed by and 
construed and enforced in accordance with the laws of the State of Maryland
applicable to contracts made and to be performed in such state without giving
effect to the principles of conflicts of laws.

                  IN WITNESS  WHEREOF,  the parties  hereto have  executed  this
Agreement this ___ day of September, 1996.

                             THE MICROCAP FUND, INC.

                           By _______________________
                                      Name:
                                     Title:


                                                     ------------------------
                                                           [Indemnitee]


<PAGE>


                                                                    Exhibit A

                                           ESCROW AGREEMENT

                  This ESCROW AGREEMENT is made and entered into as of September
___,  1996,  between  The  MicroCap  Fund,  Inc.,  a Maryland  corporation  (the
"Company"), and _________________, as escrow agent (the "Escrow Agent").

             WHEREAS,  the Company has entered into  indemnification  agreements
effective as of August 1, 1996 (the  "Indemnification  Agreements") with certain
of its current and former  directors  and officers (the  "Indemnitees"),  which,
among other  things,  require the Company to establish  and deliver  $250,000 in
cash and cash equivalents  (the "Escrowed  Assets") to an escrow account for the
purpose of  discharging  certain of its  obligations  under the  Indemnification
Agreements.

          NOW,  THEREFORE,  in consideration of the premise set forth above, the
Company hereby transfers physical possession of the Escrowed Assets for the uses
and purposes  stated herein,  subject to the terms and provisions set out below,
and the  Escrow  Agent  hereby  accepts  such  Escrowed  Assets,  subject to the
following terms and provisions:

                  1. Certain Definitions. For purposes of this Escrow Agreement,
upon the  establishment of a liquidating  trust that will hold the assets of the
Company (the  "Trust"),  references to the Company shall mean the trustee of the
Trust (the  "Trustee")  and references to the  stockholders  of the Company (the
"Stockholders") shall mean the beneficiaries of the Trust (the "Beneficiaries").

                  2. Appointment and Agreement of Escrow Agent.  The Company 
hereby appoints the Escrow Agent as escrow agent, and the Escrow Agent agrees
to perform the duties of Escrow Agent under this Agreement.

                  3. Establishment of Escrow.

3.1 Delivery of Property and Receipt.  Simultaneously with the execution of this
Escrow  Agreement,  the Company is  delivering  to the Escrow Agent the Escrowed
Assets,  initially  consisting  of  $250,000 in cash and cash  equivalents.  The
Escrow Agent hereby  acknowledges  receipt of the Escrowed  Assets and agrees to
hold  and  disburse  the  Escrowed  Assets  in  accordance  with the  terms  and
conditions of this Escrow Agreement for the uses and purposes stated herein.

3.2  Investment  and Income.  Pending the  disbursement  of the Escrowed  Assets
pursuant to this Escrow  Agreement,  the Escrow  Agent shall invest the Escrowed
Assets as directed by the Company in (i) direct obligations of the United States
of America or obligations of any agency or instrumentality  thereof which mature
not later  than one year from the date of the  acquisition  thereof;  (ii) money
market deposit accounts, checking accounts, savings accounts, or certificates of
deposit,  or other time  deposit  accounts  which mature not later than one year
from the date of  acquisition  thereof which are issued by a commercial  bank or
savings institution  organized under the laws of the United States of America or
any state thereof; or (iii) any other instruments which may be permissible under
Revenue Procedure 82-58, as the same may be amended, supplemented or modified.

                           All  dividends,  interest and other amounts  received
with respect to Escrowed Assets shall be treated
for Federal, state and local tax purposes as having been received by the Company
or, upon the  establishment  of the Trust, by the Trustee for the benefit of the
Beneficiaries.

4. Obligations Secured.  This Escrow Agreement has been executed and the deposit
of the Escrowed Assets hereunder has been made for the purpose of satisfying the
Company's obligations under the Indemnification Agreements arising in connection
with the Proceedngs (as defined therein).

5. Procedures for Disbursement of Escrowed  Assets.  The Escrow Agent shall hold
and distribute the Escrowed Assets as follows:

5.1  Disbursement of Escrowed  Assets.  Whenever there shall be delivered to the
Escrow Agent a certificate  signed by the Company to the Escrow Agent (i) that a
payment under the Indemnification  Agreement is due and payable and/or (ii) that
the  Company  believes  that there is no  substantial  likelihood  that  further
indemnification  payments will be required under the Indemnification  Agreements
in connection with the Proceedings, then the Escrow Agent shall deliver to or at
the  direction of the Company  such amount of Escrowed  Assets equal in value to
the amount  requested in (i) above and/or,  in case of (ii) above, any remaining
Escrowed Assets; provided,  however, that the Escrow Agent shall not deliver any
Escrowed  Assets pursuant to this Section 5.1 unless it shall have given each of
the  Indemnitees at least three days' prior written notice of its intent to make
such  delivery.  The Escrow Agent shall deliver any such amount by wire transfer
upon request or by check.

5.2 Interim Distributions.  Notwithstanding anything in this Escrow Agreement to
the  contrary,  any  dividends,  income  or other  amounts  attributable  to the
Escrowed  Assets  will be  distributed  to the  Company  for the  benefit of its
Stockholders.

                  6.   Termination  of  Escrow.   This  Escrow  Agreement  shall
terminate  (the  "Termination  Date") upon the  earliest of (i) a finding by the
Board of  Directors  of the  Company or, upon  establishment  of the Trust,  the
Trustee,  that there is no substantial  likelihood that further  indemnification
payments  will be required  under the  Indemnification  Agreements in connection
with the Proceedings, and (ii) the disbursement of all of the Escrowed Assets in
accordance  with Section 5. As soon as  practicable  following  the  Termination
Date, the Escrow Agent shall cause notice of such termination to be delivered to
each of the Indemnitees. On the fourth day following such notice of termination,
the Escrow Agent shall deliver the Escrowed Assets, if any, to the Company. With
respect to  subparagraph  (i) above,  this Escrow  Agreement shall be terminated
only upon the  receipt by the Escrow  Agent of a written  notice of  termination
executed by the Company  directing the  distribution of all Escrowed Assets then
held by the Escrow Agent under and pursuant to this Escrow Agreement.

                  7.       The Escrow Agent.

7.1  Indemnification of Escrow Agent. The Company hereby agrees to indemnify and
hold the  Escrow  Agent  and its  respective  directors,  officers,  agents  and
employees  harmless from and against any and all  liabilities,  claims,  losses,
costs,  charges,  damages,  and  attorneys'  fees which the Escrow Agent in good
faith may  incur or suffer in  connection  with or  arising  out of this  Escrow
Agreement.

7.2 Duties of Escrow  Agent.  The Escrow  Agent shall have no duties  other than
those expressly  imposed on it herein.  The Escrow Agent shall not be liable for
any act or omission except for its own negligence or willful  misconduct.  In no
event  shall the Escrow  Agent be liable  for any action  taken or omitted to be
taken in  accordance  with the  instructions  of the  Company  pursuant  to this
Agreement.

7.3 Fees of Escrow Agent.  The fees and charges of the Escrow Agent with respect
to this Escrow  Agreement  shall be paid by the Company in  accordance  with the
Escrow  Agent's  customary fees as charged from time to time. The Company agrees
that the Escrow Agent may deduct any unpaid fees from  Escrowed  Assets prior to
the Escrow Agent's distributing any assets in connection with the termination of
this Escrow Agreement.

7.4 Escrow Agent to Follow  Instructions  of the Company.  Any provision  herein
contained to the
contrary  notwithstanding,  the Escrow  Agent shall at any time and from time to
time take such action  hereunder with respect to the Escrowed Assets as shall be
agreed to in writing by the Company,  provided that the Escrow Agent shall first
be  indemnified  to its  satisfaction  by the Company with respect to any of its
costs,  expenses  (including  reasonable  attorneys' fees) or liabilities  which
might be incurred;  provided,  however,  that  distributions  of Escrowed Assets
shall be made only in accordance with the provisions hereof.

7.5  Resignation  of Escrow  Agent.  The Escrow  Agent may resign at any time by
providing  the Company with thirty days'  written  notice of its intention to do
so.  Upon  receiving  such  notice,  the  Company  shall  endeavor  to appoint a
successor  Escrow Agent. If the Company is unable to appoint a successor  Escrow
Agent within thirty days of receipt by the Company of the Escrow  Agent's notice
of its  intention to resign,  the Escrow Agent may petition a court of competent
jurisdiction  to appoint a successor.  The Escrow Agent's  resignation  shall be
effective upon delivery of the remaining Escrowed Assets to the successor Escrow
Agent and the  successor  assuming  the  obligations,  rights  and duties of the
Escrow Agent hereunder.

8. Provisions.

8.1 Notices.  A copy of all notices and  communications  delivered by the Escrow
Agent pursuant to
this  Agreement  shall  be  sent  to the  Indemnitees.  All  notices  and  other
communications  hereunder  shall be in writing  and shall be deemed to have been
duly given if delivered  personally  or sent by cable,  telegram,  telecopier or
telex to the parties hereto and to the Indemnitees at the following addresses or
at such other addresses as shall be specified by the parties by like notice:

                                    If to the Company or to the Trust:
                                    The MicroCap Fund, Inc.
                                    c/o Raymond S. Troubh
                                    Ten Rockefeller Plaza
                                    Suite 712
                                    New York, New York 10020
                                    Facsimile:  (212) 489-7484

                                    with a copy to:
                                    Skadden, Arps, Slate, Meagher & Flom
                                    919 Third Avenue
                                    New York, New York  10022
                                    Attention:  Richard T. Prins, Esq.
                                    Facsimile:  (212) 735-2000

                                    If to the Escrow Agent:

                                    ==============================
                                    ------------------------------


                           (c)  If to the Indemnitees:
                                    James E. Brands
                                    4330 Bancroft Valley
                                    Alpharetta, Georgia 30201
                                    Facsimile:  (770) 751-0834

                                    Richard L. Hubbell
                                    Hub Associates
                                    P.O. Box 759
                                    East Dennis, Massachusetts 02641
                                    Facsimile: (508) 385-7433

                                    Leonard J. DeRoma
                                    BZW Securities Inc.
                                    222 Broadway
                                    8th Floor
                                    New York, New York 10038
                                    Facsimile: (212) 412-6826

                                    Jeffrey Lewis
                                    J.B. Lewis Associates, Inc.
                                    415 East 52nd Street
                                    New York, New York 10022
                                    Facsimile: (212) 826-0384

                                    Robert W. Naismith, Ph.D.
                                    William Naismith & Associates
                                    P.O. Box 3994
                                    Scranton, Pennsylvania 18505-0994
                                    Facsimile: (717) 941-7884

                                    Raymond S. Troubh
                                    Ten Rockefeller Plaza, Suite 712
                                    New York, New York 10020
                                    Facsimile: (212) 489-7484

                                    Robert D. Tucker
                                    405 Townsend Place
                                    Atlanta, Georgia 30327
                                    Facsimile: (404) 816-0449

Notwithstanding the foregoing, the Escrow Agent agrees in respect of any action,
suit or  proceeding  it might  initiate  against  the  Company,  the Trust,  the
Stockholders or the Beneficiaries to furnish a duplicate copy of all such papers
so served to the Company, up until the time it dissolves,  and thereafter to the
Trustee by a nationally recognized overnight courier at the address of each such
party set forth above.

8.2 Benefit and Assignment.  The rights and obligations of each party under this
Escrow  Agreement may not be assigned  without the prior written  consent of the
other party  except  that the Company in  connection  with its  dissolution  may
assign this Escrow Agreement to the Trustee on behalf of the Beneficiaries. This
Escrow  Agreement  shall be binding upon and inure to the benefit of the parties
hereto and their  respective  successors  and assigns  (and,  in the case of the
Company,  the Beneficiaries and the Trustee).  Nothing in this Escrow Agreement,
expressed  or implied,  is  intended to or shall (i) confer on any person  other
than the parties hereto, or their respective  successors or assigns, any rights,
remedies, obligations or liabilities under or by reason of this Escrow Agreement
other than in respect to the rights conferred  hereunder on the Indemnitees,  or
(ii)  constitute  the  parties  hereto as partners  or  participants  in a joint
venture.  The  Escrow  Agent  shall  not be  obligated  to  recognize  any  such
succession or assignment, until satisfactory written evidence thereof shall have
been received by it.

8.3  Third  Party  Beneficiary.  (a) The  Company  and  the  Escrow  Agent  each
acknowledge  that each of the  Indemnitees is a third party  beneficiary of this
Escrow Agreement.

8.4 Entire Agreement;  Amendment.  This Escrow Agreement and the Indemnification
Agreements  contain all the terms agreed upon by the parties with respect to the
subject  matter hereof.  This Escrow  Agreement may be amended only by a written
instrument signed by the party against which enforcement of any waiver,  change,
modification, extension or discharge is sought.

8.5  Headings.  The  headings of the  sections  and  subsections  of this Escrow
Agreement are for ease of reference  only and shall not be deemed to evidence or
affect the meaning or construction of any of the provisions hereof.

8.6 Governing Law and Submission to Jurisdiction. This Escrow Agreement shall be
construed, as to
both validity and  performance,  enforced in accordance with and interpreted and
governed  by the laws of the  State of New  York,  without  regard to any of the
conflicts of laws provisions thereof.

The  Company  and the  Trustee  agree  that any  claim,  suit,  action  or other
proceeding  for  indemnity or otherwise  provided for in this Escrow  Agreement,
brought by the Company, the Stockholders, the Trustee or the Beneficiaries shall
be brought only in a court sitting in New York, New York.

8.7   Counterparts.   This  Escrow   Agreement   may  be  executed  in  multiple
counterparts, all of which taken together shall constitute one instrument.

                  IN WITNESS  WHEREOF,  the  parties  have  caused  this  Escrow
Agreement to be executed by their respective duly authorized officers, all as of
the day and year first above written.


                             THE MICROCAP FUND, INC.

                                    By:
                                    Raymond S. Troubh
                                    President and Chief Executive Officer


                              [ESCROW AGENT]

                                    By:
                                    Name:
                                    Title: