UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (date of earliest event reported): SEPTEMBER 29, 2004
MICROFINANCIAL INCORPORATED
(Exact name of registrant as specified in its charter)
MASSACHUSETTS
(State or other jurisdiction of incorporation)
1-14771 04-2962824
(Commission file number) (IRS Employer Identification No.)
10-M COMMERCE WAY, WOBURN, MA 01801
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (781) 994-4800
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2):
[] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On September 29, 2004, TimePayment Corp. LLC and Leasecomm Corporation
(each a wholly-owned subsidiary of the Registrant and collectively, the
"Borrowers") and the Registrant entered into a Revolving Credit Agreement (the
"Credit Agreement"), by and among the Borrowers, the Registrant, The CIT
Group/Commercial Services, Inc., as Agent ("CIT"), and the other financial
institutions from time to time party thereto, as Lenders. The Credit Agreement
provides for a secured line of credit of $30 million and CIT agrees that it
will, on a best efforts basis, attempt to secure commitments from an additional
Lender or Lenders in the aggregate additional amount of up to $20 million. Loans
to the Borrowers under the Credit Agreement in the amount of $11,322,231.15 were
funded on September 29, 2004.
Portions of the funded loans were used to repay existing indebtedness
under a senior secured credit facility with a bank group and an unsecured credit
facility with a financial institution. Both existing credit facilities were paid
in full and terminated. In addition, the Borrowers will use the loans under the
Credit Agreement for working capital needs and for ongoing general corporate
purposes. The Registrant guarantees the loans and obligations under the Credit
Agreement. The obligations of the Borrowers and the Registrant under the Credit
Agreement and such guarantee are secured by the grant of a security interest in
the Borrowers' assets and the Registrant's pledge of its ownership interests in
the Borrowers to CIT.
The borrowings under the Credit Agreement are subject to monthly interest
payments, periodic commitment fees and various other fees, as described in the
Credit Agreement. Borrowings under the Credit Agreement will bear interest at a
base rate of prime plus 1.5% or a LIBOR rate, dependent on the Borrowers'
election. Borrowings based on LIBOR will bear interest at a rate of LIBOR plus
4.0%. Availability under the Credit Agreement is subject to the satisfaction of
a borrowing base, as described in the Credit Agreement.
The revolving credit facility established pursuant to the Credit Agreement
will expire on September 29, 2007, at which time all outstanding amounts under
the credit facility will be due and payable. The Credit Agreement will, however,
automatically renew on for a one year period on September 29, 2007 and on
September 29th of each year thereafter provided that there is no then existing
event of default at such time and neither CIT nor the Borrowers have given at
least 180 days prior written notice of their intent not to renew the Credit
Agreement. If the Borrowers terminate the Credit Agreement prior to March 29,
2006, the Borrowers have agreed to pay to CIT an early termination fee in the
amount of $1.5 million. The Borrowers may under certain circumstances, as
described in the Credit Agreement, terminate the Credit Agreement prior to March
29, 2006 without liability for such early termination fee.
The Credit Agreement contains standard representations, covenants and
events of default for a facility of this type, including among other things,
certain financial tests and limitations with respect to: distributions,
dividends, payment of certain indebtedness and certain fees, transactions with
affiliates, investments, capital expenditures, incurrence of additional
indebtedness, liens, acquisitions, asset dispositions, sales of lease and
equipment portfolios, establishing special purpose corporations for the
securitization and financing of lease receivables, and other customary
restrictions.
The Credit Agreement provides that upon an event of default the Borrowers
will, at CIT's election, incur additional interest on their periodic interest
payments until such event of default is cured or waived. Also, an occurrence of
an event of default allows CIT to accelerate the payment of the loans and/or
suspend or terminate the commitments to lend, in addition to the exercise of
other legal remedies, including foreclosing on collateral. Under certain events
of default relating to bankruptcy, insolvency or
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receivership of the Borrowers or the Registrant, the obligations of CIT and
Lenders to make further loans are automatically terminated and the amounts
outstanding automatically become due and payable immediately. In addition, the
Credit Agreement contains default provisions relating to the occurrence of
certain change of control events, including (i) the failure of Richard Latour to
be at all times the chief executive officer of the Registrant and TimePayment
Corp. LLC and the executive vice president of Leasecomm corporation, (ii) the
failure of James Jackson to be at all times the chief financial officer of the
Registrant and Borrowers or (iii) certain changes to the existing composition of
the board of directors of the Registrant or Borrowers (in each such instance,
without the replacement within 60 days by individuals who are reasonably
acceptable to CIT).
The Registrant and the Borrowers have also executed and delivered certain
other related agreements and documents pursuant to the Credit Agreement,
including pledge, guaranty and security agreements. Copies of the Credit
Agreement and related agreements are attached hereto as Exhibits 10.1 through
10.7 and are incorporated herein by reference. The Registrant issued a press
release dated September 30, 2004 announcing the credit facility, which press
release is attached hereto as Exhibit 99.1. The foregoing summary does not
purport to be complete and is qualified in its entirety by reference to the
Credit Agreement and related documents.
ITEM 2.03. CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN
OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.
The information described above under "Item 1.01. Entry into a Material
Definitive Agreement" is hereby incorporated herein by reference.
ITEM 3.02. UNREGISTERED SALES OF EQUITY SECURITIES.
In connection with the Credit Agreement, the Registrant issued to CIT a
warrant certificate dated September 29, 2004 (the "Warrant") which entitles the
holder thereof to purchase fifty thousand (50,000) shares of the Registrant's
common stock at a per share purchase price of $0.825. The Warrant expires on
June 10, 2007. The Warrant was issued pursuant to the terms of that certain
Warrant Purchase Agreement, dated as of September 29, 2004, by and between the
Registrant and CIT.
Pursuant to a Registration Rights Agreement, dated as of September 29,
2004, by and between the Registrant and CIT, the Registrant has agreed to
provide customary incidental registration rights with respect to the shares of
the Registrant's common stock issuable under the Warrant, as well as providing
that the Registrant will file with the SEC an S-3 registration statement with
respect to such shares no later than December 31, 2004.
Copies of the Warrant Purchase Agreement, the Warrant and the Registration
Rights Agreement are attached hereto as Exhibits 10.8 through 10.10 and are
incorporated herein by reference. The foregoing summary does not purport to be
complete and is qualified in its entirety by reference to such agreements.
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ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(C) EXHIBITS
EXHIBIT EXHIBIT TITLE
Exhibit 10.1 Revolving Credit Agreement, dated as of September 29, 2004, by
and among Leasecomm Corporation and TimePayment Corp. LLC, as
Borrowers, MicroFinancial Incorporated, The CIT
Group/Commercial Services, Inc., as Agent, and the other
financial institutions from time to time party thereto, as
Lenders.
Exhibit 10.2 $30,000,000 Revolving Credit Note, dated as of September 29,
2004, issued by Leasecomm Corporation and TimePayment Corp.
LLC and payable to the order of The CIT Group/Commercial
Services, Inc.
Exhibit 10.3 Guaranty, dated as of September 29, 2004, by MicroFinancial
Incorporated in favor of The CIT Group/Commercial Services,
Inc., as Agent.
Exhibit 10.4 Pledge Agreement, dated as of September 29, 2004, by and
between MicroFinancial Incorporated and The CIT
Group/Commercial Services, Inc., as Secured Party, on behalf
of the Lenders.
Exhibit 10.5 Security Agreement, dated as of September 29, 2004, by and
among Leasecomm Corporation, TimePayment Corp. LLC and The CIT
Group/Commercial Services, Inc., as Agent.
Exhibit 10.6 Intellectual Property Security Agreement, dated as of
September 29, 2004, by and among Leasecomm Corporation,
TimePayment Corp. LLC and The CIT Group/Commercial Services,
Inc., as Agent.
Exhibit 10.7 Revolving Credit Assignment of Leases, dated as of September
29, 2004, by and among Leasecomm Corporation, TimePayment
Corp. LLC and The CIT Group/Commercial Services, Inc., as
Agent.
Exhibit 10.8 Warrant Purchase Agreement, dated as of September 29, 2004, by
and between MicroFinancial Incorporated and The CIT
Group/Commercial Services, Inc., as Investor.
Exhibit 10.9 Warrant Certificate, dated as of September 29, 2004, for the
purchase of 50,000 shares of common stock, issued by
MicroFinancial Incorporated in favor of The CIT
Group/Commercial Services, Inc.
Exhibit 10.10 Registration Rights Agreement, dated as of September 29, 2004,
by and between MicroFinancial Incorporated and The CIT
Group/Commercial Services, Inc., as Holder.
Exhibit 99.1 Press release dated September 30, 2004.
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
as amended, the Registrant has duly caused this report to the signed on its
behalf by the undersigned hereunto duly authorized.
Dated: October 4, 2004
MICROFINANCIAL INCORPORATED
(Registrant)
By: /s/ James Jackson
------------------------------------
Name: James Jackson
Title: Vice President and Chief
Financial Officer
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