def14a
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT þ
FILED BY A PARTY OTHER THAN THE REGISTRANT o
Check the appropriate box:
o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
þ Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
MICROFINANCIAL INCORPORATED
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
þ No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(4) 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:
o Fee paid previously with preliminary materials.
o 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:
10M Commerce Way
Woburn, Massachusetts 01801
April 15, 2010
Dear Stockholder:
I am pleased to invite you to the 2010 Special Meeting of
Stockholders in Lieu of Annual Meeting of MicroFinancial
Incorporated, which will be held on Thursday, May 13, 2010,
at 4:00 p.m., at the offices of Edwards Angell
Palmer & Dodge LLP, 111 Huntington Avenue, Boston,
Massachusetts.
The accompanying Notice of Special Meeting of Stockholders and
proxy statement describe 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 three directors for three-year terms and the
ratification of the selection of independent auditors for 2010.
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,
PETER R. BLEYLEBEN
Non-Executive Chairman
MicroFinancial
Incorporated
10M Commerce Way
Woburn, Massachusetts 01801
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
IN LIEU OF ANNUAL MEETING
To Be
Held May 13, 2010
The Special Meeting of Stockholders in Lieu of Annual Meeting of
MicroFinancial Incorporated, a Massachusetts corporation
(MicroFinancial), will be held Thursday,
May 13, 2010, at 4:00 p.m., at the offices of Edwards
Angell Palmer & Dodge LLP, 111 Huntington Avenue,
Boston, Massachusetts for the purpose of considering and voting
upon:
|
|
|
|
1.
|
The election of the three directors named in
MicroFinancials proxy statement for three-year terms.
|
|
|
2.
|
The ratification of the selection of Caturano and
Company, P.C. as independent auditors for MicroFinancial
for 2010.
|
|
|
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 5, 2010. MicroFinancials transfer books will
not be closed.
By Order of the Board of Directors,
RICHARD F. LATOUR
Clerk
Woburn, Massachusetts
April 15, 2010
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.
TABLE OF
CONTENTS
|
|
|
|
|
|
|
Page
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
3
|
|
|
|
|
3
|
|
|
|
|
3
|
|
|
|
|
4
|
|
|
|
|
5
|
|
|
|
|
5
|
|
|
|
|
6
|
|
|
|
|
7
|
|
|
|
|
7
|
|
|
|
|
7
|
|
|
|
|
8
|
|
|
|
|
9
|
|
|
|
|
9
|
|
|
|
|
9
|
|
|
|
|
10
|
|
|
|
|
17
|
|
|
|
|
18
|
|
|
|
|
18
|
|
|
|
|
19
|
|
|
|
|
20
|
|
|
|
|
20
|
|
|
|
|
20
|
|
|
|
|
22
|
|
|
|
|
24
|
|
|
|
|
27
|
|
|
|
|
27
|
|
|
|
|
28
|
|
|
|
|
28
|
|
|
|
|
28
|
|
|
|
|
28
|
|
|
|
|
29
|
|
Notice of
Internet Availability of Proxy Materials:
The Notice of Meeting, proxy statement and annual report to
shareholders
are available at
www.microfinancial.com/proxyinfo/
i
MicroFinancial
Incorporated
10M Commerce Way
Woburn, Massachusetts 01801
Telephone
781-994-4800
2010
SPECIAL MEETING OF STOCKHOLDERS
IN LIEU OF ANNUAL MEETING
PROXY
STATEMENT
GENERAL
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 (the Special
Meeting) to be held on May 13, 2010. This proxy
statement and the enclosed proxy are first being sent to
stockholders on or about April 15, 2010. 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 the election of the three director nominees named in this
proxy statement;
|
|
|
|
FOR the ratification of the selection of Caturano and
Company, P.C. as our independent registered public
accounting firm for fiscal year 2010; and
|
|
|
|
in accordance with the judgment of the proxy holders as to any
other matters that may be properly brought before the meeting or
any adjournments or postponements of the meeting.
|
The record date for determining stockholders entitled to vote at
the Special Meeting is the close of business on April 5,
2010. On this date, there were outstanding and entitled to vote
14,230,670 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 bank, broker
or other nominee, holding shares for a beneficial owner, submits
a proxy but does not vote on a particular matter because it has
not received voting instructions on the matter from the
beneficial owner and is barred by stock exchange rules from
exercising discretionary authority to vote on the matter.
VOTING
PROCEDURES
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 of a nominee or may withhold authority to vote, but
votes against may not be specified. The affirmative vote of a
majority of the votes cast at the Special Meeting is required to
ratify the selection of auditors. If a brokers 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 at the Special Meeting, and
will have no effect on either proposal. Abstentions are likewise
not considered votes cast and so will have no effect on either
proposal. At the Special Meeting, a broker nominee will not be
able to submit a vote on the director elections unless it
receives specific instructions from the beneficial owner.
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. Stockholders
who hold their shares in street name (i.e., through brokers or
other nominees) will need to follow the instructions on their
brokers or other nominees voting instruction form to
revoke any prior voting instruction. 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.
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information as of March 1,
2010 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 14,229,420 shares of Common Stock
outstanding as of such date, each director and executive officer
of the Corporation and all directors and executive officers of
the Corporation as a group.
|
|
|
|
|
|
|
|
|
|
|
Number of Shares
|
|
|
Percentage of Outstanding
|
|
Name and Address of Beneficial Owner(1)
|
|
Beneficially Owned(2)
|
|
|
Common Stock
|
|
|
Directors and Executive Officers
|
|
|
|
|
|
|
|
|
Torrence C. Harder(3)
|
|
|
1,745,372
|
|
|
|
12.2
|
%
|
Peter R. Bleyleben
|
|
|
1,422,699
|
|
|
|
10.0
|
%
|
Brian E. Boyle(4)
|
|
|
1,502,067
|
|
|
|
10.5
|
%
|
Richard F. Latour(5)
|
|
|
698,444
|
|
|
|
4.8
|
%
|
Alan J. Zakon(6)
|
|
|
245,275
|
|
|
|
1.7
|
%
|
Fritz von Mering
|
|
|
96,563
|
|
|
|
*
|
|
John W. Everets
|
|
|
66,239
|
|
|
|
*
|
|
James R. Jackson, Jr.(7)
|
|
|
105,225
|
|
|
|
*
|
|
Steven J. LaCreta(8)
|
|
|
14,832
|
|
|
|
*
|
|
Stephen Constantino(9)
|
|
|
24,408
|
|
|
|
*
|
|
All directors and executive officers as a group (10 persons)
|
|
|
5,921,124
|
|
|
|
40.2
|
%
|
Others
|
|
|
|
|
|
|
|
|
Austin W. Marxe(10)
|
|
|
1,808,814
|
|
|
|
12.7
|
%
|
David M. Greenhouse(10)
c/o AWM
Investment Company, Inc.
527 Madison Avenue, Suite 2600
New York, New York 10022
|
|
|
|
|
|
|
|
|
SKIRITAI Capital LLC(11)
|
|
|
1,084,323
|
|
|
|
7.6
|
%
|
388 Market Street, Suite 700
San Francisco, CA 94111
|
|
|
|
|
|
|
|
|
|
|
|
* |
|
Less than 1% |
|
(1) |
|
Unless otherwise indicated, the business address of each officer
and director of the Corporation is 10-M Commerce Way, Woburn,
Massachusetts 01801. |
|
(2) |
|
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. |
|
(3) |
|
Includes 95,000 shares of Common Stock issuable upon the
exercise of options issued to Mr. Harder which vest on or
before April 29, 2010; 92,200 shares of Common Stock
held in trust for Mr. Harders 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. Harders 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; and 276,045 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. |
|
(4) |
|
Includes 95,000 shares of Common Stock issuable upon the
exercise of options issued to Dr. Boyle, which vest on or
before April 29, 2010. |
|
(5) |
|
Includes 207,181 shares of Common Stock issuable upon the
exercise of options granted to Mr. Latour, which vest on or
before April 29, 2010. Excludes 12,875 shares of
Common Stock underlying unvested restricted stock units. |
|
(6) |
|
Includes 95,000 shares of Common Stock issuable upon the
exercise of options granted to Dr. Zakon, which vest on or
before April 29, 2010. |
2
|
|
|
(7) |
|
Includes 8,974 shares of Common Stock issuable upon the
exercise of options granted to Mr. Jackson, which vest on
or before April 29, 2010. Excludes 8,984 shares of
Common Stock underlying unvested restricted stock units. |
|
(8) |
|
Includes 4,980 shares of Common Stock issuable upon the
exercise of options granted to Mr. LaCreta, which vest on
or before April 29, 2010. Excludes 5,894 shares of
Common Stock underlying unvested restricted stock units. |
|
(9) |
|
Includes 4,461 shares of Common Stock issuable upon the
exercise of options granted to Mr. Constantino, which vest
on or before April 29, 2010. Excludes 5,765 shares of
Common Stock underlying unvested restricted stock units. |
|
(10) |
|
The number of shares and the following information is based upon
information set forth in the amended Schedule 13G filed
with the SEC on February 12, 2010 by Austin W. Marxe
(Marxe) and David M. Greenhouse
(Greenhouse), who are the controlling principals of
AWM Investment Company, Inc. (AWM), the general
partner of and investment adviser to Special Situations Cayman
Fund, L.P. (Cayman). AWM also serves as the general
partner of MGP Advisers Limited Partnership (MGP)
and the general partner of Special Situations Fund III QP,
LP (SSFQP). AWM serves as the investment adviser to
SSFQP. Of the 1,808,814 shares reported in the
Schedule 13G as being beneficially owned by Marxe and
Greenhouse, 339,695 shares are owned by Cayman and
1,469,119 shares are owned by SSFQP. Marxe and Greenhouse
have shared power to vote and the shared power to dispose of all
1,808,814 shares. |
|
(11) |
|
Skiritai Capital LLC (Skiritai) is the general
partner of the Leonidas Opportunity Fund L.P. and the
investment manager of the Leonidas Opportunity Offshore
Fund Ltd, and the managing directors of Skiritai are
Russell R. Silvestri and Lyron L. Bentovim. |
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 (as
amended, the Exchange Act) requires the
Corporations directors and officers and persons who
beneficially own more than ten percent (10%) of the Common
Shares (each, a Reporting Person) to file reports of
ownership and changes of ownership with the Securities and
Exchange Commission. Copies of all filed reports are required to
be furnished to the Corporation pursuant to Section 16(a)
of the Exchange Act. Based solely upon a review of Forms 3
and 4 and amendments thereto furnished to the Corporation
pursuant to
Rule 16a-3(e)
of the Exchange Act during fiscal year ended December 31,
2009 and on written representations from Reporting Persons, the
Corporation believes that each Reporting Person complied with
all applicable filing requirements during its fiscal year ended
December 31, 2009.
GOVERNANCE
OF THE CORPORATION
Members
of the Board of Directors and their Committee
Assignments
The members of the Board of Directors on the date of this proxy
statement, and the committees of the Board on which they serve,
are identified below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Strategic
|
|
|
|
Audit
|
|
|
Nominating and Corporate
|
|
|
Compensation and
|
|
|
Credit Policy
|
|
|
Planning
|
|
Director
|
|
Committee
|
|
|
Governance Committee
|
|
|
Benefits Committee
|
|
|
Committee
|
|
|
Committee
|
|
|
Peter R. Bleyleben
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
|
|
|
|
|
Brian E. Boyle
|
|
|
*
|
|
|
|
*
|
|
|
|
**
|
|
|
|
*
|
|
|
|
*
|
|
John W. Everets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
**
|
|
Torrence C. Harder
|
|
|
*
|
|
|
|
|
|
|
|
|
|
|
|
**
|
|
|
|
*
|
|
Richard Latour
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fritz von Mering
|
|
|
**
|
|
|
|
*
|
|
|
|
*
|
|
|
|
|
|
|
|
|
|
Alan Zakon
|
|
|
|
|
|
|
**
|
|
|
|
*
|
|
|
|
|
|
|
|
*
|
|
3
Description
of the Roles of the Committees
The Board of Directors has standing Audit, Nominating and
Corporate Governance, Compensation and Benefits, Credit Policy
and Strategic Planning Committees.
Audit Committee. The Audit Committee is
appointed by the Board of Directors to assist the Board in
monitoring (1) the integrity of the financial statements of
the Corporation, (2) compliance by the Corporation with
legal and regulatory requirements, (3) the independent
registered public accounting firms qualifications and
independence, (4) performance of the Corporations
independent auditors, and (5) the business practices and
ethical standards of the Corporation. The Audit Committee is
also directly responsible for the appointment, compensation,
retention and oversight of the work of the Corporations
independent registered public accounting firm, and the
preparation of the audit committee report included in this proxy
statement.
MicroFinancial is required by the rules of the SEC and the
Nasdaq Stock Market to satisfy certain requirements with respect
to its Audit Committee. In conformity with those requirements,
the MicroFinancial Board has approved the Audit Committees
written charter which may be found on the Corporations web
site at www.microfinancial.com.
All of the members of the Audit Committee are independent and
financially literate within the meaning of SEC regulations, the
listing standards of the Nasdaq Stock Market and the
Corporations Corporate Governance Guidelines. The
Board has determined that Mr. von Mering is qualified as an
audit committee financial expert within the meaning of SEC
regulations and that he meets the financial sophistication
standards of the Nasdaq Stock Market.
The Audit Committee met 6 times during fiscal 2009.
Nominating and Corporate Governance
Committee. The Nominating and Corporate
Governance Committee is appointed by the Board of Directors to
assist the Board in identifying qualified individuals to become
directors, recommend to the Board qualified director nominees
for election at the stockholders annual meeting, determine
membership on the Board committees, recommend a set of Corporate
Governance Guidelines, oversee annual self-evaluations by the
Board and evaluate itself annually, and report annually to the
Board on the Chief Executive Officer succession plan. The
written charter of the Nominating and Corporate Governance
Committee may be found on the Corporations web site at
www.microfinancial.com.
All of the members of the Nominating and Corporate Governance
Committee are independent within the meaning of the listing
standards of the Nasdaq Stock Market and the Corporations
Corporate Governance Guidelines.
The Nominating and Corporate Governance Committee met formally
one time during fiscal 2009. The committee also engaged in
informal meetings and other communications on numerous occasions
throughout 2009.
Compensation and Benefits Committee. The
Compensation and Benefits Committee is appointed by the Board of
Directors to discharge the Boards responsibilities
relating to compensation of the Corporations directors and
officers. The committee has overall responsibility for approving
and evaluating the director and officer compensation plans,
policies and programs of the Corporation. The committee is also
responsible for reviewing and recommending to the Board of
Directors the Compensation Discussion and Analysis that is
included in this proxy statement. The written charter of the
Compensation and Benefits Committee may be found on the
Corporations web site at www.microfinancial.com.
The committee has the sole authority to retain and terminate any
legal counsel or compensation or other consultant to be used to
assist in the evaluation of director or executive compensation
and also has the sole authority to approve the consultants
fees or other retention terms. Since 2007, the compensation
committee has engaged Mercer Human Resources Consulting
(Mercer) to review the annual compensation of
executive officers and make recommendations with respect to
setting the appropriate targeted compensation levels. The
committee engaged Mercer directly and has sole authority to make
decisions relating to that engagement. Mercer is not otherwise
engaged to perform any other activities or services for
MicroFinancial or its management. The committee is copied on all
final work product developed, and receives copies of the final
invoices from Mercer. Based on all of these factors, the
committee is satisfied that Mercer is independent of management
in evaluating and making
4
recommendations with respect to executive compensation. See
Compensation Discussion and Analysis
Compensation Consultant for more information on
Mercers role.
As provided for in the committees charter, the committee
may form and delegate authority to subcommittees when it
determines that such action is appropriate under the
circumstances. The committee did not delegate any of its
authority during 2009.
It also has the authority, subject to ratification of the full
Board, to adopt or amend certain equity compensation plans that
are to be submitted to shareholders for approval, and any
approval, amendment or termination of severance or change in
control arrangements involving our directors or officers.
All of the members of the Compensation and Benefits Committee
are independent within the meaning of the listing standards of
the Nasdaq Stock Market and the Corporations Corporate
Governance Guidelines.
The Compensation and Benefits Committee met 6 times during
fiscal 2009.
Credit Policy Committee. The Credit Policy
Committee is appointed by the Board to discharge the
Boards responsibilities relating to oversight of the
Corporations credit policies. The Committee has
responsibility for approving and evaluating the
Corporations policies and programs relating to customer
credit scoring parameters, including industry segments, product
lines, and overall strategic direction. The Committee will
evaluate managements recommendations consistent with those
parameters, as established from time to time, and further as
consistent with the Corporations legal and regulatory
requirements.
Strategic Planning Committee. The purpose of
the Strategic Planning Committee is to support the Board in
reviewing and assessing the long-range strategic objectives of
the Corporation, and ensuring that the Corporations
strategies, priorities and policies are consistent with the
Corporations overriding goals of creating and building
long-term sustainable value for its shareholders, and that the
Corporation is carrying out its business in accordance with its
values. These duties include providing guidance to management in
the development of a long-term strategic (as opposed to
operating) plan, assessing resource allocations decided by
management for consistency with the long-term plan, reviewing
the Corporations performance on major capital investment
projects, and reviewing proposed significant changes in the
business operations, new or discontinued lines of business,
asset or stock purchases or other extraordinary transactions.
The
Boards Leadership Structure
Since 2002, we have separated the roles of Chief Executive
Officer and Chairman in recognition of the differences between
the two functions. The Chief Executive Officer sets, with the
guidance of the Board of Directors, the strategic direction of
the Corporation and is responsible for the day to day management
and leadership of the Corporation. The non-executive Chairman
coordinates the activities of the various Board committees, may
from time to time act as a liaison between the Board and
management, sets the agenda for meetings of the Board and
presides over meetings of the full Board and shareholders. The
Board determined that this separation of duties provides an
appropriate structure for the Corporation since it separates the
day to day management of the Corporation from its oversight.
Because Dr. Bleyleben, the non-executive Chairman, is not
considered an independent director due to his prior employment
with the Corporation, the Board has named a presiding
independent director, whose primary responsibility is to preside
over periodic executive sessions of the Board in which
management directors and other members of management do not
participate. The presiding director also advises the
non-executive Chairman of the Board and, as appropriate,
Committee chairs with respect to agendas and information needs
relating to Board and Committee meetings, provides advice with
respect to the selection of Committee chairs, facilitates
communication among independent directors, and performs other
duties that the Board may from time to time delegate to assist
the Board in the fulfillment of its responsibilities. Alan Zakon
currently serves as the presiding director.
The
Boards Role in Risk Oversight
The Boards role in the Corporations risk oversight
process includes receiving regular reports from members of
senior management on specific areas of material risk to the
Corporation, including operational, financial,
5
strategic, legal, and reputational risks. Either the full Board,
or in the case of certain types of risk, an appropriate
committee of the Board, receives reports from each of the
executive officers of the Corporation in order to enable it to
understand the Corporations risk identification,
management and mitigation strategies. In particular, the Credit
Committee of the Board was established in 2005 in order to
oversee risks to the Corporation relating to the credit quality
of its lease originations. The Audit Committee generally
oversees financial risks relating to the Corporation including
risks relating to the availability of credit under its credit
facilities and interest rate risk relating to the use of those
facilities. Where risk oversight is handled primarily by a
committee of the Board, the chairman of the applicable committee
makes regular reports to the full Board for discussion. It is
the full Boards responsibility to evaluate the totality of
the risks facing the Corporation in combination.
Selection
of Nominees for the Board of Directors
The Nominating and Corporate Governance Committee considers
candidates for Board membership suggested by its members and
other Board members, as well as management and stockholders. A
stockholder who wishes to recommend a prospective nominee for
the Board should notify the Corporations Corporate
Secretary or any member of the Nominating and Corporate
Governance Committee in writing with whatever supporting
material the stockholder considers appropriate. The Nominating
and Corporate Governance Committee will also consider whether to
nominate any person nominated by a stockholder pursuant to the
provisions of the Corporations bylaws relating to
stockholder nominations.
Once the Nominating and Corporate Governance Committee has
identified a prospective nominee, the Committee makes an initial
determination as to whether to conduct a full evaluation of the
candidate. This initial determination is based on whatever
information is provided to the Committee with the recommendation
of the prospective candidate, as well as the Committees
own knowledge of the prospective candidate, which may be
supplemented by inquiries to the person making the
recommendation or others. The preliminary determination is based
primarily on the need for additional Board members to fill
vacancies or expand the size of the Board and the likelihood
that the prospective nominee can satisfy the evaluation factors
described below. If the Committee determines, in consultation
with the Non-Executive Chairman of the Board and other Board
members as appropriate, that additional consideration is
warranted, it may gather additional information about the
prospective nominees background and experience. The
Committee then evaluates the prospective nominee against the
standards and qualifications set out in the Corporations
Corporate Governance Guidelines, including:
|
|
|
|
|
the ability of the prospective nominee to represent the
long-term interests of the stockholders of the Corporation;
|
|
|
|
the prospective nominees standards of integrity,
commitment and independence of thought and judgment;
|
|
|
|
the prospective nominees ability to dedicate sufficient
time, energy and attention to the diligent performance of his or
her duties, including the prospective nominees service on
other public company boards, as specifically set out in the
Corporations Corporate Governance
Guidelines; and
|
|
|
|
the extent to which the prospective nominee contributes to the
range of talent, skill and expertise appropriate for the Board.
|
The Committee also considers such other relevant factors as it
deems appropriate, including the current composition of the
Board, the balance of management and independent directors, the
need for Audit Committee expertise, potential conflicts of
interest, and the evaluations of other prospective nominees. In
connection with this evaluation, the Committee determines
whether to interview the prospective nominee, and if warranted,
one or more members of the Committee, and others as appropriate,
interview prospective nominees in person or by telephone. After
completing this evaluation and interview, the Committee makes a
recommendation to the full Board as to the persons who should be
nominated by the Board, and the Board determines the nominees
after considering the recommendation and report of the Committee.
The Nominating and Corporate Governance Committee does not have
a formal policy on diversity with respect to its Board
composition. In considering new nominees and considering whether
to renominate existing members of the Board, the Committee
examines each persons specific skills and attributes in
the context of the skill set
6
represented on the Board as a whole, and seeks to achieve a
Board with strength in its collective knowledge and a diversity
of perspectives, skills and business and professional experience
in a broad sense.
Determination
of Director Independence
The Board and the Nominating and Corporate Governance Committee
have adopted Corporate Governance Guidelines for the
Corporation. The Guidelines may be found on the
Corporations web site at www.microfinancial.com.
Pursuant to the Guidelines, the Board undertakes a review
of director independence annually. During this review, the Board
considers transactions and relationships between each director
or any member of his or her immediate family and the Corporation
and its subsidiaries and affiliates. The Board also examines
transactions and relationships between directors or their
affiliates and members of the Corporations senior
management or their affiliates. As provided in the
Guidelines, the purpose of this review is to determine
whether any such relationships or transactions are inconsistent
with a determination that the director is independent.
As a result of this review, the Board has affirmatively
determined that all of the directors are independent of the
Corporation and its management under Nasdaq Stock Market rules
and the standards set forth in the Corporate Governance
Guidelines, with the exception of Peter Bleyleben and
Richard Latour who are considered inside directors because of
their past or present employment by the Corporation. In making
this decision, the Board considered all relationships between
the Corporation and the directors, including certain amounts of
indebtedness of the Corporation to three directors, all of which
was repaid in full during 2006. The Board also considered the
relationships between directors who serve together on the same
outside boards (including Dr. Bleyleben and
Mr. Harder, who served on the same board of a privately
held company until its sale in 2008, and Mr. von Mering and
Dr. Boyle, who served on the same board of a publicly
traded company through 2007), the former employment relationship
of Dr. Boyle to the Corporation which ended in 1987, and
the stock ownership positions of each director. The Board
determined each such relationship, and the aggregate of such
relationships, to be immaterial to the applicable
directors ability to exercise independent judgment.
Meetings
of the Board of Directors during Fiscal 2009
In 2009, all MicroFinancial Board members attended over 75% of
the aggregate of the meetings of the MicroFinancial Board and
its committees on which they served. The Corporation does not
have a formal policy relating to attendance of Board members at
its annual meeting of stockholders, but it encourages all
members of its Board to attend. Six of the seven Board members
attended the 2009 Special Meeting of Stockholders in Lieu of
Annual Meeting.
The Board of Directors met five times during fiscal 2009.
Compensation
of Directors
Since 2008, the annual compensation package for non-employee
directors is comprised of:
|
|
|
|
|
an annual retainer of $20,000, to be paid at the directors
election either entirely in shares of stock or 40% in cash and
60% in shares of stock, in each case with full vesting upon the
date of issuance;
|
|
|
|
a cash fee of $1,250 for meetings, including committee meetings
not held by telephone and not held on the same day as a full
Board meeting;
|
|
|
|
committee meeting fees of $500 for telephonic meetings and
meetings on the same day as Board meetings;
|
|
|
|
a fee for the Chair of the Corporations Audit Committee of
$10,000 per year, to be paid either entirely in shares of stock
or 40% in cash and 60% in shares of stock, in each case with
full vesting upon the date of issuance;
|
|
|
|
a fee for the Non-Executive Chairman of the Board of $20,000 per
year, to be paid either entirely in shares of stock or 40% in
cash and 60% in shares of stock, in each case with full vesting
upon the date of issuance;
|
7
|
|
|
|
|
a stock grant made annually to each non-employee director valued
at $42,000 on the date of grant, with all shares of stock fully
vested upon the date of issuance; and
|
|
|
|
health insurance benefits for those non-employee directors who
elect to participate, with the cost to be borne partially by the
Corporation, consistent with its past practices.
|
For 2009, the Compensation Committee determined, with the full
Boards approval, that for purposes of determining the
number of shares to be issued under the annual stock grant
valued at $42,000, the Corporation would use the greater of the
market value of a share of common stock on the grant date or the
book value of a share of common stock on the last day of the
fiscal year. These awards were made in February 2010, resulting
in a grant of 8,974 shares of stock to each director (based
on the $4.68 book value of the common stock as of
December 31, 2009).
Committee chairs decide at the time of any meeting whether the
meeting is substantive enough to merit the committee fees
described above.
The following table sets forth the compensation paid to each
director of the Corporation for 2009, with the exception of
Mr. Latour (whose compensation is presented in the
executive compensation tables elsewhere in this proxy statement):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
Stock
|
|
Option
|
|
Non-Equity Incentive
|
|
All Other
|
|
|
|
|
Paid in Cash
|
|
Awards
|
|
Awards
|
|
Plan Compensation
|
|
Compensation
|
|
Total
|
Name
|
|
($)(1)
|
|
($)(2)
|
|
($)(3)
|
|
($)
|
|
($)(4)
|
|
($)
|
|
Peter R. Bleyleben
|
|
|
21,000
|
|
|
|
44,999
|
|
|
|
|
|
|
|
|
|
|
|
9,898
|
|
|
|
75,897
|
|
Brian E. Boyle
|
|
|
13,500
|
|
|
|
54,000
|
|
|
|
|
|
|
|
|
|
|
|
11,096
|
|
|
|
78,596
|
|
John W. Everets
|
|
|
13,000
|
|
|
|
68,113
|
|
|
|
|
|
|
|
|
|
|
|
9,498
|
|
|
|
90,611
|
|
Torrence C. Harder
|
|
|
3,750
|
|
|
|
62,000
|
|
|
|
|
|
|
|
|
|
|
|
9,498
|
|
|
|
75,248
|
|
Fritz von Mering
|
|
|
17,500
|
|
|
|
60,000
|
|
|
|
|
|
|
|
|
|
|
|
9,498
|
|
|
|
86,998
|
|
Alan Zakon
|
|
|
5,500
|
|
|
|
62,000
|
|
|
|
|
|
|
|
|
|
|
|
9,498
|
|
|
|
76,998
|
|
|
|
|
(1) |
|
Fees earned or paid in cash represents payment of Board meeting
and committee service fees, and any portion of the Board
retainer fees taken in cash. |
|
(2) |
|
Represents the aggregate grant date fair value of stock awards
made during the year in accordance with ASC Topic 718. These
amounts include any portion of the annual retainer elected to be
paid in stock during the year, as well as the grant date fair
value of the stock grant made in February 2009. The stock grants
made in February 2010, which had a grant date fair value of
$27,819 (based on the closing market price on the grant date of
the common stock on the grant date) are not reflected in this
table. |
|
(3) |
|
At December 31, 2009, the aggregate number of option awards
outstanding to directors was: Dr. Bleyleben
100,000 shares; Dr. Boyle
145,000 shares; Mr. Everets 0 shares;
Mr. Harder 145,000 shares;
Mr. von Mering 0 shares;
Dr. Zakon 145,000 shares. Mr. Everets
was granted restricted stock in connection with his initial
election to the Board. At fiscal year end, the unvested portion
of these awards for Mr. Everets represented
3,750 shares. |
|
(4) |
|
All other compensation represents payments made by
MicroFinancial relating to health insurance benefits. |
Certain
Relationships and Related Person Transactions
There are no transactions since the beginning of fiscal 2009,
and no presently proposed transactions, in which the Corporation
was or is to be a participant, of the nature required to be
disclosed under Item 404(a) of
Regulation S-K.
Consistent with the requirements of the Nasdaq Stock Market, the
Audit Committee of the Board of Directors of the Corporation
reviews and oversees any transactions with a related
person within the scope of the SECs rules on
disclosure of such transactions. The Corporation does not have a
written policy relating to such review.
8
Communications
with the Board of Directors
Stockholders and other parties interested in communicating
directly with the non-management directors may do so by writing
to any non-management director,
c/o MicroFinancial
Incorporated, 10-M Commerce Way, Woburn, Massachusetts 01801.
The Nominating and Corporate Governance Committee of the Board
has approved a process for handling letters received by the
Corporation and addressed to non-management members of the
Board. Under that process, the Chief Financial Officer of the
Corporation reviews all such correspondence and regularly
forwards to the Board a summary of all such correspondence and
copies of all correspondence that, in the opinion of the Chief
Financial Officer, deals with the functions of the Board or
committees thereof or that he otherwise determines requires
their attention. Directors may at any time review a log of all
correspondence received by the Corporation that is addressed to
members of the Board and request copies of any such
correspondence. Concerns relating to accounting, internal
controls or auditing matters are immediately brought to the
attention of the Chairman of the Corporations Audit
Committee and handled in accordance with procedures established
by the Audit Committee with respect to such matters.
The
Corporations Code of Ethics
The Corporation has adopted a Code of Business Conduct and
Ethics, which is applicable to all directors and employees of
the Corporation, including the principal executive officer, the
principal financial officer and the principal accounting
officer. The Code of Business Conduct and Ethics may be found on
the Corporations web site at
www.microfinancial.com. The Corporation intends to post
amendments to or waivers from its Code of Business Conduct and
Ethics (to the extent applicable to its chief executive officer,
principal financial officer or principal accounting officer) on
its website.
AUDIT
COMMITTEE REPORT
Notwithstanding anything to the contrary set forth in any of
the Corporations previous filings under the Securities Act
of 1933, as amended, or the Exchange Act that might incorporate
future filings, including this proxy statement, in whole or in
part, the following Audit Committee Report set forth herein
shall not be incorporated by reference into any such filings and
shall not otherwise be deemed filed under such Acts.
In connection with the preparation and filing of the
Corporations Annual Report on
Form 10-K
for the year ended December 31, 2009, the Audit Committee
(i) reviewed and discussed the audited financial statements
with management, (ii) discussed with Caturano and
Company, P.C., the Corporations independent
registered public accounting firm (Caturano), the
matters required to be discussed by Statement of Auditing
Standards 61, as amended and as adopted by the Public Company
Accounting Oversight Board (United States), or PCAOB, and
(iii) received the written disclosures and the letter from
Caturano required by applicable requirements of the PCAOB
regarding its communications with the Audit Committee concerning
independence, and discussed the independence of Caturano with
such firm. Based on the review and discussions referred to
above, among other things, the Audit Committee recommended to
the Board of Directors that the audited financial statements be
included in the Corporations Annual Report on
Form 10-K
for the year ended December 31, 2009.
Audit Committee:
Fritz von Mering, Chairman,
Brian E. Boyle,
Torrence C. Harder
9
COMPENSATION
DISCUSSION AND ANALYSIS
Introduction
The Compensation and Benefits Committee of our Board of
Directors has the responsibility of developing, overseeing and
implementing our overall compensation philosophy, which is
described in more detail below. It has the sole authority to
establish the total compensation of our Chief Executive Officer
and other executive officers, as well as the specific elements
of compensation that make up their total compensation. It also
has the sole authority to establish compensation for our
Non-Executive Chairman and other members of our Board of
Directors. In practice, the Compensation and Benefits Committee
has historically recommended its compensation decisions to the
full Board of Directors for approval.
In this analysis, the term named executive officers
refers to our Chief Executive Officer, our Chief Financial
Officer, and the other executive officers included in the
Summary Compensation Table on page 18. We also refer to the
Compensation and Benefits Committee as the committee
or the compensation committee.
Overview
and Philosophy
The primary objectives of the compensation committee are to
ensure that our executive compensation and benefits programs:
|
|
|
|
|
reflect our entrepreneurial orientation;
|
|
|
|
are competitive with other companies of similar size and
business;
|
|
|
|
safeguard our interests and the interests of our stockholders;
|
|
|
|
are effective in driving performance to achieve financial goals
and create stockholder value;
|
|
|
|
foster teamwork on the part of management;
|
|
|
|
are cost-efficient and fair to employees, management and
stockholders; and
|
|
|
|
are well communicated to and understood by program participants.
|
The committees executive compensation policies are
designed to attract, motivate and retain highly qualified
executive officers who can enhance stockholder value, and to
support a performance-oriented environment that rewards
achievement of the financial goals we establish. The
compensation committee meets at least once and usually several
times during each fiscal year to review our existing
compensation and benefits programs and to consider modifications
that seek to provide a direct relationship between executive
compensation and sustained corporate performance.
The philosophy of the committee is to create and maintain an
environment where compensation is linked to performance. The
committee seeks to ensure that a significant portion of each
executives compensation is contingent upon the achievement
of company-wide goals and objectives. The committee also strives
to ensure that the compensation packages provided to our
executive officers are competitive with those of other companies
engaged in the equipment financing industry to ensure that we
can attract, motivate, and retain seasoned industry talent.
We compensate our executive officers through three principal
types of compensation: annual base salary, annual bonus payments
(which may include both a cash and an equity component), and
long-term equity incentive awards through either stock options,
stock awards or restricted stock units. The committee, as a
matter of policy, places substantial emphasis on the bonus plans
and long-term equity awards, or combinations of these
components, since it believes that rewarding executive officers
with respect to both our annual financial performance and our
long-term share appreciation is in the best interest of the
shareholders.
The committee reviews its compensation philosophy annually
during the first quarter of each year. The annual compensation
program described in more detail below was initially established
substantially in its current form in 2007 for the named
executive officers, and has been modified each year since then
in light of the committees review of the appropriate mix
of compensation elements, including the mix of cash and equity,
and the appropriate form that equity components should represent.
10
Committee
Purpose and Responsibilities
One of the primary responsibilities of the compensation
committee is to determine the total target compensation levels
for the senior executive officers and to establish annually the
executive goals and objectives which will determine the actual
rewards against those targets.
The committee is charged with ensuring that the target
compensation levels and the allocation of short term and long
term components is sufficient to attract, motivate, and retain
seasoned professional managers, while at the same time ensuring
that the pay is reasonable and fair to our stockholders when
compared to executive officers of similar position and
responsibility at other firms.
The committee also recommends to the Board any changes to the
total annual compensation for service on our Board of Directors
or for service as a member or chair of any of the various
committees of the Board. Until June 2008, Dr. Bleyleben,
our Non-Executive Chairman, was compensated under the terms of
an employment agreement with us, and the committee had
responsibility for setting and overseeing his compensation under
this agreement. Following June 2008, Dr. Bleyleben is
compensated on the same basis as our other non-employee
directors.
The agenda for a meeting of the committee is typically
determined by its chairman. Compensation committee meetings are
generally attended by the committee members, the President and
Chief Executive Officer, the Non-Executive Chairman and, where
applicable, the compensation consultant. The committee meets in
an executive session at every committee meeting. The committee
chairman reports the committees determinations and
recommendations on executive compensation matters to the full
Board.
Our President and Chief Executive Officer, our Chief Financial
Officer, our Vice President of Human Resources, our outside
counsel, and our compensation consultant, as applicable, are
typically called upon to supply information to the committee to
support their review process.
The committee typically receives materials in advance of each
meeting which will vary according to the specific meeting
agenda. These materials may include, among other items:
|
|
|
|
|
financial reports compared to budget goals and objectives;
|
|
|
|
qualitative goals and objectives of the President and Chief
Executive Officer;
|
|
|
|
calculations and reports on levels of achievement against
performance objectives; and
|
|
|
|
information on officers current stock ownership levels and
other compensation.
|
Compensation
Consultant
As noted above, since 2007, the compensation committee has
engaged Mercer to review the annual compensation for our
executive officers and make recommendations with respect to
setting the appropriate targeted compensation levels. Mercer
provided the committee with relevant market data and
alternatives to consider when making compensation decisions for
our Non-Executive Chairman and our President and Chief Executive
Officer and on the recommendations being made by our President
and Chief Executive Officer for our other executive officers.
Mercer periodically meets with management to solicit feedback on
the structure of the compensation program, and that feedback is
communicated to the committee for consideration in designing the
following years plan and subjective and objective goals.
Mercer has also in the past been consulted in connection with
mid-year adjustments to the quantitative application of the
bonus plan formulas, although no such adjustment was made during
2009. Mercer also advised the committee during 2009 with respect
to the adoption of stock ownership guidelines for our executive
officers and directors, described below.
Role of
Executive Officers in Compensation Decisions
Our President and Chief Executive Officer reviews annually the
performance of each of the senior executive officers. He also
presents a review of his own performance against specific agreed
upon goals to the committee and the full Board. He makes this
report to the committee along with any proposed recommendations
for salary adjustments
and/or
annual bonus amounts. As noted above, our Chief Executive
Officer, Chief Financial Officer, Vice President of Human
Resources and outside advisors are often called upon to provide
information to the
11
committee. The committee has the sole discretion for the
ultimate approval for any targets or adjustments proposed by
management or any other party.
Consideration
of Regulatory Requirements
Under Section 162(m) of the Internal Revenue Code,
deductions for compensation of named executive officers in
excess of $1 million, other than compensation that
qualifies as performance-based, are disallowed for publicly
traded companies. Since levels of compensation we pay are
typically expected to be significantly below $1 million,
the compensation committee has determined that it is unnecessary
in most years to seek to qualify the components of its
compensation program as performance-based compensation within
the meaning of Section 162(m). The committees present
intention remains that, as long as it is consistent with its
overall compensation objectives, substantially all federal
income tax deductions attributable to executive compensation
should not be subject to the deduction limitation of
Section 162(m). In this regard, none of the named executive
officers had compensation in excess of $1 million and as
such, all of the compensation paid to the named executive
officers in 2009 was Internal Revenue Code Section 162(m)
qualified.
We account for stock based payments, including our stock
options, in accordance with the requirements of Financial
Accounting Standards Board (FASB) Accounting
Standards Codification (ASC) Topic 718,
Compensation Stock Compensation. This statement
generally requires us to measure the expense of share-based
payments to employees and directors based upon the grant date
fair value of the award, and to recognize that expense over the
vesting period of the award. The committee considers the impact
of this statement on our financial statements in determining the
mix of total compensation to named executive officers between
equity and non-equity awards.
Compensation
Program Design for 2009
For fiscal year 2009, we paid our executive officers through
three principal types of compensation: (i) annual base
salary, (ii) an annual bonus payment, and (iii) a long
term incentive equity award in the form of restricted stock
units, or RSUs. The bonus payment was paid under an incentive
plan that was designed to pay, if certain threshold performance
measures were met, an annual bonus in cash or a combination of
cash and stock. Under the plan, up to the targeted bonus amount,
the bonus is paid in cash, and any amounts above that are paid
in RSUs, as described more fully below. The long term incentive
equity award consisted of a separate RSU grant that was measured
by reference to the executive officers base salary rather
than performance. The committee, as a matter of policy, places
substantial emphasis on the equity component of the annual total
compensation since it believes that rewarding executive officers
with respect to both our annual financial performance and our
long-term share valuation is in the best interest of the
shareholders. The committee will continue to evaluate, and
adjust if necessary, the appropriate mix of cash and equity
compensation elements for each member of the executive team
during 2010. See Compensation Program Changes for
2010 below for a description of how the program will
differ for 2010 compared to last year.
Base
Salary
The annual base salary of each executive officer is based on the
scope of his or her responsibility and accountability within the
corporation, as well as on performance and experience criteria.
In addition, the compensation committee considers the prior
years base salary and the internal pay equity of each
executive in determining base salary for the current year. The
compensation committee determines and makes final decisions
regarding base salary of executives on an annual basis,
typically in February of each year when the committee determines
the annual compensation plan. Salary levels are also considered
upon promotion of an individual, a new hire, or a change in
responsibility. The compensation committee recognizes that, to
some degree, the determination of an executive officers
base salary involves subjective considerations. In 2007, Mercer
conducted a survey of broad-based and industry-specific
compensation data in order to confirm that each executive
officers total target compensation fell between the market
median and the 75th percentile for his position. Base salaries
for subsequent years have increased over the prior years
levels at rates that approximated Consumer Price Index (CPI)
rates for the Northeast region.
12
Bonus
Plans
A significant component of the executive officers total
target compensation consists of an annual bonus payment, which
is intended to tie the executive officers compensation
closely to our performance and to provide executive officers
with incentives to achieve our goals, increase stockholder
value, and function as a team.
For purposes of determining the bonus payment eligibility and
target payouts, the compensation committee annually establishes
specific goals and objectives for the senior executives to
achieve during the year. These objectives are typically
finalized in the first quarter of each year and communicated to
the executive officers in such a way that the plans are easily
understood by each member of the senior management team. These
objectives are based primarily on total company performance, and
have generally been substantially the same for each of the named
executive officers, so as to foster a spirit of teamwork and
cooperation among senior management in achieving common goals.
For 2009, certain specified officers had additional performance
metrics tailored to their organizational responsibilities
included within their objectives as described below.
In order for any bonuses to be paid under the 2009 plan, the
committee evaluated whether the Corporations net income,
in light of its budgeted targets, was sufficient to justify any
payment of bonuses as a threshold matter. As a threshold matter,
positive GAAP income was necessary, but not sufficient, in order
for any award to be paid. Other than that initial threshold,
this evaluation was a purely subjective evaluation by the
committee in its discretion. The committee determined, in light
of the Corporations positive net income for 2009
(approximately $4.1 million) and in light of its budgeted
target, that this subjective threshold had been satisfied. The
committee determined that the flexibility offered by this
subjective net income evaluation was more appropriate than a
purely objective target (as might be modified through
discretionary adjustments in light of unanticipated conditions),
which it had used in prior years.
The amount of the bonus payment for each executive officer was
determined by reference to a matrix that evaluated performance
on two company-wide financial tests (new originations and
unearned income) and also on a subjective component that took
into account personal achievement, progress on our strategic
plan, and credit quality. Specific officers were also evaluated
based on additional objective criteria: Our Chief Financial
Officer and our Vice President, Human Resources, were each
evaluated based on sales, general and administrative expense
(SG&A) levels, and our Vice President, Legal and
Vendor/Lessee Relations was evaluated based upon a collections
target. Achievement of subjective measurements was measured by
the President and Chief Executive Officer for all executives
other than himself, for consideration by the committee and the
Board, and by the committee and the Board in the case of the
President and Chief Executive Officer.
With respect to both the objective and subjective components of
the 2009 plan, awards are made on a graduated basis between 70%
and 80% achievement of the applicable goals, such that 5% of the
targeted bonus amount is payable for each percentage point above
70%, and the officer would receive 50% of the targeted bonus
amount under the applicable component for achievement of 80% of
the applicable goal for such component. For the objective
portion, whether the 70% threshold has been met is measured on
an aggregate basis. If that threshold is met, actual payments
would be calculated giving different weights to originations and
unearned income (and, if applicable, SG&A and collections)
for the different executive officers as reflected below. The
targeted bonus amounts would be paid in full at 100%
achievement, and up to 120% of the target payment would be
possible under the plan (at 120% achievement or above on all
measurements). Achievement at levels between those thresholds
was prorated. The target payment was set as a percentage of each
officers base salary. The quantitative nature of the plan
metrics significantly limits the committees ability to
exercise any positive or negative discretion in the
determination of the achievement of the objectives; however, the
committee does retain the discretion to adjust awards on the
basis of other factors it may consider appropriate at the time.
The elements of the 2009 plan are reflected in the following
table, together with the
13
actual awards made under the 2009 plan as a percentage of base
salary, as determined in February 2010. Mr. Herlihy was not
employed by the Corporation in February 2010 and so received no
award.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Target Bonus (as
|
|
Actual Bonus (as
|
|
|
Sum of Originations
|
|
Subjective
|
|
Percentage of Base
|
|
Percentage of Base
|
Executive Officer
|
|
and Unearned Income
|
|
Analysis
|
|
Salary)
|
|
Salary)
|
|
Richard F. Latour
|
|
Originations:
|
|
|
35
|
%
|
|
|
30
|
%
|
|
|
100
|
%
|
|
|
68.4
|
%
|
President and Chief Executive Officer
|
|
Unearned income:
|
|
|
35
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
70
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
James R. Jackson, Jr.
|
|
Originations:
|
|
|
25
|
%
|
|
|
20
|
%
|
|
|
50
|
%
|
|
|
34.8
|
%
|
Vice President and Chief
|
|
Unearned income:
|
|
|
40
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Officer
|
|
SG&A:
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Constantino
|
|
Originations:
|
|
|
25
|
%
|
|
|
35
|
%
|
|
|
20
|
%
|
|
|
12.7
|
%
|
Vice President, Human
|
|
Unearned income:
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Resources
|
|
SG&A:
|
|
|
15
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas Herlihy
|
|
Originations:
|
|
|
55
|
%
|
|
|
15
|
%
|
|
|
40
|
%
|
|
|
|
|
Former Vice President of Sales and
|
|
Unearned income:
|
|
|
30
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, TimePayment Corp.
|
|
Total:
|
|
|
85
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. LaCreta
|
|
Originations:
|
|
|
30
|
%
|
|
|
20
|
%
|
|
|
30
|
%
|
|
|
20.4
|
%
|
Vice President, Legal and
|
|
Unearned income:
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
Vendor/Lessee Relations
|
|
Collections:
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total:
|
|
|
80
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
The 2009 origination target of $74,952,000 represented an
approximate 8.6% increase over actual 2008 origination levels.
The 2009 unearned income target of $54,321,000 represented an
approximate 10% increase over actual 2008 levels. Actual
achievement for 2009 exceeded the cumulative originations and
unearned income target levels by approximately 2.7%. However,
the committee determined that it would be appropriate in light
of the decline in net income from 2008 to 2009 to cap the total
amount of awards paid from the bonus pool at approximately 2008
levels.
Under the 2009 plan, any bonus would be paid in cash up to 100%
of the target award. Any amounts payable above 100% of the
target award (up to the cap of 120% of the target award) would
be payable in RSUs. For purposes of determining the number of
RSUs payable under the plan, the dollar amount by which the
final bonus determination exceeded the target bonus would be
divided by the greater of the market price per share of the
Corporations common stock on the determination date, or
the book value per share on the last day of the
Corporations fiscal year. RSUs issued under the 2009 plan
would vest ratably over a period of five years, in 25% annual
increments beginning on the second anniversary of the grant.
Incentive
Equity Awards
In February 2009, our Board, acting upon the recommendation of
the committee, approved the grant of long term incentive stock
option awards to named executive officers. The options were
priced at the closing market price of our common stock on the
grant date. The grant was valued at 20% of each named executive
officers annual salary, with the number of shares
determined by dividing such dollar amount by the Black-Scholes
value of the options on the grant date. These grants were
intended to permit executives to begin building a long-term
equity position in the company, and were in addition to any
incentive awards that could have been earned under the
performance measurements of the 2008 bonus plan. These options
vest over five years, in 25% annual increments beginning on the
second anniversary of the grant. Although these awards were
determined at the same time as the 2008 bonus plan
determinations, and each such award was considered payable with
respect to 2008 performance, the grant date fair value of these
options is reflected as compensation for 2009 under the Summary
Compensation Table below because they were made during fiscal
2009.
14
In February 2010, the committee made a similar long term equity
award, but in the form of RSUs rather than stock options. The
grant was valued at 20% of each named executive officers
annual salary, with the number of RSUs determined by dividing
such dollar amount by the greater of the market price of the
common stock on the grant date or the book value per share as of
the end of fiscal 2009. Under this formula, the committee used
the book value per share of $4.68 as of December 31, 2009.
These RSUs vest over five years, in 25% annual increments
beginning on the second anniversary of the grant. Dividends will
accumulate on the RSU awards and be payable upon vesting.
The use of stock options and RSUs has been designed to
facilitate the retention of key executives through the use of a
five year vesting schedule, while better aligning executive
performance with shareholder value appreciation and rewarding
the executives for such appreciation.
The total long-term incentive option grants awarded in February
2009 for services during fiscal 2008, and the RSU grants awarded
in February 2010 for services during fiscal 2009, were as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Feb. 2009
|
|
|
|
|
|
|
Incentive
|
|
Feb. 2010
|
Executive Officer
|
|
Title
|
|
Options
|
|
RSUs
|
|
Richard F. Latour
|
|
President and Chief Executive Officer
|
|
|
99,380
|
|
|
|
12,875
|
|
James R. Jackson, Jr.
|
|
Vice President and Chief Financial Officer
|
|
|
69,348
|
|
|
|
8,984
|
|
Stephen Constantino
|
|
Vice President, Human Resources
|
|
|
44,498
|
|
|
|
5,765
|
|
Thomas Herlihy
|
|
Vice President of Sales and Marketing, TimePayment Corp.
|
|
|
62,335
|
|
|
|
|
|
Steven J. LaCreta
|
|
Vice President, Legal and Vendor/ Lessee Relations
|
|
|
45,497
|
|
|
|
5,894
|
|
Mr. Herlihy left the Corporation in May 2009 and was not
eligible for an award in February 2010.
Bonuses for Other Management Team Members. To
enhance the retention of other management personnel and to
foster a spirit of teamwork, the compensation committee also
establishes a bonus pool, using the same philosophy used for
executive officers, and delegates to our President and Chief
Executive Officer the decision as to how and to whom to allocate
the approved funds. Any such bonuses are also determined and
paid upon completion of our annual audit. These funds are paid
out in cash only.
Stock Ownership Objectives and Guidelines. The
compensation committee believes that providing our key
employees, including executive officers, with the opportunity to
acquire stock ownership over time is the most desirable way to
align their interests with those of our stockholders. Shares of
common stock or options awarded under the bonus plan provide an
incentive that focuses the attention of executive officers on
managing the corporation from the perspective of an owner with
an equity interest in the business. In addition, equity awards
are a key part of our program for motivating and rewarding
managers and other employees over the long term. Through the
grant of stock and option awards, we have encouraged our
managers and other employees to obtain and hold our stock. The
value that employees will receive upon the sale of shares
underlying stock options and the sale of stock granted to
employees is tied to future performance of our stock. Since
2007, the Board has instituted a policy with respect to awards
granted under the bonus plan and the incentive options and RSUs
that will not permit more than 50% of the shares underlying any
portion that has vested to be sold by the executive officer
until the end of the full five-year vesting period. In 2009,
with the advice of Mercer, the committee adopted additional
stock ownership guidelines that will require the named executive
officers to hold and retain during their employment specified
numbers of shares (excluding shares underlying options but
including RSUs), approximating three times annual salary for the
Chief Executive Officer, two times annual salary for the Chief
Financial Officer, and one times annual salary for the other
named executive officers, with a period of five years from the
date of implementation or employment to achieve compliance.
Members of the Board will be required to hold and retain shares
representing three times the annual retainer.
Timing of Awards. The committee does not grant
awards of stock (including options) on the basis of price other
than the closing price on the determination date, nor does it
typically grant awards of stock based upon a date different from
the grant date. (As noted above, in determining the number of
RSUs issuable pursuant to a dollar-based award, the committee
does use a value of the RSU equal to the greater of the market
price on the grant date or
15
the book value per share as of the most recent fiscal year-end.)
On occasion in the past, a grant has been priced pursuant to the
approving board resolution at the closing market price on a
selected future date after the Boards approval, which date
was specified in the resolution, for administrative reasons. The
timing of grants is based upon the meeting schedule of the audit
and compensation committees, without regard to stock price at
the time or the anticipated disclosure of material news or other
pending corporate developments. Because the performance measures
for the annual bonus plan are based on year-end corporate
financial results, actual awards are determined as soon as
possible after substantial completion of the annual audit, and
consequently the payouts under the plan, if any, may be made
shortly before our year-end earnings release.
Compensation
Program Changes for 2010
The committee has changed its compensation philosophy for 2010,
shifting from a strong focus on growth in unearned income and
originations to a focus on balanced growth in unearned income
and net income. It has also made minor changes to the bonus plan
administration, but no changes to the character of the equity
awards. Total compensation for each executive officer for 2010
will still have three primary components: base salary, a bonus
plan and an incentive equity grant. Base salaries for 2010 will
increase over 2009 levels at rates approximating the consumer
price index (CPI) for the Northeast region. The bonus plan will
include target levels set as a percentage of the officers
base salary, and will pay cash up to 100% the target amounts,
with equity representing any amounts above that up to 120%.
In 2009 the committee evaluated the Corporations net
income compared to its budgeted targets and made a subjective
judgment whether the Corporations actual net income would
justify an award. However, for 2010 this method will change
since net income is one of the quantitative target metrics of
the plan, and the bonus earned is directly dependent on the
level of net income achievement measured against the target. To
ensure that the company has sufficient net income to pay
executive bonuses, the total amount of bonuses paid to all
executives in the plan will not exceed 10% of net income. To
further align executive bonuses with shareholder interests, the
total cash amount of bonuses paid to all executives in the plan
will not exceed 20% of dividends paid. Amounts that would have
been paid in cash but for this limit (even if less than 100% of
the target) will instead be paid in equity, as described below.
As in the 2009 plan, 50% of the target bonus will be paid at 80%
achievement of the performance goals for 2009. Awards will also
be made on a graduated basis between 70% achievement (0% of the
targeted award) and 80% achievement (50% of the targeted award).
The incentive equity grant will represent, as in 2009, an equity
award valued at 20% of the named executive officers base
salary.
The committee has recommended continuing the use of restricted
stock units (or RSUs) in 2010 instead of options in the equity
incentive programs, and continuing the implementation of equity
ownership guidelines for management and the Board. As in 2009,
RSU awards will have a five year vesting schedule beginning at
the end of the second year. Dividends will accumulate on RSU
awards and be payable upon vesting. The number of RSUs
comprising an award will be determined by dividing the dollar
value of the award by the greater of the book value or market
value at the time of the award.
Perquisites
and Other Personal Benefits
The named executive officers are entitled to very few benefits
that are not otherwise available to all of our employees.
In addition, all of the named executive officers were eligible
to participate in an executive disability insurance plan with
the policy premiums paid by us. The total amount of the premiums
we paid under this plan in 2009 was $9,458.
401(k)
Savings Plan
The 401(k) savings plan is a tax-qualified retirement savings
plan pursuant to which all full-time employees, including the
named executive officers, are eligible to contribute the lesser
of 100% of their annual base salary or the limit prescribed by
the Internal Revenue Service on a before tax basis. We match 50%
of the first 6% of pay that is contributed to the plan. All
contributions made by the employee are fully vested upon
contribution while our
16
matching contributions vest over a five year period from the
employees date of hire regardless of his or her plan
participation date. For 2009, an aggregate of $96,359, net of
forfeitures, was allocated to the company match for all
employees who participated in our sponsored 401(k) plan. All of
the named executive officers participated in the plan for 2009.
COMPENSATION
COMMITTEE REPORT
The Compensation and Benefits Committee of the MicroFinancial
Board of Directors has reviewed and discussed the Compensation
Discussion and Analysis with management and, based upon such
review and discussions, has recommended to the Board of
Directors that the Compensation Discussion and Analysis be
included in this Proxy Statement.
Compensation and Benefits Committee
Brian E. Boyle, Chairman
Alan Zakon
Fritz von Mering
17
COMPENSATION
OF EXECUTIVE OFFICERS
The following table sets forth the compensation of
(i) Mr. Latour, our Chief Executive Officer,
(ii) Mr. Jackson, our Chief Financial Officer,
(iii) Messrs. Constantino and LaCreta, our two other
executive officers serving in such capacities as of
December 31, 2009; and (iv) Mr. Herlihy, who
served in an executive officer position during the year and
would have been among our highest paid executive officers at the
end of the year but for the fact that he was not serving as an
executive officer as of December 31, 2009. Mr. Herlihy
left the Corporation in May 2009. We refer to each of the
persons for whom compensation is reported in the table below as
the named executive officers.
Summary
Compensation Table
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
Non-Qualified
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
Incentive Plan
|
|
Deferred
|
|
All
|
|
|
|
|
|
|
|
|
Bonus
|
|
Awards
|
|
Awards
|
|
Compensation
|
|
Compensation
|
|
Other
|
|
Total
|
Name and Principal
|
|
Year
|
|
Salary
|
|
($)
|
|
($)
|
|
($)
|
|
($)
|
|
Earnings ($)
|
|
Compensation($)
|
|
($)
|
Position(a)
|
|
(b)
|
|
($)(c)
|
|
(d)
|
|
(e)(1)
|
|
(f)(1)
|
|
(g)
|
|
(h)
|
|
(i)(2)
|
|
(j)
|
|
Richard F. Latour
|
|
|
2009
|
|
|
|
301,273
|
|
|
|
|
|
|
|
|
|
|
|
55,119
|
|
|
|
206,071
|
|
|
|
|
|
|
|
15,972
|
|
|
|
578,435
|
|
President and Chief
|
|
|
2008
|
|
|
|
298,290
|
|
|
|
|
|
|
|
|
|
|
|
122,394
|
|
|
|
172,324
|
|
|
|
|
|
|
|
15,522
|
|
|
|
608,530
|
|
Executive Officer
|
|
|
2007
|
|
|
|
287,370
|
|
|
|
25,000
|
|
|
|
|
|
|
|
42,067
|
|
|
|
251,449
|
|
|
|
|
|
|
|
14,447
|
|
|
|
620,333
|
|
James R. Jackson, Jr.
|
|
|
2009
|
|
|
|
210,230
|
|
|
|
|
|
|
|
|
|
|
|
38,463
|
|
|
|
73,055
|
|
|
|
|
|
|
|
7,350
|
|
|
|
329,098
|
|
Chief Financial Officer
|
|
|
2008
|
|
|
|
207,681
|
|
|
|
|
|
|
|
|
|
|
|
63,929
|
|
|
|
60,682
|
|
|
|
|
|
|
|
6,900
|
|
|
|
339,192
|
|
|
|
|
2007
|
|
|
|
200,529
|
|
|
|
|
|
|
|
|
|
|
|
14,677
|
|
|
|
87,731
|
|
|
|
|
|
|
|
6,750
|
|
|
|
309,687
|
|
Stephen Constantino
|
|
|
2009
|
|
|
|
134,898
|
|
|
|
|
|
|
|
|
|
|
|
24,680
|
|
|
|
17,132
|
|
|
|
|
|
|
|
2,867
|
|
|
|
179,577
|
|
Vice President, Human
|
|
|
2008
|
|
|
|
132,998
|
|
|
|
|
|
|
|
|
|
|
|
31,777
|
|
|
|
14,296
|
|
|
|
|
|
|
|
4,335
|
|
|
|
183,406
|
|
Resources
|
|
|
2007
|
|
|
|
128,673
|
|
|
|
|
|
|
|
|
|
|
|
3,766
|
|
|
|
22,518
|
|
|
|
|
|
|
|
4,162
|
|
|
|
159,119
|
|
Steven J. LaCreta
|
|
|
2009
|
|
|
|
137,925
|
|
|
|
|
|
|
|
|
|
|
|
25,234
|
|
|
|
28,137
|
|
|
|
|
|
|
|
1,430
|
|
|
|
192,726
|
|
Vice President, Legal and
|
|
|
2008
|
|
|
|
135,982
|
|
|
|
|
|
|
|
|
|
|
|
35,475
|
|
|
|
23,441
|
|
|
|
|
|
|
|
1,360
|
|
|
|
196,258
|
|
Vendor/Lessee Relations
|
|
|
2007
|
|
|
|
131,560
|
|
|
|
|
|
|
|
|
|
|
|
5,734
|
|
|
|
34,535
|
|
|
|
|
|
|
|
1,628
|
|
|
|
173,457
|
|
Thomas Herlihy
|
|
|
2009
|
|
|
|
80,635
|
|
|
|
|
|
|
|
|
|
|
|
34,573
|
|
|
|
0
|
|
|
|
|
|
|
|
71,002
|
|
|
|
186,210
|
|
Former Vice President, Sales
|
|
|
2008
|
|
|
|
186,309
|
|
|
|
|
|
|
|
|
|
|
|
61,437
|
|
|
|
62,517
|
|
|
|
|
|
|
|
6,900
|
|
|
|
317,163
|
|
and Marketing, TimePayment Corp.
|
|
|
2007
|
|
|
|
180,250
|
|
|
|
|
|
|
|
|
|
|
|
17,151
|
|
|
|
102,517
|
|
|
|
|
|
|
|
3,744
|
|
|
|
303,662
|
|
|
|
|
(1) |
|
Represents the aggregate grant date fair value of option awards
made during the applicable year computed in accordance with ASC
Topic 718, using the assumptions described in footnote F to the
Corporations Financial Statements included in the
Form 10-K
filed with the Securities and Exchange Commission for the year
ended December 31, 2009. Amounts reported for years prior
to 2009 have been restated to conform to this methodology. |
|
(2) |
|
Amounts shown in the table under All Other
Compensation for 2009 reflect: for Mr. Latour, a
401(k) contribution from us of $7,350 and payment of a
disability insurance premium of $8,622; for
Mr. Constantino, a 401(k) contribution from us of $2,031
and payment of a disability insurance premium of $836; for
Mr. Herlihy, four months of separation pay of $64,765 and a
401(k) contribution of $6,237; and for Messrs. Jackson and
LaCreta, a 401(k) contribution from us. |
In the table above, amounts reflected for 2009 under the
Non-Equity Incentive Plan Compensation column
reflect the cash bonus paid in the first quarter of 2010 under
our 2009 incentive bonus plan. No equity awards were made under
the 2009 incentive bonus plan for 2009. Amounts under
Option Awards reflect the aggregate grant date fair
value of option awards made during the applicable year, which
for 2009 consisted of the February 2009 long term incentive
grant, computed in accordance with ASC Topic 718. Amounts
reported for years prior to 2009 have been restated to conform
to this methodology. No stock awards were made in 2007, 2008 or
2009. For a more detailed description of the 2009 incentive
bonus plan and the long term incentive option grants, see
Compensation Discussion and Analysis
Compensation Program Design for 2009 above.
18
The following table reflects potential payments that could have
been made under our 2009 incentive plan. The actual amounts we
paid under that plan are reflected in the Summary Compensation
Table above and under Compensation Discussion and
Analysis Compensation Program Design for 2009.
Since restricted stock unit (RSU) awards under the plan are
denominated in dollars, with the number of RSUs awarded under
the plan determined by reference to the greater of the book
value or the market value of the common stock at the time the
payment is made, amounts under Estimated Possible Payouts
Under Equity Incentive Plan Awards in the table below are
reflected in dollars, rather than in numbers of shares.
Grants of
Plan-Based Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
All Other
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
Option
|
|
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Awards:
|
|
Awards:
|
|
Exercise or
|
|
Fair
|
|
|
|
|
Estimated Possible Payouts
|
|
Estimated Possible Payouts
|
|
Number of
|
|
Number of
|
|
Base
|
|
Value of
|
|
|
|
|
Under Non-Equity Incentive
|
|
Under Equity Incentive Plan
|
|
Shares of
|
|
Securities
|
|
Price of
|
|
Stock
|
|
|
Grant
|
|
Plan Awards
|
|
Awards
|
|
Stock or
|
|
Underlying
|
|
Option
|
|
and
|
Name
|
|
Date
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Threshold
|
|
Target
|
|
Maximum
|
|
Units
|
|
Options
|
|
Awards
|
|
Option
|
(a)
|
|
(b)
|
|
($)(c)
|
|
($)(d)
|
|
($)(e)
|
|
($)(f)
|
|
($)(g)
|
|
($)(h)
|
|
(#)(i)
|
|
(#)(j)
|
|
($/Sh)(k)
|
|
Awards(l)
|
|
Richard F. Latour
|
|
|
3/19/2009
|
|
|
$
|
150,637
|
|
|
$
|
301,273
|
|
|
$
|
301,273
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
60,255
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/3/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
99,380
|
|
|
$
|
2.30
|
|
|
$
|
55,119
|
|
James R. Jackson, Jr.
|
|
|
3/19/2009
|
|
|
$
|
52,558
|
|
|
$
|
105,115
|
|
|
$
|
105,115
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
21,023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/3/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
69,348
|
|
|
$
|
2.30
|
|
|
$
|
38,463
|
|
Stephen Constantino
|
|
|
3/19/2009
|
|
|
$
|
13,490
|
|
|
$
|
26,980
|
|
|
$
|
26,980
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
5,396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/3/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
44,498
|
|
|
$
|
2.30
|
|
|
|
24,680
|
|
Steven J. LaCreta
|
|
|
3/19/2009
|
|
|
$
|
20,689
|
|
|
$
|
41,377
|
|
|
$
|
41,377
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
8,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/3/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,497
|
|
|
$
|
2.30
|
|
|
$
|
25,234
|
|
Thomas Herlihy
|
|
|
3/19/2009
|
|
|
$
|
60,807
|
|
|
$
|
121,614
|
|
|
$
|
121,614
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
24,333
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/3/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
62,335
|
|
|
$
|
2.30
|
|
|
$
|
34,573
|
|
The Compensation and Benefits Committee of the Board of
Directors finalized the 2009 incentive plan in March 2009 for
each of the named executive officers. All awards under the plan
were to be paid out in cash up to 100% of the total target
bonus, and all amounts above the target were to be paid in
restricted stock units (RSUs) valued at the greater of the book
value of the common stock at the end of the fiscal year or the
market value of the common stock as of the payment date. Amounts
under Threshold in column (c) of the table
represent a cash amount equal to 50% of the total target payout;
amounts under both Target and Maximum in
columns (d) and (e) each represent a cash grant of
100% of the total target payout (since any amounts above that
the target would be reflected in RSU grants rather than cash).
Amounts under both Threshold and Target
with respect to equity awards (columns (f) and (g)) are
reported as zero, since no RSUs would be awarded under the plan
unless achievement exceeds 100% of the performance targets.
Equity award amounts under Maximum (column (h))
represent 20% of the target payout (the difference between the
total maximum of 120% of the target payout, less the amount
equal to 100% of the target that would be paid in cash).
Mr. Latours target was 100% of his base salary or
$301,273; Mr. Jacksons target was 50% of his base
salary or $105,115; Mr. Constantinos target was 20%
of his base salary or $26,980; Mr. LaCretas target
was 30% of his base salary or $41,377; and
Mr. Herlihys target was 65% of his base salary or
$121,614. The amounts to be paid out under the 2009 incentive
plan were finalized in accordance with the compensation plan
upon finalization of our 2009 audited financial statements on
February 2, 2010. Since less than 100% of the target payout
was achieved, no RSUs were awarded under the 2009 incentive plan.
RSU grants under our salary-based long term incentive plan are
not reflected in the table above because they were awarded
during 2010. These grants were made on February 2, 2010,
when the closing market price of our common stock was $3.15 and
the book value of our common stock as of December 31, 2009
was $4.68, as follows: 12,875 for Mr. Latour; 8,984 for
Mr. Jackson; 5,765 for Mr. Constantino; and 5,894 for
Mr. LaCreta. Grants reported under All Other Option
Awards (column (j)) in the table reflect the long-term
incentive option portion of the February 2009 option awards;
these awards were made in the form of stock options, rather than
RSUs, with the number of options determined by reference to the
Black-Scholes value of the options at the time of grant.
19
Outstanding
Equity Awards at Fiscal Year-End
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
Stock Awards
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
Plan Awards:
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
Market or
|
|
|
|
|
|
|
Incentive
|
|
|
|
|
|
|
|
|
|
Plan Awards:
|
|
Payout
|
|
|
|
|
|
|
Plan Awards:
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Value of
|
|
|
Number of
|
|
Number of
|
|
Number of
|
|
|
|
|
|
|
|
Market
|
|
Unearned
|
|
Unearned
|
|
|
Securities
|
|
Securities
|
|
Securities
|
|
|
|
|
|
Number of
|
|
Value of
|
|
Shares,
|
|
Shares,
|
|
|
Underlying
|
|
Underlying
|
|
Underlying
|
|
|
|
|
|
Shares or
|
|
Shares or
|
|
Units or
|
|
Units or
|
|
|
Unexercised
|
|
Unexercised
|
|
Unexercised
|
|
Option
|
|
Option
|
|
Units of Stock
|
|
Units of Stock
|
|
Other Rights
|
|
Other Rights
|
|
|
Options (#)
|
|
Options (#)
|
|
Unearned
|
|
Exercise
|
|
Expiration
|
|
That Have
|
|
That Have
|
|
That Have
|
|
That Have
|
Name
|
|
Exercisable
|
|
Unexercisable
|
|
Options
|
|
Price
|
|
Date
|
|
Not Vested
|
|
Not Vested
|
|
Not Vested
|
|
Not Vested
|
(a)
|
|
(b)
|
|
(c)
|
|
(#)(d)
|
|
($)(e)
|
|
(f)
|
|
(#)(g)
|
|
($)(h)
|
|
(#)(i)
|
|
($)(j)
|
|
Richard F. Latour
|
|
|
100,000
|
|
|
|
0
|
|
|
|
|
|
|
$
|
9.781
|
|
|
|
2/24/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
90,000
|
|
|
|
0
|
|
|
|
|
|
|
$
|
13.10
|
|
|
|
2/20/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
0
|
|
|
|
|
|
|
$
|
6.70
|
|
|
|
2/28/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
20,272
|
|
|
|
|
|
|
$
|
5.77
|
|
|
|
2/26/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
68,724
|
|
|
|
|
|
|
$
|
5.85
|
|
|
|
2/5/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
99,380
|
|
|
|
|
|
|
$
|
2.30
|
|
|
|
2/3/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James R. Jackson, Jr.
|
|
|
0
|
|
|
|
7,073
|
|
|
|
|
|
|
$
|
5.77
|
|
|
|
2/26/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
35,896
|
|
|
|
|
|
|
$
|
5.85
|
|
|
|
2/5/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
69,348
|
|
|
|
|
|
|
$
|
2.30
|
|
|
|
2/3/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stephen Constantino
|
|
|
0
|
|
|
|
1,815
|
|
|
|
|
|
|
$
|
5.77
|
|
|
|
2/26/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
17,843
|
|
|
|
|
|
|
$
|
5.85
|
|
|
|
2/5/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
44,498
|
|
|
|
|
|
|
$
|
2.30
|
|
|
|
2/3/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven J. LaCreta
|
|
|
0
|
|
|
|
2,763
|
|
|
|
|
|
|
$
|
5.77
|
|
|
|
2/26/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
19,919
|
|
|
|
|
|
|
$
|
5.85
|
|
|
|
2/5/2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
45,497
|
|
|
|
|
|
|
$
|
2.30
|
|
|
|
2/3/2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table above reflects outstanding equity awards at
December 31, 2009. See Compensation Program Design
for 2009 under the heading Compensation Discussion and
Analysis above for a description of RSU grants made in February
2010 to each of the named executive officers.
Option
Exercises and Stock Vested
None of our named executive officers exercised any options in
2009, nor did any executive officer hold any restricted stock
awards that vested during 2009.
Potential
Payments Upon Termination or Change in Control
The following information and the table below set forth the
amount of payments to each of our current executive officers in
the event of his termination from employment for cause, without
cause, upon disability or death, upon termination by the
executive for good reason, termination by the executive without
good reason, and in the event of a termination of employment in
connection with a change in control. These payment obligations
arise under the individual employment agreements that we have
entered into with each of our executive officers. A more
detailed summary of those agreements is provided below under the
caption Employment Agreements.
The amounts shown in the table below assume that each executive
was terminated on December 31, 2009, under the other
assumptions indicated. Accordingly, the table reflects amounts
earned as of December 31, 2009 and includes an estimate of
amounts that would be payable to the officer upon the occurrence
of a termination or a change in control. The actual amounts to
be paid to an executive can only be determined at the time of
the termination or change in control.
An executive is entitled to receive amounts earned during his
term of employment regardless of the manner in which he is
terminated. These amounts include base salary, any amounts
deferred under our bonus plans, unused vacation pay and any
amounts that had previously been earned but deferred. These
amounts are not shown in the table.
In the table below, where an executive is entitled to
acceleration of the vesting of unvested stock options or stock
awards, amounts are reported as zero where the executive has no
outstanding awards that are in the money. Certain amounts
reported below as disability payments or continued health care
benefits may be reduced to the
20
extent that the executive receives disability benefits under our
current plans or finds new employment which offers health care
coverage, respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Richard F.
|
|
|
James R.
|
|
|
Stephen
|
|
|
Steven J.
|
|
|
|
Latour
|
|
|
Jackson, Jr.
|
|
|
Constantino
|
|
|
LaCreta
|
|
|
By company without cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance
|
|
$
|
1,054,456
|
|
|
$
|
210,231
|
|
|
$
|
202,347
|
|
|
$
|
137,925
|
|
Prorated bonus
|
|
|
172,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Health care benefits
|
|
|
162,000
|
|
|
|
18,000
|
|
|
|
27,000
|
|
|
|
18,000
|
|
Disability premiums
|
|
|
77,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,466,378
|
|
|
$
|
228,231
|
|
|
$
|
229,347
|
|
|
$
|
155,925
|
|
By company for cause
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No payments
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
By executive with good reason
|
|
|
Same as By
company
without cause
above.
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
By executive without good reason
|
|
|
Same as By
company for
cause above.
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Upon death
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months salary
|
|
$
|
301,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro rated bonus
|
|
|
206,071
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Accelerated stock options
|
|
|
79,504
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
586,848
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Upon disability
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Twelve months salary
|
|
$
|
301,273
|
|
|
$
|
210,231
|
|
|
$
|
202,347
|
|
|
$
|
137,925
|
|
Pro rated bonus
|
|
|
206,071
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accelerated stock options
|
|
|
79,504
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Accelerated restricted stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
586,848
|
|
|
$
|
210,231
|
|
|
$
|
202,347
|
|
|
$
|
137,925
|
|
Termination without cause (or by executive with good reason)
following change in control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash severance
|
|
$
|
1,054,456
|
|
|
$
|
210,231
|
|
|
$
|
202,347
|
|
|
$
|
137,925
|
|
Prorated bonus
|
|
|
172,324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Continued health care benefits
|
|
|
162,000
|
|
|
|
9,000
|
|
|
|
9,000
|
|
|
|
9,000
|
|
Disability premiums
|
|
|
77,598
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
1,466,378
|
|
|
$
|
219,231
|
|
|
$
|
211,347
|
|
|
$
|
146,925
|
|
Termination for cause (or by executive without good reason)
following change in control
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
No payments
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
|
|
N/A
|
|
Death during change in control period
|
|
|
Same as Upon
death above.
|
|
|
|
Same as
Termination
without cause
following
change in
control above.
|
|
|
|
Same as
Termination
without cause
following
change in
control above.
|
|
|
|
Same as
Termination
without cause
following
change in
control above.
|
|
Disability during change in control period
|
|
|
Same as Upon
disability above.
|
|
|
|
Same as
Termination
without cause
following
change in
control above.
|
|
|
|
Same as
Termination
without cause
following
change in
control above.
|
|
|
|
Same as
Termination
without cause
following
change in
control above.
|
|
21
All payments described in the table above would qualify for a
tax
gross-up
in the event they would be subject to an excise tax as
excess parachute payments under Section 280G of
the Internal Revenue Code, in order to put the executive in the
post-tax position he would be in if the tax had not applied.
However, under the assumptions outlined above, no such payments
would be taxable as excess parachute payments because the
payments do not exceed the applicable thresholds, which are
based on a multiple of the individuals average annualized
compensation over the past five years.
In addition to the amounts that will become payable to
Mr. Latour in the event he is terminated without cause, or
in the event he terminates his employment for good reason, his
employment contract provides that his equity awards will not be
terminated, but will remain outstanding with the same expiration
provisions that would pertain in the absence of his termination.
In the event of a change in control of the Corporation,
regardless of whether an executives employment is
terminated in connection with or following the change in
control, certain stock options and equity awards that are not
vested at the time of the change in control will accelerate and
become immediately exercisable for a period of 15 days
prior to the scheduled date of the change in control, unless
determined otherwise by the Compensation and Benefits Committee.
To the extent they are not exercised, such options will
terminate upon the change in control. If the options are assumed
in writing by the successor company, or if the options are
substituted with like options of the successor company, then
these acceleration and termination provisions will not apply. At
December 31, 2009, the aggregate intrinsic value of
unvested in-the-money options held by the named executive
officers (i.e., the difference between the exercise price and
the market value of the Corporations common stock at that
date) was $79,504 for Mr. Latour, $55,478 for
Mr. Jackson, $35,598 for Mr. Constantino and $36,398
for Mr. LaCreta.
Employment
Agreements
Richard F. Latour. We have entered into an
employment agreement with Mr. Latour, which was amended and
restated in March 2004. The agreement provides for automatically
renewing successive one-year terms in March of each year unless
it is terminated with six months notice. In the event of a
termination of Mr. Latours employment agreement by
MicroFinancial without cause, or by Mr. Latour for
specified good reason, the employment agreement provides for
three years of severance payments to Mr. Latour on the
basis of his highest base salary during the employment period.
In addition, Mr. Latour would also be entitled to a
prorated payment of his base salary to the date of termination,
the acceleration of any deferred compensation, and a pro rated
percentage of the annual bonus amount paid to him for the prior
year. Furthermore, his outstanding options or other equity
awards would remain outstanding, without termination as a result
of the termination. The table above under Potential
Payments Upon Termination or Change in Control reflects
three years plus six months of salary to give effect to the six
month notice requirement. Mr. Latours current base
salary is $309,709.
If Mr. Latours employment is terminated by his death,
his estate will receive his base salary at the rate in effect at
the time of his death for a period of twelve months, and any
accrued but unpaid amounts under the bonus program. In the event
that his employment is terminated on account of a disability
(meaning a mental or physical incapacity to perform his services
for a period of six months), he would also receive his base
salary for a period of twelve months, plus accrued and unpaid
amounts under the bonus program. In the event of either his
death or his disability, all unvested stock options or
restricted stock awards would become vested. If, in connection
with a payment under his employment agreement, Mr. Latour
incurs 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, we would make
gross-up
payments to return him to the after-tax position he would have
been in if no excise tax had been imposed. Except in cases where
his employment is terminated for cause or by his death,
Mr. Latour would be entitled to receive a continuation of
health and disability benefits until the earlier of his death or
his 65th birthday, but those amounts would be offset by any
benefits provided by any new employer. As used in
Mr. Latours employment agreement, for good
reason means the assignment to him of duties inconsistent
with his position, authority, duties or responsibilities; our
failure to pay the agreed base salary and provide him with
benefits; moving him to a location outside of the metropolitan
Boston, Massachusetts area; and our failure to require a
successor to assume all obligations under the employment
agreement. In exchange for these payments, Mr. Latour has
agreed not to compete in certain respects with us for two years
following the termination of his employment.
22
Other Executives. We have also entered into
separate employment agreements with Messrs. Jackson,
Constantino and LaCreta, each amended and restated in May 2005
and amended in December 2008, which are designed to provide an
incentive to each executive to remain with us pending and
following a change in control (as defined below).
Each employment agreement had an initial term of three years
from May 2005, with an automatic renewal for a new three year
period each one-year anniversary of the date of the agreement
unless we give 60 days notice to the executive that the
period will not be renewed. If a change in control occurs within
that term, the agreement provides for an employment period of
one year following the 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, as well as participation
in bonus, incentive and benefit plans generally no less
favorable than those provided or available to the executive
prior to the change in control. If the employment agreement is
terminated by us other than for cause, death or disability, or
is terminated by the executive for specified good reason, we
will pay, in a lump sum, the executive the aggregate of the
following amounts: (i) one times annual base salary, in the
case of Messrs. Jackson and LaCreta and one and one-half
times annual base salary, in the case of Mr. Constantino;
(ii) any other compensation or bonus previously deferred by
the executive, together with any accrued interest or earnings on
those amounts; and (iii) any accrued vacation pay. In
addition, we would continue to provide health benefits to the
executive and the executives family for at least six
months and, if longer, until the next renewal date of the
contract.
If the executives employment is terminated before a change
in control, we are obligated to pay the amounts referenced
above; however, payments of the executives annual base
salary would be payable over twelve months, in the case of
Messrs. Jackson and LaCreta and eighteen months in the case
of Mr. Constantino, with payment to be made at the same
time that we pay other peer executives of MicroFinancial. In
that case, the executive would also be entitled to a
continuation of health benefits over the same period. If the
employment is terminated because of the executives
disability prior to a change in control, then we would pay the
executive the salary amounts described above (including any
previously deferred compensation and accrued vacation), less
amounts that the executive would be entitled to receive under
our disability benefit plans. Each of the executives has agreed
not to become employed by a microticket leasing company that
competes with us for the twelve months following any termination.
A change in control is defined more specifically in
each of these agreements, but it generally means one of the
following:
|
|
|
|
|
the acquisition by any person, entity or group of beneficial
ownership of 50% or more of our common stock or of the voting
power entitled to vote in the election of our directors;
|
|
|
|
members of our Board of Directors at the date of the agreements
ceasing to make up the majority of the Board, except where the
new members of the Board are approved by majority vote of the
Board at the time;
|
|
|
|
approval by our stockholders (or, if applicable, by a bankruptcy
judge) of a merger, reorganization or consolidation, unless more
than 60% of the common stock and voting power of the company
resulting from the transaction continue to be owned by
stockholders who were the owners of such stock before the
transaction; or
|
|
|
|
approval by our stockholders (or, if applicable, a bankruptcy
judge) of a complete liquidation or dissolution of the company
or the sale of all or substantially all of our assets.
|
Each of the above named executive officers entered into
amendments to their respective employment agreements with the
Corporation in December 2008 in order to clarify the timing of
certain of the payments that could be made thereunder, for the
purpose of complying with newly applicable requirements of
Section 409A of the Internal Revenue Code. The Compensation
and Benefits Committee did not consider these amendments to be
material.
The Compensation and Benefits Committee believes that these
employment agreements are in our best interests and in the best
interests of our shareholders as they provide the executives
with the proper incentives to ensure that they fully cooperate
with any new ownership pending a change in control event. In
addition, they promote the stability and continuity of the
senior management team at other times. The committee reviews
these agreements annually to ensure that they are appropriate
and adequate for each of the executives covered.
23
PROPOSAL 1
ELECTION
OF DIRECTORS
The MicroFinancial Board currently consists of 7 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. Three directors are to be
elected at the Special Meeting to serve until the 2013 annual
meeting and until their successors are elected and have
qualified. The nominees for this class of directors are Peter R.
Bleyleben, John W. Everets, and Richard F. Latour. A
director is 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 Special Meeting when there is a quorum.
All of the nominees for director are presently directors of
MicroFinancial. They have consented to being named a nominee in
this proxy statement and have agreed to serve as a director if
elected at the Special Meeting. In the event that the nominees
are unable to serve, the persons named in the proxy have
discretion to vote for other persons if those other persons are
designated by the MicroFinancial Board. The MicroFinancial Board
has no reason to believe that the nominees will be unavailable
for election.
The paragraphs below set forth information as of the date of
this proxy statement about each nominee and each director
continuing in office. This information includes certain
biographical information, such as the nominees or
continuing directors age, principal occupation, business
experience in the past five years, and the names of other
publicly held companies for which he serves as a director or has
served as a director in the past five years. The paragraphs
below also present information regarding each nominees and
each continuing directors current Board committee roles as
well as the specific experience, qualifications, attributes and
skills that led the MicroFinancial Board to conclude that he
should serve as a director. In addition to the specific
experience, qualifications, attributes and skills presented
below, the Corporation also believes that each of the nominees
and continuing directors has demonstrated the personal and
professional integrity, good business judgment, adherence to
high ethical standards, and commitment to service to the
Corporation that are required of all directors of the
Corporation.
THE
MICROFINANCIAL BOARD RECOMMENDS
A VOTE FOR THE NOMINEES FOR ELECTION AS
DIRECTORS.
Nominees
for Director (Terms to Expire in 2013)
Peter R.
Bleyleben, 57
Credit Policy Committee
Dr. Bleyleben serves as Non-Executive Chairman of the Board
of Directors of the Corporation and on the Credit Policy
Committee since January 2005. He served as President, Chief
Executive Officer and Director of the Corporation or its
predecessor since June 1987 until January 2002, and Chief
Executive Officer until October 2002. He is also a director of
Nimbit, Inc. and
Get-up-and-play-piano,
Inc., both privately held companies, and serves on the board of
Common Angels, a membership based angel financing organization.
He was a director of UpToDate in Medicine, Inc., a privately
held company, until its sale in 2008. Before joining the
Corporation, Dr. Bleyleben was Vice President and Director
of the Boston Consulting Group, Inc. in Boston.
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.
The Board believes that Dr. Bleylebens qualifications
to serve on the Board include his nearly 15 years as the
Corporations chief executive officer, from its early days
through its initial public offering and beyond, which give him
valuable insight and experience in the Corporations
business, operations, industry and history. He also brings a
first hand understanding of successful long-term business
strategies from his experiences as chief executive officer, his
membership on other boards of directors, and his work as a
senior strategic business consultant.
24
John W.
Everets, 63
Chairman, Strategic Planning Committee
Mr. Everets has been chairman of Yorkshire Capital LLC
since 2006. Mr. Everets was Chairman of the Board and Chief
Executive Officer of HPSC, Inc. from 1993 through January 2006.
HPSC was acquired by General Electric Healthcare Financial
Services in 2004. Established in 1974, HPSC was a
publicly-owned, non-bank specialty finance company providing
leasing and healthcare equipment financing on a nationwide
basis. Previous to his becoming CEO of HPSC, Mr. Everets
was Chairman of the Board and Chief Executive Officer of T.O.
Richardson Co., Inc., an investment management company. He was
also Executive Vice President and Director of Advest, Inc., an
investment banking firm, from 1977 to January 1990, as well as
Chairman of Advest Credit Corp., both subsidiaries of Advest
Group, Inc. Mr. Everets was Vice Chairman of the
Connecticut Development Authority and Chairman of the Loan
Committee of this $1.8 billion quasi-government agency. He
is a director of the Eastern Company, and serves as the chair of
its audit committee and a member of its compensation committee.
He was a director of Financial Security Assurance Holdings Ltd.,
and a member of its audit committee, from 2007 to 2009.
The Board believes that Mr. Everets qualifications to
serve on the Board include his extensive executive experience in
the field of equipment financing. As the former Chairman of the
Board and Chief Executive Officer of HPSC, Mr. Everets has
first hand knowledge of the skills and responsibilities
associated with growing and maintaining a successful financial
services organization.
Richard
F. Latour, 56
Mr. Latour has served as President, Chief Executive
Officer, Treasurer, Clerk and Secretary of the Corporation since
October 2002 and as President, Chief Operating Officer, Chief
Financial Officer, Treasurer, Clerk and Secretary, as well as a
director of the Corporation, since February 2002. From 1995 to
January 2002, he served as Executive Vice President, Chief
Operating Officer, Chief Financial Officer, Treasurer, Clerk and
Secretary. From 1986 to 1995, Mr. Latour served as Vice
President of Finance and Chief Financial Officer. Prior to
joining the Corporation, Mr. Latour was Vice President of
Finance with Trak Incorporated, an international manufacturer
and distributor of consumer goods, where he was responsible for
all financial and operational functions. Mr. Latour earned
a B.S. in accounting from Bentley College in Waltham,
Massachusetts.
The Board believes that Mr. Latours qualifications to
serve on the Board include his experience from more than two
decades in senior positions at the Corporation, including over
eight years as President, and his extensive knowledge of both
the day to day operations of the Corporation and its strategic
vision. The Board believes it is critical to have the insight of
the Chief Executive Officer and President reflected in its
strategic thinking.
Continuing
Directors
Terms
Expiring in 2011
Torrence
C. Harder, 66
Chairman,
Credit Policy Committee; Audit Committee; Strategic Planning
Committee
Mr. Harder has served as a Director of the Corporation
since 1986, served as Chairman of the Credit Policy Committee
since January 2005, and has been a member of the Audit Committee
since 1997 and of the Strategic Planning Committee since March
2006. He has been the President and Director of Harder
Management Company, Inc., a registered investment advisory firm,
since its establishment in 1971. He has also been the President
and Director of Entrepreneurial Ventures, Inc., a private equity
investment firm, since its founding in 1986. Mr. Harder is
a Director of Command Credit Corporation and MindEdge, Inc.,
both privately held companies, and was a Director of RentGrow,
Inc., a privately held company, through February 2010.
Mr. Harder earned an M.B.A. from the Wharton School of the
University of Pennsylvania, and a B.A. with honors from Cornell
University.
The Board believes that Mr. Harders qualifications to
serve on the Board include the experience he has gained from
approximately twenty-five years of investing in computer and
finance-related companies.
25
Fritz von
Mering, 57
Chairman, Audit Committee; Compensation and Benefits Committee;
Nominating and Corporate Governance Committee
Mr. von Mering has served as a Director of the Corporation and a
member of the Audit Committee since 2004, Chairman of the Audit
Committee since January 2005, and a member of the Compensation
and Benefits Committee and the Nominating and Corporate
Governance Committee since January 2005. Mr. von Mering is
currently managing director of Miles River Management, a
strategic planning and financial management consultancy. He is
also a member of the board of directors of Syniverse Holdings,
Inc., and serves on its audit and compensation committees. From
1989 to 2006, he held various roles at Boston Communications
Group, Inc. (Boston Communications), a Boston-based
provider of call processing to the global wireless industry,
including Chief Operating Officer, Vice President of Corporate
Development, and Chief Financial Officer, and served on the
Board of Boston Communications through March 2007. Prior to
joining Boston Communications, Mr. von Mering was the Chief
Financial Officer of Massachusetts Gas & Electric from
1986 to 1989. Before joining Massachusetts Gas &
Electric, Mr. von Mering was regional vice president and general
manager for Metromedias paging division from 1980 to 1986.
Prior to Metromedia, Mr. von Mering held various positions at
Coopers & Lybrand, where he earned his C.P.A. Mr. von
Mering earned his B.S. in Accounting from Boston College and an
M.B.A from Babson College.
The Board believes that Mr. von Merings qualifications to
serve on the Board include his qualifications as a financial
expert within the meaning of SEC regulations and the financial
sophistication he has obtained through his previous experiences
as a chief financial officer of a public company, his public
accounting experience, and general accounting knowledge.
Terms
Expiring in 2012
Brian E. Boyle, 62
Chairman, Compensation and Benefits Committee; Nominating and
Corporate Governance
Committee; Audit Committee; Credit Policy Committee; Strategic
Planning Committee
Dr. Boyle, the Chief Executive Officer of the Corporation
from 1985 to 1987 and Chairman of the MicroFinancial Board from
1985 to 1995, has served as a Director of the Corporation or its
predecessor since 1985. He has been a member of the Audit
Committee and the Compensation Committee since 1997 (and the
chairman of the Compensation Committee since January 2010); a
member of the Nominating and Corporate Governance Committee
since January 2004 (and its chairman until January 2010); a
member of the Credit Policy Committee since January 2005; and a
member of the Strategic Planning Committee since March 2006. He
was the Vice Chairman and a Director of Boston Communications
from 1995 through 2007. Prior to joining Boston 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. Dr. Boyle is also a director of several private
companies. Dr. Boyle earned his A.B. in Mathematics 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.
The Board believes that Dr. Boyles qualifications to
serve on the Board include his over three decades of experience
in executive leadership of public and private financial and
technology companies, including as the Corporations
founding Chief Executive Officer and former Chairman.
Alan J.
Zakon, 74
Chairman, Nominating and Corporate Governance Committee;
Compensation and Benefits
Committee; Strategic Planning Committee
Dr. Zakon has served as a Director of the Corporation since
1988. He has served on the Compensation and Benefits Committee
since 1997 (and as its chairman from January 2005 through
January 2010); on the Nominating and Corporate Governance
Committee since January 2004 (and its chairman since January
2010); and on the Strategic Planning Committee since March 2006.
Dr. Zakon served as Managing Director of Bankers
26
Trust Corporation from 1989 to 1995 where he was Chairman
of the Strategic Policy Committee. Dr. Zakon is a Director
and a member of the Audit Committee of Arkansas Best
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 Sloan School at the
Massachusetts Institute of Technology and a Ph.D. in Economics
and Finance from the University of California at Los Angeles.
The Board believes that Dr. Zakons qualifications to
serve on the Board include his twenty years of management
consulting experience as well as his past service as chief
executive of the Boston Consulting Group and current and past
membership on six public company Boards, as well as his
extensive background in finance.
PROPOSAL 2
RATIFICATION
OF THE SELECTION OF
MICROFINANCIALS
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The selection of Caturano and Company, P.C.
(Caturano) to serve as independent auditors of
MicroFinancial for the current fiscal year ending
December 31, 2010, will be submitted to the stockholders of
the Corporation for ratification at the Special Meeting.
Although ratification is not legally required, the Corporation
is submitting the appointment of Caturano to stockholders as a
matter of good corporate governance. If the ratification is not
approved, then the Audit Committee of the Corporations
Board of Directors will reconsider the appointment.
Representatives of Caturano 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.
Caturano 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 Caturano during
the year ended December 31, 2009 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.
Fees to
Independent Registered Public Accounting Firm for Fiscal 2009
and 2008
Audit Fees. The aggregate fees billed by
Caturano for professional services rendered for the audit of the
Corporations annual financial statements for the fiscal
year ended December 31, 2009 and for the reviews of the
financial statements included in the Corporations
Quarterly Reports on
Form 10-Q
for that fiscal year and for services provided in connection
with statutory or regulatory filings or engagements were
$282,916.
The aggregate fees billed by Caturano for professional services
rendered for the audit of the Corporations annual
financial statements for the fiscal year ended December 31,
2008 and for the reviews of the financial statements included in
the Corporations Quarterly Reports on
Form 10-Q
for that fiscal year and for services provided in connection
with statutory or regulatory filings or engagements were
$262,700.
Audit-Related Fees. The aggregate fees billed
by Caturano for assurance and related services reasonably
related to employee benefit plan audits and not reported under
the foregoing Audit Fees section rendered to the
Corporation for the fiscal year ended December 31, 2009
were $17,189.
The aggregate fees billed by Caturano for assurance and related
services reasonably related to employee benefit plan audits and
not reported under the foregoing Audit Fees section
rendered to the Corporation for the fiscal year ended
December 31, 2008 were $14,988.
Tax Fees. The aggregate fees billed by
Caturano for professional services rendered to the Corporation
related to tax compliance, tax advice and tax planning for the
fiscal year ended December 31, 2009 were $5,000, which
includes review of the annual tax returns.
27
The aggregate fees billed by Caturano for professional services
rendered to the Corporation related to tax compliance, tax
advice and tax planning for the fiscal year ended
December 31, 2008 were $5,000, which includes review of the
annual returns.
All Other Fees. There were no other fees
billed by Caturano for services rendered to the Corporation,
other than the services described under Audit Fees,
Audit-Related Fees, and Tax Fees for the
fiscal years ended December 31, 2009 and December 31,
2008.
Approval
by Audit Committee
The charter of the Audit Committee requires that the Committee
approve in advance any audit or permissible non-audit engagement
or relationship between the Corporation and the independent
auditors. The Committee has delegated to the Chairman of the
Audit Committee the authority to approve in advance all
audit-related or non-audit services to be provided by the
independent auditor if presented to the full Committee at the
next regularly scheduled meeting of the Audit Committee.
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. 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.
2011
STOCKHOLDER PROPOSALS
Proposals of stockholders to be included in the proxy statement
and form of proxy for the Corporations 2011 annual meeting
of stockholders must be received by December 16, 2010.
Stockholders who wish to make a proposal at the aforementioned
meeting of stockholders, other than one that will be included in
the Corporations proxy materials, must notify the
Corporation no later than January 15, 2011 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
January 15, 2011, 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
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 10M Commerce Way, Woburn, Massachusetts 01801.
FINANCIAL
STATEMENTS
The financial statements of the Corporation are contained in the
Corporations Annual Report on
Form 10-K
for its fiscal year ended December 31, 2009 that was filed
with the Securities and Exchange Commission on March 31,
2010, a copy of which is included with this proxy statement.
Such report and the financial statements contained therein are
not to be considered as a part of this soliciting material.
28
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, electronic communication 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,
RICHARD F. LATOUR
Clerk
Woburn, Massachusetts
April 15, 2010
29
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 MAY 13, 2010, 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 (each a Proxy Agent),
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 Palmer & Dodge LLP, 111 Huntington Avenue, Boston, Massachusetts on Thursday, May 13, 2010,
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, each Proxy Agent agrees that this Proxy
will be voted in the manner directed by the stockholder giving this Proxy. If no direction is specified, the Proxy will be voted
FOR the election of the nominees for Director for three-year terms and FOR the ratification of the appointment of Caturano and
Company, P.C. as the Corporations independent registered public accounting firm for the year ending December 31, 2010,
each 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.
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
THE NOMINEES FOR DIRECTOR FOR THREE-YEAR TERMS AND FOR THE RATIFICATION OF THE APPOINTMENT OF CATURANO AND COMPANY, P.C.
AS THE CORPORATIONS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR THE YEAR ENDING DECEMBER 31, 2010.
CONTINUED, AND TO BE SIGNED, ON REVERSE SIDE
SPECIAL MEETING
OF STOCKHOLDERS IN LIEU OF ANNUAL MEETING OF
MICROFINANCIAL INCORPORATED
Thursday, May 13, 2010
NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIAL:
The Notice of Meeting, proxy statement and annual report to shareholders
are available at www.microfinancial.com/proxyinfo/
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
|
|
|
|
|
|
|
|
|
|
|
Please detach and mail in the envelope provided. |
|
|
|
|
|
|
g 20330000000000001000 8
|
|
|
051310 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOARD OF DIRECTORS
RECOMMENDS A VOTE FOR THE ELECTION OF DIRECTORS AND FOR
PROPOSAL 2.
|
PLEASE SIGN, DATE AND
RETURN PROMPTLY IN THE ENCLOSED ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE
OR BLACK INK AS SHOWN HERE x
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FOR |
|
AGAINST |
|
ABSTAIN |
1. Election of the following
directors for three-year terms.
|
|
|
|
|
2. Ratification
of the appointment by the Board of Directors of Caturano and Company,
P.C. as independent registered public accounting firm of the Corporation
for the year ending December 31, 2010.
|
|
c |
|
c |
|
c |
c FOR
ALL NOMINEES
c WITHHOLD AUTHORITY
FOR
ALL NOMINEES
c FOR
ALL EXCEPT
(See
instructions below)
|
|
NOMINEES:
O Peter R. Bleyleben
O John W. Everets
O Richard F. Latour
|
|
|
|
|
|
|
|
|
|
|
|
|
THE BOARD OF DIRECTORS OF THE CORPORATION RECOMMENDS
A VOTE FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR FOR THREE-YEAR
TERMS AND FOR THE RATIFICATION OF THE APPOINTMENT OF CATURANO AND
COMPANY, P.C. AS THE CORPORATIONS INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM FOR THE YEAR ENDING DECEMBER 31, 2010.
|
|
|
|
|
|
|
|
PLEASE MARK, DATE, SIGN AND MAIL THIS PROXY
CARD IN THE ACCOMPANYING ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED
IN THE UNITED STATES.
|
INSTRUCTIONS:
To withhold authority to vote for any individual nominee(s), mark
FOR ALL EXCEPT and fill in the circle next to each
nominee you wish to withhold, as shown here: n
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MARK HERE IF YOU PLAN
TO ATTEND THE MEETING. c |
|
|
|
|
|
|
|
|
|
|
|
|
To change the address on your account, please check
the box at right and indicate your new address in the address space
above. Please note that changes to the registered name(s) on the account
may not be submitted via this method.
|
|
|
c |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Signature of Stockholder
|
|
|
|
|
|
Date:
|
|
|
|
|
|
Signature of Stockholder
|
|
|
|
|
|
Date: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Note: |
This proxy must be signed exactly as the name appears hereon.
When shares are held jointly, each holder should sign. When signing as
executor, administrator, attorney, trustee or guardian, please give full title
as such. If the signer is a corporation, please sign full corporate name by duly
authorized officer, giving full title as such. If signer is a partnership,
please sign in partnership name by authorized person.
|
|