Document:

HARRIS & HARRIS GROUP, INC.

 

2006 EQUITY INCENTIVE PLAN

 

1.           Purpose;
Types of Awards; Construction.

 

The purposes of the
Harris & Harris Group, Inc. 2006 Equity Incentive Plan (the "Plan") are to enable Harris & Harris Group, Inc.
(the "Company") to afford an incentive to non-employee and employee directors, selected officers and other employees,
advisors and consultants of the Company to continue as non-employee directors, officers, employees, advisors or consultants, as
the case may be, to increase their efforts on behalf of the Company and its subsidiaries and to promote the success of the Company's
business. In the event that the Company receives an exemptive order from the U.S. Securities and Exchange Commission ("SEC")
to that effect, the Plan shall provide for the issuance of Awards to former employees of the Company, as well. The Plan provides
for the grant of Options (including "incentive stock options" and "nonqualified stock options") and restricted
stock. The Plan is designed so that Awards granted hereunder that are intended to comply with the requirements for "performance-based
compensation" under Section 162(m) of the Code may comply with such requirements. Various provisions of the Plan may require
an exemptive order from the SEC prior to their implementation and accordingly, Awards will be granted only after consultation with
the Company's General Counsel.

 

2.           Definitions.

 

For purposes of the
Plan, the following terms shall be defined as set forth below:

 

(a)          "Award"
means any Option or Restricted Stock Award granted under the Plan.

 

(b)          "Award
Agreement" means any written agreement, contract or other instrument or document evidencing an Award.

 

(c)          "Board"
means the Board of Directors of the Company.

 

(d)          "Change
in Control" means the occurrence of any of the following:

 

(i)          any
Person is or becomes the "beneficial owner" (as such term is used in Rule 13d-3 and Rule 13d-5 under the Exchange Act),
directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such Person any securities
acquired directly from the Company or its affiliates) representing 40% or more of the combined voting power of the Company's then
outstanding securities, excluding any Person who becomes such a Beneficial Owner in connection with a transaction described in
clause (i) of paragraph (iii) below; or

 

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(ii)         the
following individuals cease for any reason to constitute a majority of the number of directors then serving: individuals who, on
the Effective Date, constitute the Board and any new director (other than a director whose initial assumption of office is in connection
with an actual or threatened election contest, including but not limited to a consent solicitation, relating to the election of
directors of the Company) whose appointment or election by the Board or nomination for election by the Company's stockholders was
approved or recommended by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors
on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended; or

 

(iii)        there
is consummated a merger or consolidation of the Company or any direct or indirect subsidiary of the Company with any other corporation,
other than a merger or consolidation immediately following which the individuals who comprise the Board immediately prior thereto
constitute at least a majority of the board of directors of (A) any parent of the Company or the entity surviving such merger or
consolidation (B) if there is no such parent, of the Company or such surviving entity; or

 

(iv)         the
stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or there is consummated an agreement
for the sale or disposition by the Company of all or substantially all of the Company's assets, other than a sale or disposition
by the Company of all or substantially all of the Company's assets to an entity, at least 60% of the combined voting power of the
voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of
the Company immediately prior to such sale.

 

Notwithstanding the foregoing, a "Change in Control"
shall not be deemed to have occurred by virtue of the consummation of any transaction or series of integrated transactions immediately
following which the record holders of the common stock of the Company immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity which owns all or substantially all of the assets
of the Company immediately following such transaction or series of transactions.

 

(e)          "Code"
means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder.

 

(f)          "Committee"
means the committee established by the Board to administer the Plan, the composition of which shall at all times consist of "non-employee
directors" within the meaning of Rule 16b-3, and "outside directors" within the meaning of Section 162(m) of the
Code.

 

(g)          "Company"
means Harris & Harris Group, Inc., a corporation organized under the laws of the State of New York, or any successor corporation.

 

(h)          "Effective
Date" means March 29, 2006, the date on which the Plan was adopted by the Board.

 

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(i)          "Exchange
Act" means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.

 

(j)          "Fair
Market Value" means, with respect to Stock or other property, the fair market value of such Stock or other property determined
by such methods or procedures as shall be established from time to time by the Board. Unless otherwise determined by the Board
in good faith, the per share Fair Market Value of Stock as of a particular date shall mean (i) the closing sales price per share
of Stock on the national securities exchange on which the Stock is principally traded, for the last preceding date on which there
was a sale of such Stock on such exchange; (ii) if the shares of Stock are then traded in an over-the-counter market, the average
of the closing bid and asked prices for the shares of Stock in such over-the-counter market for the last preceding date on which
there was a sale of such Stock in such market; or (iii) if the shares of Stock are not then listed on a national securities exchange
or traded in an over-the-counter market, such value as the Board, in its sole discretion, shall determine.

 

(k)          "ISO"
means any Option intended to be and designated as an incentive stock option within the meaning of Section 422 of the Code.

 

(l)          "NQSO"
means any Option that is not designated as an ISO.

 

(m)          "Option"
means a right, granted to a Participant under Section 6(b)(i), to purchase shares of Stock. An Option may be either an ISO or an
NQSO, provided that ISOs may be granted only to employees of the Company or a "subsidiary corporation" of the Company
(within the meaning of Section 424(f) of the Code).

 

(n)          "Participant"
means a person who, as a non-employee director, employee director, officer or other employee, advisor or consultant to the Company
or a subsidiary of the Company (or, if the SEC provides exemptive relief to that effect, a former employee of the Company), has
been granted an Award under the Plan.

 

(o)          "Performance
Goals" means performance goals based on one or more of the following criteria, determined in accordance with generally accepted
accounting principles, where applicable: (i) pre-tax income or after-tax income; (ii) cumulative realized and unrealized net appreciation;
(iii) stock price or total stockholder return; (iv) strategic business criteria, consisting of one or more objectives based on
meeting specified market penetration or market share, geographic business expansion, customer satisfaction, employee satisfaction,
human resources management, supervision of litigation, information technology, or goals relating to divestitures, joint ventures
or similar transactions; or (v) any other criteria determined by the Board to be appropriate. Where applicable, the Performance
Goals may be expressed in terms of attaining a specified level of the particular criterion or the attainment of a percentage increase
or decrease in the particular criterion, and may be applied to one or more of the Company or a subsidiary of the Company, all as
determined by the Board. The Performance Goals may include a threshold level of performance below which no payment will be made
(or no vesting will occur), levels of performance at which specified payments will be paid (or specified vesting will occur) and
a maximum level of performance above which no additional payment will be made (or at which full vesting will occur). Each of the
foregoing Performance Goals shall be evaluated in accordance with generally accepted accounting principles, where applicable, and
shall be subject to certification by the Board. The Board shall have the authority to make equitable adjustments to the Performance
Goals in recognition of unusual or non-recurring events affecting the Company or any subsidiary of the Company or the financial
statements of the Company or any subsidiary of the Company, in response to changes in applicable laws or regulations or to account
for items of gain, loss or expense determined to be extraordinary or unusual in nature or infrequent in occurrence or related to
the disposal of a segment of a business or related to a change in accounting principles.

 

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(p)          "Person"
shall have the meaning given in Section 3(a)(9) of the Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof,
except that such term shall not include (i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary holding securities
under an employee benefit plan of the Company or any of its affiliates, (iii) an underwriter temporarily holding securities pursuant
to an offering of such securities, or (iv) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially
the same proportions as their ownership of stock of the Company.

 

(q)          "Plan"
means this Harris & Harris Group, Inc. 2006 Equity Incentive Plan, as amended from time to time.

 

(r)          "Restricted
Stock" means an Award of shares of Stock to a Participant under Section 6(b)(ii) that may be subject to certain restrictions
and to a risk of forfeiture.

 

(s)          "Rule
16b-3" means Rule 16b-3, as from time to time in effect promulgated by the SEC under Section 16 of the Exchange Act, including
any successor to such Rule.

 

(t)          "SEC"
means the U.S. Securities and Exchange Commission.

 

(u)          "Securities
Act" means the Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder.

 

(v)          "Stock"
means shares of the common stock, par value $0.01 per share, of the Company.

 

3.           Administration.

 

The Plan shall be administered
by the Board. The Board may appoint a Committee to administer all or a portion of the Plan and to make recommendations to the Board
with respect to the Plan and any Award. To the extent that the Board appoints a Committee to administer all or a portion of the
Plan, references in the Plan to "the Board" shall be references to "the Committee." The Board may delegate
to one or more agents such administrative duties as it may deem advisable, and the Committee or any other person to whom the Board
has delegated duties as aforesaid may employ one or more persons to render advice with respect to any responsibility the Board
or such Committee or person may have under the Plan.

 

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The Board shall have
the authority in its discretion, subject to and not inconsistent with the express provisions of the Plan, to administer the Plan
and to exercise all the powers and authorities either specifically granted to it under the Plan or necessary or advisable in the
administration of the Plan, including, without limitation, the authority to: (i) grant Awards; (ii) determine the persons to whom
and the time or times at which Awards shall be granted; (iii) determine the type and number of Awards to be granted, the number
of shares of Stock to which an Award may relate and the terms, conditions, restrictions and performance criteria relating to any
Award, including but not limited to the effect of a Change in Control on an Award; (iv) determine Performance Goals no later than
such time as required to ensure that an underlying Award that is intended to comply with the requirements of Section 162(m) of
the Code so complies; (v) determine whether, to what extent, and under what circumstances an Award may be settled, cancelled, forfeited,
exchanged, or surrendered; (vi) make adjustments in the terms and conditions of, and the Performance Goals (if any) included in,
Awards; (vii) construe and interpret the Plan and any Award; (viii) prescribe, amend and rescind rules and regulations relating
to the Plan; (ix) determine the terms and provisions of the Award Agreements (which need not be identical for each Participant);
and (x) make all other determinations deemed necessary or advisable for the administration of the Plan. Notwithstanding any other
provision of the Plan or any Award Agreement, the Board shall not take any action that would have the effect of reducing the exercise
or purchase price of any Award, whether by means of repricing or cancellation and regrant of the Award, without having first obtained
the approval of the Company's stockholders.

 

All decisions, determinations
and interpretations of the Board shall be final and binding on all persons, including but not limited to the Company, any subsidiary
of the Company, any Participant (or any person claiming any rights under the Plan from or through any Participant) and any stockholder.
No member of the Board or Committee shall be liable for any action taken or determination made in good faith with respect to the
Plan or any Award granted hereunder.

 

4.           Eligibility.

 

Awards may be granted
to Persons who at the time of grant are natural persons who are non-employee directors, employee directors, officers and other
employees, advisors or consultants of the Company, in the discretion of the Board. In the event that the SEC provides exemptive
relief to that effect, the Board may also grant Awards to Persons who at the time of grant are former employees of the Company.
In determining the persons to whom Awards shall be granted and the type of any Award (including the number of shares to be covered
by such Award), the Board shall take into account such factors as the Board shall deem relevant in connection with accomplishing
the purposes of the Plan.

 

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5.           Stock
Subject to the Plan.

 

The maximum number
of shares of Stock reserved for the grant of Awards under the Plan shall be equal to twenty percent (20%) of the total shares of
Stock issued and outstanding, calculated on a fully diluted basis, as of any date as of or following the Effective Date, such that
the number of shares of Stock reserved for the grant of Awards under the Plan shall automatically increase (or decrease) with each
increase (or decrease) in the number of shares of Stock issued and outstanding, calculated on a fully diluted basis. All shares
of Stock reserved for the grant of Awards under the Plan may be made subject to Options granted under the Plan; provided, however,
that in the event that the SEC issues an exemptive order with respect to the issuance of Restricted Stock Awards under the Plan,
up to twenty-five percent (25%) of the shares of Stock reserved for the grant of Awards under the Plan may be subject to Restricted
Stock Awards at any time during the term of the Plan, subject to adjustment as provided herein. No more than 1,000,000 shares of
Stock may be made subject to Awards granted to any Participant in any year, subject to adjustment as provided herein. Determinations
made in respect of the limitations set forth in the immediately preceding sentence shall be made in a manner consistent with Section
162(m) of the Code. Such shares may, in whole or in part, be authorized but unissued shares or shares that shall have been or may
be reacquired by the Company in the open market, in private transactions or otherwise. If any shares subject to an Award are forfeited,
cancelled, exchanged or surrendered or if an Award terminates or expires without a distribution of shares to the Participant, or
if shares of Stock are surrendered or withheld as payment of either the exercise price of an Award and/or withholding taxes in
respect of an Award, the shares of Stock with respect to such Award shall, to the extent of any such forfeiture, cancellation,
exchange, surrender, withholding, termination or expiration, again be available for Awards under the Plan. Upon the exercise of
any Award granted in tandem with any other Award, such related Award shall be cancelled to the extent of the number of shares of
Stock as to which the Award is exercised and, notwithstanding the foregoing, such number of shares shall no longer be available
for Awards under the Plan.

 

In the event that the
Board shall determine that any dividend or other distribution (whether in the form of cash, Stock, deemed dividends or other property),
recapitalization, Stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase, or share
exchange, or other similar corporate transaction or event, affects the Stock such that an adjustment is appropriate in order to
prevent dilution or enlargement of the rights of Participants under the Plan, then the Board shall make such equitable changes
or adjustments as it deems necessary or appropriate to any or all of: (i) the number and kind of shares of Stock or other property
(including cash) that may thereafter be issued in connection with Awards; (ii) the number and kind of shares of Stock or other
property (including cash) issued or issuable in respect of outstanding Awards; (iii) the exercise price, grant price or purchase
price relating to any Award; provided, that, with respect to ISOs, such adjustment shall be made in accordance with Section 424(h)
of the Code; and (iv) the Performance Goals applicable to outstanding Awards. In addition, the Board may determine that any such
equitable adjustment may be accomplished by making a payment to the Award holder, in the form of cash or other property (including
but not limited to shares of Stock).

 

6.           Terms
of Awards.

 

(a)          General.
The term of each Award shall be for such period as may be determined by the Board. Subject to the terms of the Plan and any applicable
Award Agreement, payments to be made by the Company upon the grant, vesting, maturation or exercise of an Award may be made in
such forms as the Board shall determine at the date of grant or thereafter, including, without limitation, cash, Stock or other
property, and may be made in a single payment or transfer, in installments or on a deferred basis. The Board may make rules relating
to installment or deferred payments with respect to Awards, including the rate of interest to be credited with respect to such
payments. In addition to the foregoing, the Board may impose on any Award or the exercise thereof, at the date of grant or thereafter,
such additional terms and conditions, not inconsistent with the provisions of the Plan, as the Board shall determine.

 

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(b)          Terms
of Specified Awards. The Board is authorized to grant the Awards described in this Section 6(b), under such terms and conditions
as deemed by the Board to be consistent with the purposes of the Plan. Such Awards may be granted with vesting, value and/or and
payment thereof contingent upon Performance Goals. Except as otherwise set forth herein or as may be determined by the Board, each
Award granted under the Plan shall be evidenced by an Award Agreement containing such terms and conditions applicable to such Award
as the Board shall determine at the date of grant or thereafter, including the effect, if any, of a Change in Control on such Award.

 

(i)          Options.
The Board is authorized to grant Options to Participants on the following terms and conditions:

 

(A)         Type
of Award. The Award Agreement evidencing the grant of an Option under the Plan shall designate the Option as an ISO or an NQSO.

 

(B)         Exercise
Price. The exercise price per share of Stock purchasable under an Option shall be determined by the Board, but in no event
shall the per share exercise price of any Option be less than the Fair Market Value of a share of Stock on the date of grant of
such Option. The exercise price for Stock subject to an Option may be paid in cash, through a "broker cashless exercise"
procedure approved by the Board (to the extent permitted by law) or a combination of the above, in any case in an amount having
a combined value equal to such exercise price. An Award Agreement may provide that a Participant may pay all or a portion of the
aggregate exercise price by having shares of Stock with a Fair Market Value on the date of exercise equal to the aggregate exercise
price withheld by the Company.

 

(C)         Term
and Exercisability of Options. Options shall be exercisable over the exercise period (which shall not exceed ten years from
the date of grant), at such times and upon such conditions as the Board may determine, as reflected in the Award Agreement; provided,
that the Board shall have the authority to accelerate the exercisability of any outstanding Option at such time and under such
circumstances as it, in its sole discretion, deems appropriate. An Option may be exercised to the extent of any or all full shares
of Stock as to which the Option has become exercisable, by giving written notice of such exercise to the Board or its designated
agent.

 

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(D)         Termination
of Employment. An Option may not be exercised unless: (1) the Participant is then a director of, in the employ of, or providing
services to the Company; and (2) the Participant has remained continuously so employed, or continuously maintained such relationship,
since the date of grant of the Option; provided, that the Award Agreement may contain or be amended to contain provisions providing
for the exercisability of any Option until not later than the expiration date of such Option.

 

(E)         Other
Provisions. Options may be subject to such other conditions including, but not limited to, restrictions on transferability
of the shares acquired upon exercise of such Options, as the Board may prescribe in its discretion or as may be required by applicable
law.

 

(ii)         Restricted
Stock. The Board is authorized to grant Restricted Stock to Participants on the following terms and conditions:

 

(A)         Issuance
and Restrictions. Restricted Stock shall be subject to such restrictions on transferability and other restrictions, if any,
as the Board may impose at the date of grant or thereafter, which restrictions may lapse separately or in combination at such times,
under such circumstances, in such installments, or otherwise, as the Board may determine. The Board may place restrictions on Restricted
Stock that shall lapse, in whole or in part, only upon the attainment of Performance Goals. Unless otherwise determined by the
Board, a Participant granted Restricted Stock shall have all of the rights of a stockholder including, without limitation, the
right to vote Restricted Stock and the right to receive dividends, including deemed dividends, thereon.

 

(B)         Forfeiture.
Upon termination of employment with or service to the Company during the applicable restriction period, Restricted Stock and any
accrued but unpaid dividends that are then subject to restrictions shall be forfeited; provided, that the Board may provide, by
rule or regulation or in any Award Agreement, or may determine in any individual case, that restrictions or forfeiture conditions
relating to Restricted Stock will be waived in whole or in part in the event of terminations resulting from any cause, and the
Board may in other cases waive in whole or in part the forfeiture of Restricted Stock.

 

(C)         Certificates
for Stock. Restricted Stock granted under the Plan may be evidenced in such manner as the Board shall determine. If certificates
representing Restricted Stock are registered in the name of the Participant, such certificates shall bear an appropriate legend
referring to the terms, conditions and restrictions applicable to such Restricted Stock, and the Company shall retain physical
possession of the certificate.

 

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(D)         Dividends.
Dividends, including deemed dividends, paid on Restricted Stock shall be either paid at the dividend payment date, or deferred
for payment to such date as determined by the Board, in cash or in shares of Stock having a Fair Market Value equal to the amount
of such dividends. Unless otherwise determined by the Board, Stock distributed in connection with a stock split or stock dividend,
and other property distributed as a dividend, shall be subject to restrictions and a risk of forfeiture to the same extent as the
Restricted Stock with respect to which such Stock or other property has been distributed.

 

7.           General
Provisions.

 

(a)          Nontransferability.
Unless otherwise provided in an Award Agreement, Awards shall not be transferable by a Participant except by will or the laws of
descent and distribution and shall be exercisable during the lifetime of a Participant only by such Participant or his guardian
or legal representative.

 

(b)          No
Right to Continued Employment. Nothing in the Plan or in any Award, any Award Agreement or other agreement entered into pursuant
hereto shall confer upon any Participant the right to continue in the employ of, or to continue as a director of, or to continue
to provide services to, the Company or to be entitled to any remuneration or benefits not set forth in the Plan or such Award Agreement
or other agreement or to interfere with or limit in any way the right of the Company to terminate such Participant's employment
or director or independent contractor relationship.

 

(c)          Taxes.
The Company is authorized to withhold from any Award granted, any payment relating to an Award under the Plan, including from a
distribution of Stock, or any other payment to a Participant, amounts of withholding and other taxes due in connection with any
transaction involving an Award, and to take such other action as the Board may deem advisable to enable the Company and Participants
to satisfy obligations for the payment of withholding taxes and other tax obligations relating to any Award. This authority shall
include authority to withhold or receive Stock or other property and to make cash payments in respect thereof in satisfaction of
a Participant's tax obligations. The Board may provide in the Award Agreement that in the event that a Participant is required
to pay any amount to be withheld in connection with the issuance of shares of Stock in settlement or exercise of an Award, the
Participant may satisfy such obligation (in whole or in part) by electing to have the Company withhold a portion of the shares
of Stock to be received upon settlement or exercise of such Award that is equal to the minimum amount required to be withheld.

 

(d)          Stockholder
Approval; Amendment and Termination.

 

(i)          The
Plan shall take effect upon its adoption by the Board but the Plan (and any grants of Awards made prior to the stockholder approval
mentioned herein) shall be subject to the requisite approval of the stockholders of the Company.

 

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(ii)         The
Board may at any time and from time to time alter, amend, suspend or terminate the Plan in whole or in part; provided, however,
that unless otherwise determined by the Board, an amendment that requires stockholder approval in order for the Plan to continue
to comply with Section 162(m) or any other law, regulation or stock exchange requirement shall not be effective unless approved
by the requisite vote of stockholders. The Board may at any time and from time to time alter, amend, suspend or terminate an outstanding
Award in whole or in part; provided, that in the event an outstanding Option is to be terminated pursuant to this clause (ii),
the Option holder may be given sufficient notice of such termination to permit the exercise of the then-vested portion of such
Option prior to such Award termination.

 

(e)          Expiration
of Plan. Unless earlier terminated by the Board pursuant to the provisions of the Plan, the Plan shall expire on the tenth
anniversary of the Effective Date. No Awards shall be granted under the Plan after such expiration date. Without prejudice to the
authority of the Board under Section 7(d)(ii), the expiration of the Plan shall not affect adversely any of the rights of any Participant,
without such Participant's consent, under any Award theretofore granted.

 

(f)          Deferrals.
The Board shall have the authority to establish such procedures and programs that it deems appropriate to provide Participants
with the ability to defer receipt of cash, Stock or other property payable with respect to Awards granted under the Plan.

 

(g)          No
Rights to Awards; No Stockholder Rights. No Participant shall have any claim to be granted any Award under the Plan. There
is no obligation for uniformity of treatment among Participants. Except as provided specifically herein, a Participant or a transferee
of an Award shall have no rights as a stockholder with respect to any shares covered by the Award until the date of the issuance
of a stock certificate to him for such shares.

 

(h)          Unfunded
Status of Awards. The Plan is intended to constitute an "unfunded" plan for incentive and deferred compensation.
With respect to any payments not yet made to a Participant pursuant to an Award, nothing contained in the Plan or any Award shall
give any such Participant any rights that are greater than those of a general creditor of the Company.

 

(i)          No
Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award. The Board
shall determine whether cash, other Awards or other property shall be issued or paid in lieu of such fractional shares or whether
such fractional shares or any rights thereto shall be forfeited or otherwise eliminated.

 

(j)          Regulations
and Other Approvals.

 

(i)          The
obligation of the Company to sell or deliver Stock with respect to any Award granted under the Plan shall be subject to all applicable
laws, rules and regulations, including all applicable federal and state securities laws, and the obtaining of all such approvals
by governmental agencies as may be deemed necessary or appropriate by the Board.

 

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(ii)         Notwithstanding
any other provision of the Plan or any Award Agreement, no Award shall be granted to any Participant or become vested or exercisable,
be exercised or settled, to the extent such grant, vesting, exercise or other settlement of such Award would cause the Company
to not be in compliance with the applicable provisions of the Investment Company Act of 1940. It is acknowledged that as of the
Effective Date various provisions permissible under the Plan may require, prior to their implementation, an exemptive order from
the SEC after taking into account any exemptive relief received by the Company.

 

(iii)        Each
Award is subject to the requirement that, if at any time the Board determines, in its absolute discretion, that the listing, registration
or qualification of Stock issuable pursuant to the Plan is required by any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body is necessary or desirable as a condition of, or in connection with,
the grant of an Award or the issuance of Stock, no such Award shall be granted or payment made or Stock issued, in whole or in
part, unless listing, registration, qualification, consent or approval has been effected or obtained free of any conditions not
acceptable to the Board.

 

(iv)         In
the event that the disposition of Stock acquired pursuant to the Plan is not covered by a then-current registration statement under
the Securities Act and is not otherwise exempt from such registration, such Stock shall be restricted against transfer to the extent
required by the Securities Act or regulations thereunder, and the Board may require a Participant receiving Stock pursuant to the
Plan, as a condition precedent to receipt of such Stock, to represent to the Company in writing that the Stock acquired by such
Participant is acquired for investment only and not with a view to distribution.

 

(v)          The
Board may require a Participant receiving Stock pursuant to the Plan, as a condition precedent to receipt of such Stock, to enter
into a stockholder agreement or "lock-up" agreement in such form as the Board shall determine is necessary or desirable
to further the Company's interests.

 

(k)          Governing
Law. The Plan and all determinations made and actions taken pursuant hereto shall be governed by the laws of the State of New
York without giving effect to the conflict of laws principles thereof.

 

    	B-11HARRIS & HARRIS GROUP, INC.

EMPLOYEE STOCK PURCHASE PLAN

 

1.          Purpose;
Effective Date. The purpose of the Plan is to encourage employee participation in the ownership and economic progress of the
Company by providing employees of the Company and its Designated Subsidiaries an opportunity to purchase Common Stock.

 

The Plan was adopted and approved by the Board
on March 11, 2010 and amended on March 8, 2012.

 

2.          Definitions.

 

a.           "Agent"
means any administration of the Plan to which the Committee delegates all or a portion of the administration of the Plan.

 

b.           “Board”
means the Board of Directors of the Company.

 

c.           “Change
in Capitalization” means any dividend or other distribution (whether in the form of cash, Stock, deemed dividends or other
property), recapitalization, Stock split, reverse split, reorganization, merger, consolidation, spin-off, combination, repurchase,
or share exchange, or other similar corporate transaction or event.

 

d.           “Code”
means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder.

 

e.           “Committee”
means the Board, the Compensation Committee of the Board, or such other Committee of the Board which is appointed by the Board
to administer the Plan and to perform the functions set forth herein.

 

f.            “Common
Stock” means shares of common stock, par value $0.01 per share, of the Company.

 

g.           “Company”
means Harris & Harris Group, Inc., a corporation organized under the laws of the State of New York, or any successor corporation.

 

h.           “Compensation”
means the pre-tax fixed salary or base wage paid by the Company to an Employee as reported by the Company to the United States
government (or other applicable government) for income tax purposes, including an Employee’s portion of salary deferral contributions
pursuant to Section 401(k) of the Code and any amount excludable pursuant to Section 125 of the Code, but excluding any bonus,
fee, overtime pay, severance pay, expenses, stock option or other equity incentive income, or other special emolument or any credit
or benefit under any employee plan maintained by the Company.

 

i.            “Continuous
Status as an Employee” means the absence of any interruption or termination of service as an Employee. Continuous Status
as an Employee shall not be considered interrupted in the case of a leave of absence agreed to in writing by the Company (including,
but not limited to, military or sick leave), provided that such leave is for a period of not more than 90 days or reemployment
upon the expiration of such leave is guaranteed by contract or statute.

 

    	 

    	 

    

 

j.            “Designated
Subsidiaries” means the subsidiaries of the Company which have been designated by the Company from time to time in its sole
discretion as eligible to participate in the Plan.

 

k.          “Employee”
means any person, including an officer, who is regularly employed by the Company or one of its Designated Subsidiaries.

 

l.            “Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder.

 

m.           “Fair
Market Value” per share as of a particular date means, unless otherwise determined by the Board in good faith, (i) the closing
sales price per share of Common Stock on the national securities exchange on which the Common Stock is principally traded, on such
date, without regard to any third-market or aftermarket transactions affecting such closing price on such date, (ii) if the Common
Stock is principally traded in an established over-the-counter market, the mean between the latest bid and ask per share of Common
Stock on such over-the-counter market or (iii) if the shares of Common Stock are not then listed on a national securities exchange
or traded in an over-the-counter market, such value as the Committee, in its sole discretion, shall determine.

 

n.           “Investment
Company Act” means the Investment Company Act of 1940, as amended.

 

o.           “Participant”
means an Employee who participates in the Plan.

 

p.           “Plan”
means this Harris & Harris Group, Inc. Employee Stock Purchase Plan, as amended from time to time.

 

q.           “Plan
Year” means the calendar year, or such other period or periods determined by the Committee.

 

r.            “Purchase
Period” means the first 10 business days of each calendar quarter of each Plan Year during the effectiveness of the Plan,
or such other date or dates determined by the Committee at least 20 days in advance of a particular calendar quarter.

 

3.          Eligibility.

 

Subject to the requirements of Section 4a
hereof, any person who is (i) an Employee as of the beginning of a calendar quarter following adoption of the Plan and (ii) who
is regularly scheduled to work at least 20 hours per week and at least five
months per year shall be eligible to participate in the Plan.

 

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4.          Participation.

 

a.           Each
eligible Employee may elect to become a Participant in the Plan only by filing an agreement with the Company authorizing payroll
deductions for the following calendar quarter (as set forth in Section 5 hereof). Such authorization shall remain in effect for
all subsequent calendar quarters during which the Participant is an Employee eligible to participate in the Plan, until modified
or terminated by the Participant. Such agreement shall obligate the Employee to purchase shares through the Plan in accordance
with the terms set forth herein and other administrative terms and conditions adopted by the Committee.

 

b.           The
maximum aggregate annual payroll deduction permitted for any single Employee in any single calendar year under the Plan is one
hundred thousand dollars ($100,000.00), prorated for partial years, or such other amount as may be determined prospectively by
the Committee in its discretion from time to time and communicated to Employees.

 

c.           During
each Purchase Period the Company's Agent shall purchase the number of shares of Common Stock purchasable on behalf of the Participants
out of the payroll deductions authorized by the Participants with respect to the immediately preceding calendar quarter.

 

d.           The
shares of Common Stock purchased during each Purchase Period that are then credited to the Participant’s account under the
Plan shall be deemed to be transferred to the Participant upon purchase and, except as otherwise provided herein, the Participant
shall thereafter have all rights of a stockholder with respect to such shares.

 

5.          Payroll
Deductions.

 

a.           Subject
to the aggregate limitation in Section 4b, a Participant may increase or decrease such payroll deduction upon written approval
by the Chief Compliance Officer when such individual is not in possession of any material non-public information, but not more
frequently than once per calendar quarter, by filing a new authorization form with the Chief Compliance Officer; provided, however,
that in the event such an authorization is received by the Chief Compliance Officer during a calendar quarter, such authorization
shall have no effect until the commencement of the following calendar quarter.

 

b.           All
payroll deductions made with respect to a Participant hereunder shall be credited to such Participant’s account under the
Plan.

 

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6.          Delivery
of Common Stock.

 

Shares of Common Stock held in a Participant’s
account under the Plan may not be withdrawn by such Participant until the earlier to occur of (i) such Participant’s termination
of employment with the Company and (ii) such time as the number of shares of Common Stock beneficially owned by such Participant
(whether acquired pursuant to the Plan or otherwise) is in excess of the number of shares required to be held by such Participant
pursuant to the Company’s stock ownership guidelines as in effect from time to time; provided, that any such in-service withdrawal
shall be permitted only with respect to the number of shares of Common Stock in excess of such Company stock ownership requirement.
Notwithstanding any other provision of the Plan, no shares of Common Stock may be withdrawn by a Participant prior to the date
that is six months following the expiration of the Purchase Period for which such shares were allocated to the Participant’s
account unless such withdrawal follows the termination of such Participant’s employment with the Company. As promptly as
practicable after receipt by the Committee of a written request for withdrawal of Common Stock from any Participant, the Agent
shall arrange the delivery to such Participant of a stock certificate representing the shares of Common Stock which the Participant
is permitted and has requested to withdraw. Shares of Common Stock received upon stock dividends or stock splits shall be treated
as having been purchased during the Purchase Periods to which they relate. A Participant's interest in the account, and shares
of Common Stock to be delivered to a Participant under the Plan, shall be registered in the name of the Participant or, at the
election of the Participant, in the name of the Participant and another person as joint tenants with rights of survivorship.

 

7.          Withdrawal;
Termination of Employment.

 

a.           A
Participant may withdraw from participation in the Plan with respect to any calendar quarter at any time, by giving written notice
to the Company; provided, however, that in the event such notice is received by the Chief Compliance Officer during the 20-day
period prior to the commencement of a Purchase Period, such authorization shall have no effect until the commencement of the following
calendar quarter. In such event, any payroll deductions credited to such a Participant’s account that have not been used
to purchase shares of Common Stock shall be returned (without interest) to such Participant, and such Participant shall not be
eligible to participate with respect to the two Purchase Periods that immediately follow the calendar quarter during which such
Participant withdrew from the Plan.

 

b.           Upon
termination of a Participant’s Continuous Status as an Employee for any reason, including voluntary termination, retirement
or death, the payroll deductions credited to such Participant’s account (that have not been used to purchase shares of Common
Stock) shall be returned to such Participant or, in the case of such Participant’s death, to the person or persons entitled
thereto under Section 12 hereof, and such Participant’s participation in the Plan shall be automatically terminated.

 

8.          Dividends,
Deemed Dividends and Interest.

 

a.           Cash
dividends paid on Common Stock held in a Participant’s account shall be distributed to Participants in cash. Shares of Common
Stock held in a Participant’s account shall also be eligible for any deemed dividends paid on such shares following purchase
by such Participant. Dividends paid in Common Stock, or stock splits of the Common Stock, shall be credited to the accounts of
Participants. Dividends on Common Stock held in a Participant’s account which are paid in property other than cash or Common
Stock shall be distributed to Participants as soon as practicable.

 

    	4

    	 

    

 

b.           No
interest shall accrue on or be payable with respect to the payroll deductions of a Participant in the Plan.

 

9.          Administration.
The Plan shall be administered by the Committee, and the Committee may select an administrator to whom its duties and responsibilities
hereunder may be delegated. The Committee shall have full power and authority, subject to the provisions of the Plan, to promulgate
such rules and regulations as it deems necessary for the proper administration of the Plan, to interpret the provisions and supervise
the administration of the Plan, and to take all action in connection therewith or in relation thereto as it deems necessary or
advisable. Any decision reduced to writing and signed by a majority of the members of the Committee shall be fully effective as
if it had been made at a meeting duly held and shall be binding on all parties. The Company shall pay all expenses incurred in
the administration of the Plan. No member of the Committee shall be personally liable for any action, determination, or interpretation
made in good faith with respect to the Plan, and all members of the Committee shall be fully indemnified by the Company with respect
to any such action, determination or interpretation.

 

10.         Designation
of Beneficiary.

 

a.           A
Participant may file, on forms supplied by and delivered to the Company, a written designation of a beneficiary who is to receive
any shares and cash remaining in such Participant’s account under the Plan in the event of the Participant’s death.

 

b.           Such
designation of beneficiary may be changed by the Participant at any time by written notice. In the event of the death of a Participant
and in the absence of a beneficiary validly designated under the Plan who is living at the time of such Participant’s death,
the Company shall deliver shares of Common stock and/or cash to the executor or administrator of the estate of the Participant
or, if no such executor or administrator has been appointed (to the knowledge of the Company), the Company, in its discretion,
may deliver such shares and/or cash to the spouse or to any one or more dependents or relatives of the Participant, or if no spouse,
dependent or relative is known to the Company, then to such other person as the Company may designate.

 

11.         Transferability.
Neither payroll deductions credited to a Participant’s account nor any rights to receive shares under the Plan may be assigned,
transferred, pledged or otherwise disposed of in any way (other than by will, the laws of descent and distribution or as provided
in Section 12 hereof) by the Participant. Any such attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw funds in accordance with Section 7 hereof.

 

12.         Use
of Funds. All payroll deductions received or held by the Company under the Plan may be used by the Company only for purchases
under the Plan, and the Company shall be obligated to segregate such payroll deductions.

 

    	5

    	 

    

 

13.         Reports.
Individual accounts shall be maintained for each Participant. Statements of account shall be given to Participants as soon as practicable
following each Purchase Period, which statements shall set forth the amounts of payroll deductions, the per share purchase price,
the number of shares of Common Stock purchased, the aggregate shares in the Participant’s account and the remaining cash
balance, if any.

 

14.         Effect
of Certain Changes. In the event of a Change in Capitalization, the Committee shall determine in its sole discretion the appropriate
equitable adjustments, if any, to be made under the Plan.

 

15.         Amendment
or Termination. The Board may at any time terminate or amend the Plan at any time and for any reason or no reason. If the Plan
is terminated less than 20 days prior to or during a Purchase Period, such termination shall be effective only at the end of such
Purchase Period and all purchases for such Purchase Period shall be completed, and all shares allocated in accordance with the
Plan, before giving effect to such Plan termination.

 

16.         Notices.
All notices or other communications by a Participant to the Company under or in connection with the Plan shall be deemed to have
been duly given when received in the form specified by the Company at the location, or by the person, designated by the Company
for the receipt thereof.

 

17.         Regulations
and Other Approvals; Governing Law.

 

a.           The
obligations of the Company hereunder shall be subject to all applicable laws, rules and regulations, including all applicable federal
and state securities laws, and the obtaining of all such approvals by governmental agencies as may be deemed necessary or appropriate
by the Committee.

 

b.           This
Plan and the rights of all persons claiming hereunder shall be construed and determined in accordance with the laws of the State
of New York without giving effect to the choice of law principles thereof, except to the extent that such law is preempted by federal
law.

 

    	6

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