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                                                                    EXHIBIT 10.5

                              EMPLOYMENT AGREEMENT

      THIS EMPLOYMENT AGREEMENT by and between MicroFinancial Incorporated, a
Massachusetts corporation, and its subsidiaries (the "Company"), and Steven
LaCreta (the "Executive"), dated as of May 4, 2005 (this "Agreement").

      WHEREAS, Executive and the Company entered into an Employment Agreement
dated as of September 26, 1997 which was amended as of November 21, 2002 (as
amended from time to time, the "Original Agreement") to assure that the Company
would have the continued dedication of the Executive, notwithstanding the
possibility, threat or occurrence of a Change of Control of the Company;

      WHEREAS, in order to encourage the Executive's continued attention and
dedication to the Company, the Board of Directors of the Company (the "Board"),
has determined that it is in the best interests of the Company and its
shareholders to provide the Executive with additional severance arrangements
whether or not a Change of Control of the Company occurs and to make other
amendments to the Original Agreement, subject to the terms set forth herein; and

      WHEREAS, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement which shall amend and supersede in its
entirety the Original Agreement (and any and all prior oral and written
agreements and understandings with respect to the Original Agreement) as
follows:

      NOW, THEREFORE, IT IS HEREBY, AGREED AS FOLLOWS:

      1. Certain Definitions.

            (a) The "Effective Date" shall mean the first date during the Change
of Control Period (as defined in Section 1(b)) on which a Change of Control
occurs. Anything in this Agreement to the contrary notwithstanding, if a Change
of Control occurs and if the Executive's employment with the Company is
terminated prior to the date on which the Change of Control occurs, and if it is
reasonably demonstrated by the Executive that such termination of employment (i)
was at the request of a third party who has taken steps reasonably calculated to
effect the Change of Control or (ii) otherwise arose in connection with or
anticipation of the Change of Control, then for all purposes of this Agreement
the "Effective Date" shall mean the date immediately prior to the date of such
termination of employment.

            (b) The "Change of Control Period" shall mean the period commencing
on the date hereof and ending on third anniversary of the date of such date;
provided, however, that commencing on the first anniversary of the date hereof,
and on each annual anniversary of such date (such date and each annual
anniversary thereof shall be hereinafter referred to as the "Renewal Date"), the
Change of Control Period shall be automatically extended so as to terminate
three (3) years from such Renewal Date, unless at least sixty (60) days prior to
the Renewal Date the Company shall give notice to the Executive that the Change
of Control Period shall not be so extended.

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      2. Change of Control. For the purpose of this Agreement, a "Change of
Control" shall mean:

            (a) The acquisition by any individual, entity or group (within the
meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) (a "Person"), including an acquisition pursuant
to 11 U.S.C. Section 1129 et passim, of beneficial ownership (within the meaning
of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (i)
the then outstanding shares of common stock of the Company (the "Outstanding
Company Common Stock") or (ii) the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally in the election of
directors (the "Outstanding Company Voting Securities") or;

            (b) Individuals who, as of the date hereof, constitute the Board
(the "Incumbent Board") cease for any reason to constitute at least a majority
of the Board or are divested of possession by appointment of a trustee pursuant
to Chapter 7 or 11 of the United States Bankruptcy Code; provided, however, that
any individual becoming a director subsequent to the date hereof whose election,
or nomination for election by the Company's shareholders, was approved by a vote
of at least a majority of the directors then comprising the Incumbent Board
shall be considered as though such individual were a member of the Incumbent
Board; or

            (c) Approval by the shareholders of the Company, or, in the instance
of proceedings for the Company pursuant to Chapter 7 or Chapter 11 of the United
States Bankruptcy Code, approval by the bankruptcy judge, of a reorganization,
merger or consolidation, in each case, unless, following such reorganization,
merger or consolidation, more than 60% of, respectively, the then outstanding
shares of common stock of the corporation resulting from such reorganization,
merger or consolidation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such reorganization, merger or
consolidation in substantially the same proportions as their ownership,
immediately prior to such reorganization, merger or consolidation, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be; or

            (d) Approval by the shareholders, or, in the instance of proceedings
for the Company pursuant to Chapter 7 or Chapter 11 of the United States
Bankruptcy Code, approval by the bankruptcy judge, of the Company of (i) a
complete liquidation or dissolution of the Company or (ii) the sale or other
disposition of all or substantially all of the assets of the Company.

      3. Change of Control Employment Period. The Company hereby agrees to
continue the Executive in its employ, and the Executive hereby agrees to remain
in the employ of the Company, in accordance with the terms and provisions of
this Agreement, for the period commencing on the Effective Date and ending
(subject to the terms hereof) on the day following the first anniversary of such
date (the "Change of Control Employment Period"); provided, however, that the
Change of Control Employment Period shall be automatically extended upon

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its expiration for successive periods of one (1) month each, in full accordance
with the terms and provisions of this Agreement.

      4. Terms of Employment during Change of Control Employment Period.

            (a) Position and Duties.

                  (i) During the Change of Control Employment Period, (A) the
Executive's position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least
commensurate in all material respects with the most significant of those held,
exercised and assigned at any time during the 90-day period immediately
preceding the Effective Date and (B) the Executive's services shall be performed
at the location where the Executive was employed immediately preceding the
Effective Date or any office which is the headquarters of the Company and is
less than 35 miles from such location.

                  (ii) During the Change of Control Employment Period, and
excluding any periods of vacation and sick leave to which the Executive is
entitled, the Executive agrees to devote reasonable attention and time during
normal business hours to the business and affairs of the Company and, to the
extent necessary to discharge the responsibilities assigned to the Executive
hereunder, to use the Executive's reasonable best efforts to perform faithfully
and efficiently such responsibilities. During the Change of Control Employment
Period it shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B) deliver
lectures, fulfill speaking engagements or teach at educational institutions and
(C) manage personal investments, so long as such activities do not significantly
interfere with the performance of the Executive's responsibilities as an
employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been
conducted by the Executive prior to the Effective Date, the continued conduct of
such activities (or the conduct of activities similar in nature and scope
thereto) subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive's responsibilities to the
Company.

            (b) Compensation during Change of Control Employment Period.

                  (i) Base Salary. During the Change of Control Employment
Period, the Executive shall receive an annual base salary ("Annual Base
Salary"), which shall be paid in equal installments on a monthly basis, at least
equal to twelve times the highest monthly base salary paid or payable to the
Executive by the Company and its affiliated companies in respect of the
twelve-month period immediately preceding the month in which the Effective Date
occurs. During the Change of Control Employment Period, the Annual Base Salary
shall be reviewed at least annually and shall be increased at any time and from
time to time as shall be substantially consistent with increases in base salary
generally awarded in the ordinary course of business to other peer executives of
the Company and its affiliated companies. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under
this Agreement. Annual Base Salary shall not be reduced after any such increase
and the term Annual Base Salary as utilized in this Agreement shall refer to
Annual Base Salary as so

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increased. As used in this Agreement, the term "affiliated companies" shall
include any company controlled by, controlling or under common control with the
Company.

                  (ii) Annual Bonus. In addition to Annual Base Salary, the
Executive may be awarded, for each fiscal year ending during the Change of
Control Employment Period, an annual bonus (the "Annual Bonus") in cash as
determined in the discretion of the Company's President and Chief Executive
Officer consistent with the practices and procedures of the Company. Any such
Annual Bonus shall be paid no later than the end of the fourth month of the
fiscal year next following the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of such Annual
Bonus.

                  (iii) Incentive, Savings and Retirement Plans. During the
Change of Control Employment Period, the Executive shall be entitled to
participate in all incentive, savings and retirement plans, practices, policies
and programs applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans, practices, policies
and programs provide the Executive with incentive opportunities (measured with
respect to both regular and special incentive opportunities, to the extent, if
any, that such distinction is applicable), savings opportunities and retirement
benefit opportunities, in each case, less favorable, in the aggregate, than the
most favorable of those provided by the Company and its affiliated companies for
the Executive under such plans, practices, policies and programs as in effect at
any time during the 90-day period immediately preceding the Effective Date or if
more favorable to the Executive, those provided generally at any time after the
Effective Date to other peer executives of the Company and its affiliated
companies.

                  (iv) Welfare Benefit Plans. During the Change of Control
Employment Period, the Executive and/or the Executive's family, as the case may
be, shall be eligible for participation in and shall receive all benefits under
welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical,
prescription, dental, disability, salary continuance, employee life, group life,
accidental death and travel accident insurance plans and programs) to the extent
applicable generally to other peer executives of the Company and its affiliated
companies, but in no event shall such plans, practices, policies and programs
provide the Executive with benefits which are less favorable, in the aggregate,
than the most favorable of such plans, practices, policies and programs in
effect for the Executive at any time during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, those
provided generally at any time after the Effective Date to other peer executives
of the Company and its affiliated companies.

                  (v) Expenses. During the Change of Control Employment Period,
the Executive shall be entitled to receive prompt reimbursement for all
reasonable employment expenses incurred by the Executive in accordance with the
most favorable policies, practices and procedures of the Company and its
affiliated companies in effect for the Executive at any time during the 90-day
period immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and its affiliated companies.

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                  (vi) Fringe Benefits. During the Change of Control Employment
Period, the Executive shall be entitled to fringe benefits in accordance with
the most favorable plans, practices, programs and policies of the Company and
its affiliated companies in effect for the Executive at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.

                  (vii) Office and Support Staff. During the Change of Control
Employment Period, the Executive shall be entitled to an office or offices of a
size and with furnishings and other appointments, and to exclusive personal
secretarial and other assistance, at least equal to the most favorable of the
foregoing provided to the Executive by the Company and its affiliated companies
at any time during the 90-day period immediately preceding the Effective Date
or, if more favorable to the Executive, as provided generally at any time
thereafter with respect to other peer executives of the Company and its
affiliated companies.

                  (viii) Vacation. During the Change of Control Employment
Period, the Executive shall be entitled to paid vacation in accordance with the
most favorable plans, policies, programs and practices of the Company and its
affiliated companies as in effect for the Executive at any time during the
90-day period immediately preceding the Effective Date or, if more favorable to
the Executive, as in effect generally at any time thereafter with respect to
other peer executives of the Company and its affiliated companies.

      5. Termination of Employment (During the Change of Control Employment
Period)

            (a) Death or Disability. The Executive's employment shall terminate
automatically upon the Executive's death if during the Change of Control
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Change of Control Employment Period
(pursuant to the definition of Disability set forth below), it may give to the
Executive written notice in accordance with Section 13(b) of this Agreement of
its intention to terminate the Executive's employment. In such event, the
Executive's employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the "Disability Effective
Date"), provided that, within the 30 days after such receipt, the Executive
shall not have returned to full-time performance of the Executive's duties. For
purposes of this Agreement, "Disability" shall mean the absence of the Executive
from the Executive's duties with the Company on a full-time basis for 180
consecutive business days as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a physician selected by
the Company or its insurers and acceptable to the Executive or the Executive's
legal representative (such agreement as to acceptability not to be withheld
unreasonably).

            (b) Cause. The Company may terminate the Executive's employment
during the Change of Control Employment Period for Cause. For purposes of this
Agreement (other than Section 7) "Cause" shall mean (i) a material breach by the
Executive of the Executive's obligations under Section 4(a) of this Agreement
(other than as a result of incapacity due to physical or mental illness) which
is demonstrably willful and deliberate on the Executive's part, which is
committed in bad faith or without reasonable belief that such breach is in the
best

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interests of the Company and which is not remedied in a reasonable period of
time after receipt of written notice from the Company specifying such breach or
(ii) the conviction of the Executive of a felony involving moral turpitude.

            (c) Good Reason. The Executive's employment may be terminated during
the Change of Control Employment Period by the Executive for Good Reason. For
purposes of this Agreement, "Good Reason" shall mean:

                  (i) the assignment to the Executive of any duties inconsistent
in any respect with the Executive's position (including status, offices, titles
and reporting requirements), authority, duties or responsibilities or any other
action by which results in a diminution in such position, authority, duties or
responsibilities, excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and which is remedied by the Company
promptly after receipt of notice thereof given by the Executive;

                  (ii) any failure by the Company to comply with the provisions
of Section 4(b) of this Agreement, other than an isolated, insubstantial and
inadvertent failure not occurring in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Executive;

                  (iii) the Company's requiring the Executive to be based at any
office or location other than that described in Section 4(a)(i)(B) of this
Agreement;

                  (iv) any purported termination by the Company of the
Executive's employment otherwise than as expressly permitted by this Agreement;
or

                  (v) any failure by the Company to comply with and satisfy
Section 12(c) of this Agreement, provided that such successor has received at
least ten days prior written notice from the Company or the Executive of the
requirements of Section 12(c) of this Agreement.

For purposes of this Section 5(c), any good faith determination of "Good Reason"
made by the Executive shall be conclusive.

            (d) Notice of Termination. Any termination by the Company for Cause,
or by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a "Notice of Termination" means
a written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Executive's employment under the provision so indicated and (iii) if the
Date of Termination (as defined below) is other than the date of receipt of such
notice, specifies the termination date (which date shall be not more than 15
days after the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the

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Executive or the Company hereunder or preclude the Executive or the Company from
asserting such fact or circumstance in enforcing the Executive's or the
Company's rights hereunder.

            (e) Date of Termination. "Date of Termination" means (i) if the
Executive's employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein, as the case may be, (ii) if the Executive's
employment is terminated by the Company other than for Cause or Disability, the
Date of Termination shall be the date on which the Company notifies the
Executive of such termination and (iii) if the Executive's employment is
terminated by reason of death or Disability, the Date of Termination shall be
the date of death of the Executive or the Disability Effective Date, as the case
may be.

      6. Obligation of the Company upon Termination (During the Change of
Control Employment Period).

            (a) Good Reason; Other Than for Cause, Death or Disability. If,
during the Change of Control Employment Period, the Company shall terminate the
Executive's employment other than for Cause, death or Disability or the
Executive shall terminate employment for Good Reason:

                  (i) the Company shall pay to the Executive in a lump sum in
cash within 30 days after the Date of Termination the aggregate of the following
amounts: the sum of (1) the Executive's Annual Base Salary and (2) any
compensation or bonus previously deferred (together with any accrued interest or
earnings thereon) and any accrued vacation pay, in each case to the extent not
theretofore paid (the sum of the amounts described in clauses (1) and (2) of
this Section 6(a)(i) shall be hereinafter referred to as the "Change of Control
Severance Amount"); and

                  (ii) for a minimum period that is the greater of the period
commencing on the Date of Termination through (x) the next applicable Renewal
Date following the Date of Termination or (y) the six month period following the
Date of Termination, or such longer period as any plan, program, practice or
policy may provide, the Company shall continue benefits to the Executive and/or
the Executive's family at least equal to those which would have been provided to
them in accordance with the plans, programs, practices and policies described in
Section 4(b)(v) of this Agreement if the Executive's employment had not been
terminated in accordance with the most favorable plans, practices, programs or
policies of the Company and its affiliated companies as in effect and applicable
generally to other peer executives and their families during the 90-day period
immediately preceding the Effective Date or, if more favorable to the Executive,
as in effect generally at any time thereafter with respect to other peer
executives of the Company and its affiliated companies and their families,
provided, however, that if the Executive becomes re-employed with another
employer and is eligible to receive medical or other welfare benefits under
another employer provided plan, the medical and other welfare benefits described
herein shall be secondary to those provided under such other plan during such
applicable period of eligibility (such continuation of such benefits for the
applicable period herein set forth shall be hereinafter referred to as "Welfare
Benefit Continuation"). For purposes of determining eligibility of the Executive
for retiree benefits pursuant to such plans, practices, programs and

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policies, the Executive shall be considered to have remained employed until the
end of the Change of Control Employment Period and to have retired on the last
day of such period; and

                  (iii) for a minimum period that is the greater of the period
commencing on the Date of Termination through (x) the next applicable Renewal
Date following the Date of Termination or (y) the six month period following the
Date of Termination, to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive and/or the Executive's family any
other amounts or benefits required to be paid or provided or which the Executive
and/or the Executive's family is eligible to receive pursuant to this Agreement
and under any plan, program, policy or practice or contract or agreement of the
Company and its affiliated companies as in effect and applicable generally to
other peer executives and their families during the 90-day period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally thereafter with respect to other peer executives of the Company
and its affiliated companies and their families (such other amounts and benefits
shall be hereinafter referred to as the "Other Benefits").

            (b) Death. If the Executive's employment is terminated by reason of
the Executive's death during the Change of Control Employment Period, this
Agreement shall terminate without further obligations to the Executive's legal
representatives under this Agreement, other than for (i) payment of the Change
of Control Severance Amount (which shall be paid to the Executive's estate or
beneficiary, as applicable, in a lump sum in cash within 30 days of the Date of
Termination) and the timely payment or provision of the Welfare Benefit
Continuation and Other Benefits (excluding, in each case, Death Benefits (as
defined below)) and (ii) payment to the Executive's estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination of
an amount equal to the present value (determined as provided in Section
280G(d)(4) of the Internal Revenue Code of 1986, as amended (the "Code") of any
cash amount to be received by the Executive or the Executive's family as a death
benefit pursuant to the terms of any plan, policy or arrangement of the Company
and its affiliated companies, but not including any proceeds of life insurance
covering the Executive to the extent paid for directly or on a contributory
basis by the Executive (which shall be paid in any event as an Other Benefit)
(the benefits included in this clause (ii) shall be hereinafter referred to as
the "Death Benefits").

            (c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability during the Change of Control Employment
Period, this Agreement shall terminate without further obligation to the
Executive, other than for (i) payment of Change of Control Severance Amount
(which shall be paid to the Executive in a lump sum in cash within 30 days of
the Date of Termination) and the timely payment or provision of the Welfare
Benefit Continuation and Other Benefits (excluding, in each case, Disability
Benefits (as defined below)) and (ii) payment to the Executive in a lump sum in
cash within 30 days of the Date of Termination of an amount equal to the present
value (determined as provided in Section 280G(d)(4) of the Code) of any cash
amount to be received by the Executive as a disability benefit pursuant to the
terms of any plan, policy or arrangement of the Company and its affiliated
companies, but not including any proceeds of disability insurance covering the
Executive to the extent paid for directly or on a contributory basis by the
Executive (which shall be paid in any

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event as an Other Benefit) (the benefits included in this clause (ii) shall be
hereinafter referred to as the "Disability Benefits").

            (d) Cause; Other than for Good Reason. If the Executive's employment
shall be terminated for Cause during the Change of Control Employment Period,
this Agreement shall terminate without further obligations to the Executive
other than the obligation to pay to the Executive Annual Base Salary through the
Date of Termination plus the amount of any compensation previously deferred by
the Executive, in each case to the extent theretofore unpaid. If the Executive
terminates employment during the Change of Control Employment Period, excluding
a termination for Good Reason, this Agreement shall terminate without further
obligations to the Executive, other than the payment of the Executive's Annual
Base Salary through the Date of Termination and any compensation previously
deferred by the Executive (together with any accrued interest or earnings
thereon) and any accrued vacation pay (in each case to be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination).

      7. Terms of Employment; Obligation of the Company upon Termination of
Employment (Prior to the Effective Date).

            (a) Terms of Employment; Obligation of the Company upon Termination
of Employment. The Executive and the Company acknowledge that the employment of
the Executive by the Company is "at will" and, prior to the Effective Date, may
be terminated by either the Executive or the Company at any time. Except as
specifically provided in Sections 7(b) and (c) of this Agreement, the terms of
Executive's employment and the continuing participation of Executive in any
plan, program, policy or practice provided by the Company or any of its
affiliated companies prior to the Effective Date or upon Executive's termination
of employment prior to the Effective Date (either by Executive or the Company)
shall be governed by the then existing plan, program, policy or practice of the
Company or any of its affiliated companies.

            (b) Other Than for Cause, Death or Disability. If, at any time prior
to the Effective Date, the Company shall terminate the Executive's employment
other than for Cause (defined below), death or Disability, the Company shall (1)
pay to the Executive the Executive's Annual Base Salary payable over 12 months
at the same time that the Company pays other peer executives of the Company
generally, and (2) pay to the Executive any compensation or bonus previously
deferred (together with any accrued interest or earnings thereon) and any
accrued vacation pay, in each case to the extent not theretofore paid (the sum
of the amounts described in clauses (1) and (2) of this Section 7(b) shall be
hereinafter referred to as the "Severance Amount"); and (3) for a period equal
to that period over which the Executive's Annual Base Salary shall be paid
pursuant to Section 7(b) (1) hereof, the Company shall continue health and
dental benefits to the Executive and/or the Executive's family equal to those
health and dental benefits in effect on the Date of Termination; provided,
however, that if Executive becomes re-employed with another employer which
provides medical or dental benefits of any kind (whether equivalent to, or
lesser than, those provided by the Company on the Date of Termination), then
Executive's health or dental coverage with the Company shall, respectively,
cease upon the date

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Executive shall become eligible for either of such benefits from Executive's new
employer. Executive covenants and agrees to promptly notify the Company upon
becoming so eligible.

            For purposes of Section 7, "Cause" shall mean shall mean (i) a
material breach by the Executive of the Executive's duties, responsibilities
held, exercised and assigned by the Company to the Executive (other than as a
result of incapacity due to physical or mental illness) which is demonstrably
willful and deliberate on the Executive's part, which is committed in bad faith
or without reasonable belief that such breach is in the best interests of the
Company and which is not remedied in a reasonable period of time after receipt
of written notice from the Company specifying such breach or (ii) the conviction
of the Executive of a felony involving moral turpitude.

            (c) Disability. If the Executive's employment is terminated by
reason of the Executive's Disability prior to the Effective Date, this Agreement
shall terminate without further obligation to the Executive, other than the
payment by the Company to Executive of an amount equal to (i) the Severance
Amount minus (ii) the amount Executive would be entitled to receive as a
disability benefit under the then existing plan, program, policy or practice of
the Company or any of its affiliated companies (which shall be paid to the
Executive in accordance with the then existing, plan, program, policy or
practice of the Company or any of its affiliated companies).

      8. Non-Exclusivity of Rights. Except as provided in Sections 6(a)(ii),
6(b), 6(c), 7(b) or 7(c) of this Agreement, nothing in this Agreement shall
prevent or limit the Executive's continuing or future participation in any plan,
program, policy or practice provided by the Company or any of its affiliated
companies and for which the Executive may qualify, nor shall anything herein
limit or otherwise affect such rights as the Executive may have under any
contract or agreement with the Company or any of its affiliated companies.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.

      9. Full Settlement; Resolution of Disputes.

            (a) The Company's obligation to make the payments provided for in
this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right
or action which the Company may have against the Executive or others. In no
event shall the Executive be obligated to seek other employment or take any
other action by way of mitigation of the amounts payable to the Executive under
any of the provisions of this Agreement and, except as provided in Section
6(a)(ii) of this Agreement, such amounts shall not be reduced whether or not the
Executive obtains other employment. The Company agrees to pay promptly as
incurred, to the full extent permitted by law, all legal fees and expenses which
the Executive may reasonably incur as a result of any contest (regardless of the
outcome thereof) by the Company, the Executive or others of the validity or
enforceability of, or liability under, any provision of this Agreement or any
guarantee of performance thereof (including as a result of any contest by the
Executive about the

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amount of any payment pursuant to this Agreement), plus in each case interest on
any delayed payment at the applicable Federal rate provided for in Section
7872(f)(2)(A) of the Code.

            (b) If there shall be any dispute between the Company and the
Executive (i) in the event of any termination of the Executive's employment by
the Company, whether such termination was for Cause, or (ii) in the event of any
termination of employment by the Executive, whether Good Reason existed, then,
unless and until there is a final, nonappealable judgment by a court of
competent jurisdiction declaring that such termination was for Cause or that the
determination by the Executive of the existence of Good Reason was not made in
good faith, the Company shall pay all amounts, and provide all benefits, to the
Executive and/or the Executive's family or other beneficiaries, as the case may
be, that the Company would be required to pay or provide pursuant to Section
6(a) of this Agreement as though such termination were by the Company without
Cause or by the Executive with Good Reason; provided, however, that the Company
shall not be required to pay any disputed amounts pursuant to this paragraph
except upon receipt of an undertaking by or on behalf of the Executive to repay
all such amounts to which the Executive is ultimately adjudged by such court not
to be entitled.

      10. Certain Additional Payments by the Company.

            (a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the Company
to or for the benefit of the Executive (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise, but
determined without regard to any additional payments required under this Section
10) (a "Payment") would be subject to the excise tax imposed by Section 4999 of
the Code or any interest or penalties are incurred by the Executive with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the "Excise Tax"), then
the Executive shall be entitled to receive an additional payment (a "Gross-Up
Payment") in an amount such that after payment by the Executive of all taxes
(including any interest or penalties imposed with respect to such taxes),
including, without limitation, any income taxes (and any interest and penalties
imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment,
the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

            (b) Subject to the provisions of Section 10(c) of this Agreement,
all determinations required to be made under this Section 10, including whether
and when a Gross-Up Payment is required and the amount of such Gross-Up Payment
and the assumptions to be utilized in arriving at such determination, shall be
made by Deloitte & Touche, LLP (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has been a
Payment, or such earlier time as is requested by the Company. In the event that
the Accounting Firm is serving as accountant or auditor for the individual,
entity or group effecting the Change of Control, the Executive shall appoint
another nationally recognized accounting firm to make the determinations
required hereunder (which accounting firm shall then be referred to as the
Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall
be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 10, shall be paid by the Company to the Executive within five days
of the receipt of the Accounting Firm's

                                     - 11 -
<PAGE>

determination. If the Accounting Firm determines that no Excise Tax is payable
by the Executive, it shall furnish the Executive with a written opinion that
failure to report the Excise Tax on the Executive's applicable federal income
tax return would not result in the imposition of a negligence or similar
penalty. Any determination by the Accounting Firm shall be binding upon the
Company and the Executive. As a result of the uncertainty in the application of
Section 4999 of the Code at the time of the initial determination by the
Accounting Firm hereunder, it is possible that Gross-Up Payments which will not
have been made by the Company should have been made ("Underpayment"), consistent
with the calculations required to be made hereunder. In the event that the
Company exhausts its remedies pursuant to Section 10(c) of this Agreement and
the Executive thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has occurred
and any such Underpayment shall be promptly paid by the Company to or for the
benefit of the Executive.

            (c) The Executive shall notify the Company in writing of any claim
by the Internal Revenue Service that, if successful, would require the payment
by the Company of the Gross-Up Payment. Such notification shall be given as soon
as practicable but no later than ten business days after the Executive is
informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The
Executive shall not pay such claim prior to the expiration of the 30-day period
following the date on which it gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such claim
is due). If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive
shall:

                  (i) give the Company any information reasonably requested by
the Company relating to such claim,

                  (ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim by
an attorney reasonably selected by the Company,

                  (iii) cooperate with the Company in good faith in order
effectively to contest such claim, and

                  (iv) permit the Company to participate in any proceedings
relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest and
penalties with respect thereto) imposed as a result of such representation and
payment of costs and expenses. Without limitation on the foregoing provisions of
this Section 10(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forgo any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and

                                     - 12 -
<PAGE>

may, at its sole option, either direct the Executive to pay the tax claimed and
sue for a refund or contest the claim in any permissible manner, and the
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay such claim and sue for a refund, the
Company shall advance the amount of such payment to the Executive, on an
interest-free basis and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or
penalties with respect thereto) imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and further provided
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount
Furthermore, the Company's control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any other
issue raised by the Internal Revenue Service or any other taxing authority.

            (d) If, after the receipt by the Executive of an amount advanced by
the Company pursuant to Section 10(c) of this Agreement, the Executive becomes
entitled to receive any refund with respect to such claim, the Executive shall
(subject to the Company's complying with the requirements of Section 10(c) of
this Agreement) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Executive of an amount advanced by the Company pursuant
to Section 10(c) of this Agreement, a determination is made that the Executive
shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial of
refund prior to the expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be repaid and the amount
of such advance shall offset, to the extent thereof, the amount of Gross-Up
Payment required to be paid.

      11. Confidential Information; Non-Compete. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, which shall have been obtained by
the Executive during the Executive's employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other
than by acts by the Executive or representatives of the Executive in violation
of this Agreement). After termination of the Executive's employment with the
Company, the Executive shall not, without the prior written consent of the
Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company
and those designated by it. In no event shall an asserted violation of the
provisions of this Section 11 constitute a basis for deferring or withholding
any amounts otherwise payable to the Executive under this Agreement. For a
period of twelve months from and after the Date of Termination, the Executive
shall not, directly or indirectly, be or become employed or associated with any
microticket leasing business in the United States which is in competition with
the Company.

      12. Successors.

                                     - 13 -
<PAGE>

            (a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive
otherwise than by will or the laws of descent and distribution. This Agreement
shall inure to the benefit of and be enforceable by the Executive's legal
representatives.

            (b) This Agreement shall inure to the benefit of and be binding upon
the Company and its successors and assigns.

            (c) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.

      13. Bankruptcy Proceedings. The Company agrees that within three (3) days
of the entry of an order for relief with respect to the Company pursuant to the
provisions of Chapter 7 or Chapter 11 of the United States Bankruptcy Code, it
will seek approval of the bankruptcy court having jurisdiction over its affairs
for the assumption of this Agreement pursuant to the provisions of Section 365
of the United States Bankruptcy Code.

      14. Miscellaneous.

            (a) This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Massachusetts, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives.

            (b) This Agreement amends and supersedes in its entirety all prior
agreements and understandings, whether oral or written, with respect to the
provisions of the Original Agreement.

            (c) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:

      If to the Executive:

            Steven LaCreta
            c/o MicroFinancial Incorporated
            10 M Commerce Way
            Woburn, MA 01801

                                     - 14 -
<PAGE>

      If to the Company:

            MicroFinancial Incorporated
            10 M Commerce Way
            Woburn, MA  01801
            Attention: Richard F. Latour, President and Chief Executive Officer

      With a copy to:

            Gerald P. Hendrick, Esq.
            Edwards & Angell, LLP
            101 Federal Street
            Boston, MA 02110

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

            (d) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement.

            (e) The Company may withhold from any amounts payable under this
Agreement such Federal, state or local taxes as shall be required to be withheld
pursuant to any applicable law or regulation.

            (f) The Executive's or the Company's failure to insist upon strict
compliance with any provision hereof or any other provision of this Agreement or
the failure to assert any right the Executive or the Company may have hereunder,
including, without limitation, the right of the Executive to terminate
employment for Good Reason pursuant to Section 5(c)(i)-(v) of this Agreement,
shall not be deemed to be a waiver of such provision or right or any other
provision or right of this Agreement.

            (g) This Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together constitute one
instrument. Counterparts of this Agreement (or applicable signature pages
hereof) that are manually signed and delivered by facsimile transmission shall
be deemed to constitute signed original counterparts hereof and shall bind the
parties signing and delivering in such manner.

                                     - 15 -
<PAGE>

      IN WITNESS WHEREOF, the Executive has hereunto set the Executive's hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name on its behalf, all as of the
day and year first above written.

                                              __________________________________
                                              Steven LaCreta

                                              MicroFinancial Incorporated

                                              By: ______________________________
                                                  Its: _________________________