Unassociated Document


    AMENDED
      AND RESTATED

    SEVERANCE
      COMPENSATION AGREEMENT

    


    


    This
      is a
      SEVERANCE COMPENSATION AGREEMENT, originally effective August 15, 1990 and
      now
      amended and restated effective as of January 1, 2005, by and between Harris
      & Harris Group, Inc., a New York corporation (the "Company"), and Charles E.
      Harris (the "Executive"). This amendment and restatement is made to update
      the
      Plan for Internal Revenue Code (the "Code") Section 409A. 

     

    WHEREAS,
      the Company and the Executive are parties to an employment agreement effective
      as of August 2, 2007 (the "Employment Agreement") providing for the employment
      of the Executive by the Company for a period and upon the other terms and
      conditions therein stated; and

     

    WHEREAS,
      the Company considers the maintenance of a sound and vital senior management
      to
      be essential to protecting and enhancing the interests of the Company and its
      shareholders; and

     

    WHEREAS,
      the Company recognizes that, as is the case with many publicly owned
      corporations, the possibility of a change in control of the Company may arise
      and that such possibility, and the uncertainty and questions which it may raise
      among senior management, may result in the departure or distraction of senior
      management personnel to the detriment of the Company and its shareholders;
      and

     

    WHEREAS,
      accordingly the Company has determined that appropriate steps should be taken
      to
      reinforce and encourage the continued attention and dedication of members of
      the
      Company's senior management to their assigned duties and long-range
      responsibilities without distraction in circumstances arising from the
      possibility of a change in control of the Company; and

     

    WHEREAS,
      the Company believes it important and in the best interests of the Company
      and
      its shareholders, should the Company face the possibility of a change in
      control, that the senior management of the Company be able to assess and advise
      the Board of Directors of the Company whether such a proposed change in control
      would be in the best interests of the Company and its shareholders and to take
      such other action regarding such a proposal as the Board of Directors might
      determine to be appropriate, without senior management being influenced by
      the
      uncertainties of their own employment situations; and

     

    WHEREAS,
      in order to induce the Executive to remain in the employ of the Company in
      the
      event of any actual or threatened change in control of the Company, the Company
      has determined to set forth the severance benefits which the Company will
      provide to the Executive under the circumstances set forth below.

     

    NOW,
      THEREFORE, the parties hereto hereby agree as follows: 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    1.    
Definitions.

     

    (a)    All
      capitalized terms not otherwise defined herein shall have the meanings ascribed
      thereto in the Employment Agreement.

     

    (b)    "Change
      in Control" shall mean the occurrence of any of the following
      events:

     

     (i)       
      any
      person, within the meaning of Section 13(d)(3) of the Securities Exchange Act
      of
      1934, as amended (the "Exchange Act") , or group of persons, within the meaning
      of Exchange Act Rule 13d-5, other than the Company or any of its subsidiaries,
      becomes a beneficial owner, directly or indirectly, of thirty percent (30%)
      or
      more in voting power or amount of the Company's then outstanding equity
      securities, without the approval of not less than two-thirds of the Board in
      existence prior to such ownership;

     

     (ii)      
      individuals
      who constitute the Board on any day (the "Incumbent Board") cease for any reason
      other than their deaths or resignations to constitute at least a majority of
      the
      Board on the following day (which day shall be considered the day upon which
      occurs the Change in Control), provided that any individual becoming a director
      subsequent to the date of this Agreement whose election or nomination for
      election by the Company's shareholders was approved by a vote of not less than
      three-quarters of the Incumbent Board or not less than two-thirds of the then
      incumbent Nominating Committee of the Board shall be for purposes of this
      subsection considered as though such person were a member of the Incumbent
      Board;

     

     (iii)     
      The
      necessary majority of the Company's shareholders approve any reorganization
      (other than a mere change in identity, form or place of organization of the
      Company, however effected), merger or consolidation of the Company, or any
      other
      transaction with one or more business entities or persons as a result of which
      the stock of the Company is exchanged for or converted into cash or property
      or
      securities not issued by the Company, or as a result of which there is a change
      in ownership of existing equity securities of the Company or the issuance of
      new
      equity securities of the Company (or the right or option to acquire such equity
      securities) which equals or exceeds thirty percent (30%) in voting power or
      amount of the equity securities of the Company outstanding upon completion
      of
      such transaction, unless such reorganization, merger consolidation or other
      transaction shall have been affirmatively recommended to the Company's
      shareholders by not less than two-thirds of the Incumbent Board;

     

     (iv)     
      the
      necessary majority of the Company's shareholders approve the sale of (or
      agreement to sell or grant of a right or option to purchase as to) all or
      substantially all of the assets of the Company to any person or business entity,
      unless such sale or other transaction shall have been affirmatively recommended
      to the Company's shareholders by not less than two-thirds of the
      Board;

     

     (v)      
      the
      dissolution or liquidation of the Company;

     

     (vi)     
      the
      occurrence of any circumstance having the effect that persons who were nominated
      for election as directors by the Board shall fail to become directors of the
      Company other than because of their death or withdrawal;

     

    
      
        
        

      

      
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     (vii)    
a
      change
      in control of a nature that would be required to be reported in response to
      Item
      1(a) of the Current Report on Form 8-K, as in effect on the date hereof,
      pursuant to Section 13 or 15(d) of the Exchange Act, unless such change in
      control is approved by not less than two-thirds of the Board in existence prior
      to such change in control;

     

     (viii)    such
      other events as the Board may designate. 

     

    2.    Termination
      of Employment.
      

     

    If
      the
      Executive is an employee of the Company on the day before a Change in Control
      and the Executive's Period of Employment (as defined in the Employment
      Agreement, being a Code Section 409A separation from service definition) with
      the Company terminates (i) by the Executive or (ii) by the Company as a Without
      Cause Termination, in either case within one year from the date of such Change
      in Control, the Company hereby agrees to provide to the Executive the following
      benefits:

     

    (a)    a
      lump
      sum payment, payable in cash, cashier's check or by wire, six months and one
      day
      after the date of such termination of Executive's Period of Employment, equal
      to
      2.99 times the Executive's average Base Salary plus other amounts included
      in
      the Executive's income as compensation from the Company, but excluding bonus,
      incentive, Profit Sharing Plan and equity compensation, over the most recent
      five (5) years preceding the year in which the Change in Control
      occurred;

     

    (b)    a
      lump
      sum payment, payable in cash, cashier's check or by wire, six months and one
      day
      after the date of such termination of the Executive's Period of Employment,
      in
      an amount equal to any amounts forfeited, on account of such termination, under
      any employee pension benefit plan, as defined in Section 3(2) of the Employee
      Retirement Income Security Act of 1974, as amended ("ERISA"), maintained or
      contributed to by the Company and participated in by the Executive at any time
      between the day before the Change in Control and the day of the Executive's
      termination of employment, including benefits under the Executive Mandatory
      Retirement Benefit Plan;

     

    (c)    retirement
      benefits as stated in Section 10 of the Employment Agreement, and all other
      benefits provided for under the Employment Agreement upon termination of the
      Executive's Period of Employment by the Company that is a Without Cause
      Termination or termination by the Executive that is a Constructive Discharge
      (even if such sections are not otherwise applicable), provided that such
      benefits shall not duplicate the benefits provided hereunder. Further, in the
      event that 2.99 times five year average base salary is payable under Section
      2(a),  then the Executive shall not also be paid two times Base Salary
      under Section 8(a) of the Executive's Employment Agreement with the Company.
      

     

    3.    No
      Obligation to Mitigate Damages; No Effect on Other Contractual
      Rights.

     

    (a)    The
      Executive shall not be required to mitigate damages or the amount of any payment
      provided for under this Agreement by seeking other employment or otherwise,
      nor
      shall the amount of any payment provided for under this Agreement be reduced
      by
      any compensation earned by the Executive as the result of employment by another
      employer after the date of termination of his employment with the Company or
      otherwise.

     

    
      
        
        

      

      
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    (b)    Except
      as
      expressly provided in Section 2(c), the provisions of this Agreement, and any
      payment provided for hereunder, shall not reduce any amounts otherwise payable,
      supersede, affect or in any way diminish the Executive's existing rights, or
      rights which would accrue solely as a result of the passage of time, under
      any
      applicable law or any pension benefit or welfare benefit plan, employment
      agreement or other contract, plan or arrangement.

     

    4.    Limitation
      on Benefits; Attorney's Fees; Interest.

     

    (a)    Notwithstanding
      any provisions to the contrary in this Agreement, if any part of the payments
      provided for under Section 2 of this Agreement (the "Agreement Payments") would,
      if paid, constitute a "parachute payment" under Section 280G of the Internal
      Revenue Code of 1986, as amended (the "Code"), then the Agreement Payments
      shall
      be payable to the Executive only if (i) the sum of the value of the Agreement
      Payments and of the value of all other to or for the benefit of the Executive
      that constitute "parachute payments", less the amount of any excise taxes
      payable under Code Section 4999 and any similar or comparable taxes in
      connection with such payments, is greater than (ii) the greatest value of
      payments in the nature of compensation contingent upon a change in control
      that
      could be paid at such time to or for the benefit of the Executive and not
      constitute a "parachute payment" (the "Alternative Payment"); otherwise, only
      the Alternative Payment shall be payable to the Executive. For purposes of
      this
      Section 4(a), the value of payments shall be determined in accordance with
      Code
      Section 280G(d)(4) and any regulations issued thereunder.

     

    (b)    In
      the
      event that the Alternate Payment is to be made under 4(a), the 2.99 times
      specified compensation payment referenced in Section 2(a) shall be reduced
      as
      required to limit total payments to the Alternate Payment amount. Further,
      should the Internal Revenue Service ever determine to the Executive's
      satisfaction that any of Alternate Payment constitutes a "parachute payment,"
      the Executive shall repay to the Company an amount sufficient at that time
      to
      prevent any of such payments from constituting a "parachute payment".


     

    (c)    If
      the
      Company shall fail to pay or provide benefits under this Agreement or under
      any
      benefit plan, agreement or arrangement established, agreed to or contracted
      for
      by the Company for the benefit of or with the Executive, the Executive shall
      be
      entitled to consult with independent counsel, and the Company shall pay the
      reasonable fees and expenses of such counsel for the Executive in advising
      him
      in connection therewith or in bringing any proceedings, or in defending any
      proceedings, involving the Executive's rights under this Agreement, such right
      to reimbursement to be immediate upon the presentment by the Executive of
      written billings of such reasonable fees and expenses and shall be considered
      a
      reimbursement that is not deferred compensation under Treasury Regulation
      Section 1.409A-1(b)(9)(v) to the extent such expense is incurred no later than
      the end of the second calendar year after termination of the Period of
      Employment and is reimbursed no later than three taxable years following
      termination of the Executive's Period of Employment. The Executive shall be
      entitled to interest at the "prime rate" established from time to time by the
      Bank of New York for any payments of such expenses, or any other payments
      following the Executive's termination of employment, that are overdue.


     

    (d)    The
      Company shall have the right to withhold from all payments due hereunder all
      income and excise taxes required to be withheld by applicable law and
      regulations.

     

    
      
        
        

      

      
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    5.    Governing
      Law.

     

    This
      agreement shall be governed by and construed in accordance with the laws of
      the
      State of New York.

     

    6.    Miscellaneous.

     

    (a)    If
      any
      rights pursuant to Section 2 above have accrued to the Executive prior to the
      Executive's death or a judicial determination of the Executive's incompetence,
      but have not been fully satisfied hereunder at the time of such event, such
      rights shall survive and shall inure to the benefit of the Executive's heirs,
      beneficiaries and legal representative. Otherwise, this Agreement shall
      terminate upon the Executive's death or a judicial determination of the
      Executive's incompetence.

     

    (b)    Nothing
      herein (other than as provided in Section 2(c)) shall be deemed to affect or
      alter the Executive's current employment status and the status of the Employment
      Agreement.

     

    (c)    In
      the
      event that any provision or portion of this Agreement shall be determined to
      be
      invalid or unenforceable for any reason, the remaining provisions or portions
      of
      this Agreement shall be unaffected thereby and shall remain in full force and
      effect to the fullest extent permitted by law.

     

    7.    Notice.

     

    All
      notices or communications hereunder shall be given in accordance with the
      requirements for notices contained in the Employment Agreement.

     

    8.    Amendment;
      Termination; Waiver.

     

    No
      provisions of this Agreement may be amended, modified or waived and this
      Agreement may not be terminated unless such is authorized by a majority of
      the
      Board and agreed to in writing by the Executive; provided that if the term
      of
      the Employment Agreement, as such may be extended, expires, this Agreement
      shall
      simultaneously be terminated. No waiver by either party hereto of any breach
      by
      the other party hereto of any condition or any provision of this Agreement
      to be
      performed by such other party shall be deemed a waiver of a subsequent breach
      of
      such condition or provision or waiver of a similar or dissimilar condition
      or
      provision at the same time or any subsequent time.

     

    9.    Successors.

     

    (a)    Except
      as
      otherwise provided herein, the Company's rights, duties and obligations under
      this Agreement shall be binding upon and inure to the benefit of the Company
      and
      any successor of the Company, including, without limitation, any business entity
      or business entities acquiring directly or indirectly all or substantially
      all
      of the assets or shares of Stock whether by merger, consolidation, sale or
      otherwise –
      and such successor shall thereafter be deemed the "Company" for all purposes
      of
      this Agreement -- but such rights, duties and obligations shall not otherwise
      be
      assignable by the Company.

     

    
      
        
        

      

      
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    (b)    Within
      thirty (30) days following a Change in Control, the Company (including any
      successor of the Company) shall in writing affirm to the Executive its
      obligations under this Agreement, and any failure by the Company to so affirm
      this Agreement shall, for purposes of this Agreement only, be considered a
      Without Cause Termination of the Executive's Period of Employment.

     

    IN
      WITNESS WHEREOF, the Company has caused this Agreement to be executed and its
      seal to be affixed hereunto by its duly authorized officers, and the Executive
      has signed and delivered this Agreement, all as of January 1, 2005, but actually
      on the dates set forth below.

     

    
      	 	 	 
	 	                
              HARRIS & HARRIS GROUP, INC.
	 
 	 
 	 
 
	 	  	/s/ Douglas
              W. Jamison
	 	
              
Douglas
              W. Jamison, President


      	 	 	 
	 	 	Date: August
              2, 2007
	 	 
	 
 	 
 	 
 
	 	  	/s/ Charles
              E. Harris
	 	
              
Charles
              E. Harris
	 	 
	 	Date: August
              2, 2007


    

     

    
      
        
        

      

      
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