Unassociated Document


    AMENDED
      AND RESTATED 

    EMPLOYMENT
      AGREEMENT

    


    between

    


    HARRIS
      & HARRIS GROUP, INC.

    


    and

    


    CHARLES
      E. HARRIS

    


    As
      Amended and Restated for Code Section 409A Effective January 1,
      2005,

    but
      actually on August 2, 2007 

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    AMENDED
      AND RESTATED 

    EMPLOYMENT
      AGREEMENT

    


    This
      is
      an AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”), between HARRIS
& HARRIS GROUP, INC. (the “Company”), a New York corporation, and CHARLES E.
      HARRIS (the “Executive”) , which is generally effective August 2, 2007, except
      where a January 1, 2005 effective date is otherwise specified.

     

    W 
      I  T  N  E  S 
S  E  T  H 
T 
      H  A  T:

     

    WHEREAS,
      the Executive is currently serving as Chairman and Chief Executive Officer
      of
      the Company, pursuant to an Amended and Restated Employment Agreement, dated
      as
      of October 14, 2004 (the “Prior Agreement”); and

     

    WHEREAS,
      the Company and the Executive wish to amend the Prior Agreement to bring it
      into
      clear compliance with Internal Revenue Code (the "Code") Section 409A effective
      January 1, 2005 to avoid a 20% additional income tax assessment against employee
      due to certain compensation items provided for hereunder. 

     

    NOW,
      THEREFORE, in consideration of the mutual covenants herein contained, the
      parties hereto agree as follows:

     

    1.    Employment.
      The
      Company shall employ the Executive, and the Executive shall be employed by
      the
      Company, for the Period of Employment provided in paragraph 3(a) below and
      upon
      the other terms and conditions set forth in this Agreement.

     

    2.    Position
      and Responsibilities:
      During
      the Period of Employment, the Executive shall:

     

    (a)    Serve
      as
      the Chairman and Chief Executive Officer of the Company;

     

    (b)    Be
      responsible for the general management of the affairs of the Company and all
      its
      subsidiaries, reporting directly to the Board of Directors of the Company (the
      “Board”);

     

    (c)    Serve
      as
      a member of the Board for the period for which he is and shall from time to
      time
      be elected or reelected; and

     

    (d)    Serve,
      if
      elected, as President of the Company and as an officer and director of any
      subsidiary or affiliate of the Company.

     

    3.    Terms
      and Duties

     

    (a)    Commencement
      of Period
      of Employment.
      The
      Executive's employment hereunder shall continue, subject to earlier termination
      in accordance with the terms of this Agreement, until Executive's Mandatory
      Retirement Date under the Harris & Harris Group, Inc. Executive Mandatory
      Retirement Plan and Program ("EMRP"), including all extensions. 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     (b)    End
      of
      Period of Employment.
      Effective January 1, 2005, the following rule shall apply to determine when
      the
      Period of Employment ends: The Period of Employment shall end upon the first
      of
      the following to occur: Executive's death, in accordance with notice from the
      Company during disability in as provided in Section 6, on the date specified
      in
      notice from the Company to the Executive that his employment is being terminated
      as a Without Cause Termination or as a Termination for Cause (as defined in
      Section 8(d)), on the date specified in notice from the Executive to the Company
      as a Constructive Discharge or as a voluntary termination of employment other
      than Constructive Discharge. Further, the Period of Employment under this
      Agreement shall not extend beyond the time period specified in 3(a) above.
      Notwithstanding the forgoing, the Period of Employment shall be considered
      to
      end for purposes of Sections 8 and 10 on the last day on which the Employee
      performs services for the Company (or any other entity considered a single
      employer with the Company under Section 414(b) or (c) of the Code) substantially
      on his regular, full-time schedule, if on that date both the Company and the
      Employee reasonably anticipate that (i) no further services will be performed
      thereafter, or (ii) the level of bona fide services performed after that date
      (as an employee or independent contractor, but not including service as a member
      of the Board of Directors of the Company) will permanently decrease to no more
      than 20% of the average level of bona fide services performed over the previous
      36 months, or on such later date on which the parties first reasonably
      anticipate service has reduced in such manner. The Executive's Period of
      Employment will not be considered to be terminated while the Executive is on
      military leave, sick leave or other bona fide leave of absence if the leave
      does
      not exceed six months. If a bona fide leave of absence extends beyond six
      months, a termination of the Period of Employment will be deemed to occur on
      the
      first day after the end of such six month period. The Compensation Committee
      of
      the Board of Directors will determine whether a Termination of Employment has
      occurred based on all relevant facts and circumstances, in accordance with
      Treasury Regulation §1.409A-1(h).

     

    (b)    Duties.
      While
      employed by the Company, (except for illness or incapacity and vacation periods)
      the Executive shall perform and discharge well and faithfully the duties which
      the Board may assign to him from time to time. The Executive shall not, without
      the prior consent of the Board, engage in any business activity for which he
      is
      compensated unrelated to the Company’s business; provided, however, the
      foregoing shall not be deemed to prohibit the Executive from devoting time
      to
      his personal investments or from continuing the activities he had been engaged
      in at the time this Agreement is entered into with respect to his then personal
      investments. The Executive shall be permitted to perform and discharge his
      duties from any location.

     

    4.    Compensation.
      For all
      services rendered by the Executive in any capacity during the Period of
      Employment, including, without limitation, services as an executive, officer,
      director or member of any committee of the Company or of any subsidiary,
      affiliate or division of the Company, the Company shall compensate the Executive
      as described in paragraphs (a) through (g) below. For purposes of this Section
      4, the term “Board” shall mean either the Board of Directors of the Company or a
      committee of the Board of Directors (i.e., the Compensation Committee of the
      Board of Directors).

     

    (a)    Base
      Salary.
      During
      the Period of Employment, the Company shall pay the Executive a fixed salary
      (the “Base Salary”) at an annual rate of not less than $202,980 effective
      October 19, 1999. On January 1, 2001, and on each January 1 thereafter during
      the Period of Employment, the Base Salary shall be increased so that the new
      Base Salary equals the product of the Base Salary in effect on the immediately
      preceding December 31 times the quotient obtained by dividing A by B,
      where:

     

    
      
        
        

      

      
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    “A
      is the
      Consumer Price Index, All Urban Consumers (CPI-U), U.S. City of Average for
      All
      Items (standard reference base period 1982-84 = 100) (the “CPI”), as published
      during the September immediately preceding the January 1 with respect to which
      the increased Base Salary is being computed; and

     

    B
      is the
      CPI as published during the September twelve months prior to the September
      referred to in “A” above. If during the Period of Employment, the United States
      Bureau of Labor Statistics (the “Bureau”) ceases publication of the CPI, the
      calculations required hereby shall thereafter be made using the consumer price
      index published by the Bureau (or any successor agency of the federal
      government) that is most nearly equivalent to the CPI.”

     

    (b)    Discretionary
      Base Salary Increases.
      At any
      time or from time to time during the Period of Employment, the Board may
      increase the Base Salary to an amount exceeding the Base Salary determined
      pursuant to paragraph 3(a) above. Following any such discretionary increase
      in
      the Base Salary, the Board may or may not maintain the Base Salary at that
      increased level (or further increase the Base Salary beyond that level). But
      in
      no event shall the Base Salary in effect for any portion of the Period of
      Employment be an annual amount less than the amount determinable in accordance
      with paragraph 3(a) above as if no discretionary increases had been
      made.

     

    (c)    Incentive
      Compensation.
      Executive acknowledges that in 2006, the Board terminated the Company's
      incentive compensation Employee Profit Sharing Plan (the “Profit Sharing Plan”),
      and replaced it, effective for performance in 2006 and later years, with the
      Harris & Harris Group, Inc 2006 Equity Incentive Plan. 

     

    (d)    Additional
      Benefits.
      In
      addition, the Executive shall be entitled to participate in all compensation
      or
      employee benefit plans or programs, and to receive all benefits, perquisites,
      and emoluments for which any salaried employees are eligible under any plan
      or
      program, now or hereafter established and maintained by the Company for salaried
      employees (which shall be comparable to those provided to senior officers of
      other comparable companies), to the extent permissible under the general terms
      and provisions of such plans or programs and in accordance with the provisions
      thereof, including group hospitalization, health, dental care, life or other
      insurance, tax-qualified pension, savings, thrift and profit-sharing plans,
      termination pay programs, sick-leave plans, travel or accident insurance,
      disability insurance, auto allowance or auto lease plans, and executive
      contingent compensation plans, including, without limitation, capital
      accumulation programs and stock purchase, restricted stock or stock option
      plans. Specifically, but without limitation, the Company shall furnish the
      Executive, with (1) cash reimbursement for the cost of term life insurance
      for
      the benefit of the Executive’s designated beneficiary in the amount of at least
      $2,000,000, (2) supplemental uninsured medical reimbursement plan coverage
      of
      $10,000 for expenses incurred by the Executive or his covered dependents which
      are not covered by the Company’s group hospitalization, health and dental care
      insurance plans, provided that this $10,000 limit shall be increased so that
      on
      a cumulative basis, such limit equals the product of $10,000 multiplied times
      the quotient (the “CPI Factor”) obtained by dividing the CPI published during
      the most recent September by the CPI published for September, 1999, (3)
      disability insurance (through an insurance carrier and/or self-insured by the
      Company) for the benefit of the Executive providing for continuation of 100%
      of
      his Base Salary for the period specified in the insured long term disability
      coverage in force in August, 2007, and (4) long-term care insurance (through
      an
      insurance carrier) for the benefit of the Executive and his spouse in an amount
      reasonable expected to cover daily expenses of $250 (subject to cost of living
      adjustments) the Executive and his spouse may each incur with respect to
      long-term care. After an event of a Change of Control (as defined in the Amended
      and Restated Severance Compensation Agreement effective as of August 2, 2007,
      by
      and between the Company and the Executive), the disability insurance referred
      to
      in clause (3) above shall be provided through an insurance carrier. If such
      disability insurance is provided to the Executive at any time though an
      insurance carrier, then at the Executive’s election, the Company shall increase
      the Executive’s Base Salary in an amount equal to the premium payments due with
      respect to such insurance and the Executive shall thereafter be responsible for
      making the premium payments for such coverage.

     

    
      
        
        

      

      
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    (e)    Perquisites.
      The
      Company shall also furnish the Executive, without cost to him, with (1) a
      Company-owned or leased automobile which will be replaced with a new automobile
      every four years, provided that the Executive may select the automobile and,
      if
      the value of the automobile selected by the Executive is greater than $40,000
      times the CPI Factor (for purposes of this clause (1) only, the CPI Factor
      shall
      be based on the CPI published for September, 1991 rather than for September,
      1999), the Executive shall pay to the Company, each month during which he shall
      have use of the automobile, the difference between the monthly market rental
      of
      the vehicle being furnished to the Executive and the monthly market rental
      of an
      automobile with a value of $40,000 times the CPI Factor; and (2) membership
      in
      one health club (including the cost of a personal trainer), one luncheon club,
      and one social or country club of the Executive’s choosing. The Company shall
      also reimburse the Executive annually for the cost of (1) an annual physical
      examination of the Executive by a physician selected by the Executive, and
      (2)
      personal financial, investment or tax advice, not to exceed $5,000 times the
      CPI
      Factor per annum. Any reimbursable amount for the cost of personal financial,
      investment or tax advice not utilized in a year shall be available to reimburse
      the Executive for such costs incurred in a prior or subsequent year. The
      Executive shall properly document such costs for federal income taxation
      purposes to preserve any deduction for such reimbursements to which the Company
      may be entitled.

     

    (f)    Deferred
      Compensation.
      This
      Section 4(f) shall be applicable January 1, 2005. The Company maintains a
      supplemental executive retirement plan (the “SERP”), as amended and restated
      (also previously documented by the Company as the "Deferred Compensation
      Agreement"), for the benefit of the Executive. Under the SERP, the Company
      shall
      cause an amount equal to one-twelfth of the Executive’s current Base Salary to
      be credited each month (a “Monthly Credit”) to a special account maintained for
      this purpose on the books of the Company for the benefit of the Executive (the
      “SERP Account”). The SERP Account shall be credited and debited to reflect the
      deemed investment returns, losses and expenses attributed to such deemed
      investments and reinvestments in accordance with the terms of the SERP in effect
      from time to time. The Executive’s benefit under the SERP shall equal the
      balance in the SERP Account and such benefit shall always be 100% vested
      (i.e.,
      not
      forfeitable). One or more payments equal to the balance of the SERP Account
      shall be made to the Executive in accordance with the provisions of the separate
      Amended and Restated SERP dated August 2, 2007. The Company shall establish
      a
      rabbi trust for the purpose of accumulating funds to satisfy the obligations
      incurred by the Company pursuant to this paragraph 4(f). Each time the Company
      credits a Monthly Credit to the SERP Account, the Company shall make a
      corresponding dollar contribution to the trust. The Executive’s rights to
      benefits pursuant to this paragraph 4(f) shall be no greater than those of
      a
      general creditor of the Company. The Executive’s benefits pursuant to this
      paragraph 4(f) may not be anticipated, alienated, pledged, encumbered or subject
      to attachment, garnishment, levy, execution, or other legal or equitable
      process. If the Board determines that the investment of the rabbi trust assets
      in mutual funds will cause the Company to fail to comply with certain statutory
      asset holding requirements, such assets shall be invested in U.S. Government
      securities to the extent necessary to meet the statutory
      requirements.

     

    
      
        
        

      

      
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    (g)    Office
      Equipment.
      During
      the Period of Employment, the Company shall provide the Executive with state
      of
      the art communication and office equipment for use at a residence of the
      Executive’s choice.

     

    (h)    Vacation.
      In each
      calendar year during the Period of Employment, the Executive shall be entitled
      to not less than 11⁄2 days of an annual vacation for each full year of employment
      with the Company (e.g.,
      for
      2007, the Executive shall be entitled to not less than 36 vacation
      days).

     

    5.    Business
      Expenses.
      The
      Company shall pay or reimburse the Executive for all reasonable travel or other
      expenses incurred by the Executive in connection with the performance of his
      duties and obligations under this Agreement, including, without limitation,
      routine and necessary costs of maintaining the automobile (including garage
      space) provided to the Executive by the Company pursuant to paragraph 4(e)
      above, subject to the Executive’s presentation of appropriate vouchers in
      accordance with such procedures as the Company may from time to time establish
      for senior officers and to preserve any deductions for federal income taxation
      purposes to which the Company may be entitled.

     

    6.    Disability.
      This
      Section 6 is applicable effective January 1, 2005. 

     

    (a)    In
      the
      event of the disability of the Executive during the Period of Employment, the
      Company shall, subject to the provisions of the next following sentence,
      continue to pay to the Executive the compensation provided in paragraph 4 above
      during the period of his disability. But if the Executive’s disability continues
      until the Executive becomes entitled to receive the proceeds of the disability
      insurance described in paragraph 4(d) above, or after 180 days of the disability
      benefit if the benefit is fully self-funded, the Company may, at its election,
      terminate the Period of Employment, in which event the Company’s obligation to
      make payments under paragraph 4 shall cease, except for (1) unpaid continuation
      of Base Salary disability benefits, (2) Monthly Credits to the SERP Account
      through the effective date of termination, and (3) retirement benefits as
      described in paragraph 10 below. However, the benefits described in paragraph
      4(d) and the perquisites described in paragraph 4(e) shall continue to be
      provided for a period of ten years, except that the Company shall only continue
      to provide the automobile described in paragraph 4(d) for six months following
      termination of the Period of Employment and then allow the Executive to assume
      (without any continuing obligations under the lease, if any, on the part of
      the
      Company) the Company’s rights and obligations to lease or purchase such
      automobile (to the extent any lease is so assumable) or to purchase such
      automobile at its then book value.

     

    
      
        
        

      

      
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    (b)    During
      the period the Executive is receiving payments, either under paragraph 6 or
      under the disability insurance described in paragraph 4(d) above, to the extent
      that he is physically and mentally able to do so, he shall furnish information
      and assistance to the Company and, upon a reasonable request in writing by
      the
      Board from time to time, he shall make himself available to the Company to
      undertake reasonable assignments consistent with the dignity, importance, and
      scope of his prior position with the Company and his physical and mental health.
      During the first six months of disability, the Executive shall report directly
      to the Board. If the Company fails to make a payment or provide a benefit
      required under paragraph 6(a), the Executive’s obligation to furnish information
      and assistance and undertake assignments shall terminate.

     

    (c)    If
      the
      Executive’s disability continues until the Executive becomes entitled to receive
      the proceeds of the disability insurance described in paragraph 4(d) above,
      or
      after 180 days of the disability benefit if fully self-funded, then beginning
      January 1, 2010, the Company shall also pay to the Executive or his wife, if
      he
      predeceases her, for a period of three years, the Base Salary amount that
      existed at the time disability began. Such Base Salary amount shall be paid
      by
      the Company in 36 monthly installments.

     

    (d)    If
      the
      Executive dies prior to the date he becomes entitled to receive the proceeds
      of
      the disability insurance described in paragraph 4(d) above, or after 180 days
      of
      the disability if the disability benefit is fully self-funded, then the Company
      shall pay his wife, if she survives him, for a period of two years beginning
      in
      the month following the date of the Executive's death, the Base Salary amount
      that existed at the onset of the disability in the form of a death benefit.
      Such
      Base Salary amount shall be paid by the Company in 24 monthly installments
      commencing in the month following the Executive’s death.

     

    (e)    As
      used
      in this Agreement, the term “disability” shall mean the Executive is
      unable
      to engage in any substantial gainful activity by reason of any medically
      determinable physical or mental impairment which can be expected to result
      in
      death or can be expected to last for a continuous period of not less than 12
      months, or the Executive is, by reason of any medically determinable physical
      or
      mental impairment which can be expected to result in death or can be expected
      to
      last for a continuous period of not less than 12 months, receiving income
      replacement benefits for a period of not less than 3 months under an accident
      and health plan covering employees of the participant's employer. 

     

    7.    Death.
      If the
      Executive dies during the Period of Employment, the Executive’s designated
      beneficiary shall be entitled to receive the proceeds of any life or other
      insurance or other death benefit program provided pursuant to paragraph 4(d)
      above in accordance with the provisions thereof, and the Period of Employment
      and the Company’s obligation to make payments under paragraph 4 (except for
      payment of SERP benefits already accrued as provided in paragraph 4(f)) shall
      cease as of the date of death, except (1) for earned (through the date of death)
      but unpaid Base Salary or disability benefits, (2) Monthly Credits to the SERP
      Account through the date of death, and (3) retirement benefits as described
      in
      paragraph 10 below. The Company shall pay the Executive’s wife, if she survives
      him, for a period of two years the Base Salary amount that existed at the time
      of death in the form of a death benefit, provided that this benefit will not
      be
      paid if the Executive is already entitled to salary continuation under paragraph
      6(d) above. Such Base Salary amount shall be paid by the Company in 24 monthly
      installments commencing in the month following the Executive’s
      death.

     

    
      
        
        

      

      
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    8.    Effect
      of Termination of Employment.
      This
      Section 8 shall be applicable effective January 1, 2005. 

     

    (a)    If
      the
      Period of Employment hereunder terminates because of either a Without Cause
      Termination or Constructive Discharge, the Executive shall be entitled to (1)
      earned (through the effective date of the termination) but unpaid Base Salary,
      (2) Monthly Credits to the SERP Account through the effective date of the
      termination and (3) retirement benefits as described in paragraph 10 below.
      In
      addition, if the Period of Employment is terminated because of either a Without
      Cause Termination or Constructive Discharge, the Company shall, as liquidated
      damages or severance pay, or both, pay to the Executive (or to his estate if
      he
      dies before all payments are made) two times his Base Salary in effect at the
      time of such termination of the Period of Employment, which payments shall
      be
      made as follows: 1⁄2 year of base salary shall be paid six months and one day
      after the termination of the Period of Employment, and the remaining 11⁄2 years of
      Base Salary shall be paid in 18 monthly installments commencing in the month
      following the date the first payment is made. In addition, benefits described
      in
      paragraph 4(d), the perquisites described in paragraph 4(e) and the
      communication and office equipment described in paragraph 4(g) shall continue
      to
      be provided for twenty-four months, except that the Company shall only continue
      to provide the automobile allowance described in paragraph 4(e) for six months
      following such termination and then the Executive may assume (without any
      continuing obligations under the lease, if any, on the part of the Company)
      the
      Company’s rights and obligations to lease or purchase such automobile (to the
      extent any lease is so assumable) or to purchase such automobile at its then
      book value and except that the Company shall continue to provide communication
      and office equipment to the Executive for only 18 months. To the extent any
      benefit under 4(d), (e) or (g) is determined to be deferred compensation under
      Code Section 409A, such benefit shall not be paid or provided until the day
      six
      months and one day after termination of the Period of Employment, and then
      all
      payments that would have been made during such six month period had this payment
      delay rule not been in effect shall be made on that payment date. 

     

    (ii)    To
      the
      extent that the Executive is entitled to receive cash compensation that is
      (or
      would be, if any elective deferral were disregarded) subject to federal income
      taxation in respect of any other employment or a consulting position with
      another company before all compensation provided for in this Section 8(a) is
      paid, the payments to be made pursuant to this paragraph 8(a) shall be
      correspondingly reduced by such cash compensation and, to the extent that
      benefits of the kind required by this paragraph 8(a) to be continued are payable
      in respect of such other employment or consulting position, such benefits
      provided by the other Company shall be deemed the primary coverage for purposes
      of coordination of benefits and avoiding duplication of benefits. However,
      at no
      time shall such benefits of a kind described herein, be less than those required
      by this paragraph 8(a) or paragraphs 4(d) and 4(e).

     

    (b)    If
      the
      Period of Employment hereunder terminates because of a Termination for Cause,
      the Executive shall receive: (1) earned (through the effective date of
      termination) but unpaid Base Salary, and (2) monthly credits to the SERP Account
      through the effective date of the termination of the Period of Employment,
      but
      no other payments (except the SERP benefit as provided in paragraph 4(f)) shall
      be made, or benefits provided, by the Company.

     

    
      
        
        

      

      
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    (c)    Notwithstanding
      anything to the contrary in this Agreement, if the Period of Employment
      hereunder terminates because the Executive has reached his Mandatory Retirement
      Date under the EMRP including any extensions, the Executive shall receive:
      (1)
      earned (through the effective date of termination) but unpaid Base Salary,
      (2)
      Retirement Benefits under Section 10, (3) the monthly credit to the SERP Account
      through the effective date of the termination, and (4) any benefits to which
      the
      Executive may be entitled pursuant to the Employee Mandatory Retirement Benefits
      Plan, subject to the terms of that Plan, shall be payable to the Executive,
      but
      no other payments (except payment under the SERP deferred compensation as
      provided in paragraph 4(f)) shall be made, or benefits provided, by the
      Company.

     

    (d)    If
      the
      Period of Employment hereunder terminates due to the Executive's voluntary
      termination of the Period of Employment other than on account of Constructive
      Discharge, death, disability, or termination under the EMRP, the Executive
      shall
      receive: (1) earned (through the effective date of termination) but unpaid
      Base
      Salary, (2) the Monthly Credit to the SERP Account through the effective date
      of
      the termination of the Period of Employment, and (3) the Retirement Benefits
      under Section 10, but no other payments (except the SERP benefit as provided
      in
      paragraph 4(f)) shall be made, or benefits provided, by the
      Company.

     

    (e)    As
      used
      in this Agreement:

     

    (1)    “Termination
      for Cause” means a termination of the Period of Employment by the Company, by
      written notice to the Executive, specifying the event relied upon for such
      termination, because of the Executive’s serious, willful misconduct in respect
      of his duties under this Agreement, including, without limitation, conviction
      of
      a felony or for perpetration of a common law fraud which has resulted in
      material economic damage to the Company or any of its subsidiaries or
      affiliates. If the Executive’s misconduct can be cured, a Termination for Cause
      shall not occur until the Executive fails to so cure within 30 days from
      delivery to the Executive of a written demand by the Company that he do so,
      which demand shall specify the misconduct being relied upon for termination
      pursuant to this paragraph 8(c)(1).

     

    (2)    “Constructive
      Discharge” means a termination of the Period of Employment by the Executive
      because of (A) a failure of the Company to fulfill its obligations under this
      Agreement in any material respect, including any failure to elect or reelect
      or
      to appoint or reappoint the Executive to the offices of Chairman of the Company
      and its Chief Executive Officer or as a member of the Board or other material
      change by the Company in the functions, duties, or responsibilities of the
      Executive’s position with the Company which would reduce the ranking or level,
      dignity, responsibility, importance, or scope of such position, or (B) any
      assignment or reassignment by the Company of the Executive to a place of
      employment other than the Company’s headquarters, (which shall be located in New
      York, New York, or other location of the Executive’s choosing). A Constructive
      Discharge shall apply to any case in which the Company shall have failed to
      remedy within 30 days from delivery to the Company of a written demand by the
      Executive that it do so, which demand shall specify the circumstances being
      relied upon for termination pursuant to this paragraph 8(c)(2).

     

    
      
        
        

      

      
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    (3)    “Without
      Cause Termination” means a termination of the Period of Employment by the
      Company other than because of disability or expiration of the Period of
      Employment and other than a Termination for Cause. The exercise by the Company
      or the Executive, as the case may be of a right to terminate the Period of
      Employment under this paragraph 8(c) shall not abrogate the rights and remedies
      of the terminating party in respect of the circumstances giving rise to such
      termination.

     

    9.    Other
      Duties of Executive During and After Period of Employment.

     

    (a)    The
      Executive shall, upon reasonable notice, during or after the Period of
      Employment, furnish such information as may be in his possession to, and
      cooperate with the Company, as the Company may reasonably request in connection
      with the analysis, negotiation, and settlement of any pending claims and any
      litigation in which the Company or any of its subsidiaries or affiliates, is,
      or
      may become, a party.

     

    (b)    The
      Executive recognizes and acknowledges that all information pertaining to the
      affairs, business, or clients of the Company or any of its subsidiaries or
      affiliates, as such information may exist from time to time, is confidential
      information and is a unique and valuable asset of the Company, access to and
      knowledge of which are essential to the performance of the Executive’s duties
      under this Agreement. The Executive shall not, during the Period of Employment
      or thereafter, except to the extent reasonably necessary in the performance
      of
      his duties under this Agreement, divulge to any person, firm, association,
      corporation or governmental agency, any information concerning the affairs,
      business, clients, or customers of the Company or any of its subsidiaries or
      affiliates (except such information as it is required by law to be divulged
      to a
      government agency), or make use of any such information for his own purposes
      or
      for the benefit of any person, firm, association or corporation (except the
      Company or its subsidiaries or affiliates) and shall use his best efforts to
      prevent the disclosure of any such information by others. All records,
      memoranda, letters, books, papers, reports, accountings, experience or other
      data, and other records and documents relating to the business of the Company
      or
      any of its subsidiaries or affiliates, whether made by the Executive or
      otherwise coming into his possession, are confidential information and are,
      and
      shall be, and shall remain the property of the Company.

     

    (c)    During
      the Period of Employment and for a one year period thereafter in the event
      of
      (1) a Termination for Cause, (2) a termination of the Period of Employment
      by
      the Executive that is not a Constructive Discharge, or (3) the disability of
      the
      Executive, the Executive shall not:

     

    Make
      any
      statement or perform any act intended to advance an interest of any existing
      or
      prospective competitor of the Company or any of its subsidiaries or affiliates
      in any way that will injure an interest of the Company or any of its
      subsidiaries or affiliates in its relationship and dealings with existing or
      potential clients, customers or brokers or to do any act that is disloyal to
      the
      Company or inconsistent with the Company’s interests or in violation of any
      provision of this Agreement.

     

    (d)    The
      Company’s obligation to make payments under paragraph 4, other than the SERP
      benefits described in paragraph 4(f), shall cease upon any violation of the
      provisions of paragraph 9 which is not inadvertent and which has resulted in
      material economic damage to the Company or any of its subsidiaries.

     

    
      
        
        

      

      
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    10.    Retirement
      Benefits.
      At the
      termination of Executive’s Period of Employment with the Company, the Executive,
      his spouse and dependents shall be entitled to medical and health insurance
      coverage under the Harris & Harris Group, Inc. Retiree Medical Benefit Plan
      as amended on May 3, 2007 and as further amended from time to time, provided
      that no amendment shall reduce the level of benefit to be provided thereunder.
      Any dispute as to whether the Company has complied with its obligations under
      this paragraph 10 may be referred to final and binding arbitration in accordance
      with the Commercial Arbitration Rules of the American Arbitration Association,
      and the Company agrees to reimburse the Executive or the Executive’s spouse, as
      the case maybe, for reasonable attorney fees and expenses incurred by the
      Executive or the Executive’ spouse in connection with such
      arbitration.

     

    11.    Indemnification,
      Litigation.

     

    (a)    Throughout
      the Period of Employment and thereafter, the Executive shall continue to be
      entitled to indemnification from the Company pursuant to the Indemnification
      Agreement, dated as of December 15, 1992 between the Company and the Executive
      (the “Indemnification Agreement”), a copy of which is attached hereto as Exhibit
      B.

     

    (b)    In
      the
      event of any litigation or other proceeding between the Company and the
      Executive with respect to the subject matter of this Agreement and the
      enforcement of rights hereunder, the Company shall reimburse the Executive
      for
      all costs and expenses relating to such litigation or other proceeding,
      including reasonable attorneys’ fees and expenses, provided that such litigation
      or proceeding results in any:

     

    (1)    Settlement
      requiring the Company to make a payment to the Executive; or

     

    (2)    Judgment,
      order, or award in favor of the Executive, regardless of whether such judgment,
      order, or award is subsequently reversed on appeal or in a collateral
      proceeding.

     

    (c)    In
      no
      event shall the Executive be required to reimburse the Company for any of the
      costs and expenses relating to such litigation or other proceeding referred
      to
      in paragraph 11(b).

     

    12.    Withholding
      Taxes.
      The
      Company may directly or indirectly withhold from any payments made under this
      Agreement all federal, state, city, or other taxes as shall be required pursuant
      to any law or governmental regulation or ruling.

     

    13.    Consolidation,
      Merger, or Sale of Assets: Change of Control.

     

    (a)    Nothing
      in this Agreement shall preclude the Company from consolidating or merging
      into
      or with, or transferring all or substantially all of its assets to, another
      corporation which assumes this Agreement and all obligations and undertakings
      of
      the Company hereunder. Upon such a consolidation, merger, or transfer of assets
      and assumption, the term “Company” as used herein shall mean such other
      corporation and this Agreement shall continue in full force and
      effect.

     

    
      
        
        

      

      
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          10
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    (b)    The
      provisions of the Severance Compensation Agreement, made effective as of August
      15, 1990, and amended as of August 2, 2007, by and between the Company and
      the
      Executive, (the “Severance Compensation Agreement”), shall apply and coordinate
      with this Agreement as provided therein. 

     

    14.    Effect
      of Prior Agreements.
      This
      Agreement between the Company and the Executive, contains the entire
      understanding between the Company and the Executive with respect to the subject
      matter hereof and supersedes any prior employment agreement (including the
      “Prior Agreement”) between the Company or any predecessor of the Company and the
      Executive, except that this Agreement shall not affect or operate to reduce
      any
      benefit or compensation inuring to the Executive of a kind elsewhere provided
      and not expressly provided in this Agreement, and this Agreement shall also
      not
      be superseded by, but shall operate in tandem with, the Indemnification
      Agreement, the Severance Compensation Agreement, the SERP, and the Harris &
Harris Group, Inc. 2006 Equity Incentive Plan and awards issued
      thereunder.

     

    15.    Notices.
      All,
      notice, requests, demands, and other communications required or permitted
      hereunder shall be given in writing and shall be deemed to have been duly given
      if hand delivered or mailed, postage prepaid by same day or overnight mail
      as
      follows:

     

    
      
        	
                (1)

              	
                To
                  the Company:

              	
                Harris
                  & Harris Group, Inc.

              
	 	 	
                111
                  West 57th Street, Suite 1100

              
	 	 	
                New
                  York, NY 10019

              
	 	 	
                Attn.:
                  Secretary

              
	 	 	 
	
                (2)

              	
                To
                  the Executive:

              	
                Charles
                  E. Harris

              
	 	 	
                322
                  East 57th Street, #18A

              
	 	 	
                New
                  York, NY 10022

              


      

    

    


    or
      to
      such other address as either party shall have previously specified in writing
      to
      the other.

     

    16.    No
      Attachment.
      Except
      as required by law, no right to receive payments under this Agreement shall
      be
      subject to anticipation, commutation, alienation, sale, assignment, encumbrance,
      charge, pledge, or hypothecation or to execution, attachment, levy, or similar
      process or assignment by operation of law, and any attempt, voluntary or
      involuntary, to effect any such action shall be null, void, and of no effect.
      But nothing in this paragraph 16 shall preclude the executors, administrators,
      or other legal representatives of the Executive from assigning any rights
      hereunder to the person or persons entitled thereto.

     

    17.    Binding
      Agreement.
      This
      Agreement shall benefit and bind (a) the Executive, his heirs, beneficiaries,
      and personal representatives, and (b) the Company and its successors and
      assigns.

     

    18.    Severability.
      If any
      provision of this Agreement shall be held or deemed to be invalid, inoperative
      or unenforceable in any jurisdiction or jurisdictions, because of conflicts
      with
      any constitution, statute, rule or public policy or for any other reason, such
      circumstance shall not have the effect of rendering the provision in question
      unenforceable in any other jurisdiction or in any other case of circumstance
      or
      of rendering any other provisions herein contained unenforceable to the extent
      that such other provisions are not themselves actually in conflict with such
      constitution, statute or rule or public policy, but this Agreement shall be
      reformed and construed in any such jurisdiction or case as if such invalid,
      inoperative, or unenforceable provision had never been contained herein and
      such
      provision reformed so that it would be enforceable to the maximum extent
      permitted in such jurisdiction or in such case.

     

    
      
        
        

      

      
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    19.    Modification
      and Waiver.
      This
      Agreement may not be modified or amended except by an instrument in writing
      signed by the parties hereto. No terms or condition of the Agreement shall
      be
      deemed to have been waived, nor shall there be any estoppel against the
      enforcement of any provision of this Agreement except by written instrument
      signed by the party charged with such waiver or estoppel. No such written waiver
      shall be deemed a continuing waiver unless specifically stated therein, and
      each
      such waiver shall operate only as to the specific term or condition waived
      and
      shall not constitute a waiver of such term or condition for the future as to
      any
      act other than that specifically waived.

     

    20.    Headings
      of No Effect.
      The
      paragraph headings contained in this Agreement are included solely for
      convenience of reference and shall not in any way affect the meaning or
      interpretation of any of the provisions of this Agreement.

     

    21.    Governing
      Law.
      The
      laws of New York shall govern the validity, construction, and interpretation
      of
      this Agreement.

     

    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, on the date set forth
      above.

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


      	 	 	 
	 
 	 
 	 
 
	 	BY:  	/s/ Charles
              E. Harris
	 	
              
Charles
              E. Harris


    

     

    
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