SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A) of the
Securities Exchange Act of 1934
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Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
Harris & Harris Group, Inc.
(Name of Registrant as Specified in Its Charter)
-----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
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[ ] Fee paid previously with preliminary materials.
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previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
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HARRIS & HARRIS GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held May 12, 2004
To the Shareholders of Harris & Harris Group, Inc.:
NOTICE IS HEREBY GIVEN that the 2004 Annual Meeting of the Shareholders
of Harris & Harris Group, Inc. (the "Company") will be held on Wednesday, May
12, 2004, at 2:30 p.m., local time, on the Concourse Level at 780 Third Avenue
(between 48th Street and 49th Street), New York, New York 10017. This meeting
has been called by the Board of Directors of the Company, and this notice is
being issued at its direction. It has called this meeting for the following
purposes:
1. To elect 10 directors of the Company to hold office until the
next annual meeting of shareholders or until their respective
successors have been duly elected and qualified;
2. To approve a proposal to authorize the Company to offer
long-term rights, including warrants and options, to purchase
shares of the Company's common stock at an exercise price
that, at the time such rights are issued, will not be less
than the greater of the market value of the Company's common
stock or the net asset value of the Company's common stock.
Such rights may be part of or accompanied by other securities
of the Company; and
3. To transact such other business, including adjournments, as
may properly come before the meeting or any adjournment or
adjournments thereof.
Holders of common stock of record at the close of business on March 26,
2004 will be entitled to vote at the meeting.
Whether or not you expect to be present in person at the meeting,
please sign and date the accompanying proxy and return it promptly in the
enclosed business reply envelope, which requires no postage if mailed in the
United States.
By Order of the Board of Directors
April 12, 2004 /s/ Susan T. Harris
New York, New York __________________________________
Susan T. Harris
Secretary
IMPORTANT: PLEASE MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED
ENVELOPE. THE MEETING DATE IS MAY 12, 2004.
(THIS PAGE LEFT BLANK INTENTIONALLY)
Harris & Harris Group, Inc.
111 West 57th Street
New York, New York 10019
(212) 582-0900
PROXY STATEMENT
2004 Annual Meeting of Shareholders
General Information
This proxy statement is being furnished in connection with the
solicitation of proxies by the Board of Directors of Harris & Harris Group,
Inc. (the "Company," "us," "our," and "we") to be voted at the 2004 Annual
Meeting of Shareholders (the "Annual Meeting") to be held on May 12, 2004 and
at any adjournment thereof.
The Annual Meeting will be held on Wednesday, May 12, 2004 at 2:30
p.m., local time, on the Concourse Level at 780 Third Avenue (between 48th
Street and 49th Street), New York, New York 10017. At the Annual Meeting, our
shareholders will be asked to elect 10 directors to serve on the Board of
Directors of the Company and to hold office until the next Annual Meeting and
to vote on the other matters stated in the accompanying Notice and described
in more detail in this proxy statement. If any other matters properly come
before the Annual Meeting, the persons named on the proxies will, unless the
shareholder otherwise specifies in the proxy, vote upon such matters in
accordance with their best judgment. The enclosed proxy card and this proxy
statement and annual report on Form 10-K are being first transmitted on or
about April 12, 2004 to our shareholders.
The Board of Directors has fixed the close of business on March 26,
2004 as the record date for the determination of our shareholders entitled to
receive notice of, and to vote at, the Annual Meeting. At the close of business
on the record date, an aggregate of 13,798,845 shares of common stock were
issued and outstanding. Each such share will be entitled to one vote on each
matter to be voted upon at the Annual Meeting. The presence, in person or by
proxy, of the holders of a majority of such outstanding shares is necessary to
constitute a quorum for the transaction of business at the Annual Meeting.
Solicitation and Revocation; Vote Required
All properly executed proxies received prior to the Annual Meeting
will be voted at the meeting in accordance with the instructions marked
thereon or otherwise as provided therein. Unless instructions to the contrary
are marked, shares represented by the proxies will be voted "for" all the
proposals.
Any proxy given pursuant to this solicitation may be revoked by a
shareholder at any time before it is exercised, by written notification
delivered to our Secretary, by voting in person at the Annual Meeting, or by
executing another proxy bearing a later date. If your shares are held for your
account by a broker, bank or other institution or nominee, you may vote such
shares at the Annual Meeting only if you obtain proper written authority from
your institution or nominee that you present at the Annual Meeting.
Approval of any of the matters submitted for shareholder approval
requires that a quorum be present. The presence, in person or by proxy, of at
least a majority of the total number of outstanding shares of common stock
entitled to vote is necessary to constitute a quorum. Abstentions and broker
non-votes will be counted as shares present at the Annual Meeting for purposes
of determining the existence of a quorum. Broker non-votes are proxies
received by us from brokers or nominees when the broker or nominee neither has
received instructions from the beneficial owner or other persons entitled to
vote nor has discretionary power to vote on the particular matter.
If a quorum is present (in person or by proxy) and voting, (i) for
Proposal 1, the directors will be elected by a plurality of the votes cast;
and (ii) for Proposal 2, the financing proposal will be approved if a majority
of the votes cast are cast in favor. All other matters being submitted to
shareholder vote pursuant to the Notice of Annual Meeting will be approved if
a quorum is present in person or by proxy and a majority of the votes cast on
a particular matter are cast in favor of that matter. For purposes of
Proposals 1, 2 and unspecified matters that come before the meeting, votes
withheld, abstentions and broker non-votes will not be counted as votes cast
on the matter and will have no effect on the result of the vote.
Proxies are being solicited by us. Proxies will be solicited by mail.
All expenses of preparing, printing, mailing, and delivering proxies and all
materials used in the solicitation of proxies will be borne by us. They may also
be solicited by officers and regular employees of the Company personally, by
telephone or otherwise, but these persons will not be specifically compensated
for such services. Banks, brokers, nominees, and other custodians and
fiduciaries will be reimbursed for their reasonable out-of-pocket expenses in
forwarding solicitation material to their principals, the beneficial owners of
our common stock. It is estimated that those costs will be nominal.
ELECTION OF DIRECTORS
(Proposal No. 1)
The 10 nominees listed below, all of whom currently serve as
directors, have been nominated to serve as our directors until the next Annual
Meeting or until their respective successors are duly elected and qualified.
Although it is not anticipated that any of the nominees will be unable or
unwilling to serve, in the unexpected event that any such nominees should
become unable or decline to serve, it is intended that votes will be cast for
substitute nominees designated by our present Board of Directors.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" ALL THE NOMINEES.
Nominees
Certain information, as of March 26, 2004, with respect to each of
the 10 nominees for election at the Annual Meeting is set forth below,
including their names, ages and a brief description of their recent business
experience, including present occupations and employment, certain
directorships held by each and the year in which each became a director of the
Company. The nominees for election as directors of the Company have been
divided into two groups -- interested directors and independent directors.
Interested directors are "interested persons" as defined in the 1940 Act or
persons who may be considered an "interested person" because of consulting
work done for us. All 10 nominees are currently directors of the Company. We
do not have an advisory board.
Independent Directors
Dr. C. Wayne Bardin, age 69, was elected to our Board of Directors in
December 1994. From 1998 until the present, he served as President of Thyreos
Corp., a privately held, start-up pharmaceutical company. In 2003, Thyreos
sold its pharmaceutical assets but remains a holding company. From 1978
through 1996, Dr. Bardin was Vice President of The Population Council. Dr.
Bardin's professional appointments have included: Professor of Medicine, Chief
of the Division of Endocrinology, The Milton S. Hershey Medical Center of
Pennsylvania State University; and Senior Investigator, Endocrinology Branch,
National Cancer Institute. He has also served as a consultant to several
pharmaceutical companies. He has been appointed to the editorial boards of 15
journals. He has also served on national and international committees and
boards for National Institute of Health, World Health Organization, The Ford
Foundation, and numerous scientific societies. Dr. Bardin received a B.A. from
Rice University; an M.S. and M.D. from Baylor University; and a Doctor Honoris
Causa from the University of Caen, the University of Paris and the University
of Helsinki.
Dr. Phillip A. Bauman, age 48, was elected to our Board of Directors
in February 1998. He is Senior Attending in Orthopaedic Surgery at St.
Luke's/Roosevelt Hospital Center in Manhattan and has served as an elected
member of the executive committee of the Medical Board since 2000. He has been
Assistant Professor of Orthopaedic Surgery at Columbia University since 1998
and a Vice President of Orthopaedic Associates of New York since 1994. He was
elected a fellow of the American Academy of Orthopaedic Surgeons in 1991. He
is an active member of the American Orthopaedic Society for Sports Medicine,
the New York State Society of Orthopaedic Surgeons and the American Medical
Association. Dr. Bauman holds a B.A. and M.S. in biology from Harvard
University and a medical degree from Columbia University.
G. Morgan Browne, age 69, was elected to our Board of Directors in
June 1992. From 2001-2003, Mr. Browne was the Chief Financial Officer of Cold
Spring Harbor Laboratory, a not-for-profit institution that conducts research
and education programs in the fields of molecular biology and genetics. From
1985 to 2001, he was the Administrative Director of Cold Spring Harbor
Laboratory. In prior years, he was active in the management of numerous
scientifically based companies as an officer, as an individual consultant and
as an associate of Laurent Oppenheim Associates, Industrial Management
Consultants. He is a Director of OSI Pharmaceuticals, Inc., a publicly held
company principally engaged in drug discovery based on gene transcription. He
was a founding director of the New York Biotechnology Association and a
founding director of the Long Island Research Institute. Mr. Browne was
graduated from Yale University.
Dugald A. Fletcher, age 74, was elected to our Board of Directors in
June 1996. He has served as President of Fletcher & Company, Inc., a
management consulting firm since 1984. Until the end of 1997, he was Chairman
of Binnings Building Products Company, Inc. Mr. Fletcher's previous business
appointments include: adviser to Gabelli/Rosenthal LP, a leveraged buyout
fund; Chairman of Keller Industries, building and consumer products; Senior
Vice President of Booz-Allen & Hamilton; President of Booz-Allen Acquisition
Services; Executive Vice President and a Director of Paine Webber, Inc.; and
President of Baker, Weeks and Co., Inc., a New York Stock Exchange member
firm. He is currently a Trustee of the Gabelli Growth Fund and a Director of
the Gabelli Convertible and Income Securities Fund, Inc. Mr. Fletcher was
graduated from Harvard College and Harvard Business School.
Mark A. Parsells, age 44, was elected to our Board of Directors in
November 2003. Since May 2001, Mr. Parsells has been Chairman, President and
Chief Executive Officer of Fusura LLC, an AIG company that is an
internet-based, direct to consumer auto insurance business. From February 2000
through May 2001, Mr. Parsells was President and Chief Operating Officer of
Citibank Online. From April 1999 through February 2000, Mr. Parsells was
Senior Vice President for Strategic Planning and General Manager of First USA,
Wingspan. He was graduated from Emory University (BA), Cornell University
(MBA) and Vlerick LeuvenGent Business School (MBA).
Charles E. Ramsey, age 61, was elected to our Board of Directors in
October 2002. He is a retired founder and principal of Ramsey/Beirne
Associates, Inc., an executive search firm that specialized in recruiting top
officers for high technology companies, many of which were backed by venture
capital. An active investor, he is a director of three privately held
companies, including Experion Systems, Inc. (in which we own an equity
interest). He works on construction projects in Nicaragua as a member of the
Nicaraguan Initiative Committee for the Presbyterian Churches of the Hudson
River and as Chair of Bridges to Community, a non-governmental organization
dedicated to construction projects in Nicaragua. He was graduated from
Wittenberg University (B.A.).
James E. Roberts, age 58, was elected to our Board of Directors in
June 1995. Since November 2002, he has been Executive Vice President and Chief
Underwriting Officer of the Reinsurance Division of Alea North America
Company. From October 1999 to November 2002, he was Chairman and Chief
Executive Officer of the Insurance Corporation of New York, Dakota Specialty
Insurance Company, and Recor Insurance Company Inc., all members of the
Trenwick Group, Ltd. From October 1999 to March 2000, he served as Vice
Chairman of Chartwell Reinsurance Company. Prior to assuming those positions,
he was Vice Chairman of Trenwick America Reinsurance Corporation from May 1995
to March 2000. Mr. Roberts is a graduate of Cornell University.
Interested Directors
Charles E. Harris, age 61, has been a Director, Chairman of our Board
of Directors and Chief Executive Officer since April 1984 and Managing
Director since January 2004. He also served as our Chief Compliance Officer
from February 1997 to February 2001. He was a member of the Advisory Panel for
the Congressional Office of Technology Assessment. Prior to joining us, he was
Chairman of Wood, Struthers and Winthrop Management Corporation, the
investment advisory subsidiary of Donaldson, Lufkin and Jenrette. He is
currently a member of the New York Society of Security Analysts. He acts as a
Trustee and head of the audit committee of Cold Spring Harbor Laboratory, a
not-for-profit institution that conducts research and education programs in
the fields of molecular biology and genetics. He also serves as a Trustee and
head of the audit committee of the Nidus Center, a life sciences business
incubator in St. Louis, Missouri. He is a life-sustaining fellow of MIT and a
shareholder of its Entrepreneurship Center. He was graduated from Princeton
University (A.B., 1964) and Columbia University Graduate School of Business
(MBA, 1967). He is an "interested person" as defined in Section 2(a)(19) of
the 1940 Act, as a beneficial owner of more than 5% of our common stock, as a
control person and as one of our officers. In addition, Mr. Harris's wife
serves as our corporate secretary.
Dr. Kelly S. Kirkpatrick, age 37, was elected to our Board of
Directors in March 2002. She has served as a consultant to us on
nanotechnology and in our due diligence work on Agile Materials &
Technologies, Inc. and Optiva, Inc. She is an independent business consultant
assessing and advising on early stage, technology start-ups for venture
capital companies. From 2000 to 2002, she served in the Office of the
Executive Vice Provost of Columbia University as Director of the Columbia
University Nanotechnology Initiative and as Director for Research and
Technology Initiatives. From 1998 to 2000, she served in the White House
Office of Science and Technology Policy as a Senior Policy Analyst involved in
the National Nanotechnology Initiative. From 1997 to 1998, she was a Science
Policy Coordinator for Sandia National Laboratories. From 1995 to 1996, she
served in the office of Senator Joseph Lieberman as Legislative Assistant,
Congressional Science and Engineering Fellow. Dr. Kirkpatrick received her
B.S. in Chemistry with a business option from the University of Richmond and
received her Ph.D. in Materials Science and Engineering from Northwestern
University. She may be considered to be an "interested person" of the Company
because of the consulting work she does for us.
Lori D. Pressman, age 46, was elected to our Board of Directors in
March 2002. She has served as a consultant to us on tiny technology,
intellectual property and in our due diligence work on Chlorogen, Inc.,
Continuum Photonics, Inc., NanoOpto Corporation, Nanopharma Corp., Nanosys,
Inc., Nantero, Inc. and NeoPhotonics Corporation. We define tiny technology as
microsystems, microelectromechanical systems (which we refer to as MEMS) and
nanotechnology. She also acts as an observer for us at board meetings of
certain portfolio companies in the Boston area. She is a business consultant
providing advisory services to start-ups and venture capital companies. She
consults internationally on technology transfer practices and metrics for
non-profit and government organizations. From 1999 to 2001, she was Chair of
the Survey Statistics and Metrics Committee of the Association of University
Technology Managers. From September 1989 to July 2000, she was employed by MIT
in its Technology Licensing Office. She served as its Technology Licensing
Officer from 1989 to 1995 and as Assistant Director from 1996 to 2000. From
September 1984 to September 1989, she was Senior Development Engineer at
Lasertron, Inc. Ms. Pressman was graduated from the Massachusetts Institute of
Technology, Physics (S.B.), and the Columbia School of Engineering (MSEE). She
may be considered to be an "interested person" of the Company because of the
consulting work she does for us.
Set forth below is the dollar range of equity securities beneficially
owned by each director or nominee as of March 25, 2004.
=========================================================================
Dollar Range of Equity Securities
of the Company Beneficially
Name of Director or Nominee Owned (1)(2)(3)
-------------------------------------------------------------------------
Dr. C. Wayne Bardin Over $100,000
Dr. Phillip A. Bauman Over $100,000
G. Morgan Browne Over $100,000
Dugald A. Fletcher Over $100,000
Mark A. Parsells None
Charles E. Ramsey Over $100,000
James E. Roberts Over $100,000
Charles E. Harris (4) Over $100,000
Dr. Kelly S. Kirkpatrick (5) $50,001 - $100,000
Lori D. Pressman (5) $50,001 - $100,000
==========================================================================
(1) Beneficial ownership has been determined in accordance with
Rule 16a-1(a)(2) of the 1934 Act.
(2) The dollar ranges are: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000
and over $100,000.
(3) The dollar ranges are based on the price of the equity securities as of
March 25, 2004.
(4) Denotes an individual who is an "interested person" as defined in the 1940
Act.
(5) Denotes an individual who may be considered an "interested person" because
of consulting work performed for us.
Board of Directors and Committees
In 2003, there were five meetings of the Board of Directors of the
Company and the full Board acted 11 times by unanimous written consent. No
director attended fewer than 75 percent of the aggregate of Board of Directors'
and applicable committee meetings on which each director served (during the
periods that they so served), except that Mr. Ramsey attended one of the two
meetings of the Ad Hoc Long-Term Planning Committee.
It is the policy of the Company that a portion of our directors are
encouraged to attend annual meetings of shareholders. In 2003, one director
attended the annual meeting.
Shareholders and other interested parties may contact the Board or
any member of the Board by mail. To communicate with the Board or any member
of the Board, correspondence should be addressed to the Board or the Board
members with whom you wish to communicate by either name or title. All such
correspondence should be sent c/o the Company, 111 West 57th Street, Suite
1100, New York, New York 10019.
The Company's Board of Directors has seven committees(1) comprised of
the following members, all of whom except Mr. Harris are independent both
under the rules of the NASD and for purposes of the 1940 Act:
Board Committees
---------------------------- ------------------------- ------------------------
Executive Audit Compensation
---------------------------- ------------------------- ------------------------
Charles E. Harris (2) Dugald A. Fletcher (2) James E. Roberts (2)
Dr. C. Wayne Bardin Dr. Phillip A. Bauman Dr. Phillip A. Bauman
G. Morgan Browne G. Morgan Browne Mark A. Parsells
James E. Roberts Charles E. Ramsey
---------------------------- ------------------------- ------------------------
---------------------------- ------------------------ ------------------------ ------------------------
Nominating Valuation Independent Directors Pricing
---------------------------- ------------------------ ------------------------ ------------------------
Dr. C. Wayne Bardin (2) Dugald A. Fletcher (2) G. Morgan Browne(2) Charles E. Harris(2)
Dr. Phillip A. Bauman Dr. C. Wayne Bardin Dr. C. Wayne Bardin G. Morgan Browne
Mark A. Parsells G. Morgan Browne Dr. Phillip A. Bauman Dugald A. Fletcher
Charles E. Ramsey Mark A. Parsells Dugald A. Fletcher
James E. Roberts Mark A. Parsells
Charles E. Ramsey
James E. Roberts
---------------------------- ------------------------ ------------------------ ------------------------
(1) The Ad Hoc Long-Term Planning Committee was terminated by the Board of
Directors on March 10, 2004.
(2) Denotes the Chairman of the Committee.
Executive Committee
The Executive Committee meets from time to time between regular
meetings of the Board of Directors and exercises the authority of the Board to
the extent provided by law. The Executive Committee did not meet as a separate
committee and did not act by unanimous written consent in 2003.
Audit Committee
The Audit Committee has been delegated the sole authority to appoint,
subject to ratification by the Board, our independent accountant. The Audit
Committee discusses and reviews the scope and fees of the prospective annual
audit, reviews the results thereof with the independent accountant, reviews
and approves non-audit services of the independent accountant, reviews
compliance with existing major accounting and financial policies relative to
the adequacy of the Company's internal accounting controls, reviews compliance
with federal and state laws relating to accounting practices and reviews and
approves transactions, if any, with affiliated parties.
The Audit Committee operates pursuant to a written charter approved
by our Board of Directors, which is attached hereto as Appendix A. The Audit
Committee Charter sets out the responsibilities, authority and duties of the
Audit Committee. The Audit Committee met three times and acted by unanimous
written consent one time in 2003.
Compensation Committee
The Compensation Committee has the full power and authority of the
Board with respect to all matters pertaining to the remuneration of our
employees. The Compensation Committee met one time and acted by unanimous
written consent two times in 2003.
Nominating Committee
The Nominating Committee acts as an advisory committee to the Board
by making recommendations to the Board of potential new directors, committee
members and officers of the Company. The Board must ratify, approve or
otherwise confirm the Nominating Committee's selections and appointments to
render them effective. The Nominating Committee met one time and acted by
unanimous written consent two times in 2003.
The Nominating Committee will consider Director candidates
recommended by shareholders. In considering candidates submitted by
shareholders, the Nominating Committee will take into consideration the needs
of the Board and the qualifications of the candidate. The Nominating Committee
may also take into consideration the number of shares held by the recommending
shareholder and the length of time that such shares have been held. To have a
candidate considered by the Nominating Committee, a shareholder must submit
the recommendation in writing and must include:
o The name of the shareholder and evidence of the person's ownership of
shares of the Company, including the number of shares owned and the
length of time of ownership;
o The name of the candidate, the candidate's resume or a listing of his
or her qualifications to be a Director of the Company and the person's
consent to be named as a Director if selected by the Nominating
Committee and nominated by the Board; and
o If requested by the Nominating Committee, a completed and signed
directors' questionnaire.
The shareholder recommendation and information described above must
be sent to the Company's Corporate Secretary, c/o Harris & Harris Group, Inc.,
111 West 57th Street, Suite 1100, New York, New York 10019 and must be
received by the Corporate Secretary not less than 120 days prior to the
anniversary date of the Company's most recent annual meeting of shareholders
or, if the meeting has moved by more than 30 days, a reasonable amount of time
before the meeting.
The Nominating Committee believes that the minimum qualifications for
serving as a director of the Company are that a nominee demonstrate, by
significant accomplishment in his or her field, an ability to make a
meaningful contribution to the Board's oversight of the business and affairs
of the Company and have an impeccable record and reputation for honest and
ethical conduct in both his or her professional and personal activities. In
addition, the Nominating Committee examines a candidate's specific experiences
and skills, time availability in light of other commitments, potential
conflicts of interest and independence from management and the Company. The
Nominating Committee also seeks to have the Board represent a diversity of
backgrounds and experience. The Company does not pay any third party a fee to
assist in the process of identifying and evaluating candidates.
The Nominating Committee operates pursuant to a written charter
approved by our Board of Directors. The Nominating Committee Charter sets out
the responsibilities, authority and duties of the Nominating Committee. Our
Nominating Committee Charter is attached hereto as Appendix B.
Valuation Committee
The Valuation Committee has the full power and authority of the Board
in reviewing and approving the valuation of our assets for reporting purposes
pursuant to our Asset Valuation Policy Guidelines that were established and
approved by the Board of Directors. Glenn E. Mayer(1) was a member of the
Valuation Committee from October 21, 2003 through December 24, 2003. The
Valuation Committee met seven times in 2003.
__________________
(1) Mr. Mayer is currently a Director but is not a nominee for reelection at
this Annual Meeting.
Ad Hoc Long-Term Planning Committee
The Board of Directors approved the appointment of an Ad Hoc
Long-Term Planning Committee on February 5, 2003, which acted as an advisory
committee to the Board. The members of the Ad Hoc Long-Term Planning Committee
during 2003 were G. Morgan Browne, Dr. C. Wayne Bardin, Glenn E. Mayer and
Charles E. Ramsey, and such committee members were considered independent as
defined in the 1940 Act. The Ad Hoc Long-Term Planning Committee met two times
in 2003. This committee was terminated by the Board of Directors on March 10,
2004.
Independent Directors Committee
The Board of Directors approved the appointment of an Independent
Directors Committee on March 10, 2004, which will have the responsibility of
proposing corporate governance and long-term planning matters to the Board of
Directors.
Pricing Committee
The Board of Directors approved the appointment of a Pricing
Committee on October 21, 2003 to fix the price of the 2003 public offering and
to handle such details as were necessary to effect the public offering. The
members of the Pricing Committee were Charles E. Harris, Dugald A. Fletcher
and Glenn E. Mayer. The Pricing Committee met one time during 2003 and upon
the completion of the offering on December 24, 2003, the Pricing Committee was
terminated.
The Board of Directors approved the appointment of a Pricing
Committee on February 12, 2004 to fix the price of future public or private
offerings and to handle such details as are necessary to effect such
offerings.
Audit Committee Report
The Audit Committee of the Company presents the following report:
The Audit Committee of the Company has performed the following
functions: (i) the Audit Committee reviewed and discussed the audited
financial statements of the Company with management, (ii) the Audit
Committee discussed with the independent auditors the matters required
to be discussed by the Statements on Auditing Standards No. 61, (iii)
the Audit Committee received the written disclosures and the letter
from the independent auditors required by ISB Standard No. 1 and has
discussed with the auditors the auditors' independence and (iv) the
Audit Committee recommended to the Board of Directors of the Company
that the financial statements be included in the Company's Annual
Report on Form 10-K for the past fiscal year.
Dugald A. Fletcher (Chair)
Dr. Phillip A. Bauman
Glenn E. Mayer
Audit Committee's Pre-Approval Policies
Since March 2003, the Audit Committee of the Company has pre-approved
all audit and non-audit services provided by PricewaterhouseCoopers LLC to the
Company. On November 11, 2003, the Audit Committee adopted Pre-Approval
Policies and Procedures which provide that requests or applications to provide
services that require approval by the Audit Committee (or the Chairman
pursuant to delegated authority) must be submitted to the Audit Committee or
the Chairman, as the case may be, by both the Independent Auditor and the
Chief Financial Officer, and must include a joint statement as to whether, in
their view, (a) the request or application is consistent with the SEC's rules
on auditor independence and (b) the requested service is or is not a non-audit
service prohibited by the SEC.
Audit Fees
The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP in connection with their annual audit of the
Company's consolidated financial statements, and reviews of the consolidated
financial statements included in the Company's quarterly reports on Form 10-Q
for the fiscal year ended December 31, 2003, and the review of documents and
matters associated with our 2003 public offering was approximately $98,800 and
for the fiscal year ended December 31, 2002 was approximately $55,500.
Audit-Related Fees
There were no fees during the last two fiscal years for professional
services rendered by PricewaterhouseCoopers LLP for audited-related services.
Tax Fees
The aggregate fees for professional services rendered by
PricewaterhouseCoopers LLP for tax services for the fiscal year ended December
31, 2003 was approximately $13,450 and for the fiscal year ended December 31,
2002 was approximately $13,400. The nature of the services was tax return
preparation.
All Other Fees
There were no other fees for professional services rendered by
PricewaterhouseCoopers LLP during the last two fiscal years other than the
audit and tax fees described above.
All audit and tax fees for services rendered during 2003 were
pre-approved by the Audit Committee. The Audit Committee has determined that
the provision of non-audit services that were provided during 2003 is
compatible with maintaining PricewaterhouseCoopers LLP's independence in
performing audit services for the Company.
Principal Shareholders
Set forth below is information as of March 25, 2004 with respect to
the beneficial ownership of our common stock by (i) each person who is known
by us to be the beneficial owner of more than 5% of the outstanding shares of
the common stock, (ii) each of our directors and executive officers and (iii)
all of our directors and executive officers as a group. Except as otherwise
indicated, to our knowledge, all shares are beneficially owned and investment
and voting power is held by the persons named as owners. The information in
the table below is from publicly available information that may be as of dates
earlier than March 25, 2004. At this time, we are unaware of any shareholder
owning more than 5% of the outstanding shares of common stock other than the
ones noted below. Unless otherwise provided, the address of each holder is c/o
Harris & Harris Group, Inc., 111 West 57th Street, Suite 1100, New York, New
York 10019.
Name and Address of Beneficial Owner Amount and Nature of Percentage of Outstanding Common
Beneficial Ownership Shares Owned
---------------------------------------------- -------------------------- -----------------------------------
Directors and Executive Officers:
Charles E. and Susan T. Harris............... 1,050,893(1) 7.6
Dr. C. Wayne Bardin.......................... 21,316(2) *
Dr. Phillip A. Bauman........................ 22,476(3) *
G. Morgan Browne............................. 34,172 *
Dugald A. Fletcher........................... 13,370 *
Douglas W. Jamison........................... 625 *
Dr. Kelly S. Kirkpatrick..................... 3,313 *
Daniel V. Leff............................... 0 *
Glenn E. Mayer............................... 100,000 *
Mark A. Parsells............................. 0 *
Mel P. Melsheimer............................ 80,210(4) *
Lori D. Pressman............................. 3,871 *
Charles E. Ramsey............................ 28,046
James E. Roberts............................. 16,392 *
Helene B. Shavin............................. 3,000 *
All directors and executive officers as
a group (16 persons).......................... 1,377,684 10.0
5% Shareholders:
Jonathan Rothschild
c/o Arterio, Inc.
1061-B Shary Circle
Concord, California 94518................... 770,330 5.6
Masters Capital Management
LLC/Michael Masters(5)
3060 Peachtree Road, N.E., Suite 1815
Atlanta, Georgia 30305...................... 886,962(6) 6.4
________________
* Less than 1%.
(1) Includes 1,039,559 shares owned by Mrs. Harris and 11,334 shares owned by
Mr. Harris.
(2) Includes 3,786 shares owned by Bardin LLC for the Bardin LLC Profit-
Sharing Keogh.
(3) Includes 5,637 shares owned by Ms. Milbry C. Polk, Dr. Bauman's wife; 100
shares owned by Adelaide Polk-Bauman, Dr. Bauman's daughter; 100 shares
owned by Milbry Polk-Bauman, Dr. Bauman's daughter; and 100 shares owned by
Mary Polk-Bauman, Dr. Bauman's daughter. Ms. Milbry C. Polk is the
custodian for the accounts of the three children.
(4) Includes 13,334 shares which are owned jointly by Mel P. Melsheimer and his
wife.
(5) Pursuant to a Schedule 13G/A dated February 9, 2004, Masters Capital
Management LLC ("Masters") and Michael Masters beneficially owned 568,200
shares and Marlin Fund Offshore, Ltd. beneficially owns 318,762 shares (all
with shared voting and dispositive power).
(6) See Footnote 5.
Executive Officers
Our executive officers who are not directors are set forth below.
Information relating to our executive officers who are directors is set forth
under "Election of Directors - Nominees." Our executive officers are elected
to serve until they resign or are removed, or are otherwise disqualified to
serve, or until their successors are elected and qualified.
Mel P. Melsheimer, age 64, has served as President, Chief Operating
Officer and Chief Financial Officer since February 1997 and Managing Director
since January 2004. Since February 2001, he has also served as our Chief
Compliance Officer and since July 2001, as Treasurer. From March 1994 to
February 1997, he served as a nearly full-time consultant to us or as an
officer to one of our portfolio companies. From November 1992 to February
1994, he served as Executive Vice President, Chief Operating Officer and
Secretary of Dairy Holdings, Inc. He was graduated from the University of
Southern California (MBA) and Occidental College (B.A.).
Daniel V. Leff, age 35, has served as Executive Vice President and
Managing Director since January 2004. Prior to joining us, he was a Senior
Associate with Sevin Rosen Funds in the firm's Dallas, Texas office where he
focused on early-stage investment opportunities in semiconductors, components,
and various emerging technology areas. Mr. Leff has also worked for Redpoint
Ventures in the firm's Los Angeles office. In addition, he previously held
engineering, marketing and strategic investment positions with Intel
Corporation. Mr. Leff received his Ph.D. degree in Physical Chemistry from
UCLA's Department of Chemistry and Biochemistry. He also received a B.S. in
Chemistry from the University of California, Berkeley and an MBA from The
Anderson School at UCLA, where he was an Anderson Venture Fellow.
Douglas W. Jamison, age 34, has served as Vice President since
September 2002 and Managing Director since January 2004. Prior to joining us,
he worked for five years as a senior technology manager at the University of
Utah Technology Transfer Office, where he managed intellectual property for
the University of Utah. He was graduated from Dartmouth College (B.A.) and the
University of Utah (M.S.).
Helene B. Shavin, age 50, has served as our Vice President and
Controller since November 2001. Prior to joining us, she was a Vice President
with Citicorp Venture Capital from 1986 to 2000. Ms. Shavin is a graduate of
Queens College (B.A.) and Baruch College (MBA) and is a certified public
accountant.
Susan T. Harris, 59, was employed by Harris & Harris Enterprises,
Inc., a wholly owned subsidiary of Harris & Harris Group, Inc., from July 1999
through July 2003, working primarily in financial public relations. From July
2001 through July 2003, she served as its Secretary and Treasurer. Also since
July 2001, Ms. Harris has served as corporate secretary of Harris & Harris
Group, Inc. She has been an investor relations consultant since 1972,
operating as a sole proprietor prior to 1999, and again from July 2001 to the
present. From 1966 to 1972, she was a securities analyst with several
securities firms, including Eastman Dillion, Union Securities, Inc., where she
was Vice President and Senior Consumer Products Analyst. She is a graduate of
Wellesley College with a B.A. in economics. Ms. Harris's husband serves as the
Chairman, Chief Executive Officer and a Managing Director of the Company.
Remuneration of Chief Executive Officer and Other Executive Officers
The following table sets forth a summary for each of the last three
years of the cash and non-cash compensation awarded to, earned by, or paid to
our Chief Executive Officer and our other executive officers.
Annual Compensation
Other Annual All Other
Name and Year Salary Bonus Compensation Compensation
Principal Position ($) ($)(1) ($)(2) ($)(3)
-------------------------------- ---------- ----------------- ------------------ ------------------ ---------------------
Charles E. Harris 2003 224,567 0 43,006 318,296
Chairman of the Board, 2002 221,217 10,503 46,570 165,468
Chief Executive Officer (4) 2001 215,510 0 48,453 232,000
Mel P. Melsheimer 2003 254,106 0 0 14,000
President, Chief Operating, 2002 250,327 3,224 0 12,000
Officer, Chief Financial 2001 243,869 0 0 10,500
Officer, Treasurer &
Chief Compliance Officer
Helene B. Shavin 2003 89,241 0 0 14,000
Controller 2002 85,353 1,161 0 11,000
2001 13,333 0 0 1,867
Susan T. Harris 2003 9,522 0 0 0
Secretary 2002 12,703 0 0 2,332
2001 12,376 0 0 1,578
Douglas W. Jamison 2003 137,182 0 0 12,000
Vice President 2002 35,936 0 0 1,050
(1) For 2002, these amounts represent the actual amounts earned as a result of
realized gains during the year ended December 31, 2002 under the Harris &
Harris Group Employee Profit-Sharing Plan and paid out in 2003. You may
find more information on our Employee Profit-Sharing Plan under Incentive
Compensation Plans.
(2) Other than Mr. Harris, amounts of "Other Annual Compensation" earned by the
named executive officers for the periods presented did not meet the
threshold reporting requirements.
(3) Except for Mr. Harris, amounts reported represent our contributions on
behalf of the named executive to the Harris & Harris Group, Inc. 401(k)
Plan. For 2003, Mr. Harris's "All Other Compensation" consists of: $14,000
401(k) Plan employer contribution; $298,306 for his 2003 SERP contribution;
and $5,990 in life insurance premiums for the benefit of his beneficiaries.
With respect to 2002 and 2003, an additional $73,739 was accrued for Mr.
Harris's SERP account in 2002, but not paid until 2003.
(4) Mr. Harris has an employment agreement with us.
Incentive Compensation Plans
As of January 1, 2003, we implemented the Amended and Restated Harris &
Harris Group, Inc. Employee Profit-Sharing Plan, which we refer to as the 2002
Plan.
The Plan (and its predecessor) provides for profiting sharing by our
officers and employees equal to 20% of our "qualifying income" for that plan
year. For the purposes of the Plan, qualifying income is defined as net realized
income as reflected on our consolidated statements of operations for that year,
less nonqualifying gains, if any.
For purposes of the Plan, our net realized income includes investment
income, realized gains and losses, and operating expenses (including taxes paid
or payable by us), but is calculated without including dividends paid or
distributions made to shareholders, payments under the Plan, unrealized gains
and losses, and loss carry-overs from other years. The proportion of net
after-tax realized gains attributable to asset values as of September 30, 1997
is considered nonqualifying gain, which reduces qualifying income.
On October 15, 2002, our shareholders approved the performance goals
under the 2002 Plan in accordance with Section 162(m) of the Code, effective as
of January 1, 2003. The Code generally provides that a public company such as we
are may not deduct compensation paid to its chief executive officer or to any of
its four most highly compensated officers to the extent that the compensation
paid to the officer/employee exceeds $1,000,000 in any tax year, unless payment
is made upon the attainment of objective performance goals that are approved by
our shareholders.
Under the 2002 Plan, our net realized income includes investment
income, realized qualifying gains and losses, and operating expenses (including
taxes paid or payable by us), but is calculated without including dividends paid
or loss carry-overs from other years, which we refer to as qualifying income. As
soon as practicable following the year-end audit, the Compensation Committee
will determine whether, and if so how much, qualifying income exists for a plan
year. Once determined, 90% of the qualifying income will be paid out to Plan
participants pursuant to the distribution percentages set forth in the Plan. The
remaining 10% will be paid out after we have filed our federal tax return for
that plan year.
Under the 2002 Plan, awards previously granted to the four current
Participants (Messrs. Harris and Melsheimer and Ms. Shavin and Jacqueline M.
Matthews, herein referred to as the "grandfathered participants") will be
reduced by 10% with respect to "Non-Tiny Technology Investments" (as defined in
the 2002 Plan) and by 25% with respect to "Tiny Technology Investments" (as
defined in the 2002 Plan) and will become permanent. These reduced awards are
herein referred to as "grandfathered participations." The amount by which the
awards are reduced will be allocable and reallocable each year by the
Compensation Committee among current and new participants as awards under the
2002 Plan. The grandfathered participations will be honored by us whether or not
the grandfathered participant is still employed by us or is still alive (in the
event of death, the grandfathered participations will be paid to the
grandfathered participant's estate), unless the grandfathered participant is
dismissed for cause, in which case all awards, including the grandfathered
participations, will be immediately cancelled and forfeited. With regard to new
investments and follow-on investments made after the date on which the first new
employee begins participating in the 2002 Plan, both current and new
participants will be required to be employed by us at the end of a plan year in
order to participate in profit-sharing on our investments with respect to that
year.
Notwithstanding any provisions of the 2002 Plan, in no event may the
aggregate amount of all awards payable for any Plan Year during which we remain
a "business development company" within the meaning of the 1940 Act be greater
than 20% of our "net income after taxes" within the meaning of Section
57(n)(1)(B) of the 1940 Act. In the event the awards as calculated exceed that
amount, the awards will be reduced pro rata.
The 2002 Plan may be modified, amended or terminated by the
Compensation Committee at any time. Notwithstanding the foregoing, the
grandfathered participations may not be further modified. Nothing in the 2002
Plan will preclude the Compensation Committee from naming additional
participants in the 2002 Plan or, except for grandfathered participations,
changing the Award Percentage of any Participant (subject to the overall
percentage limitations contained in the 2002 Plan). Currently, under the 2002
Plan, the distribution amounts for non-grandfathered investments for each
officer and employee currently are as follows: Charles E. Harris, 7.790%; Mel P.
Melsheimer, 3.733%; Douglas W. Jamison, 3.5%; Daniel V. Leff, 3.0%; Helene B.
Shavin, 1.524%; and Jacqueline M. Matthews, 0.453%, which together equal 20%. In
one case, for a former employee who left other than due to termination for
cause, any amount earned will be accrued and may subsequently be paid to the
participant.
The grandfathered participations are set forth below:
Grandfathered Participations
Name of Officer/Employee Non-Tiny Technology (%) Tiny Technology (%)
Charles E. Harris 12.41100 10.34250
Mel P. Melsheimer 3.80970 3.17475
Helene B. Shavin 1.37160 1.14300
Jacqueline M. Matthews 0.40770 0.33975
TOTAL 18.00000 15.00000
--------------------------------------------------------------------------------
Accordingly, an additional 2% of Qualifying Income with respect to
grandfathered Non-Tiny Technology Investments, 5% of Qualifying Income with
respect to grandfathered Tiny Technology Investments and the full 20% of
Qualifying Income with respect to new investments are available for allocation
and reallocation from year to year. Currently, Douglas W. Jamison and Daniel V.
Leff are each allocated 0.80% of the Non-Tiny Technology Grandfathered
Participations and 2% of the Tiny Technology Grandfathered Participations.
We calculate the profit-sharing accrual based on the terms of the plan
in effect. During the first quarter of 2003, we paid out 90 percent of the 2002
profit sharing in the amount of $13,710. The remaining 10 percent of the 2002
profit sharing, $1,523, was paid out upon the completion and filing of our 2002
federal tax return. During 2003, we made no accrual for profit sharing.
401(k) Plan
As of January 1, 1989, we adopted an employee benefits program covering
substantially all employees under a 401(k) Plan and Trust Agreement. As of
January 1, 1999, we adopted the Harris & Harris Pension Plan and Trust, a money
purchase plan that would allow us to stay compliant with the 401(k) top-heavy
regulations and deduction limitation regulations. In 2001, Congress enacted the
Economic Growth and Tax Relief Reconciliation Act of 2001 which has increased
the deduction limits for plans such as the 401(k) Plan. This eliminated the need
for us to maintain two separate plans. Effective December 31, 2001, the Pension
Plan merged into the 401(k) Plan, with the 401(k) Plan being the surviving plan.
Contributions to the plan are at our discretion. During 2003, contributions to
the plan charged to operations were approximately $64,500.
Medical Benefits
On June 30, 1994, we adopted a plan to provide medical and health
insurance for retirees, their spouses and dependents who, at the time of their
retirement, have 10 years of service with us and have attained 50 years of age
or have attained 45 years of age and have 15 years of service with us. On
February 10, 1997, we amended this plan to include employees who "have seven
full years of service and have attained 58 years of age." The coverage is
secondary to any government or subsequent employer provided health insurance
plans. Based upon actuarial estimates, we provided an original reserve of
$176,520 that was charged to operations for the period ending June 30, 1994. As
of December 31, 2003 we had a reserve of $531,293 for the plan.
Mandatory Retirement Plan
On March 20, 2003, in order to begin planning for eventual management
succession, the Board of Directors voted to establish a mandatory retirement
plan for individuals who are employed by us in a bona fide executive or high
policy making position. There are currently two such individuals, the Chairman
and CEO, and the President and COO. Under this plan, mandatory retirement will
take place effective December 31 of the year in which the eligible individuals
attain the age of 65. On an annual basis beginning in the year in which the
designated individual attains the age of 65, a committee of the Board consisting
of non-interested directors may determine to postpone the mandatory retirement
date for that individual for one additional year for our benefit.
Under applicable law prohibiting discrimination in employment on the
basis of age, we can impose a mandatory retirement age of 65 for our executives
or employees in high policy making positions only if each employee subject to
the mandatory retirement age is entitled to an immediate retirement benefit at
retirement age of at least $44,000 per year. The benefits payable at retirement
to Charles E. Harris, our Chairman and Chief Executive Officer, and Mel P.
Melsheimer, our President, Chief Operating Officer and Chief Financial Officer,
under our existing retirement plans do not equal this threshold. Mr. Harris has
offered, for our benefit, to waive his right to exclude certain other benefits
from this calculation, which makes it unlikely that any provision will have to
be made for him in order for us to comply with this threshold requirement. For
Mr. Melsheimer, however, a new plan was established to provide him with the
difference between the benefit required under the age discrimination laws and
that provided under our existing plans. The expense to us of providing the
benefit under this new plan is currently estimated to be $450,000. This benefit
will be unfunded, and the expense is being amortized over the fiscal periods
through the year ended December 31, 2004.
Employment Agreement
On October 19, 1999, Charles E. Harris signed an Employment Agreement
with us (the "Employment Agreement"), which superseded an employment agreement
that was about to expire on December 31, 1999. The Employment Agreement expires
on December 31, 2004 ("Term"); provided, on January 1, 2000, and on each day
thereafter, the Term extends automatically by one day unless at any time we or
Mr. Harris, by written notice, decides not to extend the Term, in which case the
Term will expire five years from the date of the written notice. Accordingly, if
we or Mr. Harris were to provide notice on June 30, 2004, the Term would expire
on June 30, 2009.
During the period of employment, Mr. Harris shall serve as our Chairman
and Chief Executive Officer; be responsible for our general management of the
affairs and all subsidiaries, reporting directly to our Board of Directors;
serve as a member of the Board for the period of which he is and shall from time
to time be elected or reelected; and serve, if elected, as our President and as
an officer and director of any subsidiary or affiliate of the Company.
Mr. Harris is to receive compensation under his Employment Agreement in
the form of base salary of $208,315 for 2000, with automatic yearly adjustments
to reflect inflation. In addition, the Board may increase such salary, and
consequently decrease it, but not below the level provided for by the automatic
adjustments described above. Mr. Harris is also entitled to participate in our
Profit-Sharing Plan as well as in all compensation or employee benefit plans or
programs, and to receive all benefits, perquisites, and emoluments for which
salaried employees are eligible. Under the Employment Agreement, we will furnish
Mr. Harris with certain perquisites which include a company car, membership in
certain clubs and up to a $5,000 annual reimbursement for personal, financial or
tax advice.
The Employment Agreement provides Mr. Harris with life insurance for
the benefit of his designated beneficiaries in the amount of $2,000,000;
provides reimbursement for uninsured medical expenses, not to exceed $10,000 per
annum, adjusted for inflation, over the period of the contract; provides Mr.
Harris and spouse with long-term care insurance; and provides disability
insurance in the amount of 100 percent of his base salary. These benefits are
for the term of the contract.
The Employment Agreement provides severance pay in the event of
termination without cause or by constructive discharge and also provides for
certain death benefits payable to the surviving spouse equal to the executive's
base salary for a period of two years.
In addition, Mr. Harris is entitled to receive severance pay pursuant
to the severance compensation agreement that he entered into with us, effective
August 15, 1990. The severance compensation agreement provides that if,
following a change in our control, as defined in the agreement, such
individual's employment is terminated by us without cause or by the executive
within one year of such change in control, the individual shall be entitled to
receive compensation in a lump sum payment equal to 2.99 times the individual's
average annualized compensation and payment of other welfare benefits. If Mr.
Harris's termination is without cause or is a constructive discharge, the amount
payable under the Employment Agreement will be reduced by the amounts paid
pursuant to the severance compensation agreement.
SERP
The Employment Agreement provides that we adopt a supplemental
executive retirement plan (the "SERP") for the benefit of Mr. Harris. Under the
SERP, we will cause an amount equal to one-twelfth of Mr. Harris's current base
salary to be credited each month (a "Monthly Credit") to a special account
maintained for this purpose on our books for the benefit of Mr. Harris (the
"SERP Account"). The amounts credited to the SERP Account will be deemed
invested or reinvested in such mutual funds or U.S. Government securities as
determined by Mr. Harris. The SERP Account will be credited and debited to
reflect the deemed investment returns, losses and expenses attributed to such
deemed investments and reinvestments. Mr. Harris's benefit under the SERP will
equal the balance in the SERP Account and such benefit will always be 100
percent vested (i.e., not forfeitable). Mr. Harris will determine the form and
timing of the distribution of the balance in the SERP Account; provided,
however, in the event of the termination of Mr. Harris's employment, the balance
in the SERP Account will be distributed to Mr. Harris or his beneficiary, as the
case may be, in a lump-sum payment within 30 days of such termination. We
contributed $298,306 during 2003 to a rabbi trust established for the purpose of
accumulating funds to satisfy the obligations incurred by the Company under the
SERP. The restricted funds for the SERP Plan total $1,212,078 at December 31,
2003. Mr. Harris's rights to benefits pursuant to this SERP will be no greater
than those of a general creditor of the Company.
Senior Code of Ethics
On March 19, 2004, the Board of Directors adopted a Senior Code of
Ethics for Chief Executive and Senior Financial Officers. A copy of this code of
ethics will be provided, free of charge, to each shareholder as of March 26,
2004, upon the written request of such shareholder by writing to: Investor
Relations, Harris & Harris Group, Inc., 111 West 57th Street, Suite 1100, New
York, New York 10019.
Remuneration of Directors and Others
The following table sets forth the compensation paid by us for the
fiscal year ended December 31, 2003 to our directors and others. During the
fiscal year ended December 31, 2003, we did not pay any pension or retirement
benefits.
Total Compensation
Name of Director Aggregate Compensation ($) Paid to Directors ($)
---------------------- ---------------------------- ---------------------
Independent Directors:
Dr. C. Wayne Bardin 19,000 19,000
Dr. Phillip A. Bauman 18,000 18,000
G. Morgan Browne(1) 21,462 21,462
Dugald A. Fletcher 19,000 19,000
James E. Roberts 16,000 16,000
Glenn E. Mayer 18,000 18,000
Mark A. Parsells(2) 1,214 1,214
Charles E. Ramsey 13,000 13,000
Interested Directors:
Lori D. Pressman(3) 75,725 75,725
Dr. Kelly S. Kirkpatrick(4) 18,926 18,926
Charles E. Harris(5) 0 0
--------------------
(1) Includes $462 for reimbursement for travel expenses to attend board
meetings.
(2) Includes $414 for reimbursement for travel expenses to attend board
meetings.
(3) Includes $1,725 for reimbursement for travel expenses to attend board
meetings and $57,000 for consulting services. Ms. Pressman may be
considered an "interested person" because of consulting work performed for
us.
(4) Includes $1,613 for reimbursement for travel expenses to attend board
meetings and $1,313 for consulting services. Dr. Kirkpatrick may be
considered an "interested person" because of consulting work performed for
us.
(5) Mr. Harris is an "interested person" as defined in the 1940 Act.
Effective June 18, 1998, directors who were not officers received
$1,000 for each meeting of the Board of Directors and $1,000 for each committee
meeting they attended in addition to a monthly retainer of $500. Prior to June
18, 1998, the directors were paid $500 for committee meetings and no monthly
retainer. We also reimburse our directors for travel, lodging and related
expenses they incur in attending board and committee meetings. The total
compensation and reimbursement for expenses paid to all directors in 2003 was
$162,014.
In 1998, the Board of Directors approved that effective January 1,
1998, 50 percent of all director fees be used to purchase our common stock from
us. However, effective March 1, 1999, the Board of Directors approved that
directors purchase our common stock in the open market, rather than from us.
During 2000 and 2001, the outside directors (i.e., all directors except Mr.
Harris) bought a total of 15,818 and 7,944 shares, respectively, in the open
market. In 2002, the outside directors bought 9,524 shares in the open market
and 43,426 shares through exercise of rights in a public offering of our common
stock. In 2003, the directors bought 7,860 shares in the open market.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires our
officers and directors, and persons who own more than 10 percent of our common
stock, to file reports (including a year-end report) of ownership and changes in
ownership with the Securities and Exchange Commission (the "SEC") and to furnish
the Company with copies of all reports filed.
Based solely on a review of the forms furnished to us, or written
representations from certain reporting persons, we believe that all persons who
were subject to Section 16(a) in 2003 complied with the filing requirements.
SALE OF RIGHTS TO PURCHASE COMMON STOCK AT NOT
LESS THAN THE GREATER OF THE MARKET VALUE OR THE
NET ASSET VALUE PER SHARE AT THE TIME OF ISSUANCE
(Proposal No. 2)
Proposal
During the coming year the Board of Directors believes it would be in
our best interest to have the ability to offer long-term rights (which may be
accompanied by or be part of other securities, including convertible debt or
convertible preferred securities) to purchase common stock at an exercise price
that will not be less than the greater of the market value or the net asset
value per share at the time of issuance of such long-term rights. Section 61(a)
of the 1940 Act permits a business development company such as us to sell such
securities on such terms (and to issue shares of common stock upon their
exercise), only if several conditions are satisfied. Specifically, such practice
must be approved by a majority of the independent directors and shareholders of
the issuer within 12 months prior to sale. In addition, a majority of the
issuer's independent directors must determine in good faith that the issuance of
such securities is in the best interests of the Company and our shareholders and
that the price at which such rights or other securities are to be sold (which
refers to the exercise or conversion price in the case of rights such as
warrants, options or conversion rights) is not less than a price which closely
approximates the market value for the underlying shares of common stock at the
time of issuance of such rights or other securities. Finally, the long-term
rights or other securities outstanding at any particular time may not be
exercisable or convertible for more than 25% of the common stock outstanding at
that time. The subsequent issuance of shares upon exercise of properly
authorized rights is permitted without regard to net asset value or market value
at the time of exercise. Our Board of Directors has approved and recommends to
the shareholders for their approval a proposal authorizing us, over the next
year, to issue long-term rights to purchase common stock (subject to the 25%
limitation stated above) at exercise prices that will not be less than the
greater of the market value or the net asset value per share at the time of
issuance of such rights. Upon obtaining the requisite shareholder approval, we
will comply with the foregoing requirements in connection with any financing
undertaken pursuant to this proposal.
Reasons for the Proposal
Management and the Board of Directors have determined that it would be
advantageous to us to have the ability to sell, either alone or as part of
another security, warrants, options or rights to purchase common stock in
connection with our financing and capital raising activities. This ability may
be a cost-effective way for us to raise capital. Our Board of Directors has
determined that it would be in the best interest of the Company and our
shareholders to increase our assets so that we may be in a better position to
make follow-on investments and take advantage of attractive new investment
opportunities in tiny technology, including nanotechnology, microsystems and
microelectromechanical systems (MEMS), augment working capital, increase the
diversification of our portfolio and achieve other net benefits to us. We
believe that our prior investment and expertise in the tiny technology sector
are likely to lead to several attractive investment opportunities in the tiny
technology sector becoming available to us over the next one to two years. We do
not have any current plans to issue rights or other securities and would
determine to do so only after reviewing the pace at which we are investing the
proceeds of our recent stock offering and the level and attractiveness of
investment opportunities becoming available.
The Board also believes that increasing our assets will lower our
expense ratio by spreading our fixed costs over a larger asset base. The
issuance of additional common stock may also enhance the liquidity of our common
stock on the Nasdaq National Market.
Although we are permitted without shareholder approval to engage in
rights offerings to our existing shareholders of short-term rights to purchase
common stock at less than net asset value per share, these offerings must either
be non-transferable, in which case shareholders who decide not to participate
will have no means of capturing any portion of the value of the right to acquire
shares at a discount, or must be limited in such a manner that we, after
applying the offering discount, can increase our capital base by only
approximately 25 percent per year. In addition, offerings of transferable rights
whose exercise price is at a discount to net asset value may be made only once
per year. In 2002, we made such a transferable rights offering and believe that
the investment opportunities in tiny technology over the coming year are likely
to be sufficient to justify raising capital. Inasmuch as the Board of Directors
believes that it would not be in the best interests of shareholders for us to
engage in large scale nontransferable rights offerings, it believes that the
proposal is an attractive way to give us additional flexibility to take
advantage of investment opportunities that may arise over the next one to two
years.
The Board of Directors has approved and is seeking shareholder approval
of the proposal described above to sell, either alone or as part of another
security, warrants, options or rights to purchase common stock. The final terms
of any such sale, including price, term, and vesting requirements, will be
determined by the Board of Directors at the time of issuance. Also, the nature
and amount of consideration that would be received by us at the time of issuance
and the use of any such consideration would be considered and approved by the
Board of Directors at the time of issuance. Any such issuance may be made
pursuant to either a public or non-public offering, as determined by the Board
of Directors in an appropriate manner prior to the time of issuance. Any such
sale would be anticipated to result in a potential increase in the number of
outstanding shares of common stock. The long-term rights or other securities
outstanding at any particular time may not be exercisable or convertible for
more than 25% of the common stock outstanding at that time.
Dilution
Any such sale, other than to existing shareholders, would be
potentially dilutive to the voting power of existing shareholders and could be
dilutive with regard to dividends and other economic aspects of the common
stock. Because the number of shares of common stock that could be so issued and
the timing of any issuance is not currently known, the actual dilutive effect
cannot be predicted. In addition, because the exercise price per share at the
time of exercise could be less than the net asset value per share at the time of
exercise and because we could well incur expenses in connection with any such
sale, such exercise could result in a dilution of net asset value per share at
the time of exercise for all shareholders. Such dilution would
disproportionately affect non-subscribing shareholders.
Leverage
Any long-term rights issued may be accompanied by or be part of other
securities, including convertible debt or convertible preferred securities. If
we issue convertible debt or convertible preferred securities accompanied by
long-term rights, such issuance would result in the use of leverage by us and
would require us to make periodic interest or dividend payments. The use of
leverage results in additional risks and can magnify the effect of any losses.
If the income and gains earned on securities purchased with the proceeds of such
convertible securities are greater than the cost of leverage, our return on the
shares will be greater than if leverage had not been used. Conversely, if the
income or gains from the securities purchased with such proceeds does not cover
the cost of leverage, the return to us will be less than if leverage had not
been used. There is no assurance that a leveraging strategy will be successful.
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE "FOR" THIS PROPOSAL.
Other Business
The Board of Directors does not intend to bring any other matters
before the Annual Meeting and, at the date of mailing of this proxy statement,
has not been informed of any matter that others may bring before the Annual
Meeting. However, if any other matters properly come before the Annual Meeting,
it is the intention of the persons named in the accompanying proxy to vote such
proxy in accordance with their judgment on such matters.
Annual Reports on Form 10-K
Our Annual Report on Form 10-K, as filed with the SEC, is being
delivered with this proxy statement.
We undertake to provide, without charge, to each shareholder as of
March 26, 2004, upon the written request of such shareholder, a copy of our
Annual Report on Form 10-K, including the financial statements and the financial
statement schedules, required to be filed with the SEC for our most recent
fiscal year. Any shareholder who would like to request a copy of our most recent
Annual Report on Form 10-K may do so by submitting a written request, which
shall contain a representation in good faith that such shareholder was a
beneficial owner as of March 26, 2004 of our securities entitled to vote, to the
following address:
Investor Relations
Harris & Harris Group, Inc.
111 West 57th Street, Suite 1100
New York, NY 10019
Submission of Shareholder Proposals
Any shareholder proposals intended to be presented for inclusion in our
proxy statement and form of proxy for the next annual meeting of shareholders to
be held in 2005 must be received in writing by the Secretary of the Company at
Harris & Harris Group, Inc., 111 West 57th Street, New York, New York 10019 no
later than January 23, 2005, in order for such proposals to be considered for
inclusion in the proxy statement and proxy relating to the 2005 annual meeting
of shareholders. Submission of a proposal does not guarantee inclusion in the
proxy statement, as the requirements of certain federal laws and regulations
must be met by such proposals.
Under our Bylaws, nominations for director may be made only by the
Board or the Nominating Committee, or by a shareholder entitled to vote who has
delivered written notice to our Secretary (containing certain information
specified in the Bylaws) not less than 90 days nor more than 120 days prior to
the anniversary of the date of the immediately preceding annual meeting of
shareholders; provided, however, that in the event that the annual meeting is
called for a date that is not within 30 days before or after such anniversary
date, notice by the shareholder in order to be timely must be so received not
later than the close of business on the 10th day following the day on which
notice of the date of the annual meeting was mailed or such public disclosure of
the date of the annual meeting was made, whichever first occurs. The Bylaws also
provide that no business may be brought before an annual meeting of the
shareholders except as specified in the notice of the meeting or as otherwise
properly brought before the meeting by or at the direction of the Board or by a
shareholder entitled to vote who has delivered written notice to our Secretary
(containing certain information specified in the Bylaws) not less than 90 days
nor more than 120 days prior to the anniversary of the date of the immediately
preceding annual meeting of shareholders; provided, however, that in the event
that the annual meeting is called for a date that is not within 30 days before
or after such anniversary date, notice by the shareholder in order to be timely
must be so received not later than the close of business on the 10th day
following the day on which notice of the date of the annual meeting was mailed
or such public disclosure of the date of the annual meeting was made, whichever
first occurs.
Rule 14a-4 of the Securities and Exchange Commission's proxy rules
allows us to use discretionary voting authority to vote on matters coming before
an annual meeting of shareholders, if we do not have notice of the matter at
least 45 days before the anniversary of the date on which we first mailed our
proxy materials for the prior year's annual meeting of shareholders or the date
specified by the advance notice provision in our Bylaws. Our Bylaws contain such
an advance notice provision as described above. For our Annual Meeting of
Shareholders expected to be held on April 22, 2005, shareholders must submit
such written notice to our Secretary in accordance with our advance notice
provision, as described above.
A copy of the full text of the Bylaw provisions discussed above may be
obtained by writing to our Secretary.
By Order of the Board of Directors
New York, New York /s/ Susan T. Harris
April 12, 2004 ---------------------------------
Susan T. Harris
Secretary
APPENDIX A
----------
CHARTER
of the AUDIT COMMITTEE
of the BOARD of DIRECTORS
of
Harris & Harris Group, Inc.
The Board of Directors (the "Board") of Harris & Harris Group, Inc.
(the "Corporation") has determined that the Audit Committee of the Board shall
assist the Board in fulfilling certain of the Board's oversight
responsibilities. The Board hereby adopts this Charter to establish the
governing principles of the Audit Committee and shall review and reassess the
adequacy of this Charter on an annual basis.
I. Role of the Audit Committee
The role of the Audit Committee is to act on behalf of the Board in
fulfilling the following responsibilities of the Board:
A. To oversee all material aspects of the Corporation's accounting and
financial reporting processes, internal control and audit functions,
except those that are specifically related to the responsibilities of
another committee of the Board;
B. To monitor the independence and performance of the Corporation's
independent accountants;
C. To provide a means for open communication among the Corporation's
independent accountants, financial and senior management and the Board;
and
D. To oversee compliance by the Corporation with legal and regulatory
requirements.
While the Audit Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Audit Committee to plan or conduct
financial statement audits or to determine that the Corporation's financial
statements are complete and accurate or are in accordance with generally
accepted accounting principles. The responsibility to plan and conduct financial
statement audits is that of the Corporation's independent accountants. The
Corporation's management has the responsibility to determine that the
Corporation's financial statements are complete and accurate and in accordance
with generally accepted accounting principles. Nor is it the duty of the Audit
Committee to assure the Corporation's compliance with laws and regulations. The
primary responsibility for these matters also rests with the Corporation's
management.
II. Composition of the Audit Committee
A. The Board shall designate the members of the Audit Committee at the
Board's annual organizational meeting and each member shall serve,
subject to his or her earlier resignation or removal from the Audit
Committee or his or her ceasing to be a director, until the next such
meeting and until their successors are designated by the Board.
B. The Audit Committee shall consist of at least three members, but no more
than six members. The members of the Audit Committee shall meet the
independence and experience requirements of the rules of the principal
market or transaction reporting system on which the Corporation's
securities are traded or quoted (currently, the Nasdaq National Market),
Section 10A(m)(3) of the Securities Exchange Act of 1934 and the rules
and regulations of the Securities and Exchange Commission (the "SEC").
III. Meeting of the Audit Committee
The Audit Committee shall meet at least two times a year and more
frequently as circumstances may require. The Audit Committee shall be
responsible for meeting with the independent accountants at their request to
discuss the interim financial statements. The Audit Committee shall meet
privately with the independent accountants at least annually in a separate
executive session.
IV. Responsibilities of the Audit Committee
The Audit Committee shall assist the Board in overseeing the
Corporation's financial and operating reporting practices, internal controls and
compliance with laws and regulations.
Specifically, the Audit Committee shall have the responsibility with
respect to:
A. The Corporation's Risks and Control Environment:
o To discuss with the Corporation's management and independent
accountants the integrity of the Corporation's financial reporting
processes and controls, particularly the controls in areas
representing significant financial and business risks; and
o To investigate and follow up on any matters brought to its attention
within the scope of its duties.
B. The Corporation's Independent Accountants:
o The Audit Committee shall have the sole authority to appoint or
replace the independent accountants (subject to ratification by the
Board). The Audit Committee shall be directly responsible for the
compensation and oversight of the work of the independent accountants
(including resolution of disagreements between management and the
independent accountants regarding financial reporting) for the purpose
of preparing or issuing an audit report or related work. The
independent accountants shall report directly to the Audit Committee;
o To ensure that the Audit Committee receives annually from the
Corporation's independent accountants the information about all of the
relationships between the independent accountants and the Corporation
that the independent accountants are required to provide to the Audit
Committee, to actively engage in a dialogue with the independent
accountants about any relationships between the independent
accountants and the Corporation or any services that the independent
accountants provide or propose to provide that may affect the
objectivity and independence of the independent accountants and to
take, or recommend that the Board take, any appropriate action to
oversee the independence of the independent accountants;
o The Audit Committee shall establish guidelines similar to those set
forth in Annex A relating to the Corporation's hiring of employees or
former employees of the independent accountants who participated in
any capacity in the audit of the Corporation;
o The Audit Committee shall establish policies or procedures similar to
those set forth in Annex B to pre-approve all auditing services and
permitted non-audit services (including fees and terms thereof) (the
"Covered Services") to be performed for the Corporation by its
independent accountants. The Audit Committee may form and delegate
authority to the Chairman of the Audit Committee or subcommittees
consisting of one or more members when appropriate, including the
authority to grant pre-approvals of audit and permitted non-audit
services, provided that decisions of the Chairman or such subcommittee
to grant pre-approvals shall be presented to the full Audit Committee
at its next scheduled meeting; and
o To ensure the rotation of the lead (or coordinating) audit partner
(or, if required by the rules and regulations of the SEC, other
employees of the independent accountants) having primary
responsibility for the audit and the audit partner responsible for
reviewing the audit as required by law.
C. The Corporation's Financial Reporting Process:
o To oversee the Corporation's selection of and major changes to its
accounting policies;
o To meet with the Corporation's independent accountants and financial
management both to discuss the proposed scope of the audit and to
discuss the conclusions of the audit, including any items that the
independent accountants are required by generally accepted auditing
standards to discuss with the Audit Committee, such as, any
significant changes to the Corporation's accounting policies, the
integrity of the Corporation's financial reporting process and any
proposed changes or improvements in financial, accounting or auditing
practices;
o To discuss with the Corporation's financial management and independent
accountants the Corporation's annual results and, when appropriate,
the interim results before they are made public;
o To review with management and the independent accountants, prior to
the filing of an audit report with the SEC, all alternative treatments
of financial information within generally accepted accounting
principles that have been discussed with management, ramifications of
the use of such alternative disclosures and treatments, and the
treatment preferred by independent accountants;
o To review with management and the independent accountants, prior to
the filing of an audit report with the SEC, material written
communications between the independent accountants and management,
such as any management letter or schedule of unadjusted differences;
o Review disclosures made to the Audit Committee by the Corporation's
Chief Executive Officer and Chief Financial Officer during their
certification process for the Form 10-K and Form 10-Q about any
significant deficiencies in the design or operation of internal
controls or material weaknesses therein and any fraud involving
management or other employees who have a significant role in the
Corporation's internal controls;
o To review with the independent accountants, prior to the filing of an
audit report with the SEC, all critical accounting policies and
practices to be used;
o To review and discuss with the Corporation's financial management and
independent accountants the Corporation's audited financial statements
including qualitative judgments, appropriateness of accounting
principles (old and new), financial disclosure practices, and any
observations regarding the quality of accounting principles and
underlying estimates and, when appropriate, the Corporation's interim
financial statements, before they are made public;
o To recommend to the Board of Directors that the audited financial
statements be included in the Corporation's Annual Report on Form
10-K; and
o To issue for public disclosure by the Corporation the report required
by the rules of the SEC.
D. Other Matters
o To review and reassess the adequacy of this charter on an annual
basis;
o To review reports and any financial information submitted by the
Corporation to a government body or the public;
o To report to the Board the matters discussed at each meeting of the
Audit Committee;
o To administer the procedures set forth in Annex C relating to the
receipt, retention and treatment of complaints received by the
Corporation regarding accounting, internal accounting controls or
auditing matters, and the confidential, anonymous submission by
employees or any other provider of accounting related services of
concerns regarding questionable accounting or auditing matters;
o To keep an open line of communication with the financial and senior
management and the independent accountants and the Board; and
o To review in advance and approve any "related party" transaction, or
series of similar transactions, to which the Corporation or any of its
subsidiaries was or is to be a party, in which the amount involved
exceeds $60,000 and in which such related party had, or will have, a
direct or indirect material interest. For purposes of this item, a
"related party" includes any director or executive officer of the
Corporation, any nominee for election as a director, any security
holder who is known to the Corporation to own of record or
beneficially more than five percent of any class of the Corporation's
voting securities, and any member of the immediate family(2) of any of
the foregoing persons. The materiality of any interest is to be
determined on the basis of the significance of the information to
investors in light of all the circumstances of the particular case.
--------
(2) A person's immediate family shall include such person's spouse,
parents, children, siblings, mothers and fathers-in-law, sons and
daughters-in-law, and brothers and sisters-in-law.
V. Advisors/Funding
In discharging its duties hereunder, the Audit Committee shall have the
authority, to the extent it deems necessary or appropriate, to retain
independent legal, accounting or other advisors. The Corporation shall provide
for appropriate funding, as determined by the Audit Committee, for payment of
such compensation as is determined by the Audit Committee to the independent
accountants and to any other advisors employed by the Audit Committee. The
Corporation shall also provide funding for any other functions or initiatives
undertaken by the Audit Committee.
APPENDIX B
----------
NOMINATING COMMITTEE CHARTER
OF THE
BOARD OF DIRECTORS OF
HARRIS & HARRIS GROUP, INC.
AS APPROVED BY THE BOARD OF DIRECTORS
MARCH 10, 2004
1. PURPOSE OF THE NOMINATING COMMITTEE
The purpose of the Nominating Committee (the "Nominating Committee")
of the Board of Directors (the "Board") of Harris & Harris Group, Inc. (the
"Company") is to identify individuals qualified to serve on the Board as
directors and on committees of the Board, and to select, or to recommend that
the Board select, the Board nominees for the next annual meeting of
shareholders.
2. COMPOSITION OF THE NOMINATING COMMITTEE
The Nominating Committee shall be comprised of at least three of the
Directors as determined by the Board that are "independent" as defined in
Section 2(a)(19) of the Investment Company Act of 1940 (the "1940 Act").
3. MEETINGS AND PROCEDURES OF THE NOMINATING COMMITTEE
The Nominating Committee shall fix its own rules of procedure, which
shall be consistent with the charter documents of the Company and this
Nominating Committee Charter. The Nominating Committee shall meet as
circumstances require. The chairperson of the Nominating Committee or a majority
of the members of the Nominating Committee may call a meeting of the Nominating
Committee.
A majority of the members of the Nominating Committee present in person
or by means of a conference telephone or other communications equipment by means
of which all persons participating in the meeting can communicate with each
other shall constitute a quorum and shall act by majority vote. The Nominating
Committee may also take action by written consent of the number of members that
would be required to adopt a resolution if all members of the Nominating
Committee were present.
The Nominating Committee may form subcommittees for any purpose that
the Nominating Committee deems appropriate and may delegate to such
subcommittees such power and authority as the Nominating Committee deems
appropriate; provided, however, that no subcommittee shall consist of fewer than
two members; and provided further that the Nominating Committee shall not
delegate to a subcommittee any power or authority required by any law,
regulation or listing standard to be exercised by the Nominating Committee.
The Nominating Committee may request that any directors, officers or
employees of the Company, or other persons whose advice and counsel are sought
by the Nominating Committee, attend any meeting of the Nominating Committee to
provide such pertinent information as the Nominating Committee requests.
The Nominating Committee shall keep written minutes of its meetings,
which minutes shall be maintained with the books and records of the Company and
delivered to the Board, including a description of all actions taken by the
Nominating Committee at the meeting.
4. AUTHORITY
(1) The Nominating Committee shall have the authority to carry out its duties
and responsibilities as set forth in this Nominating Committee Charter. The
Nominating Committee shall have sole authority to retain and terminate any
search firm to be used to identify director candidates, including sole authority
to approve the search firm's fees and other retention terms.
5. DUTIES OF THE NOMINATING COMMITTEE
The Nominating Committee shall have the following goals and
responsibilities with respect to Board candidates and nominees:
(i) establish procedures for evaluating the suitability of potential
director nominees;
(ii) select the nominees for election by the shareholders or
appointment by the Board, as the case may be, pursuant to the
Bylaws of the Company. Persons selected by the Nominating
Committee shall possess such knowledge, experience, skills,
expertise and diversity so as to enhance the Board's ability to
manage and direct the affairs and business of the Company,
including, when applicable, to enhance the ability of committees
of the Board to fulfill their duties and/or to satisfy any
independence requirements imposed by law, regulation or the Nasdaq
National Market listing requirements; and
(iii) review the suitability for continued service as a director when
his or her term expires and at such other times as the Nominating
Committee deems necessary or appropriate, and to recommend whether
or not the director should be re-nominated.
6. OUTSIDE ADVISERS
The Nominating Committee may retain, at the Company's expense, such
independent counsel or other advisers as it deems necessary.
H&H FINANCIAL PRINTING PROOF #3 4/05/04 12:10 CUST. THE BANK OF NEW YORK
FILE NAME 8895 HARRIS & HARRIS P.L
Admin: Annette Hogan
Forms Coordinator-Greg Harris Ext#6282
DETACH PROXY CARD HERE
|_| Sign, Date and Return the |X|
Proxy Card Promptly Using Votes must be indicated
the Enclosed Envelope. (x) in Black or Blue ink.
1. ELECTION OF DIRECTORS
FOR all nominees |_| WITHHOLD AUTHORITY to vote |_| *EXCEPTIONS |_|
listed below for all nominees listed
below
Nominees: Dr. C. Wayne Bardin, Dr. Phillip A. Bauman, G. Morgan Browne,
Dugald A. Fletcher, Charles E. Harris, Dr. Kelly S. Kirkpatrick,
Mark A. Parsells, Lori D. Pressman, Charles E. Ramsey,
James E. Roberts.
(INSTRUCTIONS: To withhold authority to vote for any individual nominee,
mark the "Exceptions" box and write that nominee's name in the space
provided below.)
*Exceptions: ___________________________________________________________
2. To approve a proposal to authorize the
Company to offer long-term rights, including FOR AGAINST ABSTAIN
warrants and options, to purchase common
stock at an exercise price that will not be less |_| |_| |_|
than the greater of the market value or the net
asset value per share at the time of issuance
of the rights.
3. At their discretion, the Proxies are authorized
to vote upon such other business, including
adjournment, as may properly come before the
meeting or any adjournment or adjournments thereof.
To change your address, please mark this box. |_|
To include any comments, please mark this box. |_|
------------------------------------
S C A N L I N E
------------------------------------
Please sign exactly as name appears to the left. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee or guardian, please give full title as such. If a corporation, please
sign in full corporation name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person.
----------------------------------- --------------------------------------
Date Share Owner sign here Co-Owner sign here
H&H FINANCIAL PRINTING PROOF #3 4/05/04 12:10 CUST. THE BANK OF NEW YORK
FILE NAME 8895 HARRIS & HARRIS P.L
Admin: Annette Hogan
Forms Coordinator-Greg Harris Ext#6282
HARRIS & HARRIS GROUP, INC.
111 West 57th Street
New York, NY 10019
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints CHARLES E. HARRIS and HELENE B. SHAVIN
and each of them, with full power of substitution, proxies to vote at the
annual meeting of shareholders to be held on May 12, 2004, or an adjournment
thereof, to represent and to vote all the shares of common stock of Harris &
Harris Group, Inc. that the undersigned is entitled to vote with all powers
the undersigned would have if personally present, on the following matters as
designated on the reverse side and in their discretion with respect to such
other business as may properly come before the meeting or any adjournment
thereof.
The Board of Directors recommends a vote "FOR" all the nominees listed in
item 1 and "FOR" item 2.
When properly executed, this proxy will be voted as specified and in
accordance with the accompanying proxy statement. If no instruction is
indicated, this proxy will be voted "FOR" items 1, 2.
(Continued and to be dated and signed on the reverse side.)
HARRIS & HARRIS GROUP, INC.
P.O. BOX 11469
NEW YORK, N.Y. 10203-0469