<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF
THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a party other than the Registrant / /
Check the appropriate box:
/ / Preliminary proxy statement
/ / Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2)).
/X/ Definitive proxy statement.
/ / Definitive additional materials.
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12.
MICROFINANCIAL INCORPORATED
---------------------------
(Name of Registrant as Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
------
(2) Aggregate number of securities to which transaction applies:
---------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------
(4) Proposed maximum aggregate value of transaction:
---------------------
(5) Total fee paid:
------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / 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.
(1) Amount Previously Paid:
----------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------
(3) Filing Party:
--------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------
<PAGE>
[LOGO]
950 Winter Street
Waltham, Massachusetts 02451
May 3, 1999
Dear Stockholder:
I am pleased to invite you to the 1999 Special Meeting of Stockholders in
Lieu of Annual Meeting of MicroFinancial Incorporated ("MicroFinancial"), which
will be held on Tuesday, June 8, 1999, at 4:00 p.m. at Edwards & Angell, LLP,
101 Federal Street, Boston, Massachusetts.
The accompanying Notice of Special Meeting of Stockholders in Lieu of Annual
Meeting and proxy statement contain the matters to be considered and acted upon.
Please read these materials carefully.
Matters scheduled for consideration at the Special Meeting are the election
of directors and the ratification of the selection of independent auditors for
1999.
I hope you will be able to attend the meeting, but if you cannot do so, it
is important that your shares be represented and voted. ACCORDINGLY, I URGE YOU
TO MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY PROMPTLY IN THE RETURN
ENVELOPE PROVIDED.
Very truly yours,
/s/ Peter R. Bleyleben
PETER R. BLEYLEBEN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
<PAGE>
MICROFINANCIAL INCORPORATED
950 WINTER STREET
WALTHAM, MASSACHUSETTS 02451
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS IN LIEU OF ANNUAL MEETING
MAY 3, 1999
The Special Meeting of Stockholders in Lieu of Annual Meeting of
MicroFinancial Incorporated, a Massachusetts corporation ("MicroFinancial"),
will be held on Tuesday, June 8, 1999, at 4:00 p.m. at Edwards & Angell, LLP,
101 Federal Street, Boston, Massachusetts for the purpose of considering and
voting upon:
1. The election of two directors for a three-year term.
2. The ratification of the selection of PricewaterhouseCoopers LLP as
independent auditors for MicroFinancial for 1999.
3. The transaction of such other business as may properly come before
the Special Meeting.
The record date for determining stockholders entitled to notice of, and to
vote at, the Special Meeting is the close of business on April 21, 1999.
MicroFinancial's transfer books will not be closed.
By Order of the Board of Directors,
/s/ Richard F. Latour
RICHARD F. LATOUR
CLERK
Waltham, Massachusetts
May 3, 1999
YOUR VOTE IS IMPORTANT. PLEASE COMPLETE, DATE, SIGN AND MAIL THE ENCLOSED PROXY
AT YOUR EARLIEST CONVENIENCE, USING THE RETURN ENVELOPE ENCLOSED WITH THE PROXY.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU WISH, EVEN IF
YOU HAVE PREVIOUSLY RETURNED YOUR PROXY.
<PAGE>
MICROFINANCIAL INCORPORATED
950 WINTER STREET
WALTHAM, MASSACHUSETTS 02451
TELEPHONE 781-890-0177
------------------------
1999 SPECIAL MEETING OF STOCKHOLDERS IN LIEU OF ANNUAL MEETING
------------------------
PROXY STATEMENT
The enclosed proxy is solicited by the Board of Directors ("MicroFinancial
Board") of MicroFinancial Incorporated ("MicroFinancial" or the "Corporation")
in connection with the Special Meeting of Stockholders in Lieu of Annual Meeting
to be held on June 8, 1999. This proxy statement and the enclosed proxy are
first being sent to stockholders on or about May 3, 1999. The proxy will be
voted at the Special Meeting in accordance with the instructions indicated on
the proxy by the stockholder. If no instructions are indicated, all shares
represented by valid proxies received pursuant to this solicitation (and not
revoked before they are voted) will be voted FOR Proposal Nos. 1 and 2.
The record date for determining stockholders entitled to vote at the Special
Meeting is the close of business on April 21, 1999. On this date, there were
outstanding and entitled to vote 13,334,994 shares of Common Stock, par value
$0.01 per share, of the Corporation (the "Common Stock"), each of which is
entitled to one vote on each matter to be voted on at the Special Meeting. The
presence (in person or by proxy) of a majority of the aggregate number of shares
of Common Stock outstanding and entitled to vote on the record date is necessary
to constitute a quorum at the Special Meeting. Abstentions and "broker
non-votes" will be counted as present at the Special Meeting for purposes of
determining whether there is a quorum. A "broker non-vote" occurs when a broker
or other nominee, holding shares for a beneficial owner, has not received voting
instructions on a matter from such owner and is barred by stock exchange rules
from exercising discretionary authority to vote on the matter.
Management is not aware of any matter to be considered at the Special
Meeting other than those referred to in this proxy statement. If any other
business should properly come before the Special Meeting, the persons named in
the proxy will vote according to their best judgment.
VOTING PROCEDURES
The affirmative vote of a majority of the shares of Common Stock represented
at the Special Meeting and entitled to vote is required to ratify the selection
of auditors. A plurality of votes of the shares of Common Stock represented at
the Special Meeting is required to elect directors. In voting for the election
of directors, stockholders may cast their votes in favor or against, but
abstentions may not be specified. Abstentions may be specified with respect to
the ratification of the selection of independent auditors. If a broker's
authority to vote on a particular matter is limited, thus resulting in a broker
non-vote, such broker non-vote will not be counted in determining the number of
votes cast or entitled to vote at the Special Meeting. Abstentions are counted
for this purpose. Since a broker's authority is not limited with respect to
Proposal Nos. 1 and 2, MicroFinancial does not expect to receive any broker
non-votes with respect to the Special Meeting.
A stockholder of record may revoke a proxy by delivering written notice of
revocation to Richard F. Latour, Clerk of MicroFinancial, at the address set
forth above, by filing a duly executed proxy bearing a later date, or by
attending the Special Meeting in person, notifying the Clerk, and voting by
ballot at the Special Meeting. Any stockholder of record attending the Special
Meeting may vote in person whether or not a proxy has been previously given, but
the mere presence (without notifying the Clerk) of a stockholder at the Special
Meeting will not constitute revocation of a previously given proxy. In addition,
stockholders whose shares of Common Stock are not registered in their own name
will need additional documentation from the record holder of the shares to vote
in person at the Special Meeting.
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of April 15, 1999 with respect
to the beneficial ownership of Common Stock of each person known by the
Corporation to be the beneficial owner of more than 5% of the 13,334,994
outstanding shares of Common Stock, each director and executive officer of the
Corporation and all directors and executive officers of the Corporation (not
including treasury stock) as a group. Each person named has sole voting and
investment power with respect to the shares indicated, except as otherwise
stated in the notes to the table.
<TABLE>
<CAPTION>
NUMBER OF SHARES
BENEFICIALLY PERCENTAGE OUTSTANDING OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED(1) COMMON STOCK
- ------------------------------------------------------------------ -------------------- ---------------------------
<S> <C> <C>
Peter R. Bleyleben(2)............................................. 1,555,410 11.66%
66 Norfolk Road
Chestnut Hill, Massachusetts 02464
Brian E. Boyle(3)................................................. 2,041,450 15.31%
11 Whispering Lane
Weston, Massachusetts 02493
Torrence C. Harder(4)............................................. 1,924,002 14.43%
Walden Woods, 657 Sudbury Road
Concord, Massachusetts 01742-4321
Jeffrey P. Parker(5).............................................. 340,840 2.56%
253 Meadowbrook Road
Weston, Massachusetts 02493
Alan J. Zakon..................................................... 40,000 *
31 Pumpkin Cay Road, Apartment A
Key Largo, Florida 33037
Richard F. Latour................................................. 306,772 2.30%
29 Cherubs Way
Hampstead, New Hampshire 03841
J. Gregory Hines.................................................. 25,080 *
14 Tory Treasure Lane
Sharon, Massachusetts 02067
John Plumlee...................................................... 30,275 *
97 By-Pass 28
Derry, New Hampshire 03038
Carol Salvo....................................................... 18,000 *
164 Albemarle Road
Norwood, Massachusetts 02062
All directors and executive officers as a group (9 persons)....... 6,342,609 47.56%
</TABLE>
- ------------------------------
* Less than 1%
(1) Unless otherwise indicated in the footnotes, each of the stockholders named
in this table has sole voting and investment power with respect to the
shares of Common Stock shown as beneficially owned by such stockholder,
except to the extent that authority is shared by spouses under applicable
law.
(2) Includes 19,600 shares of Common Stock owned by Dr. Bleyleben's mother for
which Dr. Bleyleben disclaims beneficial ownership.
(3) Includes 636,750 shares of Common Stock owned by Dr. Boyle's former spouse
over which Dr. Boyle retains voting control, for which Dr. Boyle disclaims
beneficial ownership.
(4) Includes 92,200 shares of Common Stock held in trust for Mr. Harder's
daughter, Lauren E. Harder, over which Mr. Harder retains sole voting and
investment power as the sole trustee and for which Mr. Harder disclaims
beneficial ownership; 92,200 shares of Common Stock held in trust for Mr.
Harder's daughter, Ashley J. Harder, over which Mr. Harder maintains voting
and investment power as the sole trustee and for which Mr. Harder disclaims
beneficial ownership; 346,372 shares of Common Stock owned by
Entrepreneurial Ventures, Inc. over which Mr. Harder retains shared voting
and investment power through his ownership in, and positions as President
and Director of, Entrepreneurial Ventures, Inc.; and 34,046 shares of Common
Stock owned by Lightbridge, Inc. over which Mr. Harder retains shared voting
and investment power through his ownership in, and position as Director of,
Lightbridge, Inc., for which Mr. Harder disclaims beneficial ownership.
(5) Owned by The Parker Family Limited Partnership over which Mr. Parker retains
shared voting and investment power through his ownership in, and position as
Director of, the general partner of the Parker Family Limited Partnership.
2
<PAGE>
ELECTION OF DIRECTORS
As of the date of this proxy statement, the MicroFinancial Board consists of
5 persons. The MicroFinancial Board is divided into three classes, with each
class serving staggered terms of three years, so that only one class is elected
in any one year. Two directors are to be elected at the Special Meeting to serve
until the 2002 Annual Meeting and until their successors are elected and have
qualified. Such nominees are Torrence C. Harder and Jeffrey P. Parker. Directors
are elected by a plurality of votes of the shares of Common Stock, present in
person or represented by proxy, and entitled to vote at the Annual Meeting (or
Special Meeting in lieu thereof) when there is a quorum.
Each of the nominees for director is presently a director of MicroFinancial.
Each has consented to being named a nominee in this proxy statement and has
agreed to serve as a director if elected at the Special Meeting. In the event
that any nominee is unable to serve, the persons named in the proxy have
discretion to vote for other persons if the other persons are designated by the
MicroFinancial Board. The MicroFinancial Board has no reason to believe that any
of the nominees will be unavailable for election.
THE MICROFINANCIAL BOARD RECOMMENDS
A VOTE "FOR" ALL NOMINEES FOR ELECTION AS DIRECTORS
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
NOMINEE, AGE AND PRINCIPAL OCCUPATION AND
COMMITTEE MEMBERSHIP OTHER INFORMATION
- ---------------------------- ------------------------------------------------------------------------------------
<S> <C>
TERMS EXPIRING IN 2002
Torrence C. Harder, 55 Torrence C. Harder has served as a Director of the Corporation since 1986 and has
Audit Committee; served as Chairman of the Compensation Committee since 1997. He has been the
Chairman, Compensation President and Director of Harder Management Corporation, Inc., a registered
Committee investment advisory firm, since its establishment in 1971. He has also been the
President and Director of Entrepreneurial Ventures, Inc., a venture capital
investment firm, since its founding in 1986. Mr. Harder is a Director of
Lightbridge, Inc., a wireless industry software services provider, Dent-A-Med, Inc.,
RentGrow, Inc., GWA Information Systems, Inc., Trade Credit Corporation and UpToDate
in Medicine, Inc. Mr. Harder earned an M.B.A. from the Wharton School of the
University of Pennsylvania, and a B.A. with honors in the Philosophy of Economic
Thought from Cornell University.
Jeffrey P. Parker, 55 Jeffrey P. Parker has served as a Director of the Corporation since 1992. He is the
founder and has served since 1997 as the Chief Executive Officer of CCBN.COM, a
world wide web information services company based in Boston. He is also the founder
and has served since 1991 as the managing director of Private Equity Investments, a
venture capital firm focusing on start-up and early stage companies. Mr. Parker is a
Director of Boston Treasury Systems, FaxNet Corporation, Pacific Sun Industries,
Vintage Partners and XcelleNet, Inc. Mr. Parker earned a B.A., an M.A. in
Engineering and an M.B.A. from Cornell University.
</TABLE>
3
<PAGE>
DIRECTOR, AGE AND COMMITTEE MEMBERSHIP
<TABLE>
<CAPTION>
NOMINEE, AGE AND PRINCIPAL OCCUPATION AND
COMMITTEE MEMBERSHIP OTHER INFORMATION
- ---------------------------- ------------------------------------------------------------------------------------
<S> <C>
TERM EXPIRING IN 2001
Peter R. Bleyleben, 46 Peter R. Bleyleben has served as President, Chief Executive Officer and Director of
Audit Committee the Corporation or its predecessor since June 1987. Before joining the Corporation,
Dr. Bleyleben was Vice President and Director of the Boston Consulting Group, Inc.
("BCG") in Boston. During his more than eight years with BCG, Dr. Bleyleben focused
his professional strategic consulting practice on the financial services and
telecommunications industries. Prior to joining BCG, Dr. Bleyleben earned an M.B.A.
with distinction and honors from the Harvard Business School, an M.B.A. and a Ph.D.
in Business Administration and Economics, respectively, from the Vienna Business
School in Vienna, Austria and a B.S. in Computer Science from the Vienna Institute
of Technology.
TERMS EXPIRING IN 2000
Brian E. Boyle, 51 Brian E. Boyle, the Chief Executive Officer of the Corporation from 1985 to 1987 and
Audit Committee; Chairman of the MicroFinancial Board from 1985 to 1995, has served as a Director of
Compensation Committee the Corporation or its predecessor since 1985. He is currently the Vice Chairman and
a Director of Boston Communications Group, Inc. ("Communications"), a Boston-based
provider of call processing to the global wireless industry. Prior to joining
Communications, Dr. Boyle was the Chairman and Chief Executive Officer of Credit
Technologies, Inc., a Massachusetts-based provider of credit decision and customer
acquisition software, from 1989 to 1993. He is also a Director of Saville Systems, a
global telecommunications billing software company, with its United States
headquarters in Burlington, Massachusetts, as well as of several private companies.
Dr. Boyle earned his A.B. in Mathematics and Economics from Amherst College and a
B.S. in Electrical Engineering and Computer Science, an M.S. in Operations Research,
an E.E. in Electrical Engineering and Computer Science and a Ph.D. in Operations
Research, all from the Massachusetts Institute of Technology.
Alan J. Zakon, 63 Alan J. Zakon has served as a Director of the Corporation since 1988 and has served
Chairman, Audit as Chairman of the Audit Committee since 1997. Since 1995, he has been the Vice
Committee; Compensation Chairman and a Director, and since November 1997, Chairman of the Executive
Committee Committee, of Autotote Corporation, a New York-based global gaming and simulcasting
company. He served as Managing Director of Bankers Trust Corporation from 1989 to
1995 where he was Chairman of the Strategic Policy Committee. Dr. Zakon is a
Director of Arkansas-Best Freight Corporation, a nationwide commercial
transportation and trucking company. Dr. Zakon holds a B.A. from Harvard University,
an M.S. in Industrial Management from the Sloane School at the Massachusetts
Institute of Technology and a Ph.D. in Economics and Finance from the University of
California at Los Angeles.
</TABLE>
4
<PAGE>
CERTAIN INFORMATION REGARDING THE MICROFINANCIAL BOARD
MEETINGS AND COMMITTEES
During 1998, the MicroFinancial Board met nine times and committees of the
Board met as follows: the Compensation Committee met two times and the Audit
Committee met two times. In 1998, all MicroFinancial Board members attended all
of the meetings of the MicroFinancial Board and its committees on which they
served.
The Audit Committee oversees the scope of MicroFinancial's internal
auditing, the independence of the outside auditors, the adequacy of
MicroFinancial's system of internal accounting controls and procedures, and the
adequacy of management's action with respect to recommendations thereon by
MicroFinancial's auditors. The Compensation Committee is responsible for
compensation and benefit plans (including management bonuses).
The MicroFinancial Board has no nominating committee, as the MicroFinancial
Board as a whole studies the qualifications and recommends to the stockholders
the election of MicroFinancial directors. A stockholder may nominate a person
for election as a director by complying with Section 3.1 of the MicroFinancial
By-laws, which provides that advance notice of a nomination must be delivered to
MicroFinancial and must contain the name and certain information concerning the
nominee and the stockholders who support the nominee's election. A copy of this
By-law provision may be obtained by writing to Richard F. Latour, Clerk of
MicroFinancial, at 950 Winter Street, Waltham, Massachusetts 02451.
COMPENSATION OF DIRECTORS
The MicroFinancial Board is comprised of five Directors, one of whom, Peter
Bleyleben, is a salaried employee of the Corporation who receives no additional
compensation for services rendered as a Director. The members of the
MicroFinancial Board who were not employees of the Corporation ("Non-Employee
Directors") received compensation under the Corporation's Board of Directors
Stock Unit Compensation Plan (the "Stock Unit Plan") for their service on the
MicroFinancial Board. Directors also are reimbursed for out-of-state travel
expenses incurred in connection with attendance at meetings of the
MicroFinancial Board and committees thereof. In addition, the Corporation pays
for health care insurance for each Non-Employee Director.
The Corporation adopted the Stock Unit Plan in February 1997. The Stock Unit
Plan was terminated effective as of February 10, 1999. Under the Stock Unit
Plan, Non-Employee Directors who did not serve as committee chairpersons
received up to $30,000 per year, payable $3,750 per meeting in cash and $3,750
per meeting in stock units (the "Stock Units"). Committee chairpersons received
up to $35,000 per year, payable $4,375 per meeting in cash and $4,375 per
meeting in Stock Units. Under the Stock Unit Plan, the Corporation paid the
participant the cash amount currently and credited Stock Units in the
appropriate amounts to a deferred fee account on the date of the MicroFinancial
Board or Committee meeting. Each Stock Unit in the deferred fee account was
valued at the time each such credit was made at the then-current value of the
Common Stock, as that value was determined from time to time by the
MicroFinancial Board. The number of Stock Units credited to each Non-Employee
Director's deferred fee account and the value placed on each Stock Unit was
appropriately adjusted in the event of a stock dividend, stock split or other
similar change affecting the Common Stock.
As of December 31, 1998, Dr. Boyle, Mr. Harder, Mr. Parker and Dr. Zakon had
3,665.75, 4,276.71, 3,665.75 and 4,276.71 Stock Units in their respective
accounts.
Since the Stock Unit Plan has been terminated, each Non-Employee Director
will receive a cash payment, in equal quarterly installments starting with the
second quarter of 1999, in an amount equal to the number of Stock Units in their
respective accounts multiplied by $13.95.
5
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
EXECUTIVE COMPENSATION
The following table sets forth the compensation of the Chief Executive
Officer and the four most highly compensated executive officers for the years
ended December 31, 1998, 1997 and 1996 (the "Named Executive Officers").
Determination of the most highly compensated executive officers is based upon
compensation for the Corporation's fiscal year ended December 31, 1998 and does
not necessarily reflect the most highly compensated executive officers for the
Corporation's fiscal years ended December 31, 1997 and 1996.
SUMMARY COMPENSATION TABLE(1)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
------------------------------------------------
ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(2) COMPENSATION
- ------------------------------------------------------------------ --------- ---------- ---------- -------------
<S> <C> <C> <C> <C>
Peter R. Bleyleben................................................ 1998 $ 250,888 $ 364,000 $ 65,245(3)
President, Chief Executive Officer and Director 1997 218,798 276,730 71,072
1996 187,837 214,073 73,674
Richard F. Latour................................................. 1998 198,446 244,568 45,690(4)
Executive Vice President, Chief 1997 169,495 153,755(5) 49,680
Operating Officer, Chief Financial 1996 134,535 43,000 44,381
Officer, Treasurer, Clerk and Secretary
J. Gregory Hines.................................................. 1998 106,951 42,095 4,281(6)
Vice President, Funding 1997 87,348 26,950 3,206
1996 79,853 10,320 2,256
John Plumlee...................................................... 1998 141,351 44,533 21,191(7)
Vice President, MIS 1997 124,624 29,769 20,687
1996 108,657 14,346 18,603
Carol Salvo....................................................... 1998 84,677 34,734 4,022(8)
Vice President, Legal 1997 66,368 15,781 2,170
1996 47,190 3,817 1,502
</TABLE>
- ------------------------
(1) Columns required by the rules and regulations of the Securities and Exchange
Commission that contain no entries have been omitted.
(2) Bonuses are paid over a three-year period, with one-third payable each year.
The remaining two-thirds is subject to discretionary review by the
Corporation and, therefore, does not vest to the employee. The bonus amount
set forth for each fiscal year thus represents the amount actually paid for
such fiscal year, plus amounts relating to the prior two fiscal years.
(3) Amounts for Dr. Bleyleben include: (a) contributions by the Corporation
under the Corporation's 401(k) retirement/profit sharing plan in 1998
($4,000), 1997 ($4,470) and 1996 ($4,500); (b) split dollar life insurance
premiums paid by the Corporation in 1998 ($54,156), 1997 ($62,461) and 1996
($60,515) (in the event of the death of Dr. Bleyleben, the Corporation is
entitled to the cash value under such plan with the beneficiary receiving
the life insurance portion thereof); (c) executive disability insurance
policy premiums paid by the Corporation in 1998 ($7,089), 1997 ($3,546) and
1996 ($3,546); and (d) the benefit to the executive of interest-free loans
from the Corporation based on the applicable federal rate in effect on the
date of issuance of each such loan, in 1997 ($595) and 1996 ($5,113).
6
<PAGE>
(4) Amounts for Mr. Latour include: (a) contributions by the Corporation under
the Corporation's 401(k) retirement/profit sharing plan in 1998 ($4,000),
1997 ($4,500) and 1996 ($4,435); (b) split dollar life insurance premiums
paid by the Corporation in 1998 ($34,917), 1997 ($40,501) and 1996 ($35,067)
(in the event of the death of Mr. Latour, the Corporation is entitled to the
cash value under such plan with the beneficiary receiving the life insurance
portion thereof); (c) executive disability insurance policy premiums paid by
the Corporation in 1998 ($3,028), 1997 ($1,586) and 1996 ($2,460); and (d)
the benefit to the executive of interest-free loans from the Corporation
based on the applicable federal rate in effect on the date of issuance of
each such loan, in 1998 ($3,745), 1997 ($3,093) and 1996 ($2,419).
(5) Does not include $179,745 which related to bonuses awarded in prior years
and deferred until 1997 at Mr. Latour's option.
(6) Amounts for Mr. Hines include: (a) contributions by the Corporation under
the Corporation's 401(k) retirement/profit sharing plan in 1998 ($2,738),
1997 ($2,273) and 1996 ($1,963); (b) term life insurance premiums paid by
the Corporation in 1998 ($84), 1997 ($84) and 1996 ($76); (c) executive
disability insurance policy premiums paid by the Corporation in 1998 ($602),
1997 ($434) and 1996 ($217); and (d) the benefit to the executive of
interest-free loans from the Corporation based on the applicable federal
rate in effect on the date of issuance of each such loan, in 1998 ($857) and
1997 ($415).
(7) Amounts for Mr. Plumlee include: (a) contributions by the Corporation under
the Corporation's 401(k) retirement/profit sharing plan in 1998 ($3,870),
1997 ($3,722) and 1996 ($2,991); (b) split dollar life insurance premiums
paid by the Corporation in 1998 ($15,000), 1997 ($15,113) and 1996 ($15,104)
(in the event of the death of Mr. Plumlee, the Corporation is entitled to
the cash value under such plan with the beneficiary receiving the life
insurance portion thereof); (c) executive disability insurance policy
premiums paid by the Corporation in 1998 ($1,016), 1997 ($1,016) and 1996
($508); and (d) the benefit to the executive of interest-free loans from the
Corporation based on the applicable federal rate in effect on the date of
issuance of each such loan, in 1998 ($1,305) and 1997 ($836).
(8) Amounts for Ms. Salvo include: (a) contributions by the Corporation under
the Corporation's 401(k) retirement/profit sharing plan in 1998 ($2,597),
1997 ($1,686) and 1996 ($1,447); (b) term life insurance premiums paid by
the Corporation in 1998 ($84), 1997 ($69) and 1996 ($55); (c) executive
disability insurance policy premiums paid by the Corporation in 1998 ($485);
and (d) the benefit to the executive of interest-free loans from the
Corporation based on the applicable federal rate in effect on the date of
issuance of each such loan, in 1998 ($857) and 1997 ($415).
7
<PAGE>
STOCK OPTION PLANS
There were no stock options awarded in 1998 under the Corporation's 1987
Stock Option Plan or 1998 Equity Incentive Plan. The following table indicates
the aggregate option exercises in 1998 by the Named Executive Officers and
fiscal year-end option values:
AGGREGATED OPTION EXERCISES IN FISCAL YEAR 1998
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT FISCAL YEAR END AT FISCAL YEAR-END
ACQUIRED ON VALUE ------------------------------ ----------------------------
NAME EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------- ------------- ----------- --------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Peter R. Bleyleben............. 0 $ 0 0 0 $ 0 $ 0
Richard F. Latour.............. 40,262 354,244 0 38,778 0 395,835
J. Gregory Hines............... 13,420 116,842 0 14,920 0 153,719
John Plumlee................... 11,940 96,982 0 12,000 0 120,552
Carol Salvo.................... 11,940 96,982 0 12,000 0 120,552
</TABLE>
- ------------------------
(1) The amounts in these columns are calculated using the difference between the
fair market value of the Corporation's Common Stock at exercise or at the
end of the Corporation's 1998 fiscal year, as the case may be, and the
option exercise prices. The MicroFinancial Board determines the fair market
value of the Corporation's Common Stock in connection with the Stock Unit
Plan based on a formula which values the Corporation at a multiple
(determined by reference to an index of publicly traded companies) of the
Corporation's most recent four quarters net income, multiplied by a discount
factor to take into account the illiquidity of the Common Stock. The most
recent value as so determined by the MicroFinancial Board was used in such
calculations.
PROFIT SHARING PLAN AND DISCRETIONARY BOARD OF DIRECTOR BONUS PROGRAMS
The Corporation pays annual bonuses and makes profit sharing payments as
determined by the Compensation Committee of the MicroFinancial Board. These
payments are made under informal arrangements and are based on an employee's
performance during the prior fiscal year. Historically, the MicroFinancial Board
has determined annual bonus and profit sharing payments for Dr. Bleyleben and
Mr. Latour. The MicroFinancial Board also establishes a pool to be allocated by
Dr. Bleyleben and Mr. Latour on an annual basis among senior executives of the
Corporation. Each employee is paid one-third of his or her bonus and profit
sharing at the time such amount is determined. The remaining two-thirds is paid
over the next two years in the discretion of the MicroFinancial Board or Dr.
Bleyleben and Mr. Latour based on Corporation and employee performance.
EMPLOYMENT AGREEMENTS
The Corporation has entered into Employment Agreements with Dr. Bleyleben
and Mr. Latour for a three-year period commencing June 12, 1998, subject to
automatic successive one-year renewals unless terminated pursuant to the terms
thereof. In the event of a termination of the Employment Agreements by the
Corporation without cause, or by Dr. Bleyleben or Mr. Latour for specified good
reason, the Employment Agreements provide for three years of severance payments
to Dr. Bleyleben and Mr. Latour, respectively, on the basis of their highest
base salary during the employment period. In addition, Dr. Bleyleben and Mr.
Latour would also be entitled to a prorated payment of base salary and bonus to
the date of termination, and the acceleration of deferred compensation and
accrued but unpaid amounts under the Corporation's bonus and/or profit sharing
plans. Dr. Bleyleben's and Mr. Latour's current base salaries, respectively, are
$260,000 and $210,000. The bonus for the current fiscal year will be determined
8
<PAGE>
by the MicroFinancial Board. If, in connection with a payment under their
Employment Agreement, either Dr. Bleyleben or Mr. Latour shall incur any excise
tax liability on the receipt of "excess parachute payments" as defined in
Section 280G of the Internal Revenue Code of 1986, as amended, the Employment
Agreements provide for gross-up payments to return them to the after-tax
position they would have been in if no excise tax had been imposed. As used in
each Employment Agreement, "for good reason" means the assignment to the
executive of duties inconsistent with the executive's position, authority,
duties or responsibilities; the failure by the Corporation to pay the agreed
base salary and provide the executive with benefits; moving the executive to a
location outside of the metropolitan Boston, Massachusetts area; and the failure
by the Corporation to require a successor to assume all obligations under the
Employment Agreement.
The Corporation has also entered into separate employment agreements with
each of the remaining Named Executive Officers which are designed to provide an
incentive to each executive to remain with the Corporation pending and following
a Change in Control (as defined below). Each employment agreement has an initial
term of one year following a Change in Control, with automatic extensions upon
the expiration of the initial one-year term for successive one-month periods.
Pursuant to each employment agreement, the executive will be entitled to receive
an annual base salary of not less than twelve times the highest monthly base
salary paid or payable to the executive within the twelve months preceding the
Change in Control. If the employment agreement is terminated by the
MicroFinancial Board other than for cause, death or disability, or is terminated
by the executive for specified good reason, the Corporation shall pay to the
executive in a cash lump sum within 30 days after the date of termination, the
aggregate of the following amounts: (i) the executive's annual base salary
through the date of termination; (ii) a special bonus (reduced over time as
described below) in the initial amount of $575,000, $600,000 and $585,000 for
Messrs. Hines and Plumlee and Ms. Salvo (the "Special Bonus"), respectively;
(iii) any other compensation previously deferred by the executive, together with
any accrued interest or earnings thereon; and (iv) any accrued vacation pay.
Beginning on February 25, 1999 and on each anniversary of that date, the Special
Bonus for each of Messrs. Hines and Plumlee and Ms. Salvo is reduced by $150,000
until such time as the Special Bonus equals zero ($0).
"Change in Control" means (i) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or
more of either the then outstanding shares of Common Stock or the combined
voting power of the then outstanding voting securities of the Corporation
entitled to vote generally in the election of directors; (ii) individuals who,
as of the date of the Corporation's 1998 Equity Incentive Plan constitute the
MicroFinancial Board, cease for any reason to constitute at least a majority of
the MicroFinancial Board except with respect to any director who was approved by
a vote of at least a majority of the directors then comprising the
MicroFinancial Board; (iii) approval by the shareholders of the Corporation of a
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, more than 60% of the then outstanding
shares of Common Stock continues to be owned by the shareholders who were the
beneficial holders of such stock prior to such transaction; or (iv) approval by
the shareholders of the Corporation of a complete liquidation or dissolution of
the Corporation or the sale or other disposition of all or substantially all of
the assets of the Corporation.
9
<PAGE>
OTHER INFORMATION RELATING TO
DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
CERTAIN TRANSACTIONS
During 1995, 1997 and 1998, Richard F. Latour, Executive Vice President,
Chief Operating Officer and Chief Financial Officer of the Corporation, borrowed
an aggregate of $152,776 from the Corporation to exercise vested options to
purchase Common Stock (the "Exercised Options"). Mr. Latour repaid all
outstanding indebtedness to the Corporation upon the closing of the
Corporation's initial public offering with the proceeds of shares of Common
Stock sold by him. The loans were non-interest bearing unless the principal
amount thereof was not paid in full when due, at which time interest accrued and
was payable at a rate per annum equal to the prime rate published by The Wall
Street Journal plus 4.0%. The outstanding principal balance of these loans was
reduced by any dividends payable upon the stock underlying the Exercised
Options. All principal amounts outstanding under such loans were due on the
earlier of the end of employment or December 27, 2005. During the fiscal year
ended December 31, 1998, the largest aggregate amount outstanding under these
loans was $106,300. Mr. Latour also has an outstanding Demand Note issued to the
Corporation. As at December 31, 1998, the balance payable to Mr. Latour under
this Demand Note was $297,387 at an interest rate per annum equal to a bank
prime rate minus 1%.
The Parker Family Limited Partnership, controlled by Jeffrey Parker, a
director of the Corporation, loaned the Corporation an aggregate of $2.4 million
in the form of junior subordinated notes, $2.2 million of which was outstanding
as of December 31, 1998, as follows: $200,000 on September 1, 1994 at an
interest rate per annum equal to the higher of 12% or a bank prime rate plus 3%
maturing September 1, 1999; $200,000 on May 1, 1995 at an interest rate per
annum equal to 12% or a bank prime rate plus 4% maturing May 1, 2000; $500,000
on June 1, 1996 at an interest rate per annum equal to the higher of 12% or a
bank prime rate plus 3% maturing June 1, 2000; $250,000 on December 1, 1996 at
an interest rate per annum equal to the higher of 12% or a bank prime rate plus
3% maturing December 1, 1999; $500,000 on December 1, 1996 at an interest rate
per annum equal to the higher of 12% or a bank prime rate plus 3% maturing
December 1, 2002; $250,000 on December 1, 1996 at an interest rate per annum
equal to the higher of 12% or a bank prime rate plus 3% maturing December 1,
2001; $125,000 on September 1, 1997 at an interest rate per annum equal to 11%
maturing September 1, 2001; and $125,000 on September 1, 1997 at an interest
rate per annum equal to 11% maturing September 1, 2003.
Peter R. Bleyleben, the President and Chief Executive Officer and a Director
of the Corporation, loaned the Corporation an aggregate of $125,000 in the form
of junior subordinated notes as follows: $100,000 on December 1, 1996 at 12%
interest per annum maturing December 1, 2001; and $25,000 on June 1, 1998 at
10.5% interest per annum maturing June 1, 2003. Mr. Bleyleben also loaned the
Corporation an aggregate of $200,000 in the form of demand notes as follows:
$100,000 on October 17, 1997 at an interest rate per annum equal to a bank prime
rate minus 1%; and $100,000 on December 1, 1998 at an interest rate per annum
equal to a bank prime rate minus 1%.
Alan J. Zakon, a director of the Corporation, loaned the Corporation an
aggregate of $200,000 in the form of junior subordinated notes as follows:
$100,000 on February 1, 1995 at 12% interest per annum maturing February 1,
2000; and $100,000 on March 18, 1998 at 10.5% interest per annum through his IRA
maturing April 1, 1999.
Ingrid R. Bleyleben, the mother of Peter R. Bleyleben, the President and
Chief Executive Officer and a Director of the Corporation, loaned the
Corporation the following amounts in the form of junior subordinated notes:
$120,000 on February 16, 1996 at an interest rate per annum equal to 11.5%
maturing March 1, 2001; $25,000 on December 17, 1996 at an interest rate per
annum equal to 11.5% maturing January 1, 2002; $20,000 on June 4, 1997 at an
interest rate per annum equal to 11.5% maturing May 1, 2002; and $25,000 on June
1, 1998 at an interest rate per annum equal to 10% maturing June 1, 2003.
10
<PAGE>
Torrence C. Harder, a director of the Corporation, loaned the Corporation
$100,000 in the form of a Junior Subordinated Note on November 1, 1994 at an
interest rate per annum equal to 12.0% or a bank prime rate plus 3% maturing
November 1, 1999. Additionally, Torrence C. Harder Cultural Foundation, a entity
related to Torrence C. Harder, loaned the Corporation $50,000 in the form of a
junior subordinated note on January 1, 1996 at an interest rate per annum equal
to 11.5% maturing January 1, 2001.
All of the foregoing transactions, with the exception of the loans to Mr.
Latour, are on terms similar to those that would have been obtained through
arms-length negotiations.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
MicroFinancial was not subject to the reporting requirements of the
Securities Exchange Act of 1934 (the "Exchange Act") until February 1999.
Accordingly, MicroFinancial's directors and executive officers were not subject
to the filing requirements of Section 16(a) during 1998.
RATIFICATION OF THE SELECTION OF
MICROFINANCIAL'S INDEPENDENT AUDITORS
The selection of PricewaterhouseCoopers LLP to serve as independent auditors
of MicroFinancial for the current fiscal year ending December 31, 1999, will be
submitted to the stockholders of the Corporation for ratification at the Special
Meeting. Representatives of PricewaterhouseCoopers LLP will be present at the
Special Meeting, will have the opportunity to make a statement if they so desire
and will be available to answer appropriate questions.
The firm of PricewaterhouseCoopers has advised MicroFinancial that neither
it nor any of its members has any direct financial interest in MicroFinancial as
a promoter, underwriter, voting trustee, director, officer or employee. All
professional services rendered by PricewaterhouseCoopers LLP during the year
ended December 31, 1998 were furnished at customary rates.
The ratification of the selection of independent auditors requires the
affirmative vote of a majority of the outstanding Common Stock, present in
person or represented by proxy, and entitled to vote thereon at the Special
Meeting when there is a quorum.
THE MICROFINANCIAL BOARD RECOMMENDS A VOTE "FOR" THIS PROPOSAL,
WHICH IS IDENTIFIED AS PROPOSAL 2 ON THE ENCLOSED PROXY
OTHER MATTERS
Management does not know of any matters which will be brought before the
Special Meeting other than those specified in the Notice of Special Meeting of
Stockholders in Lieu of Annual Meeting. However, if any other matters properly
come before the Special Meeting, the persons named in the form of proxy, or
their substitutes, will vote on such matters in accordance with their best
judgment.
2000 STOCKHOLDER PROPOSALS
Proposals of stockholders to be included in the proxy statement and form of
proxy for the Corporation's 2000 Annual Meeting of Stockholders must be received
by January 3, 2000. Stockholders who wish to make a proposal at the
aforementioned Annual Meeting of Stockholders, other than one that will be
included in the Corporation's proxy materials, must notify the Corporation no
later than February 3, 2000 of such a proposal. If a stockholder makes such a
timely notification, the proxies solicited by the MicroFinancial Board will
confer discretionary voting authority on the persons named as attorneys in the
proxy and such persons may exercise discretionary voting authority under
circumstances consistent with the rules of the Securities and Exchange
Commission. If a stockholder who wishes to present a proposal fails to notify
the Corporation by February 3, 2000, the stockholder shall not be entitled to
present the proposal at the meeting. Notwithstanding the failure to timely
notify the Corporation, if the proposal is brought
11
<PAGE>
before the meeting, then the proxies solicited by the MicroFinancial Board will
confer discretionary voting authority on the persons named as attorneys in the
proxy.
Proposals should be mailed to Richard F. Latour, Clerk of MicroFinancial, at
950 Winter Street, Waltham, Massachusetts 02451.
FINANCIAL STATEMENTS
The financial statements of the Corporation are contained in the 1998 Annual
Report to Stockholders, which has been provided to the stockholders concurrently
herewith. Such report and the financial statements contained therein are not to
be considered as a part of this soliciting material.
AVAILABILITY OF INFORMATION
The Corporation will provide without charge to each person solicited
hereunder upon the written request of such person, a copy of the Corporation's
Annual Report on Form 10-K for the fiscal year ended December 31, 1998,
including the financial statements and the financial statement schedules,
required to be filed with the Securities and Exchange Commission. Requests for
such document should be directed to Richard F. Latour, Clerk of MicroFinancial,
at 950 Winter Street, Waltham, Massachusetts 02451.
MISCELLANEOUS
All the expenses of preparing, assembling, printing and mailing the material
used in the solicitation of proxies by the Board will be paid by the
Corporation. In addition to the solicitation of proxies by use of the mails,
officers and regular employees of the Corporation may solicit proxies on behalf
of the Board by telephone, telegram or personal interview, the expenses of which
will be borne by the Corporation. Arrangements may also be made with brokerage
houses and other custodians, nominees and fiduciaries to forward soliciting
materials to the beneficial owners of stock held of record by such persons at
the expense of the Corporation.
Submitted by Order of the Board of
Directors,
/s/ Richard F. Latour
RICHARD F. LATOUR
CLERK
Waltham, Massachusetts
May 3, 1999
12
<PAGE>
PROXY
MICROFINANCIAL INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF THE
CORPORATION FOR THE SPECIAL MEETING OF STOCKHOLDERS IN LIEU OF ANNUAL MEETING TO
BE HELD ON JUNE 8, 1999, OR ANY ADJOURNMENTS THEREOF. THE SHARES REPRESENTED
HEREBY WILL BE VOTED AS DIRECTED BY THEIR STOCKHOLDER(S).
The undersigned stockholder of MicroFinancial Incorporated (the
"Corporation") hereby appoints Peter R. Bleyleben and Richard F. Latour, jointly
and severally with full power of substitution to each, as proxies for and on
behalf of the undersigned, to attend the Special Meeting of Stockholders in Lieu
of Annual Meeting of MicroFinancial Incorporated, to be held at Edwards &
Angell, LLP, 101 Federal Street, Boston, Massachusetts, on Tuesday, June 8,
1999, at 4:00 p.m., or any adjournments thereof, and to vote as directed below
all stock of the Corporation which the undersigned would be entitled to vote if
personally present.
By acceptance, the proxies named above agree that this Proxy will be voted
in the manner directed by the stockholder giving this Proxy. If no directions
are specified, the Proxy will be voted FOR the election of the 2 nominees for
Director, and FOR the ratification of the selection of PricewaterhouseCoopers
LLP as independent auditors of the Corporation for the fiscal year ending
December 31, 1999, all as set forth on the reverse. Discretionary authority is
hereby conferred as to all other matters which may properly come before the
meeting or any adjournments thereof. This Proxy, if properly executed and
delivered, will revoke all other Proxies.
(CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE) SEE REVERSE SIDE
<PAGE>
Please mark your
/X/ votes as in this
example.
This Proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this Proxy will
be voted FOR all nominees, and FOR Proposal 2.
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS A VOTE FOR ALL NOMINEES AND
FOR PROPOSAL 2
1. Election of each of the following two directors for a three-year term.
Nominees: Torrence C. Harder and Jeffrey P. Parker
FOR / / WITHHELD / /
/ / ________________________________________________For all nominees
except as noted above.
2. To ratify the appointment by the Board of Directors of the firm of
PricewaterhouseCoopers LLP as independent auditors of the Corporation
for the year ending December 31, 1999.
/ / FOR / / AGAINST / / ABSTAIN
<TABLE>
<S> <C>
MARK HERE MARK HERE
FOR ADDRESS / / IF YOU PLAN / /
CHANGE AND NOTE TO ATTEND
AT LEFT THE MEETING
</TABLE>
PLEASE DATE, SIGN AND MAIL THIS PROXY
CARD IN THE ACCOMPANYING ENVELOPE.
NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
Please sign EXACTLY as name(s) appear
hereon. When signing as administrator,
attorney, executor, guardian or
trustee, please give your full title.
If the signer is a corporation or
partnership, please sign full corporate
or partnership name by any authorized
officer or person. If shares are held
jointly, each joint owner should sign.
SIGNATURE(S) _________ DATE: _________
