Unassociated Document
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of
the
Securities Exchange Act of 1934 (Amendment
No. )
Filed
by the Registrant x
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Filed
by a Party other than the Registrant o
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Check
the appropriate box:
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
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x
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Definitive
Proxy Statement
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o
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Definitive
Additional Materials
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o
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Soliciting
Material Pursuant to §240.14a-12
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Harris
& Harris Group, Inc.
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(Name
of Registrant as Specified In Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if other than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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x
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No
fee required.
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o
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Fee
computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant
to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee
is calculated and state how it was determined):
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(4)
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Proposed
maximum aggregate value of transaction:
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(5)
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Total
fee paid:
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o
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Fee
paid previously with preliminary materials.
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o
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Check
box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement No.:
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(3)
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Filing
Party:
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(4)
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Date
Filed:
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NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
TO
BE HELD MAY 1, 2008
To
the
Shareholders of Harris & Harris Group, Inc.:
NOTICE
IS
HEREBY GIVEN that the 2008 Annual Meeting of the Shareholders of Harris &
Harris Group, Inc. (the "Company") will be held on May 1, 2008, at 3:00 p.m.,
local time, at The Princeton Club of New York, 15 West 43rd Street (between
5th
and 6th Avenues), New York, New York 10036. 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:
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1.
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To
elect 11 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;
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2.
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To
ratify, confirm and approve the Audit Committee’s selection of
PricewaterhouseCoopers LLP as the independent registered public accountant
for the fiscal year ending December 31, 2008;
and
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3.
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To
transact such other business as may properly come before the meeting
or
any postponements or adjournments
thereof.
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We
encourage you to contact us at 877-TINY-TECH, from 9:00 a.m. to 5:00 p.m. EST,
if you have any questions.
Holders
of record of the Company's common stock as of the close of business on March
10,
2008, 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 card and return it promptly in the enclosed business
reply envelope, which requires no postage if mailed in the United States, so
you
will be represented at the Annual Meeting. Even if you vote your shares prior
to
the meeting, you still may attend the meeting and vote your shares in
person.
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By
Order of the Board of Directors,
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March
25, 2008
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/s/
Susan T. Harris
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Susan
T. Harris
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Secretary
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IMPORTANT:
PLEASE MAIL YOUR PROXY PROMPTLY IN THE ENCLOSED ENVELOPE. THE MEETING DATE
IS
MAY 1, 2008.
(THIS
PAGE LEFT BLANK INTENTIONALLY)
Harris
& Harris Group, Inc.
111
West
57th
Street
New
York,
New York 10019
(212)
582-0900
PROXY
STATEMENT
FOR
THE
ANNUAL
MEETING OF SHAREHOLDERS
TO
BE HELD ON MAY 1, 2008
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"), for use at the 2008 Annual Meeting of
Shareholders (the "Annual Meeting"), to be held on May 1, 2008, and at any
postponements or adjournments thereof. The enclosed proxy card, this Proxy
Statement and the Company's Annual Report for the fiscal year ended December
31,
2007, are being first transmitted on or about March 25, 2008, to our
shareholders.
The
Annual Meeting will be held on Thursday, May 1, 2008, at 3:00 p.m., local time,
at The Princeton Club of New York, 15 West 43rd Street (between 5th and 6th
Avenues), New York, New York 10036. At the Annual Meeting, shareholders will
be
asked to elect 11 directors to serve on the Board of Directors of the Company
until the next annual meeting; or until their successors have been duly elected
and qualified, and to vote on the other matters stated in the accompanying
Notice and described in more detail in this Proxy Statement.
We
encourage you to vote your shares, either by voting in person at the Annual
Meeting or by granting a proxy (i.e., authorizing someone to vote your shares).
If you properly sign and date the accompanying proxy card and the Company
receives it in time for the Annual Meeting, the persons named as proxies will
vote the shares registered directly in your name in the manner that you
specified. If
you give no instructions on the proxy card, the shares covered by the proxy
card
will be voted FOR the election of the nominees as directors and FOR the other
matters listed in the accompanying Notice. If
any other matters properly come before the Annual Meeting, the persons named
on
the proxies will vote upon such matters at their
discretion.
The
Board
of Directors has fixed the close of business on March 10, 2008, 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 23,314,573 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.
Purpose
of Meeting
At
the
Annual Meeting, you will be asked to vote on the following
proposals:
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1.
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To
elect 11 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 ("Election of Directors
Proposal");
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2.
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To
ratify, confirm and approve the Audit Committee's selection of
PricewaterhouseCoopers LLP as the independent registered public accountant
for the fiscal year ending December 31, 2008 ("Ratification of Auditor
Proposal"); and
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3.
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To
transact such other business as may properly come before the meeting
or
any postponements or adjournments
thereof.
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Solicitation
and Revocation
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, including if no instructions are
provided, shares represented by the proxies will be voted "FOR" all of 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.
Quorum
Required
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. A broker non-vote occurs when a broker holding shares
for
a beneficial owner does not vote on a particular proposal because the broker
does not have discretionary voting power for that particular item and has not
received instructions from the beneficial owner or other persons entitled to
vote.
Vote
Required
Election
of Directors.
For the
Election of Directors Proposal, the Directors will be elected by a plurality
of
the votes cast (that is, the 11 nominees who receive more affirmative votes
than
any other nominees will be elected).
Ratification
of Auditor.
For the
Ratification of Auditor Proposal, the proposal will be approved if a majority
of
the votes cast are cast in favor.
Other
Matters.
All
other matters being submitted to a shareholder vote pursuant to the Notice
of
Annual Meeting will be approved if a majority of the votes cast on a particular
matter are cast in favor of that matter.
For
purposes of the Election of Directors Proposal, the Ratification of Auditor
Proposal and unspecified matters that come before the meeting, votes withheld
or
abstentions will not be counted as votes cast on the matter and will have no
affect on the result of the vote. If your broker holds your shares in its
"street" name, the broker may vote your shares on the Election of Directors
Proposal, the Ratification of Auditor Proposal and unspecified matters that
come
before the meeting even if it does not receive instructions from you.
Information
Regarding This Solicitation
Proxies
are being solicited by Innisfree M&A Incorporated, pursuant to its standard
contract as proxy solicitor, the cost of which will be borne by us and is
estimated to be approximately $6,500 plus out-of-pocket expenses. Proxies will
be solicited by telephone or 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. Proxies may also be solicited by officers 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.
Principal
Shareholders and Ownership by Directors and Executive
Officers
Set
forth
below is information, as of March 10, 2008, with respect to the beneficial
ownership of our common stock by (i) each of our directors and nominees, (ii)
each of our named executive officers (as defined below) 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. None of the shares owned by directors
or
officers have been pledged. The information in the table below is from publicly
available information that may be as of dates earlier than March 10, 2008.
At
this time, we are unaware of any shareholder owning five percent or more of
the
outstanding shares of common stock other than Charles E. and Susan T. Harris.
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
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Amount and Nature
of
Beneficial
Ownership(1)
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Percentage of Outstanding
Common
Shares Owned(2)
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Independent
Directors:
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W.
Dillaway Ayres, Jr.
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2,031
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*
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Dr.
C. Wayne Bardin
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28,574(3)
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*
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Dr.
Phillip A. Bauman
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28,829(4)
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*
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G.
Morgan Browne
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35,431
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*
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Dugald
A. Fletcher
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23,081
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*
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Charles
E. Ramsey
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33,442
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*
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James
E. Roberts
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23,097
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*
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Richard
P. Shanley
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4,524
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*
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Interested
Directors:
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Charles
E. Harris
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1,671,166(5)
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7.0
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Douglas
W. Jamison
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267,324(6)
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1.1
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Kelly
S. Kirkpatrick
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7,481
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*
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Lori
D. Pressman
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8,067
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*
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Named
Executive Officers:
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Alexei
A. Andreev
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271,697(7)
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1.2
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Sandra
M. Forman
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126,902(8)
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*
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Michael
A. Janse
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237,891(9)
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1.0
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All
directors and executive officers as
a
group (20 persons)
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2,974,164
(10)
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11.9
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________________
(1) |
Beneficial
ownership has been determined in accordance with Rule 13d-3 of the
Securities Exchange Act of 1934.
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(2) |
The
percentage of ownership is based on 23,314,573 shares of common stock
outstanding as of March 10, 2008, together with the exercisable options
for such shareholder, as applicable. In computing the percentage
ownership
of a shareholder, shares that can be acquired upon the exercise of
outstanding options are not deemed outstanding for purposes of computing
the percentage ownership of any other person.
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(3) |
Includes
5,441 shares owned by Bardin LLC for the Bardin LLC Profit-Sharing
Keogh.
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(4) |
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.
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(5) |
Includes
1,039,559 shares owned by Mrs. Susan T. Harris, Mr. Harris's wife
and our
Corporate Secretary, 30,766 shares owned by Mr. Harris and 600,841
shares
that can be acquired upon the exercise of outstanding options by
Mr.
Harris.
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(6) |
Includes
247,681 shares that can be acquired upon the exercise of outstanding
options.
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(7) |
Includes
261,428 shares that can be acquired upon the exercise of outstanding
options.
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(8) |
Includes
250 shares owned by Edward Forman, Ms. Forman's husband, 270 shares
owned
jointly with Edward Forman and 119,200 shares that can be acquired
upon
the exercise of outstanding options by Ms.
Forman.
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(9) |
Includes
237,891 shares that can be acquired upon the exercise of outstanding
options.
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(10) |
Includes
1,668,513 shares that can be acquired upon the exercise of outstanding
options.
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Set
forth
below is the dollar range of equity securities beneficially owned by each
director and nominee as of March 10, 2008.
Name
of Director or Nominee
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Dollar
Range of Equity Securities
Beneficially
Owned (1)(2)(3)
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Independent
Directors
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W.
Dillaway Ayres, Jr.
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$10,001
- $50,000
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Dr.
C. Wayne Bardin
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Over
$100,000
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Dr.
Phillip A. Bauman
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Over
$100,000
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G.
Morgan Browne
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Over
$100,000
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Dugald
A. Fletcher
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Over
$100,000
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Charles
E. Ramsey
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Over
$100,000
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James
E. Roberts
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Over
$100,000
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Richard
P. Shanley
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$10,001
- $50,000
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Interested
Directors
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Charles
E. Harris (4)
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Over
$100,000
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Douglas
W. Jamison (4)
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Over
$100,000
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Kelly
S. Kirkpatrick (5)
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$10,001
- $50,000
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Lori
D. Pressman (5)
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$10,001
- $50,000
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(1) |
Beneficial
ownership has been determined in accordance with Rule 16a-1(a)(2)
of the
1934 Act.
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(2) |
The
dollar ranges are: none, $1-$10,000, $10,001-$50,000, $50,001-$100,000
and
over $100,000.
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(3) |
The
dollar ranges are based on the price of the equity securities as
of March
10, 2008.
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(4) |
Denotes
an individual who is an "interested person" as defined in the 1940
Act.
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(5) |
Denotes
an individual who may be considered an "interested person" because
of
consulting work performed for us.
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ELECTION
OF DIRECTORS
(Proposal
No. 1)
The
11
nominees listed below have been nominated to serve as our directors until the
next annual meeting or until their respective successors are duly elected and
qualified. All nominees currently serve as directors. 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 OF THE
NOMINEES.
Nominees
Certain
information, as of March 10, 2008, with respect to each of the 11 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. All of the nominees have agreed
to
serve if elected and consent to being referred to in this Proxy Statement.
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 Investment Company Act of 1940 (the
"1940 Act") or persons who may be considered "interested persons" because of
consulting work done for us. All
of
the nominees are currently directors of the Company. We
do not
have an advisory board.
Interested
Directors
Charles
E. Harris.
Mr.
Harris, age 65, currently serves as our Chairman, Chief Executive Officer and
as
a Managing Director. He has served as our Chief Executive Officer since July
1984 and as a Managing Director since January 2004. He has been a member of
our
Board of Directors and served as Chairman of the Board since April 1984. He
also
served as our Chief Compliance Officer from February 1997 to February 2001.
He
is Chairman of the Board, Chief Executive Officer and a Director of
Harris & Harris Enterprises, a wholly owned subsidiary of the Company.
His wife serves as our Corporate Secretary. He is a director of Mersana
Therapeutics, Inc., and of SiOnyx, Inc., privately held nanotechnology-enabled
companies in which we have investments. 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 was, until
2004, 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 biological sciences, and he is currently a member of its
President's Council. He also serves as a Trustee and head of the Audit Committee
of the Nidus Center, a not-for-profit, life sciences, business incubator in
St.
Louis, Missouri. He is a life-sustaining fellow of MIT and a shareholder of
its
Entrepreneurship Center. He is an "interested person" as defined in
Section 2(a)(19) of the 1940 Act, as a beneficial owner of more than five
percent of our common stock, as a control person and as one of our officers.
He
was graduated from Princeton University (A.B.) and from the Columbia University
Graduate School of Business (M.B.A.).
Douglas
W. Jamison.
Mr.
Jamison, age 38, has served as President and as Chief Operating Officer since
January 1, 2005, as Treasurer since March 2005, as a Managing Director
since January 2004, as Chief Financial Officer from January 2005 through
December 2007 and as Vice President from September 2002 through December 2004.
He has been a member of our Board of Directors since May 2007. Since January
2005, he has been President and a Director of Harris & Harris
Enterprises, Inc., a wholly owned subsidiary of Harris & Harris Group,
Inc. Upon Mr. Harris's retirement, scheduled for December 31, 2008, the Board
of
Directors has named Mr. Jamison to succeed Mr. Harris in Mr. Harris's positions
as Chairman and Chief Executive Officer. Mr. Jamison is a director of Ancora
Pharmaceuticals, Inc., of Nextreme Thermal Solutions, Inc., and of Phoenix
Molecular Corporation, privately held nanotechnology-enabled companies in which
we have investments. He is Co-Editor-in-Chief of "Nanotechnology Law &
Business." He is Co-Chair of the Advisory Board, Converging Technology Bar
Association, a member of the University of Pennsylvania Nano-Bio Interface
Ethics Advisory Board and a member of the Advisory Board, Massachusetts
Technology Collaborative Nanotechnology Venture Forum. His professional
societies include the Association of University Technology Managers. From 1997
to 2002, he worked as a senior technology manager at the University of Utah
Technology Transfer Office, where he managed intellectual property in physics,
chemistry and the engineering sciences. He was graduated from Dartmouth College
(B.A.) and the University of Utah (M.S.).
Lori
D. Pressman.
Ms.
Pressman, age 50, has served as a member of our Board of Directors since March
2002. She has served as a consultant to us on tiny technology, intellectual
property and in our due diligence work on certain prospective investments.
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,
including
certain of our portfolio 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
a Technology Licensing Officer from 1989 to 1995 and as Assistant Director
of
the Technology Licensing Office from 1996 to 2000. She was graduated from the
Massachusetts Institute of Technology (S.B., Physics) 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.
Independent
Directors
W.
Dillaway Ayres, Jr.
Mr.
Ayres, age 57, has served as a member of our Board of Directors since November
2006. He has served as the Chief Operating Officer of Cold Spring Harbor
Laboratory, a research and educational institution in the biological sciences,
since November of 2000. Prior to joining Cold Spring Harbor Laboratory in 1998,
Mr. Ayres had a 20-year business career during which he worked as a corporate
executive, investment banker and entrepreneur. In 1996, he co-founded Business
& Trade Network, Inc., a business-to-business, venture capital-backed
Internet company. Prior to that he worked for five years as a Managing Director
of Veronis, Suhler & Associates, a boutique investment banking firm in New
York specializing in the media/communications industry. At Veronis, Suhler,
he
focused on investing the firm's private equity fund. He was graduated from
Princeton University (A.B., English) and from the Columbia University Graduate
School of Business (M.B.A., Finance).
Dr.
C. Wayne Bardin.
Dr.
Bardin, age 73, has served as a member of our Board of Directors since December
1994. Since 1996, he has served as the President of Bardin LLC, a consulting
firm to pharmaceutical companies. From 1998 to 2003, he served as President
of
Thyreos Corp., a privately held, start-up pharmaceutical company. From 1978
through 1996, he was Vice President of The Population Council. His 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 the National
Institutes of Health, World Health Organization, The Ford Foundation and
numerous scientific societies. He was graduated from Rice University (B.A.),
Baylor University (M.S., M.D.) and he received a Doctor Honoris Causa from
the
University of Caen, the University of Paris and the University of
Helsinki.
Dr.
Phillip A. Bauman.
Dr.
Bauman, age 52, has served as a member of our Board of Directors since February
1998. Since 1999, he has been Senior Attending of Orthopedic Surgery at St.
Luke's/Roosevelt Hospital Center in Manhattan and since 2000, he has served
as
an elected member of the Executive Committee of the Medical Board of St.
Luke's/Roosevelt Hospital. Since 2005, he has been on the Board of Managers
for
the Hudson Crossing Surgery Center. Since 1997, he has been Assistant Professor
of Orthopedic Surgery at Columbia University. Since 1994, he has been a Vice
President of Orthopedic Associates of New York. He is an active member of the
American Academy of Orthopaedic Surgeons, the American Orthopaedic Society
for
Sports Medicine, the New York State Society of Orthopaedic Surgeons and the
American Medical Association. He was graduated from Harvard College (A.B.),
Harvard University (A.M., Biology) and the College of Physicians and Surgeons
at
Columbia University (M.D.).
G.
Morgan Browne.
Mr.
Browne, age 73, has served as a member of our Board of Directors since June
1992. Since 2004, he has been President and since 2000, a Trustee of Planting
Fields Foundation, a supporting institution of Planting Fields Arboretum State
Historic Park. He is Chairman of the OSI Pharmaceuticals Foundation which
supports cancer and diabetes patient care and science education. From 2001
to
2003, he served as Chief Financial Officer of Cold Spring Harbor Laboratory,
a
not-for-profit institution that conducts research and education programs in
the
biological sciences. From 1985 to 2000, 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 was a founding director of the New York Biotechnology
Association. He was graduated from Yale University (B.A.).
Dugald
A. Fletcher.
Mr.
Fletcher, age 78, was appointed Lead Independent Director on November 2, 2006.
Since 1996, he has served as a member of our Board of Directors. Since 1984,
he
has served as President of Fletcher & Company, Inc., a management
consulting firm. Until the end of 1997, he was Chairman of Binnings Building
Products Company, Inc. His 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
of Paine Webber Jackson & Curtis 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. He was graduated from
Harvard College (A.B.) and Harvard Business School (M.B.A.).
Charles
E. Ramsey.
Mr.
Ramsey, age 65, has served as a member of our Board of Directors since October
2002. Since 1997, he has been a consultant. 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. He is Chairman Emeritus of Bridges to
Community, a non-governmental organization dedicated to construction projects
in
Nicaragua. As Chairman Emeritus, he serves on the Executive, Personnel and
Administration and Fund Development Committees. He was graduated from Wittenberg
University (B.A.).
James
E. Roberts.
Mr.
Roberts, age 62, has served as a member of our Board of Directors since June
1995. Since January 2006, he has been President of AequiCap Insurance Company
and since September 2007, President of AequiCap Program Administrators. Mr.
Roberts is also a senior officer of various other AequiCap affiliated entities.
From November 2002 to October 2005, he was Executive Vice President and Chief
Underwriting Officer of the Reinsurance Division of Alea North America Company
and Senior Vice President of Alea North America Insurance 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
(also a member of Trenwick Group, Ltd.) and from March 2000 to November 2002,
he
was the company's Chairman and CEO. He was graduated from Cornell University
(A.B.).
Richard
P. Shanley.
Mr.
Shanley, age 61, joined our Board on March 12, 2007. From February 2001 to
December 31, 2006, he was a partner of Deloitte & Touche LLP. From March
1976 to January 2001, he was employed by Eisner LLP and was a partner from
1982
until 2001. During his over 30 years of public accounting experience, he served
as lead audit partner on numerous audit engagements for public and private
companies and companies making public stock offerings, including those requiring
application of Sarbanes-Oxley Section 404. He served as lead audit partner
primarily for biotech, pharmaceutical and high-tech companies, including
companies enabled by nanotechnology. He has been actively involved on the
Biotech Council of New Jersey, the New Jersey Technology Council, the New York
Biotechnology Association, the Connecticut Venture Group, the Biotechnology
Industry Organization and the NanoBusiness Alliance. He is an active member
of
the New York State Society of Certified Public Accountants and the American
Institute of Certified Public Accountants. He is currently serving his fourth
term on the New York State Society of CPA's Professional Ethics Committee.
He is
a licensed Certified Public Accountant in New Jersey and New York. He was
graduated from Fordham University (B.S.) and Long Island University (M.B.A.
in
Accounting).
Board
of Directors and Committees
In
2007,
there were nine meetings of the Board of Directors of the Company, and the
full
Board acted six times by unanimous written consent. During 2007, no director
attended fewer than 75 percent of the total Board of Directors' meetings and
applicable committee meetings on which each director served.
Our
policy is that at least a portion of our directors are encouraged to attend
annual meetings of shareholders. In 2007, 11 of the Company's 12 directors
attended the annual meeting.
Communications
with the Board of Directors
Shareholders
and other interested parties may contact the Board, Dugald A. Fletcher, our
Lead
Independent Director, or any member of the Board by mail. To communicate with
the Board, the Lead Independent Director 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 Harris & Harris Group, Inc., 111 West 57th Street, Suite 1100,
New York, New York 10019. Such correspondence will be forwarded to the
appropriate board member or members after screening to eliminate marketing
and
junk mail.
Board
Committees
The
Company's Board of Directors currently has six committees comprised of the
following members in 2007, all
of whom except Mr. Harris and Mr. Jamison are independent under the rules of
the
Nasdaq Global Market and "not interested" directors for the purposes of the
1940
Act:
Executive
|
|
Audit
|
|
Compensation
|
|
|
|
|
|
Charles
E. Harris (1)
|
|
Dugald
A. Fletcher (1)
|
|
James
E. Roberts (1)
|
Dr.
C. Wayne Bardin
|
|
W.
Dillaway Ayres
|
|
Dr.
Phillip A. Bauman
|
G.
Morgan Browne
|
|
G.
Morgan Browne
|
|
Dugald
A. Fletcher
|
Charles
E. Ramsey
|
|
James
E. Roberts
|
|
Charles
E. Ramsey
|
Douglas
W. Jamison
|
|
Richard
P. Shanley
|
|
|
Nominating
|
|
Valuation
|
|
Independent
Directors
|
|
|
|
|
|
Dr.
C. Wayne Bardin (1)
|
|
G.
Morgan Browne (1)
|
|
Dugald
A. Fletcher (1)
|
W.
Dillaway Ayres
|
|
W.
Dillaway Ayres
|
|
W.
Dillaway Ayres
|
Dr.
Phillip A. Bauman
|
|
Dr.
C. Wayne Bardin
|
|
Dr.
C. Wayne Bardin
|
Richard
P. Shanley
|
|
Dr.
Phillip A. Bauman
|
|
Dr.
Phillip A. Bauman
|
|
|
Dugald
A. Fletcher
|
|
G.
Morgan Browne
|
|
|
Charles
E. Ramsey
|
|
Charles
E. Ramsey
|
|
|
James
E. Roberts
|
|
James
E. Roberts
|
|
|
Richard
P. Shanley
|
|
Richard
P. Shanley
|
|
(1)
|
Denotes
the Chairman of the Committee.
|
Executive
Committee. The
Executive Committee may meet from time to time between regular meetings of
the
Board of Directors and may exercise 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 2007.
Audit
Committee. The
Audit
Committee (i) oversees all material aspects of our accounting and financial
reporting processes, internal control and audit functions, (ii) monitors the
independence and performance of our independent registered public accountants,
(iii) provides a means for open communication among our independent registered
public accountants, financial and senior management and the Board and (iv)
oversees compliance by us with legal and regulatory requirements.
The
Audit
Committee operates pursuant to a written charter approved by our Board of
Directors. A current copy of the Audit Committee Charter of the Company is
available on our website (http://www.tinytechvc.com/newsite/PDFs/Audit.pdf).
The
Audit Committee Charter sets out the responsibilities, authority and duties
of
the Audit Committee. The Audit Committee met four times and did not act by
unanimous written consent in 2007. The Audit Committee has selected, and a
majority of the Board of Directors has ratified, PricewaterhouseCoopers LLP
as
the Company's independent registered public accounting firm for the fiscal
year
ending December 31, 2008.
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 PwC to us. The Audit Committee's Pre-Approval
Policies and Procedures provide that the Audit Committee (or the Chairman
pursuant to delegated authority) must pre-approve all auditing services and
permitted non-audit services and that all such requests to provide services
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.
The
Audit
Committee has determined that the provision of non-audit services that were
provided during 2007 is compatible with maintaining PwC's independence in
performing audit services for the Company.
Audit
Committee Report
Our
Audit
Committee 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, as amended, as adopted by the Public Company Accounting
Oversight Board in Rule 3200T, (iii) the Audit Committee received the written
disclosures and the letter from the independent auditors required by ISB
Standard No.1, as amended, as adopted by the Public Company Accounting Oversight
Board in Rule 3600T 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 audited financial statements be included in the
Company's Annual Report on Form 10-K for the past fiscal year.
Respectfully,
Members
of the Audit Committee
Dugald
A.
Fletcher (Chairman)
W.
Dillaway Ayres
G.
Morgan
Browne
James
E.
Roberts
Richard
P. Shanley
Compensation
Committee.
The
Compensation Committee of the Board (the "Committee") annually reviews and
approves corporate goals and objectives relevant to total compensation -- that
is, changes in components of total compensation, including base salary and
equity incentive plan compensation -- of the Chief Executive Officer and other
executive officers, evaluates their performance against these goals and
objectives, and, based on its evaluation, sets their total compensation. The
Committee is composed entirely of Independent Directors, as defined in the
1940
Act and under the NASDAQ listing standards. The Committee also annually reviews
benefits for all employees. The details of the processes and procedures involved
in the establishment of executive compensation and benefits are described in
the
Compensation Discussion & Analysis ("CD&A") beginning on page 18. The
Committee met four times and acted by unanimous written consent once in
2007.
The
Company's full Board ultimately makes the final decisions regarding the Chief
Compliance Officer's compensation as required by Rule 38a-1 under the 1940
Act
and also approves grants under the Equity Incentive Plan made by the Committee.
The
Compensation Committee Charter is available on the Company's website
(http://www.tinytechvc.com/newsite/PDFs/Compensation.pdf).
Role
of Compensation Consultants
In
2007,
the Committee engaged Johnson Associates to advise it on relevant executive
pay
and related issues. Mr. Roberts, the Chairman of the Committee, Ms. Forman,
in
her role as Director of Human Resources, and Mr. Harris, our Chief Executive
Officer, provided information to Johnson Associates regarding the role of each
employee, our perceived competition and the Committee's goals with respect
to
compensation in general, and specifically the granting of long-term and
short-term equity incentives. During 2007, Johnson Associates assisted the
Committee by:
|
· |
Reviewing
the Company's competitive market data with respect to private venture
capital firms, public companies with similar market capitalizations
and
compliance professionals;
|
|
· |
Providing
recommendations for the option awards granted to employees in 2007;
and
|
Compensation
Committee Interlocks and Insider Participation
There
were no Compensation Committee interlocks or insider participation on the
Committee in 2007.
All
members of the Committee are independent directors and none of the members
are
present or past employees of the Company. No member of the Committee: (i) has
had any relationship with us requiring disclosure under Item 404 of Regulation
S-K under the Exchange Act; or (ii) is an executive officer of another entity,
at which one of our executive officers serves on the board of
directors.
Compensation
Committee Report on Executive Compensation
Our
Compensation Committee presents the following report:
The
Committee has reviewed and discussed the CD&A with management and has
recommended that the CD&A be included in this Proxy Statement.
Respectfully,
Members
of the Compensation Committee
James
E.
Roberts (Chairman)
Dugald
A.
Fletcher
Charles
E. Ramsey
Phillip
A. Bauman
Nominating
Committee. The
Nominating Committee acts as an advisory committee to the Board by identifying
individuals qualified to serve on the Board as directors and on committees
of
the Board, and to recommend that the Board select the Board nominees for the
next annual meeting of shareholders. The Nominating Committee met once and
did
not act by unanimous written consent in 2007.
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:
|
·
|
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;
|
|
· |
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
|
|
·
|
If
requested by the Nominating committee, a completed and signed director's
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
a
reputation for honest and ethical conduct. In addition, the Nominating Committee
examines a candidate's specific experience 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 experience. We do not pay any third party a
fee
to assist in the process of identifying and evaluating candidates. The
Nominating Committee evaluates all candidates for the Board based on the above
qualifications, regardless of whether the candidate was nominated by an officer,
Board member or shareholder.
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. The
Nominating Committee Charter is available on our website
(http://www.tinytechvc.com/newsite/PDFs/Nominating.pdf).
Valuation
Committee. The
Valuation Committee has the full power and authority of the Board in reviewing
and approving the valuation of our securities for reporting purposes, pursuant
to our Valuation Procedures that were established and approved by the Board
of
Directors. The Valuation Committee met six times and did not act by unanimous
written consent in 2007.
Independent
Directors Committee. The
Independent Directors Committee has the responsibility of proposing corporate
governance and long-term planning matters to the Board of Directors, overseeing
compliance and making the required determinations pursuant to the 1940 Act.
All
of the Independent Directors are members of the committee. The Independent
Directors Committee met four times and did not act by unanimous written consent
in 2007.
Executive
Officers
Our
executive officers who are not nominees for directors are set forth below.
Information relating to our executive officers who are nominees for 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.
Daniel
B. Wolfe.
Mr.
Wolfe, age 31, has served as Chief Financial Officer and as a Managing Director
since January 2008, as Principal from January 2007 to January 2008, as Senior
Associate from January 2006 to January 2007, and as Vice President from July
2004 to January 2008. He is a director of Phoenix Molecular Corporation, a
privately held nanotechnology-enabled company in which we have an investment.
Prior to joining us, he served as a consultant to Nanosys, Inc. (from 2002
to
2004), to CW Group (from 2001 to 2004) and to Bioscale, Inc. (from January
2004
to June 2004). From February 2000 to January 2002, he was the Co-founder and
President of Scientific Venture Assessments, Inc., a provider of scientific
analysis of prospective investments for venture capital placements and of
scientific expertise to high-technology companies. He was graduated from Rice
University (B.A., Chemistry), where his honors included the Zevi and Bertha
Salsburg Memorial Award in Chemistry and the Presidential Honor Roll, and from
Harvard University (A.M., Ph.D., Chemistry), where he was an NSF Predoctoral
Fellow.
At
our
request, Mr. Wolfe was interim Chief Executive Officer of Evolved Nanomaterial
Sciences, Inc. ("ENS"), one of our portfolio companies, from July 1, 2007 to
September 28, 2007. ENS filed for Chapter 7 bankruptcy on September 30,
2007.
Alexei
A. Andreev.
Mr.
Andreev, age 35, has served as an Executive Vice President and as a Managing
Director since March 2005. From 2002 to March 2005, he was an Associate with
Draper Fisher Jurvetson, a venture capital firm. In 2001, he was a Summer
Associate with TLcom Capital Partners, a London-based venture capital fund
backed by Morgan Stanley. From 1997 to 2000, he was an Associate at Renaissance
Capital Group/Sputnik Funds, a venture capital fund in Moscow, Russia.
Previously, he was a researcher at the Centre of Nanotechnology, Isan, in
Troitsk, Russia. He is a director of CSwitch, Inc., of D-Wave Systems, Inc.,
and
of Xradia, Inc., privately-held nanotechnology-enabled companies in which we
have investments. He is a director of the American Business Association of
Russian Expatriates. He was graduated with a B.S. with honors in
Engineering/Material Sciences, with a Ph.D. in Solid State Physics from Moscow
Steel and Alloys Institute and with an M.B.A. from the Stanford Graduate School
of Business.
Michael
A. Janse.
Mr.
Janse, age 39, has served as an Executive Vice President and as a Managing
Director since April 2007. From January 2007 to April 2007 he was a Principal
with ARCH Venture Partners and was an Associate from June 2002 to January 2007,
following earlier roles as an intern and then consultant. He concentrated
on investment opportunities in advanced semiconductor products, nanotechnology,
and novel materials. From 1995 to 2000, Mr. Janse worked in Motorola's
Semiconductor Products Sector (now Freescale Semiconductor, Inc.) as a process
engineer, and later marketed semiconductor components to manufacturers of
personal computers and networking products. He is a director of Adesto
Technologies Corp., of Innovalight, Inc., and of Nanomix, Inc., privately-held
nanotechnology-enabled companies in which we have investments. He was graduated
from Brigham Young University (B.S., Chemical Engineering) and The University
of
Chicago (M.B.A.).
Sandra
Matrick Forman, Esq.
Ms.
Forman, age 41, has served as General Counsel, as Chief Compliance Officer
and
as Director of Human Resources since August 2004. From 2001 to 2004, she was
an
Associate at Skadden, Arps, Slate, Meagher & Flom LLP, in the
Investment Management Group. From May to August 2000, she was a summer associate
with Latham & Watkins LLP in its London office. From August to December
2000, she served as an intern in the office of the General Counsel, United
States Department of Defense, Office of the Secretary of Defense. From June
to
August 1999, she served as an intern for the Honorable Ronald S. Lew, United
States Federal District Court, Central District of California. She was graduated
from New York University (B.A.), where her honors included National Journalism
Honor Society, and from the University of California Los Angeles (J.D.), where
her honors included Order of the Coif and membership on the Law Review. She
is
currently a member of the working group for the National Venture Capital
Association model documents.
Misti
Ushio.
Ms.
Ushio, age 36, has served as a Vice President and Associate since May 2007.
From
June 2006 to May 2007, Ms. Ushio was a Technology Licensing Officer at Columbia
University. From May 1996 to May 2006, she was employed by Merck & Co.,
Inc., most recently as a Senior Research Biochemical Engineer with the
Bioprocess R&D group. She was graduated from Johns Hopkins University (B.S.,
Chemical Engineering), Lehigh University (M.S., Chemical Engineering) and
University College London (Ph.D., Biochemical Engineering).
Patricia
N. Egan.
Ms.
Egan, age 33, has served as Chief Accounting Officer, as a Vice President and
as
Senior Controller since June 2005. From June 2005 to December 2005 and since
August 2006, she served as an Assistant Secretary. She also serves as Chief
Accounting Officer, as Treasurer and as Secretary of Harris & Harris
Enterprises, Inc., a wholly owned subsidiary of the Company. From 1996 to 2005,
she served as a Manager at PricewaterhouseCoopers LLP in its financial services
group. She was graduated from Georgetown University (B.S., Accounting), where
her honors included the Othmar F. Winkler Award for Excellence in Community
Service. She is a Certified Public Accountant.
Mary
P. Brady. Ms.
Brady, age 46, has served as a Vice President, as Controller and as an Assistant
Secretary since November 2005. From 2003 through 2005, she served as a senior
accountant at Clarendon Insurance Company in its program accounting group.
She
served from 2000 to 2003 as a senior associate at PricewaterhouseCoopers LLP
in
its financial services group. She was graduated Summa Cum Laude from Lehman
College (B.S., Accounting). She is a Certified Public Accountant.
Jennifer
M. McGovern.
Ms.
McGovern, age 30, has served as an Assistant Vice President, Counsel and an
Assistant Secretary from August 2007. From June 2006 to August 2006, she worked
as a law clerk at Luskin, Stern & Eisler LLP. From January 2006 to April
2006, she was an intern in the Office of the General Counsel, New York Stock
Exchange. From July 1999 to June 2004, she worked at BlackRock, Inc., first
as
an Analyst, and then as an Associate, in the Private Client Group. She was
graduated from Columbia University (B.A., Art History, Economics), and from
Brooklyn Law School (J.D.), cum laude, where she was the Managing Editor of
the
Brooklyn
Journal of International Law
and a
member of the Moot Court Honor Society.
Susan
T. Harris. Ms.
Harris, age 63, has served as our Secretary since July 2001. From July 1999
to
July 2003, she was employed by Harris & Harris Enterprises, Inc., our
wholly owned subsidiary, working primarily in financial public relations. From
July 2001 to July 2003, she served as Secretary and Treasurer of Harris &
Harris Enterprises, Inc. Since 1972, she has been an investor relations
consultant, operating as a sole proprietor prior to 1999, and again from July
2003 to the present. She was graduated from Wellesley College (B.A., Economics).
Ms. Harris's husband serves as the Chairman, Chief Executive Officer and as
a Managing Director of the Company.
Related
Party Transactions
In
the
ordinary course of business, the Company enters into transactions with portfolio
companies that may be considered related party transactions. Other than these
transactions, for the fiscal year ended December 31, 2007, there were no
transactions, or proposed transactions, in which the registrant was or is a
participant in which any related person had or will have a direct or indirect
material interest.
In
order
to ensure that the Company does not engage in any prohibited transactions with
any persons affiliated with the Company, the Company has implemented procedures,
which are set forth in the Company's Compliance Manual. Our Audit Committee
must
review in advance any "related party" transaction, or series of similar
transactions, to which the Company or any of its subsidiaries was or is to
be a
party, in which the amount involved exceeds $120,000 and in which such related
party had, or will have, a direct or indirect material interest. The Board
of
Directors reviews these procedures on an annual basis.
In
addition, the Company's Code of Conduct for Directors and Employees ("Code
of
Conduct"), which is signed by all employees and directors on an annual basis,
requires that all employees and directors avoid any conflict, or the appearance
of a conflict, between an individual's personal interests and the interests
of
the Company. Pursuant to the Code of Conduct, each employee and director must
disclose any conflicts of interest, or actions or relationships that might
give
rise to a conflict, to the Chief Compliance Officer. The Independent Directors
Committee is charged with monitoring and making recommendations to the Board
of
Directors regarding policies and practices relating to corporate governance.
If
there were any actions or relationships that might give rise to a conflict
of
interest, such actions or relationships would be reviewed and approved by the
Board of Directors.
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 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 2007 complied with the filing requirements.
EXECUTIVE
COMPENSATION
Compensation
Discussion & Analysis
Overview
This
Compensation Discussion & Analysis ("CD&A") describes the material
elements of compensation awarded to, earned by, or paid to our principal
executive officer, principal financial officer and the three most highly paid
executive officers (other than the principal executive officer and the principal
financial officer) serving as such at the end of 2007 (the "named executive
officers"), who are:
· Charles
E. Harris, our Chairman, Chief Executive Officer and a Managing Director;
· Douglas
W. Jamison, our President, Chief Operating Officer, Chief Financial Officer
(in
2007) and a Managing Director;
· Alexei
A.
Andreev, an Executive Vice President and a Managing Director;
· Michael
A. Janse, an Executive Vice President and a Managing Director; and
· Sandra
M.
Forman, our General Counsel, Chief Compliance Officer and Director of Human
Resources.
This
CD&A focuses on the information contained in the following tables and
related footnotes and narrative for primarily the last completed fiscal year,
and we also describe compensation actions taken before or after the last
completed fiscal year to the extent it enhances the understanding of our
executive compensation for the last completed fiscal year. Pursuant to our
Compensation Committee's written charter, the Committee oversees the design
and
administration of our executive compensation program. The Committee ensures
that
the total compensation paid to our executive officers is fair, reasonable and
competitive.
Compensation
Program Objectives and Philosophy
In
General. The
objectives of the Company's compensation program are to:
|
·
|
attract,
motivate and retain employees by providing market-competitive compensation
while preserving company resources;
|
|
·
|
maintain
our leadership position as a venture capital firm specializing in
tiny
technology, especially nanotechnology; and
|
|
·
|
align
management's interests with shareholders' interests.
|
To
achieve the above objectives, the Committee has designed a total compensation
program in 2007 for our executive officers and all 12 of our permanent,
full-time employees that is composed of a base salary and equity awards in
the
form of stock options. The Committee believes that the equity component of
compensation is a crucial component of our compensation package. Shorter-term
and longer-term vesting stock options are utilized for shorter-term and
longer-term incentive, and to make the Company's compensation program more
competitive, particularly with compensation programs of private partnerships
that, unlike the Company, are able to award carried interests taxable as
long-term gains and to permit co-investments in deals. Such private partnerships
also are more easily able to pay cash bonuses because they do not have the
expenses associated with being publicly traded. Our executive compensation
programs and related data are reviewed throughout the year and on an annual
basis by the Committee to determine if the compensation program is providing
its
intended results.
The
Committee believes that retention is especially important for a company of
our
size (12 permanent employees) and the specialized nature of our business. Our
employees have been selected and trained to support our focus on investment
in
tiny-technology companies and our specialized regulation and administration
as a
business development company. Our tiny-technology focus requires highly
specialized scientific knowledge. There are relatively few individuals who
have
both such scientific knowledge and venture capital experience. Additionally,
our
business development company structure requires specialized management,
administrative, legal and financial knowledge of our specific regulatory regime.
Because there are very few business development companies, it would be difficult
to find replacements for certain executive, legal and financial positions.
Competitive
Market.
For our
investment-team members, the competition for retention and recruitment is
primarily private venture capital firms, hedge funds and, to a lesser extent,
investment banking firms. Such a fund commonly pays at least 20 percent of
the
profits (including capital gains), or carried interest, of each newly-raised
fund to the management firm, which awards interests to its partners and
employees. For our legal and accounting professionals, in addition to the
foregoing, the competition is other public companies without regard to industry,
asset management companies and legal and accounting firms. The Company does
not
have a readily identifiable peer group, because most business development
companies are not early-stage venture-capital companies, and most other
early-stage venture-capital companies are not publicly traded. Thus, we do
not
emphasize the use of peer comparison groups in the design of our compensation
program. We do utilize compensation comparables, on an individual basis, to
the
extent that they seem appropriately analogous, as provided to the Committee
by
an independent compensation consultant, as one factor in determining
compensation.
Compensation
Process. On
an
annual basis, the Committee reviews and approves each element of compensation
for each of our executive officers, taking into consideration the recommendation
of our Chief Executive Officer (for compensation other than his own, which
is
subject to his employment agreement as discussed below) in the context of the
Committee's compensation philosophy, to ensure that the total compensation
program and the weight of each of its elements meets the overall objectives
discussed above. For the Chief Compliance Officer, the Committee recommends
her
compensation to the full Board, for approval by at least a majority of the
non-interested directors (as defined in Section 2(a)(19) of the 1940 Act).
In
2007,
an independent compensation consultant, Johnson & Associates, supplied the
Committee with market data on all officers' positions. The information provided
for 2007-2008 was for private-equity firms, venture capital firms and broad
investment management firms, and was adjusted to reflect compensation for a
venture capital firm with $100 - $200 million in assets under management. Data
was also provided for public companies with comparable market capitalizations.
Further data was provided for 1940 Act compliance personnel (collectively,
the
"Identified Group"). The independent consultant did not identify the names
of
companies included in the Indentified Group. The Committee considers
recommendations from the Chief Executive Officer regarding salaries, along
with
factors such as individual performance, current and potential impact on Company
performance, reputation, skills and experience. When determining compensation,
the Committee considers the importance of retaining certain key officers whose
replacement would be challenging owing to the Company's status as a 1940 Act
company and owing to its tiny-technology specialty. The Committee also considers
the highly specialized nature of certain positions in determining overall
compensation.
When
addressing executive compensation matters, the Committee generally meets outside
the presence of all executive officers except our Chief Executive Officer and
our General Counsel, each of whom leaves the meeting when his/her compensation
is reviewed.
Regulatory
Considerations.
The
1940 Act permits business development companies to either pay out up to 20
percent of net income after taxes through the implementation of a profit-sharing
plan or issue up to 20 percent of shares issued and outstanding through
implementation of a stock-option plan. The exercise price of stock options
may
not be less than the current market value at the date of issuance of the
options.
We
have
applied for exemptive relief from the SEC permitting us to issue restricted
stock pursuant to the Harris & Harris Group, Inc. 2006 Equity Incentive Plan
(the "Stock Plan") to employees and to permit non-employee directors to
participate in the Stock Plan. Until such time as we receive such exemptive
relief and such provisions are approved by shareholders, we will not issue
any
shares of restricted stock and our non-employee directors will not participate
in the Stock Plan.
The
Company has been informed that the SEC has commenced its review of the exemptive
application, and we have received and responded to formal written comments.
We
cannot, however, evaluate whether or when an order regarding our application
for
the relief requested may be granted.
We
have
also designed our Stock Plan with the intention that awards made thereunder
generally will qualify as performance-based compensation under Section 162(m)
of
the Internal Revenue Code of 1986 (the "Code"), but we reserve the right to
pay
amounts thereunder that do not qualify as such performance-based compensation
if
we determine such payments to be appropriate in light of our compensation
objectives from time to time. Section 162(m) of the Code disallows a tax
deduction to publicly held companies for compensation paid to their chief
executive officer or any of their three other most highly compensated executive
officers and chief financial officer, to the extent that compensation exceeds
$1
million per covered officer in any fiscal year. However, if compensation
qualifies as performance-based, the limitation does not apply.
Our
status as a regulated investment company under Subchapter M of the Code makes
the deductibility of our compensation arrangements a much less important factor
for the Committee to consider than it would be if we were an operating company.
Under Subchapter M, the Company cannot deduct operating expenses from its
long-term capital gains, which are its most significant form of income. The
Company presently has more operating expenses than it can deduct for tax
purposes, even before equity compensation.
Compensation
Components
The
principal elements of our executive compensation program for 2007 are base
salary, equity and other benefits and perquisites. The Committee believes that
each element is essential to achieve the Company's objectives as set forth
above. The Committee is mindful of keeping cash compensation expenses at as
low
a level of total operating expenses as is consistent with maintaining the
Company's competitiveness versus private venture capital funds while meeting
the
expenses of complying with the regulatory requirements of a publicly traded
company. Therefore, the equity component of compensation is key to keeping
overall compensation competitive, while making prudent use of the Company's
resources.
Base
Salaries.
We
recognize the need to pay our named executive officers, and other employees,
a
competitive annual base salary. We
review
base salaries for our named executive officers annually. In 2007, the Committee
compared salary ranges for all executive officers against the Identified Group.
Base salaries are generally adjusted annually for inflation and also based
on
changes in the marketplace and an executive's individual performance, salary
position among peers, career growth potential and/or a change in
responsibilities. Other than Mr. Harris, whose salary was set pursuant to his
employment agreement as described below, all of the named executive officers
are
paid the same base salary.
Effective
January 1, 2007, the base salary of Sandra M. Forman, our General Counsel,
Chief
Compliance Officer and Director of Human Resources, was increased from $215,000
in 2006 to $267,403 in 2007, to remain market competitive for her services
and
to put her base salary on parity with our Managing Directors.
All
other
named executive officers received cost of living adjustments in 2007. There
presently are no contemplated increases in base salary for any of the named
executive officers in 2008 other than cost-of-living adjustments.
Equity
Incentive Awards.
In
General
Commencing
in 2006, we have provided the opportunity for our named executive officers
and
other employees to earn longer-term and shorter-term equity incentive awards.
Equity incentive awards in the form of options potentially generate cash for
the
Company that can be used for portfolio company investments and for working
capital.
Longer-Term
Equity Incentive Awards
The
longer-term equity incentive awards provide employees with the incentive to
stay
with us for longer periods of time, which in turn provides us with greater
stability. Longer-term equity incentive awards are meant to substitute for
carried interest that our investment professionals would receive were they
employed by private-sector venture capital firms, which typically pay at least
20 percent of profits before any taxes, and that carried interest is usually
in
the form of long-term capital gains, not ordinary income.
The
Committee believes that strategically timed awards of restricted stock are
also
important to ensuring the retention, stability and desired succession of
executive talent, but the Company is not permitted to grant awards of restricted
stock unless the Company receives an exemptive order from the SEC to do
so.
On July
11, 2006, we filed an application with the SEC to obtain such exemptive relief
(as described above) and on June 29, 2007, the Company responded to comments
from the SEC on the application. If we receive the exemptive relief, the
Committee will not grant any awards of restricted stock unless the amended
Stock
Plan is approved by shareholders, and such awards would be longer term.
Shorter-Term
Equity Incentive Awards
Shorter-term
equity incentive awards help to motivate employees in the short term, as we
generally do not pay annual cash bonuses. Without cash bonuses or cash retained
through the exercise and sale of shorter-term options, the Committee's
independent compensation consultant has advised that certain key positions
are
not competitive when compared with the Identified Group. Shorter-term equity
incentive awards also permit each executive officer to increase his/her
ownership in Company stock, pursuant to minimum share ownership guidelines
established by our Board. Shorter-term vesting periods also have the potential
of generating cash for the company in the short term, through the purchase
of
stock in the course of the exercise of options, that can be used for making
venture-capital investments and for working capital.
If
the
named executive officers, exclusive of Mr. Harris, as he is scheduled to retire
on December 31, 2008, do not receive sufficient cash from the exercise and
sale
of stock options in a year to provide market-competitive total compensation,
as
determined by the Committee, based on advice from the independent compensation
consultant, the Committee will pay the named executive officers cash bonuses.
No
such discretion was exercised in 2007. The Committee believes that retention
of
key employees is crucial because of the specialized nature of our business
as
described more fully below. Additionally, the Committee has considered that,
owing to the scheduled retirement of Mr. Harris, the importance of retaining
the
other team members has increased.
Awards
Under the Stock Plan
In
accordance with the Stock Plan, which was approved by shareholders at the 2006
Annual Meeting of Shareholders, the Committee can issue options from time to
time for up to 20 percent of the total shares of stock issued and outstanding.
Thus, the number of shares of stock able to be reserved for the grant of awards
under the Stock Plan will automatically increase (or decrease) with each
increase (or decrease) in the number of shares of stock issued and outstanding.
The Board intends to increase the number of shares reserved for stock option
grants (currently 4,662,915) from time to time as the number of outstanding
shares increases. The Committee may grant awards under the Stock Plan to the
full extent permitted at the time of each grant in order to compete with private
equity firms by retaining the specially qualified and trained personnel that
have been carefully recruited and developed for the Company's specialized
business. Because our primary competitors are organized as private partnerships,
they do not have the overhead of a publicly traded company. As a consequence,
unlike the Company, they can afford for cash compensation to be a larger
percentage of their total expenses. Unlike us, they are not prohibited from
paying out at least 20 percent of their profits to key employees, primarily
in
the form of long-term capital gains. They also, unlike us, are permitted to
grant their employees co-investment rights.
Under
the
Stock Plan, no more than 25 percent of the shares of stock reserved for the
grant of the awards under the Stock Plan may be restricted stock awards at
any
time during the term of the Stock Plan. If any shares of restricted stock are
awarded, such awards will reduce on a percentage basis the total number of
shares of stock for which options may be awarded. If we do not receive exemptive
relief from the SEC to issue restricted stock, all shares granted under the
Stock Plan may be subject to stock options. If we were to receive such exemptive
relief and were to issue the full 25 percent of the shares of stock reserved
for
grant under the Stock Plan as restricted stock, no more than 75 percent of
the
shares granted under the Stock Plan could be subject to stock options. No more
than 1,000,000 shares of our common stock may be made subject to awards under
the Stock Plan to any individual in any year.
On
June
27, 2007, the Committee and the full Board of Directors approved individual
stock-option awards for certain officers and employees of the Company. The
terms
and conditions of the stock options granted were set forth in award agreements
between the Company and each award recipient. A total of 1,700,609 stock options
were granted with vesting dates ranging from December 2007 to June 2014, with
an
exercise price of $11.11, which was the closing volume weighted average price
on
the date of the grant. Upon exercise, the shares will be issued from our
previously authorized but unissued shares.
The
Committee has generally granted the same number of stock options to each of
the
Managing Directors, with the exception of Mr. Harris as discussed below.
Additionally, in 2007, the Committee granted an additional 50,000 options to
Mr.
Jamison in anticipation of his growing role in the Company as the successor
to
Mr. Harris as Chief Executive Officer in 2009 upon Mr. Harris's retirement.
In
2007, Mr. Janse received an additional 429,128 options to give him an equivalent
number of options to Mr. Andreev.
The
number of options per employee and the vesting and expiration dates were
originally proposed by the independent consultant after conversations with
the
Chairman of the Committee and input from the Chief Executive Officer (with
respect to options other than his own). All awards granted to executive officers
vest subject to continued employment with the Company through each applicable
vesting date, except for certain retirees. All stock-option awards to officers
will be subject to stock-retention guidelines (as described below on page 27).
In
2006
and 2007, new grants were planned in advance of, and in anticipation of, the
expiration of prior grants. Commencing in 2008, the Committee may give
quarterly, rather than annual, grants to executive officers. The Committee
believes that giving four smaller grants quarterly, rather than one annual
grant, will more closely align employees' interests with those of shareholders.
We do not time stock option grants in coordination with the release of material,
non-public information, nor do we time the release of material, non-public
information for the purpose of affecting the value of executive
compensation.
Option
grants in 2007 were not subject to performance goals. Other than stock options
being tied to stock price, no other items of corporate performance were taken
into account at the time of grant, because of the difficulty of determining
annual performance metrics. Business development companies like us do not report
earnings per share; moreover, write-downs and write-offs of investments are
an
expected part of our risk-seeking strategy, and it is not uncommon for even
our
most successful investments to take years to come to fruition. The Committee
may
create performance goals for the vesting of restricted stock (subject to receipt
of an exemptive order). If performance goals are used in the future, the Board
will have the authority to make equitable adjustments to the performance goals
in recognition of unusual or non-recurring events affecting the Company or
the
financial statements of the Company, in response to changes in applicable laws
or regulations or to account for items of gain, loss or expense determined
to be
extraordinary or unusual in nature or infrequent in occurrence or related to
the
disposal of a segment of a business or related to a change in accounting
principles.
Generally,
the Committee is made aware of the tax and accounting treatment of various
compensation alternatives. SFAS 123(R) requires us to record the fair value
of
equity awards on the date of grant as a component of equity. We account for
the
Stock Plan in accordance with the provisions of SFAS No. 123(R), "Share-Based
Payment," which requires that we determine the fair value of all share-based
payments to employees, including the fair value of grants of employee stock
options, and record these amounts as an expense in the Statement of Operations
over the vesting period with a corresponding increase to our additional paid-in
capital. The increase to our operating expenses is offset by the increase to
our
additional paid-in capital, resulting in no net impact to our net asset value.
Thus, the granting of options is expected to have no net impact on our net
asset
value. If and when the options are exercised, the net asset value per share
will
be decreased if the net asset value per share at the time of exercise is higher
than the exercise price, and increased if the net asset value per share at
the
time of exercise is lower than the exercise price. As a result, although we
consider the accounting treatment of granting options, we do not consider the
accounting treatment to be a dominant factor in the form and/or design of
awards.
Additionally,
we do not record tax benefits associated with expensing of stock options,
because we intend to qualify as a RIC under Subchapter M of the Code. As a
RIC,
we cannot use all of our existing operating expenses for tax purposes.
10b5-1
Plans
We
have
established a policy of permitting our officers to enter into trading plans
to
sell shares of our common stock in accordance with Rule 10b5-1 of the Securities
Act of 1934. The policy allows our participating officers to adopt a
pre-arranged stock trading plan to buy or sell pre-determined amounts of our
common stock over a period of time. This policy was established in recognition
of the liquidity and diversification objectives of our officers, including
enabling our officers to sell certain shares of our common stock (such as some
of the shares of our common stock they acquire upon exercise of stock options,
to pay for the exercise of options, to provide for taxes triggered by the
exercise of options and to generate cash from the exercise of options).
Benefits
and Perquisites. We
provide the opportunity for our named executive officers and other full-time
employees to receive certain perquisites and general health and welfare
benefits, discussed more fully below, which consist of life- and
health-insurance benefits, reimbursement for certain medical expenses and
gym-membership fees. We
also
offer participation in our defined contribution 401(k) plan. For the year ended
December 31, 2007, the Committee approved a 401(k) plan match of 100 percent
of
employee contributions. Except as provided in our employment agreement with
Mr.
Harris, our executive officers generally receive the same benefits and
perquisites as our full-time administrative employees.
Profit
Sharing.
Prior
to the adoption of the Stock Plan, the Company maintained the Amended and
Restated Harris & Harris Group, Inc. Employee Profit-Sharing Plan (the "2002
Plan"). Under the 2002 Plan, approximately 90 percent of the amount determined
as "qualifying income" was paid out to participants pursuant to distribution
percentages determined by the Committee. The remaining payment was paid out
after we finalized our tax returns for each plan year. Effective May 4, 2006,
the 2002 Plan was terminated. On January 31, 2007, a final profit sharing award
of $261,661 was paid to certain participants related to the 2005 plan year
after
finalization of our tax returns for 2005. Please see the "Non-Equity Incentive
Plan Compensation" column and accompanying footnote in the 2007 Summary
Compensation Table for more information about profit sharing
awards.
Internal
Pay Equity.
In
2007, the Committee discussed the internal pay equity of the named executive
officers. The Committee noted that Mr. Harris's compensation is appropriate
based on the unique qualifications and skills required for the Chief Executive
Officer position in our Company and his role as Founder. The Committee further
noted that our investment professionals work together as a team rather than
as a
collection of individuals, which was the basis for the Committee's decision
to
pay all Managing Directors (except for Mr. Harris) identically. The Committee
believes that, on a small team, all members must pull their full weight.
Accordingly, the Committee believes that the team approach to compensation
promotes teamwork among the Managing Directors. The Committee also noted that
Ms. Forman's base salary was on parity with the Managing Directors to make
her
compensation competitive based on her 1940 Act specialty and her management
role
in the Company as General Counsel, Chief Compliance Officer and Director of
Human Resources. The Committee further noted that the Managing Directors should
receive more stock options than other employees based on their income-generating
role and to keep their total compensation competitive with private
venture-capital firms.
Compensation
of our Chief Executive Officer
The
Committee reviews all elements of the compensation of Charles E. Harris, our
Chairman, Chief Executive Officer and a Managing Director, on an annual basis
and then makes a determination about his compensation without his presence,
subject to his employment agreement.
Pursuant
to that agreement, as most recently amended as of August 2, 2007 (the
"Employment Agreement"), during the period of employment, Mr. Harris is to
receive compensation in the form of base salary, with automatic yearly
adjustments to reflect inflation, which amounted to a minimum required base
salary of $246,651 for 2006. In addition, the Board may increase such salary,
and subsequently decrease it, but not below the level provided for by the
automatic adjustments described above. Mr. Harris's base salary for 2006 was
increased to $300,000 (thereby also increasing his SERP benefit as described
below) in part in recognition of a 74 percent decrease in Mr. Harris's
profit-sharing allocation in recent years in order to provide additional profit
sharing to other employees. This was the first salary increase for Mr. Harris,
other than cost-of-living adjustments, since 1994. Mr. Harris's base salary
for
2007 and 2008 was increased to $306,187 and $314,623, respectively, based on
cost-of-living adjustments.
In
2007,
the Committee granted to Mr. Harris the following stock options:
|
|
Expiration Date
|
|
Year
of Vesting
|
|
Exercise
|
|
|
|
of Options
|
|
2007
|
|
2008
|
|
Price
|
|
9
Yr NQSO (vest 50% on
12/27/07,
50% vest of 12/27/08)
|
|
|
6/26/2016
|
|
|
120,491
|
|
|
120,490
|
|
$
|
11.11
|
|
The
amount of options granted to Mr. Harris was based on creating long-term
incentives for Mr. Harris with respect to strategy and investment, balance
sheet, personnel and lease decisions despite his scheduled retirement, in
recognition of his role as Founder of the Company, and as an incentive for
him
to sign upon his retirement a three-year non-compete agreement covering the
period after his retirement.
Under
his
employment agreement, Mr. Harris is entitled to participate in all compensation
and employee benefit plans or programs, and to receive all benefits,
perquisites, and emoluments, for which salaried employees are eligible. Under
the Employment Agreement, we furnish Mr. Harris with certain perquisites, which
include a company car, health-club membership, personal trainer, membership
in
certain social or country clubs, a reimbursement for an annual physical
examination and up to a $5,000 annual reimbursement, adjusted for inflation,
over the period of the agreement, for personal financial or tax
advice.
The
Employment Agreement also provides Mr. Harris with life insurance for the
benefit of his designated beneficiary in the amount of at least $2,000,000;
provides reimbursement for uninsured medical expenses, not to exceed $10,000
per
annum, adjusted for inflation, over the period of the agreement; provides Mr.
Harris and his spouse with long-term care insurance; and provides Mr. Harris
with disability insurance providing for continuation of 100 percent of his
base
salary for a specified period. These benefits are for the term of the Employment
Agreement. The Employment Agreement provides that the term of Mr. Harris's
employment may not be extended beyond December 31, 2008, unless a committee
of
the Board consisting of non-interested Directors extends the date by one year
pursuant to the Executive Mandatory Retirement Benefit Plan, and Mr. Harris
agrees to serve beyond December 31, 2008.
Mr.
Harris's Employment Agreement also provides for a supplemental executive
retirement plan (the "SERP") and a severance compensation agreement for his
benefit. See "2007 Non-Qualified Deferred Compensation" below for more
information about the SERP. For more information about Mr. Harris's severance
compensation, please see "Potential Payments upon Termination or Change in
Control" below.
The
Committee determined that the Employment Agreement, the severance compensation
agreement and the awards made to Mr. Harris in 2007 pursuant to the Stock Plan
are appropriate based on the unique qualifications and skills required for
the
Chief Executive Officer position in our Company. Our Chief Executive Officer
must have expertise in managing a public company, managing a business
development company and managing a venture-capital company. He must also have
knowledge of tiny technology, particularly nanotechnology, have stature within
both the nanotechnology community and the venture-capital community and have
relationships with the investment banking community.
Share
Ownership Guidelines
Our
Board
of Directors has established a retained stock-ownership policy for our officers.
Pursuant to the policy, each executive officer is expected to own at least
25
percent of the net shares (after sales of stock to cover the purchase price
and
taxes triggered by the exercise of options) that he or she purchases in a
calendar year through the exercise of options covering up to $75,000 of
underlying stock based on current market value on the day of each transaction.
Each executive officer must then retain at least 50 percent of the net shares
(after sales of stock to cover the purchase price and taxes triggered by the
exercise of options) above $75,000 until his or her purchases reach the
following share ownership levels:
|
|
Ownership Level
|
|
|
|
|
|
|
Managing
Directors (including CEO)
|
|
$
|
4,500,000
|
|
Other
Deal Team Members (including General Counsel)
|
|
$
|
2,500,000
|
|
Other
Officers
|
|
|
1
X Base Salary
|
|
After
reaching the above ownership levels, each executive officer is expected to
retain 25 percent of the net shares (after sales of stock to cover the purchase
price and taxes triggered by the exercise of options) that he or she purchases
in any calendar year through the exercise of options. The policy aligns the
interests of our officers and directors with the interests of shareholders.
Our
Chief Executive Officer currently exceeds the guidelines. Other executive
officers are working toward the ownership levels as stock options are
exercised.
Remuneration
of Named Executive Officers
2007
Summary Compensation Table
The
following table sets forth a summary for the years ended December 31, 2007,
and
December 31, 2006, of the cash and non-cash compensation paid to our named
executive officers. The primary elements of each named executive officer's
total
compensation reported in the table are base salary and equity incentives
consisting of stock options. The Summary Compensation Table should be read
in
conjunction with the CD&A and the other tables and narrative descriptions
that follow.
Name
and Principal
Position
|
|
Year
|
|
Salary
($)
|
|
Option
Awards (1)
($)
|
|
Non-Equity
Incentive Plan Compensation (2)
($)
|
|
Change in
Pension Value and Nonqualified Compensation Earnings(3)
($)
|
|
All
Other Compensation
($)(4)(6)(7)
|
|
Total
($)
|
|
Charles
E. Harris
Chairman
of the Board,
Chief
Executive Officer, Managing Director(5)
|
|
|
2007
2006
|
|
|
306,187
300,000
|
|
|
3,374,224
2,034,482
|
|
|
0
29,067
|
|
|
42,063
54,692
|
|
|
418,479
405,628
|
|
|
4,140,953
2,823,869
|
|
Douglas
W. Jamison
President,
Chief Operating Officer, Chief Financial Officer (2007), Managing
Director, Former Vice President
|
|
|
2007
2006
|
|
|
267,403
262,000
|
|
|
953,931
668,677
|
|
|
0
3,957
|
|
|
0
—
|
|
|
15,500
15,000
|
|
|
1,236,834
949,634
|
|
Alexei
A. Andreev
Managing
Director, Executive Vice President
|
|
|
2007
2006
|
|
|
267,403
262,000
|
|
|
897,250
668,677
|
|
|
0
0
|
|
|
|
|
|
15,500
15,000
|
|
|
1,180,153
945,677
|
|
Michael
A. Janse
Managing
Director, Executive Vice President(8)
|
|
|
2007
2006
|
|
|
184,211
|
|
|
873,201
|
|
|
0
|
|
|
|
|
|
45,500
|
|
|
1,102,912
|
|
Sandra
M. Forman, Esq.
General
Counsel, Chief Compliance Officer, Director of Human
Resources
|
|
|
2007
2006
|
|
|
267,403
215,000
|
|
|
559,229
381,595
|
|
|
0
1,580
|
|
|
|
|
|
15,500
15,000
|
|
|
842,132
613,175
|
|
(1) |
The
figures in this column do not represent amounts actually paid to
the named
executive officers, but represent the aggregate dollar amount of
compensation cost recognized by us in 2007 under FAS 123(R) for options
granted in 2007 and prior years. We use the Black-Scholes model to
calculate compensation cost under FAS 123(R). You may find more
information about the assumptions we use in the Black-Scholes model
under
"Fair Valuation of Option Awards."
|
(2) |
These
amounts represent the actual amounts earned as a result of realized
gains
during the year ended December 31, 2005, and paid out in 2006 and
2007,
under the Harris & Harris Group Employee Profit-Sharing Plan. These
2006 amounts are in addition to the $1,107,088 for Mr. Harris, $165,308
for Mr. Jamison, and $62,685 for Ms. Forman reported in the 2005
proxy and
were determined in 2006 based on the finalization of our 2005 tax
returns.
|
(3) |
Represents
increase in pension obligation. There were no preferential or above
market
earnings on Mr. Harris's deferred
compensation.
|
(4) |
The
amounts reported for Mr. Harris for 2007 represent actual amounts
of
benefits paid or payable including personal use of an automobile
totaling
$10,252, membership in a private club totaling $11,026, membership
in a
health club and use of a trainer totaling $19,333, medical care
reimbursement, consultation with a financial planner totaling $21,505,
long-term disability insurance, group term-life insurance, long-term
care
insurance for him and his wife and $20,500 in employer contributions
to
the Harris & Harris Group, Inc. 401(k) Plan. It also includes the
employer contribution to his SERP totaling $306,187.
|
(5)
|
In
2007 and 2006, Mr. Harris's wife received compensation of $25,000
and
$21,000, respectively for serving as our Secretary.
|
(6)
|
The
amounts reported for Mr. Janse for 2007 represent qualified moving
expenses paid totaling $30,000 and $15,500 in employer contributions
to
the Harris & Harris Group 401(k)
Plan.
|
(7) |
Except
for Mr. Harris (see footnote 4 above), and Mr. Janse (see footnote
6
above), amounts reported for 2007 represent our contributions on
behalf of
the named executive to the Harris & Harris Group, Inc. 401(k) Plan.
The named executive did not earn any other compensation reportable
in this
column that met the threshold reporting requirements
|
(8) |
Mr.
Janse joined the Company in April
2007.
|
Fair
Valuation of Option Awards
We
account for the Stock Plan in accordance with the provisions of SFAS No. 123(R),
"Share-Based Payment," which requires that we determine the fair value of all
share-based payments to employees, including the fair value of grants of
employee stock options, and record these amounts as an expense in the Statement
of Operations over the vesting period with a corresponding increase to our
additional paid-in capital. The increase to our operating expenses is offset
by
the increase to our additional paid-in capital, resulting in no net impact
to
our net asset value. Additionally, we do not record the tax benefits associated
with the expensing of stock options, because we currently intend to qualify
as a
RIC under Subchapter M of the Code.
The
fair
value of each stock option award is estimated on the date of grant using the
Black-Scholes option pricing model as permitted by SFAS No. 123(R). The stock
options were awarded in five different grant types, each with different
contractual terms. The assumptions used in the calculation of fair value using
the Black-Scholes model for each contract term for grants in 2007 were as
follows:
|
|
|
|
Number
|
|
Expected
|
|
Expected
|
|
Expected
|
|
Risk-free
|
|
Fair
|
|
|
|
Contractual
|
|
of Options
|
|
Term
|
|
Volatility
|
|
Dividend
|
|
Interest
|
|
Value
|
|
Type
of Award
|
|
Term
|
|
Granted
|
|
in Yrs
|
|
Factor
|
|
Yield
|
|
Rate
|
|
Per Share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified
stock options
|
|
|
1.5
Years
|
|
|
380,000
|
|
|
1
|
|
|
42.6%
|
|
|
0%
|
|
|
4.93%
|
|
$
|
2.11
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified
stock options
|
|
|
2.5
Years
|
|
|
600,540
|
|
|
2
|
|
|
40.1%
|
|
|
0%
|
|
|
4.91%
|
|
$
|
2.92
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified
stock options
|
|
|
3.5
Years
|
|
|
338,403
|
|
|
3
|
|
|
44.7%
|
|
|
0%
|
|
|
4.93%
|
|
$
|
3.94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-qualified
stock options
|
|
|
9
Years
|
|
|
381,666
|
|
|
Ranging
from
4.75-
6.28
|
|
|
Ranging
from
57.8%
to 59.9%
|
|
|
0%
|
|
|
Ranging
from
4.97%
to 5.01%
|
|
|
Ranging
from
$5.92
to $6.85
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
1,700,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
An
option's expected term is the estimated period between the grant date and the
exercise date of the option. As the expected-term period increases, the fair
value of the option and the compensation cost will also increase. The
expected-term assumption is generally calculated using historical stock option
exercise data. The Company does not have historical exercise data to develop
such an assumption. In cases where companies do not have historical data and
where the options meet certain criteria, SEC Staff Accounting Bulletin 107
("SAB
107") provides the use of a simplified expected-term calculation. Accordingly,
the Company calculated the expected terms using the SAB 107 simplified
method.
Expected
volatility is the measure of how the stock's price is expected to fluctuate
over
a period of time. An increase in the expected volatility assumption yields
a
higher fair value of the stock option. Expected volatility factors for the
stock
options were based on the historical fluctuations in the Company's stock price
over a period commensurate with the expected term of the option, adjusted for
stock splits and dividends.
The
expected-dividend yield assumption is traditionally calculated based on a
company's historical dividend yield. An increase to the expected-dividend yield
results in a decrease in the fair value of the option and resulting compensation
cost. Although the Company has declared deemed dividends in previous years,
most
recently in 2005, the amounts and timing of any future dividends cannot be
reasonably estimated. Therefore, for purposes of calculating fair value, the
Company has assumed an expected-dividend yield of 0 percent.
The
risk-free interest rate assumptions are based on the annual yield on the
measurement date of a zero-coupon U.S Treasury bond, the maturity of which
equals the option's expected term. Higher assumed interest rates yield higher
fair values.
2007
Grants of Plan-Based Awards
The
following table presents information regarding the equity incentive awards
granted to the named executive officers during the fiscal year ended December
31, 2007.
Name
|
|
Grant
Date
|
|
All
Other
Stock
Awards: Number of
Shares
of
Stock
or Units
(#)
|
|
All
Other Option Awards: Number
of
Securities Underlying
Options
(#)
|
|
Exercise
or
Base
Price
of
Option
Awards*
($/Sh)
|
|
Closing
Price
on
Grant Date
($)
|
|
Grant
Date Fair
Value
of Stock
and
Option
Awards
|
|
Charles
E. Harris
|
|
|
June
27, 2007
|
|
|
N/A
|
|
|
240,981
|
|
$
|
11.11
|
|
$
|
11.15
|
|
$
|
1,460,345
|
|
Douglas
W. Jamison
|
|
|
June
27, 2007
|
|
|
N/A
|
|
|
250,000
|
|
$
|
11.11
|
|
$
|
11.15
|
|
$
|
785,737
|
|
Alexei
A. Andreev
|
|
|
June
27, 2007
|
|
|
N/A
|
|
|
200,000
|
|
$
|
11.11
|
|
$
|
11.15
|
|
$
|
628,590
|
|
Michael
A. Janse
|
|
|
June
27, 2007
|
|
|
N/A
|
|
|
629,128
|
|
$
|
11.11
|
|
$
|
11.15
|
|
$
|
2,038,717
|
|
Sandra
M. Forman
|
|
|
June
27, 2007
|
|
|
N/A
|
|
|
135,000
|
|
$
|
11.11
|
|
$
|
11.15
|
|
$
|
420,312
|
|
*Equals
the closing volume weighted average price on the date of grant.
2007
Outstanding Equity Awards at Fiscal Year-End
The
following table presents information regarding the outstanding equity awards
held by each of the named executive officers as of December 31,
2007.
|
|
Option
Awards
|
|
Name
|
|
Number of Securities
Underlying
Unexercised Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Option
Exercise
Price
($)
|
|
Option Expiration
Date
|
|
Charles
E. Harris
|
|
|
8,820
451,530
20,000
0
120,491
|
|
|
9,891(1)
230,000(1)
0
26,666(2)
120,490(3)
|
|
$
$
$
$
$
|
10.11
10.11
10.11
10.11
11.11
|
|
|
June
26, 2016
June
26, 2016
June
26, 2008
June
26, 2009
June
26, 2016
|
|
Douglas
W. Jamison
|
|
|
8,647
138,200
53,334
47,500
0
0
|
|
|
69,237(4)
0
106,666(2)
0
110,135(3)
92,365(5)
|
|
$
$
$
$
$
$
|
10.11
10.11
10.11
11.11
11.11
11.11
|
|
|
June
26, 2016
June
26, 2008
June
26, 2009
Dec.
27, 2008
Dec.
27, 2009
Dec.
27, 2010
|
|
Alexei
A. Andreev
|
|
|
12,735
157,359
53,334
38,000
0
0
|
|
|
69,237(4)
0
106,666(2)
0
88,108(3)
73,892(5)
|
|
$
$
$
$
$
$
|
10.11
10.11
10.11
11.11
11.11
11.11
|
|
|
June
26, 2016
June
26, 2008
June
26, 2009
Dec.
27, 2008
Dec.
27, 2009
Dec.
27, 2010
|
|
Michael
A. Janse
|
|
|
9,891
228,000
0
0
|
|
|
69,237(6)
0
248,108(3)
73,892(5)
|
|
$
$
$
$
|
11.11
11.11
11.11
11.11
|
|
|
June
26, 2016
Dec.
27, 2008
Dec.
27, 2009
Dec.
27, 2010
|
|
Sandra
M. Forman
|
|
|
12,600
55,000
25,000
26,600
0
0
|
|
|
69,237(4)
0
50,000(2)
0
61,676(3)
46,724(5)
|
|
$
$
$
$
$
$
|
10.11
10.11
10.11
11.11
11.11
11.11
|
|
|
June
26, 2016
June
26, 2008
June
26, 2009
Dec.
27, 2008
Dec.
27, 2009
Dec.
27, 2010
|
|
(1)
|
Options
vest 100 percent on June 26, 2008.
|
(2)
|
Options
vest in two equal installments on June 26, 2008, and December 26,
2008.
|
(3)
|
Options
vest 100 percent on December 27,
2008.
|
(4)
|
Options
vest in seven equal installments on June 26, 2008, June 26, 2009,
June 26,
2010, June 26, 2011, June 26, 2012, June 26, 2013, and June 26,
2014.
|
(5)
|
Options
vest 100 percent on December 27,
2009.
|
(6)
|
Options
vest in seven equal installments on June 27, 2008, June 27, 2009,
June 27,
2010, June 27, 2011, June 27, 2012, June 27, 2013, and June 27,
2014.
|
2007
Option Exercises and Stock Vested
The
following table presents information regarding the exercises of stock options
by
named executive officers for the fiscal year ended December 31, 2007.
|
|
Option
Awards
|
|
Name
|
|
Number
of Shares Acquired on Exercise
(#)
|
|
Value
Realized on
Exercise
($)
|
|
Charles
E. Harris
|
|
|
192,466
|
|
|
244,291
|
|
Douglas
W. Jamison
|
|
|
199,048
|
|
|
359,391
|
|
Alexei
A. Andreev
|
|
|
185,040
|
|
|
343,632
|
|
Michael
A. Janse
|
|
|
0
|
|
|
0
|
|
Sandra
M. Forman
|
|
|
121,834
|
|
|
210,136
|
|
2007
Pension Benefits
The
following table presents information about the pension benefits attributable
to
the named executive officers as of December 31, 2007, and any pension benefit
payments to them during 2007.
Name
|
|
Plan
Name
|
|
Number
of Years
Credited
Service
(#)
|
|
Present
Value of Accumulated
Benefits
($)
|
|
Payments
During
Last
Fiscal Year
($)
|
|
Charles
E. Harris
|
|
|
Executive
Mandatory Retirement Plan
|
|
|
24
|
|
|
147,302
|
|
|
0
|
|
Douglas
W. Jamison
|
|
|
Executive
Mandatory Retirement Plan
|
|
|
3
|
|
|
0
|
|
|
0
|
|
The
present value of accumulated benefits amount reported in the table above was
calculated pursuant to FAS 87, "Employers' Accounting for Pensions" and FAS
158,
"Employers' Accounting for Pensions and Other Postretirement Plans - an
amendment of FASB Statements No. 87, 88, 106, and 132(R)." Several statistical
and other factors that attempt to anticipate future events are used in
calculating the expense and liability values related to our pension plan. These
factors include a discount rate assumption of 5.75 percent and use of the 94GAM
mortality table. The calculation also assumes that the benefit is earned
uniformly over the employees' careers. Any benefit attributable to service
prior
to the effective date of the plan is amortized over each person's future working
lifetime.
Executive
Mandatory Retirement Benefit Plan
On
March
20, 2003, in order to begin planning for eventual management succession, the
Board of Directors voted to establish the Executive Mandatory Retirement Benefit
Plan for individuals who are employed by us in a bona fide executive or high
policy-making position. The plan was amended and restated effective January
1,
2005, to comply with certain provisions of the Internal Revenue Code. There
are
currently four individuals that qualify under the plan: Charles E. Harris,
the
Chairman and Chief Executive Officer, Douglas W. Jamison, the President and
Chief Operating Officer, Daniel B. Wolfe, the Chief Financial Officer, and
Mel
P. Melsheimer, the former President, Chief Operating Officer and Chief Financial
Officer. Under this plan, mandatory retirement takes 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 for our benefit to postpone the mandatory retirement date for that
individual for one additional year.
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 Mr. Harris
and Mr. Melsheimer under our existing 401(k) plan do not equal this threshold.
The plan was established to provide the difference between the benefit required
under the age discrimination laws and that provided under our existing plans.
For individuals retiring after 2007, the benefit under the plan is paid to
the
qualifying individual in the form of a lump sum, and is paid six months and
one
day after the individual's separation from service with the Company, pursuant
to
certain exceptions. Mr. Harris's projected mandatory benefit will be
approximately $147,302 and paid as a lump sum six months and one day after
his
expected retirement on December 31, 2008.
2007
Non-Qualified Deferred Compensation
The
following table presents information regarding the Company's Amended and
Restated Supplemental Executive Retirement Plan for the fiscal year ended
December 31, 2007. Other than for Mr. Harris, we do not maintain any pension
or
non-qualified pension benefits except as disclosed in "Executive Mandatory
Retirement" above.
Name
|
|
Executive
Contributions
in
Last FY
($)
|
|
Registrant
Contribution in
Last
FY
($)(1)
|
|
Aggregate
Earnings
in
Last
FY
($)
|
|
Aggregate
Withdrawals/
Distributions
($)
|
|
Aggregate
Balance
at Last
FYE
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Charles
E. Harris
|
|
|
0
|
|
|
306,187
|
|
|
210,533
|
|
|
0
|
|
|
2,667,020
|
|
(1)
|
This
amount is included in the Summary Compensation Table under "All Other
Compensation."
|
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 annual salary to be
credited each month (a "Monthly Credit") to a special account maintained on
our
books for the benefit of Mr. Harris (the "SERP Account"), provided that Mr.
Harris is employed by us on the last business day of such month. The amounts
credited to the SERP Account are deemed invested or reinvested in such
investments as are requested by Mr. Harris and agreed to by the Company. The
SERP Account is credited and debited to reflect the deemed investment returns,
losses and expenses attributed to such deemed investments and reinvestments
in
accordance with the terms of the SERP. Mr. Harris's benefit under the SERP
equals the balance in the SERP Account and such benefit will always be 100
percent vested (i.e., not forfeitable).
In
2005,
Mr. Harris received a $125,000 distribution from the SERP Account. The balance
of the SERP Account will be paid in a lump sum on May 30, 2008, and any
subsequent balance attributable to subsequent monthly credits will be paid
on
July 31, 2009.
If
Mr.
Harris dies before the entire benefit under the SERP Account has been paid
to
him, the amount remaining in the SERP Account will be distributed to his
beneficiary in a lump-sum payment on the 90th
day
after the date of his death.
Potential
Payments upon Termination or Change in Control
Other
than Mr. Harris, our Chairman and Chief Executive Officer, none of our executive
officers has a change in control agreement or is entitled to any special
payments solely upon a change in control.
In
the
event of termination without cause or by constructive discharge, Mr. Harris's
Employment Agreement provides for the continuation of certain benefits over
specified periods, as well as severance pay, payable to Mr. Harris (or to his
estate if he dies before all payments are made), equal to two times his base
salary distributed over 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, as amended and restated effective as of January 1, 2005. The severance
compensation agreement provides that if, following a change in our control,
as
defined in the agreement, Mr. Harris's employment is terminated by us without
cause or by him within one year of such change in control, he shall be entitled
to receive compensation in a lump sum payment equal to 2.99 times his average
base salary plus other amounts included in Mr. Harris's income as compensation
from the Company (but excluding bonus, incentive, profit-sharing plan and equity
compensation) as in effect over the most recent five years preceding the year
in
which the change in control occurred. Under the severance compensation
agreement, Mr. Harris is also entitled to receive a lump-sum payment equal
to
any amounts forfeited on account of his termination, under any employee pension
benefit plan, including benefits under the Company's executive mandatory
retirement benefit plan. In addition, he is entitled to receive medical and
health insurance coverage under the Company's retiree medical benefit plan
and
all other benefits he would be eligible to receive in the event of termination
without cause or by constructive discharge, although no duplicate benefits
will
be provided. In the event that Mr. Harris is entitled to receive 2.99 times
his
base salary under the severance compensation agreement, he shall not also be
paid two times his base salary under the employment agreement.
On
June
30, 1994, we adopted the Medical Benefit Retirement Plan. 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. On November 3, 2005, we amended this plan
to
reverse the 1997 amendment for future retirees and to remove dependents other
than spouses from the plan. The coverage is secondary to any government or
subsequent employer-provided health-insurance plans. The annual premium cost
to
us with respect to the entitled retiree shall not exceed $12,000, subject to
an
index for inflation. As of December 31, 2007, and 2006, we had liabilities
of
$913,904 and $791,972, respectively, for the plan; there are no plan assets.
The
options of retirees who qualify for the Medical Benefit Retirement Plan will
remain exercisable (to the extent exercisable at the time of the optionee's
termination) post retirement, subject to certain conditions, if such retiree
executes a post-termination non-solicitation agreement, in a form reasonably
acceptable to the Company, until the expiration of its term.
The
following chart sets forth amounts that would have been payable to Mr. Harris
had he realized a qualifying termination of employment under his severance
agreement or Employment Agreement, determined as if the triggering event had
occurred on December 31, 2007. Other than Mr. Harris, we do not maintain any
established severance plan for our employees. Due to the number of factors
that
affect the calculations in the table, actual amounts paid or distributed may
be
different.
|
|
Termination
Scenarios
|
|
Charles
E. Harris
|
|
Termination
Following Change of Control
($)
|
|
Termination
Without
Cause or Constructive Discharge
($)
|
|
Termination
for Cause
($)
|
|
Mandatory
Retirement
($)
|
|
Voluntary
Termination
($)
|
|
Death
($)
|
|
Disability
($)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lump
Sum Salary Payments
|
|
|
885,434
|
|
|
612,374
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
612,374
|
|
|
0
|
|
Medical
Insurance Benefits
|
|
|
194,423
|
|
|
194,423
|
|
|
0
|
|
|
194,423
|
|
|
194,423
|
|
|
194,423
|
|
|
194,423
|
|
Pension
Benefits
|
|
|
147,302
|
|
|
0
|
|
|
0
|
|
|
147,302
|
|
|
0
|
|
|
0
|
|
|
0
|
|
All
Other Perqs.
|
|
|
146,101
|
|
|
146,101
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
0
|
|
|
373,256
|
|
SERP
Payments
|
|
|
2,667,020
|
|
|
2,667,020
|
|
|
2,667,020
|
|
|
2,667,020
|
|
|
2,667,020
|
|
|
2,667,020
|
|
|
2,667,020
|
|
Total
|
|
|
4,040,280
|
|
|
3,619,918
|
|
|
2,667,020
|
|
|
3,008,745
|
|
|
2,861,443
|
|
|
3,473,817
|
|
|
3,234,699
|
|
In
addition, pursuant to his stock option agreements, if Mr. Harris voluntarily
terminates his employment and executes a post-termination non-solicitation
agreement and a post-termination three-year non-compete agreement in forms
reasonably acceptable to the Company, his options (to the extent exercisable
at
the time of his termination) will remain exercisable until the expiration of
their terms. If Mr. Harris’s employment terminates under any of the other
termination scenarios outlined in the table immediately above, his options
will
remain exercisable for periods ranging from zero to one year, depending on
the
type of option and termination scenario. Mr. Harris’s exercisable options as of
December 31, 2007 are reflected in the table “2007 Outstanding Equity Awards at
Fiscal Year-End.”
Remuneration
of Directors
The
following table sets forth the compensation paid by us to our directors for
the
fiscal year ended December 31, 2007. During 2007, we did not grant any stock
option awards or pay or accrue any pension or retirement benefits for our
directors.
2007
Director Compensation
Name
of Director
|
|
Fees
Earned or Paid
in
Cash ($)
|
|
All
Other
Compensation
($)
|
|
Total
($)
|
|
Independent
Directors:
|
|
|
|
|
|
|
|
W.
Dillaway Ayres, Jr.
|
|
|
42,000
|
|
|
0
|
|
|
42,000
|
|
Dr.
C. Wayne Bardin
|
|
|
42,000
|
|
|
0
|
|
|
42,000
|
|
Dr.
Phillip A. Bauman
|
|
|
45,000
|
|
|
0
|
|
|
45,000
|
|
G.
Morgan Browne
|
|
|
45,000
|
|
|
0
|
|
|
45,000
|
|
Dugald
A. Fletcher
|
|
|
57,000
|
|
|
0
|
|
|
57,000
|
|
Mark
A. Parsells(1)
|
|
|
18,823
|
|
|
0
|
|
|
18,823
|
|
Charles
E. Ramsey
|
|
|
42,000
|
|
|
0
|
|
|
42,000
|
|
James
E. Roberts
|
|
|
47,250
|
|
|
0
|
|
|
47,250
|
|
Richard
P. Shanley
|
|
|
29,710
|
|
|
0
|
|
|
29,710
|
|
|
|
|
|
|
|
|
|
|
|
|
Interested
Directors:
|
|
|
|
|
|
|
|
|
|
|
Charles
E. Harris(2)
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Douglas
W. Jamison(2)
|
|
|
0
|
|
|
0
|
|
|
0
|
|
Kelly
S. Kirkpatrick
|
|
|
22,500
|
|
|
7,500
|
(3)
|
|
30,000
|
|
Lori
D. Pressman
|
|
|
24,000
|
|
|
35,938
|
(4)
|
|
59,938
|
|
|
|
|
|
|
|
|
|
|
|
|
——————————
(1) |
Mark
A. Parsells did not stand for re-election at the Annual Meeting held
on
May 3, 2007.
|
(2) |
Mr.
Harris and Mr. Jamison do not receive additional compensation as
Directors. Refer to the "2007 Summary Compensation Table" for details
of
Mr. Harris's and Mr. Jamison's compensation for
2007.
|
(3) |
Represents
$7,500 for consulting services. Ms. Kirkpatrick may be considered
an
"interested person" because of consulting work performed for
us.
|
(4) |
Represents
$35,938 for consulting services. Ms. Pressman may be considered an
"interested person" because of consulting work performed for
us.
|
There
are
no outstanding option awards to directors.
The
directors who are not officers receive $1,500 for each meeting of the Board
of
Directors and $1,500 for each committee meeting they attend, and a monthly
retainer of $750. Each non-employee committee Chairman receives an additional
monthly retainer of $250. The Lead Independent Director receives an additional
monthly retainer of $500. 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 or payable to all
directors in 2007 was $438,788.
The
Board
of Directors has adopted a policy that 50 percent of all director fees must
be
used to purchase our common stock. In 2007, the directors collectively bought
26,555 shares in the open market.
SELECTION
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTANT
(Proposal
No. 2)
PricewaterhouseCoopers
LLP ("PwC") has been selected as the independent registered public accounting
firm by our Audit Committee and ratified by a majority of our Board, including
a
majority of the independent directors by vote cast in person, to audit the
accounts of the Company for and during the Company's fiscal year ending December
31, 2008. This selection is subject to ratification or rejection by the
shareholders of the Company. The Company knows of no direct or indirect
financial interest of PwC in the Company.
Representatives
of PwC will not attend the Annual Meeting in person but will be available to
respond to appropriate questions by telephone.
Fees
Paid to PwC for 2007 and 2006
PwC
performed various audit and other services for us during 2007. The following
table presents a summary of the 2007 and 2006 fees billed by PwC:
|
|
Fiscal
Year Ended
December
31, 2007
|
|
Fiscal
Year Ended
December
31, 2006
|
|
Audit
Fees
|
|
$
|
338,800
|
|
$
|
334,000
|
|
Audit-Related
Fees
|
|
|
0
|
|
|
0
|
|
Tax
Fees
|
|
|
30,000
|
|
|
32,500
|
|
All
Other Fees
|
|
|
1,626
|
|
|
1,626
|
|
TOTAL
FEES:
|
|
$
|
370,426
|
|
$
|
368,126
|
|
Audit
Fees
Audit
fees include fees for professional services rendered by PwC, in connection
with
its annual audit of the Company's consolidated financial statements, reviews
of
the consolidated financial statements included in the Company's quarterly
reports on Form 10-Q, and assistance with and review of documents filed with
the
SEC.
Audit-Related
Fees
Audit-related
fees consist of fees billed for assurance and related services that are
reasonably related to the performance of the audit or review of the Company's
consolidated financial statements and are not reported under "Audit
Fees."
Tax
Fees
Tax
fees
consist of fees billed for professional services for tax compliance. These
services included assistance regarding federal, state and local tax compliance,
including tax-return preparation.
All
Other Fees
All
other
fees would include fees for products and services other than the services
reported above. In 2006 and 2007, these services include an accounting research
tool licensed from PwC.
The
Audit
Committee has determined that the provision of non-audit services that were
provided during 2007 is compatible with maintaining PwC's independence in
performing audit services for the Company.
Unless
marked to the contrary, the shares represented by the enclosed proxy card will
be voted "FOR" ratification of the appointment of PwC as the independent
registered public accounting firm of the Company.
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 10, 2008,
upon the written request of such shareholder, a copy of our Annual Report on
Form 10-K and/or our last Quarterly Report on Form 10-Q, including the financial
statements and the financial statement schedules, required to be filed with
the
SEC for our most recent fiscal year and/or quarter. Any shareholder who would
like to request a copy of our most recent Annual Report on Form 10-K or
Quarterly Report on Form 10-Q may do so by calling toll-free 1-877-TINY-TECH
or
submitting a written request to the following address, which shall contain
a
representation in good faith that such shareholder was a beneficial owner,
as of
March 10, 2008, of our securities, entitled to vote:
Investor
Relations
Harris
& Harris Group, Inc.
111
West 57th
Street, Suite 1100
New
York, NY 10019
Submission
of Shareholder Proposals
Under
SEC
rules, 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 2009 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 November 25, 2008, in order for such
proposals to be considered for inclusion in the proxy statement and proxy
relating to the 2009 Annual Meeting of Shareholders.
Shareholders
who do not wish to follow the SEC rules for submitting a proposal must notify
the Company in accordance with the provisions of the Company's Bylaws. Under
our
Bylaws, nominations for director may be made only by the Board or by 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 (i.e.,
between January 1, 2009, and January 31, 2009); 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. 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.
Rule
14a-4 of the SEC'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 in May of 2009,
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
|
March
25, 2008
|
Susan
T. Harris
|
|
Secretary
|