MICROFINANCIAL INC
EXHIBIT 10.8
<DOCUMENT>
<TYPE>EX-10
<SEQUENCE>9
<FILENAME>exh_10-8.txt
<DESCRIPTION>EXHIBIT 10.8
<TEXT>
                                                                    Exhibit 10.8


                        SUBORDINATED CONDITIONAL GUARANTY

               THIS  SUBORDINATED  CONDITIONAL  GUARANTY (this  "Guaranty"),  is
entered  into  as  of  June  10,  2004,  by   MICROFINANCIAL   INCORPORATED,   a
Massachusetts  corporation  ("Guarantor"),  in favor of and for the  benefit  of
AMPAC CAPITAL SOLUTIONS,  LLC, a Nevada limited liability company ("Subordinated
Lender").

                                    RECITALS

               1. Pursuant to the Subordinated Note Purchase  Agreement dated as
of the date hereof (as amended,  supplemented or modified from time to time, the
"Subordinated Note Purchase  Agreement";  capitalized terms used but not defined
herein  shall  have the  meanings  given  such  terms in the  Subordinated  Note
Purchase  Agreement)  by and among  TimePayment  Corp.  LLC, a Delaware  limited
liability  company and wholly-owned  subsidiary of Guarantor  ("Borrower"),  and
Subordinated  Lender,  Subordinated  Lender  has  agreed  to  make  the  Loan to
Borrower; and

               2. Guarantor, as Borrower's parent,  acknowledges and agrees that
Guarantor  has received and will receive  direct and indirect  benefits from the
extension of the Loan made to Borrower.

               3. Guarantor  wishes to grant  Subordinated  Lender  security and
assurance in order to secure the payment and  performance  by Borrower of all of
its  present  and future  Obligations  (as  hereinafter  defined),  and, to that
effect, to guaranty Borrower's Obligations as set forth herein.

               Accordingly, Guarantor hereby agrees as follows:

               A. Conditional Guaranty.

                  1. Subject to Section A(5),  Guarantor hereby  unconditionally
and irrevocably  guarantees to Subordinated Lender the full and punctual payment
by  Borrower,  when due,  whether  at the stated due date,  by  acceleration  or
otherwise of all Obligations (as defined below) of Borrower,  howsoever created,
arising or  evidenced,  voluntary or  involuntary,  whether  direct or indirect,
absolute  or  contingent  now or  hereafter  existing  or owing to  Subordinated
Lender,  (collectively,  the  "Guaranteed  Obligations").  Except as provided in
Section A(5), this Guaranty is an absolute,  unconditional,  continuing guaranty
of payment and not of  collection  of the  Guaranteed  Obligations  and includes
Guaranteed  Obligations arising from successive  transactions which shall either
continue such Guaranteed  Obligations or from time to time renew such Guaranteed
Obligations  after  the same  has been  satisfied.  This  Guaranty  is in no way
conditioned upon any attempt to collect from Borrower or upon any other event or
contingency, and shall be binding upon and enforceable against Guarantor without
regard  to the  validity  or  enforceability  of  any  document,  instrument  or
agreement  evidencing or governing  the  Obligations  or any other  agreement or
instrument executed in connection therewith (including, without limitation, this
Guaranty) or  contemplated  thereby (each, a  "Subordinated  Debt Document" and,
collectively,  the "Subordinated  Debt  Documents").  If for any reason Borrower
shall  fail or be  unable  duly  and  punctually  to pay  any of the  Guaranteed
Obligations  (including,  without limitation,  amounts that would become due but
for the operation of the automatic  stay under Section  362(a) of the Bankruptcy
Code, 11 U.S.C. ss. 362(a)),  Guarantor will forthwith pay the same, in cash. As
used  herein   "Obligations"   shall  mean  all  obligations,   liabilities  and
indebtedness  of Borrower to  Subordinated  Lender under the  Subordinated  Note
Purchase  Agreement  and the  Subordinated  Debt  Documents  and  any  documents
relating  thereto,  whether  now  existing  or  hereafter  created,  absolute or
contingent, direct or indirect, due or not, whether created directly or acquired
by assignment or otherwise,  including,  without  limitation,  the Loans and the
payment and performance of all other obligations,  liabilities, and indebtedness
of  Borrower to  Subordinated  Lender  under the  Subordinated  Debt  Documents,
including without limitation all fees, costs, expenses and indemnity obligations
thereunder.

                  2. In the  event  any  Subordinated  Debt  Document  shall  be
terminated  as a result of the  rejection  thereof by any  trustee,  receiver or
liquidating  agent  of  Borrower  or any of its  properties  in any  bankruptcy,
insolvency, reorganization, arrangement, composition, readjustment, liquidation,
dissolution  or similar  proceeding,  Guarantor's  obligations  hereunder  shall
continue to the same extent as if such  Subordinated  Debt Document had not been
so rejected.

                  3. Guarantor  agrees to pay all reasonable  costs and expenses
(including,  without limitation,  reasonable  attorneys' fees and disbursements)
incurred in connection  with the  enforcement of the  Guaranteed  Obligations of
Borrower  to the extent  that such costs and  expenses  are not paid by Borrower
pursuant to the respective Subordinated Debt Documents.

                  4.  Guarantor  further  agrees  that  if any  payment  made by
Borrower or Guarantor to  Subordinated  Lender on any  Guaranteed  Obligation is
rescinded, recovered from or repaid by Subordinated Lender, in whole or in part,
in any  bankruptcy,  insolvency or similar  proceeding  instituted by or against
Borrower or Guarantor,  this Guaranty shall  continue to be fully  applicable to
such Guaranteed Obligation to the same extent as though the payment so recovered
or  repaid  had  never  originally  been  made  on  such  Guaranteed  Obligation
regardless  of,  and,  without  giving  effect to, any  discharge  or release of
Guarantor's  obligations hereunder granted by Subordinated Lender after the date
hereof.

                  5.   Notwithstanding   the  execution  and  delivery  of  this
Agreement on the date hereof,  the guaranty  pursuant hereto shall not be deemed
made,  and this Guaranty  shall not be  effective,  until the earlier of the day
that (A) all  obligations  under  the  Fleet  Loan  Agreement  shall  have  been
discharged in full, or (B) Fleet otherwise consents to this Guaranty.

               B. Guaranty Continuing,  Absolute,  Unlimited. Subject to Section
A(5) and Section D hereof,  the  obligations  of  Guarantor  hereunder  shall be
continuing,  absolute, unlimited and unconditional,  shall not be subject to any
counterclaim,  setoff,  deduction or defense based upon any claim  Guarantor may
have  against  Subordinated  Lender or Borrower or any other  person,  and shall
remain in full force and effect  without  regard to, and, to the fullest  extent
permitted by  applicable  law,  shall not be released,  discharged or in any way
affected by, any circumstance or condition  (whether or not Guarantor shall have
any knowledge or notice thereof)  whatsoever  which might  constitute a legal or
equitable discharge or defense.

               C. Waiver.  Guarantor  unconditionally and irrevocably waives, to
the fullest extent permitted by applicable law: (1) notice of any of the matters
referred  to in  Section B hereof;  (2) all  notices  which may be  required  by
statute,  rule of law or  otherwise  to preserve  any rights  against  Guarantor
hereunder,  including,  without  limitation,  notice of the  acceptance  of this
Guaranty, or the creation,  renewal,  extension,  modification or accrual of the
Guaranteed  Obligations  or notice of any other matters  relating  thereto,  any
presentment,  demand, notice of dishonor,  protest, nonpayment of any damages or
other amounts payable under any Subordinated Debt Document;  (3) any requirement
for the  enforcement,  assertion  or  exercise  of any right,  remedy,  power or
privilege  under or in respect of any  Subordinated  Debt  Document,  including,
without limitation, diligence in collection or protection of or realization upon
the Guaranteed  Obligations or any part thereof or any collateral therefor;  (4)
any  requirement  of  diligence;  (5) any  requirement  to mitigate  the damages
resulting from a default by Borrower under any Subordinated  Debt Document;  (6)
the occurrence of every other condition precedent to which Guarantor or Borrower
may  otherwise  be  entitled;  (7) the right to require  Subordinated  Lender to
proceed  against   Borrower  or  any  other  person  liable  on  the  Guaranteed
Obligations,  to proceed against or exhaust any security held by Borrower or any
other  person,  or to pursue any other  remedy in  Subordinated  Lender's  power
whatsoever;  (8) the right to have the property of Borrower first applied to the
discharge  of the  Guaranteed  Obligations  and (9)  until  such  time  that all
Guaranteed  Obligations have been  indefeasibly paid in full, any and all rights
it may  now  or  hereafter  have  under  any  agreement  or at law or in  equity
(including,  without limitation,  any law subrogating Guarantor to the rights of
Subordinated   Lender)  to  assert  any  claim  against  or  seek  contribution,
indemnification  or any other form of  reimbursement  from Borrower or any other
party  liable for payment of any or all of the  Guaranteed  Obligations  for any
payment  made  by  Guarantor  under  or in  connection  with  this  Guaranty  or
otherwise.

                  Subordinated  Lender may, at its election,  exercise any right
or remedy it may have against Borrower without affecting or impairing in any way
the liability of Guarantor hereunder and Guarantor waives, to the fullest extent
permitted by applicable law, any defense arising out of the absence,  impairment
or loss of any right of reimbursement,  contribution or subrogation or any other
right or remedy of  Guarantor  against  Borrower,  whether  resulting  from such
election  by  Subordinated  Lender or  otherwise.  Guarantor  waives any defense
arising by reason of any disability or other defense of Borrower or by reason of
the cessation for any cause  whatsoever of the liability,  either in whole or in
part, of Borrower to Subordinated Lender for the Guaranteed Obligations.

                  Guarantor  assumes  the  responsibility  for being and keeping
informed of the financial  condition of Borrower and of all other  circumstances
bearing upon the risk of nonpayment  of the  Guaranteed  Obligations  and agrees
that  Subordinated  Lender  shall  not  have  any duty to  advise  Guarantor  of
information  regarding  any  condition  or  circumstance  or any  change in such
condition or circumstance.  Guarantor  acknowledges that Subordinated Lender has
not made any representations to Guarantor  concerning the financial condition of
Borrower.

               D.  Subordination.  This  Guaranty  shall at all  times be wholly
subordinate  and junior in right of payment  to all  Senior  Obligations  to the
extent and in the manner provided in this Part D.

                    1. Definitions. The following terms shall have the following
          meanings.  All other capitalized terms used herein without  definition
          shall have the  meanings  assigned  to them in the  Subordinated  Note
          Purchase Agreement.

                  1.1 Agent.  Any  administrative  or collateral agent acting on
         behalf of any one or more Senior  Lenders and as indicated in a written
         notice  provided to  Subordinated  Lender by Borrower or Guarantor  and
         such Senior  Lender(s)  stating that such agent has been  requested and
         authorized to act as agent for such Senior Lender(s) hereunder pursuant
         to the terms of the applicable  Senior Credit Agreement (s).  Guarantor
         agrees  that any Agent,  to the extent it may so act  hereunder,  shall
         exercise all of the rights and remedies  hereunder on behalf of, and as
         agent for the benefit of, each of such Senior Lenders. Without limiting
         the  generality of the  foregoing,  such Agent is authorized to execute
         and  deliver,  from time to time,  on behalf of the  applicable  Senior
         Lender(s),  any and all amendments and  modifications  to this Guaranty
         and  any  and all  waivers  to any  conditions  herein  or any  default
         hereunder.

                  1.2  Bankruptcy or  Liquidation  Event.  (a) Any  dissolution,
         winding-up or liquidation of a Debtor, partial or complete,  whether or
         not involving insolvency or bankruptcy proceedings, (b) any bankruptcy,
         insolvency,  receivership  or other statutory or common law proceedings
         or  assignment  for the benefit of creditors  involving a Debtor or any
         marshalling  of  the  assets  or  liabilities  of  a  Debtor,  (c)  any
         proceeding  by or  against a Debtor  for  relief of any kind  under any
         bankruptcy  or insolvency  law(s)  relating to the relief of debtors or
         readjustments,   reorganizations,   compositions   or   extensions   of
         indebtedness, or (d) any other marshalling of the assets of any Debtor.

                    1.3 Debtor.  Borrower,  Guarantor or any of their respective
          Affiliates.

                    1.4 Liabilities. When used with respect to any Debtor, the
         term "Liabilities" shall mean indebtedness, obligations and liabilities
         of such  Debtor to the  designated  Person(s),  whether the same is now
         existing  or  hereafter  arising,  direct  or  indirect,   absolute  or
         contingent, secured or unsecured,  liquidated or unliquidated,  matured
         or unmatured,  disputed or undisputed,  legal or equitable, and however
         made or evidenced.

                  1.5 Maximum  Senior Debt  Amount.  The sum of (a)  $75,000,000
         plus  (b) any  additional  Indebtedness  incurred  as  permitted  under
         Section 6.1 of the Subordinated Note Purchase Agreement.

                  1.6 Payment in Full. The expressions  "prior payment in full",
         "payment in full",  "paid or satisfied in full", "paid in full" and any
         other  similar  phrases,  when used herein  with  respect to the Senior
         Obligations,  shall mean the  indefeasible,  full and final  payment in
         cash, in immediately  available  funds, of all the Senior  Obligations,
         whether or not any of the Senior  Obligations  shall have been  voided,
         disallowed  or  subordinated  pursuant to any  provisions of the United
         States  Bankruptcy Code or any applicable state  fraudulent  conveyance
         laws, in any case whether asserted directly or indirectly.

                  1.7 Required Senior Lenders.  For purposes of Sections 2.7 and
         2.8 of this Part D, those Senior Lenders having the right to consent to
         amendments  of the  Subordinated  Documents  and to approve  agreements
         effecting any transfer of the Subordinated  Obligations,  respectively,
         pursuant to the terms of their respective Senior Credit Agreements.

                  1.8  Senior  Covenant  Default.  Any  "Event of  Default",  as
         defined in any agreement pertaining to Senior Obligations, other than a
         Senior Payment Default.

                  1.9 Senior  Credit  Agreements.  Any and all loan  agreements,
         credit  agreements,  indentures,  reimbursement  agreements  and  other
         agreements  providing for the extension of credit to Borrower by one or
         more Senior Lenders  (including but not limited to the credit agreement
         entered  into by Borrower  with Acorn  Capital  Group,  LLC, a Delaware
         limited liability  company,  dated as of May __, 2004), in each case as
         the same may be amended, extended,  renewed, restated,  supplemented or
         otherwise   modified  from  time  to  time  in  accordance  with  their
         respective  terms, and any additional  agreement or agreements  entered
         into from time to time  governing  Indebtedness  incurred to refinance,
         replace,  restructure  or refund in whole or in part the  extensions of
         credit and the maximum commitments thereunder and under such additional
         agreement(s) (whether, in any case, with the original Senior Lender and
         its successors and assigns or otherwise, and whether provided under the
         original  Senior  Credit  Agreement  or  other  credit   agreements  or
         otherwise).

                    1.10 Senior Credit Documents.  The Senior Credit Agreements,
          the Senior Notes, the Senior Security  Documents and any and all other
          documents pertaining to Senior Obligations.

                    1.11 Senior  Default.  A Senior Payment  Default or a Senior
          Covenant Default.

                    1.12  Senior  Lender.  Any holder of any  Senior  Obligation
          (including  any Affiliate of such Senior  Lender and their  respective
          successors and assigns).

                    1.13  Senior  Notes.  Any and all  promissory  notes  issued
          pursuant to any and all of the Senior Credit Agreements.

                    1.14 Senior  Obligations.  All  Liabilities of any or all of
          the Debtors  designated  from time to time as Senior  Obligations by a
          written  notice to  Subordinated  Lender from  Borrower  or  Guarantor
          (including without limitation  interest accruing after the maturity of
          such  Liabilities  and  interest  accruing  after  the  filing  of any
          petition  in  bankruptcy  or  the   commencement  of  any  insolvency,
          reorganization or similar proceeding  relating to any Debtor,  whether
          or not such post-filing or  post-petition  interest is allowed in such
          proceeding  and whether the  applicable  Senior  Lender(s) is (or are)
          oversecured or undersecured) and other fees, charges and other amounts
          due on or under the applicable Senior Credit Agreements,  Senior Notes
          and Senior Security Documents.  Notwithstanding  the foregoing,  in no
          event shall the aggregate  principal amount of all Senior  Obligations
          exceed the  Maximum  Senior  Debt  Amount (as  defined in Section  1.5
          above).  The term "Senior  Obligations"  shall  include any  renewals,
          extensions,   refinancings,   modifications   or   refundings  of  the
          Liabilities described above in this Section 1.14.

                    1.15 Senior Payment  Default.  Any default in the payment of
          principal,  interest or fees under any Senior  Obligation  when due in
          accordance with the terms and conditions thereof.

                    1.16  Senior  Security  Documents.  Any and all  guaranties,
          security agreements, pledge agreements and other documents pursuant to
          which any of the Senior  Obligations  are secured,  including  without
          limitation the Conditional Guaranty of even date herewith executed and
          delivered by Guarantor and Leasecomm in favor of Acorn Capital  Group,
          LLC.

                    1.17  Subordinated  Default.  Any  "Event  of  Default",  as
          defined in the Subordinated Note Purchase Agreement.

                    1.18 Subordinated Documents.  The Subordinated Note Purchase
          Agreement,  the Notes, this Guaranty,  the Warrant  Certificates,  the
          Registration   Rights  Agreement  and  any  and  all  other  documents
          pertaining to Subordinated Obligations.

                    1.19 Subordinated  Obligations.  All Liabilities owed by any
          or  all of the  Debtors  to  Subordinated  Lender,  including  without
          limitation all such  Liabilities (a) in respect of subrogation  rights
          under any guaranty or any other rights to be  subrogated to the rights
          of the  holders of the Senior  Obligations  in respect of  payments or
          distributions  of assets of, or  ownership  interests  in, the Debtors
          made on the  Senior  Obligations,  (b)  under  the  Subordinated  Note
          Purchase Agreement and the Subordinated Notes, (c) under this Guaranty
          and (d) as compensation  or in respect of any ownership  interests (or
          warrants,  options or other  rights for the  purchase  thereof) in any
          Debtor  issued  or  sold to  Subordinated  Lender,  including  without
          limitation the Warrant Certificates and the Warrant Shares, whether by
          dividend, redemption, repurchase or otherwise.

                   2. Terms of Subordination.

               2.1 Subordination.  Subordinated  Lender hereby (a) covenants and
          agrees that the Subordinated  Obligations are and shall be subordinate
          and subject in right of payment to the prior payment in full of all of
          the  Senior  Obligations,  whether  or not any  portion  of the Senior
          Obligations  shall  have  been  voided,   disallowed  or  subordinated
          pursuant to Section 548 of the United  States  Bankruptcy  Code or any
          applicable state fraudulent conveyance laws, whether asserted directly
          or under Section 544 of the United  States  Bankruptcy  Code,  and (b)
          irrevocably  directs  Guarantor to make such payment in full,  and all
          other payments in respect of the Senior  Obligations  contemplated  by
          this  Guaranty  and  referred  to below,  to Senior  Lenders (or their
          Agent(s),  as applicable)  before making any payments or distributions
          of any kind in  respect  of the  Subordinated  Obligations,  except as
          provided in Section 2.4. In furtherance of the foregoing, Subordinated
          Lender will not demand,  accept or receive,  any payment of  interest,
          principal  or  any  other  amount  on  account  of  the   Subordinated
          Obligations or as a sinking fund for any Subordinated Obligations,  or
          in respect of any  redemption,  retirement,  prepayment,  purchase  or
          other acquisition of any Subordinated  Obligations,  including without
          limitation any dividends or other distributions, or exercise any right
          of set-off or  recoupment  until all of the Senior  Obligations  shall
          have been paid in full.

               2.2 Distributions in Bankruptcy or Liquidation Events.

                    (a) Distributions. Anything in the Subordinated Documents to
          the  contrary  notwithstanding,  in the  event  of  any  distribution,
          division  or   application,   in  whole  or  in  part,   voluntary  or
          involuntary,  by operation of law or  otherwise,  of the assets of any
          Debtor or the  proceeds  thereof,  to or for the benefit of any of the
          Debtors'  creditors  arising by reason of a Bankruptcy or  Liquidation
          Event, then all Senior  Obligations shall first be paid in full before
          any payment is made upon any Subordinated Obligations; and any payment
          or distribution of any kind or character (whether in cash, property or
          securities and whether or not any of such Senior  Obligations has been
          disallowed,  or estimated for purpose of  allowance,  under the United
          States  Bankruptcy  Code or otherwise)  made upon or in respect of the
          Subordinated  Obligations  in violation of this Guaranty shall be paid
          over to  Senior  Lenders  (or  their  Agent(s),  as  applicable),  for
          application in payment of the Senior Obligations, unless and until the
          Senior Obligations shall have been paid or satisfied in full.

                    (b) Authority to Act for Creditor.  If  Subordinated  Lender
          fails to file a proper claim or proof of debt therefor prior to thirty
          (30) days  before  the  expiration  of the time to file such  claim or
          proof, then Senior Lenders (and/or their Agent(s),  as applicable) are
          hereby  permitted and authorized (but not obligated) for the specified
          and limited purpose set forth in this paragraph, to file such claim or
          proof  for or on  behalf  of such  holder  at any  time  prior  to the
          expiration of the time to file such claim or proof; provided, however,
          that Senior Lenders  (and/or such Agent(s))  shall promptly  deliver a
          copy of any such claim or proof so filed to Subordinated  Lender. Upon
          written  request of any Senior Lender (or any Agent,  as  applicable),
          Subordinated  Lender shall confirm to Senior  Lenders (and such Agent)
          whether  Subordinated Lender shall have in fact filed a proof of claim
          in order for the Senior Lenders (and their Agent(s), as applicable) to
          exercise  their rights in this  paragraph.  Nothing  contained in this
          Guaranty shall be interpreted or construed to impair the voting rights
          of Subordinated  Lender in any meeting relating to any  Reorganization
          or Liquidation Event, except that Subordinated Lender hereby covenants
          to Senior Lenders that Subordinated  Lender shall not vote in favor of
          any reorganization plan (whether under Chapter 11 of the United States
          Bankruptcy  Code or  other  statute  or law)  that any  Senior  Lender
          opposes.

                    (c) Additional Action.  Subordinated  Lender agrees duly and
          promptly  to file  appropriate  proofs  of  claim  in  respect  of the
          Subordinated Obligations and to execute and deliver to Senior Lenders,
          or their Agent(s),  as applicable,  promptly following  request,  such
          assignments, proofs of claim or other instruments as may be reasonably
          requested  by any Senior  Lender  (and/or  their  Agent(s))  to enable
          Senior Lender  (and/or  their  Agent(s)) to enforce any and all claims
          upon or with respect to the  Subordinated  Obligations  and to collect
          and  receive  any and all  payments  and  distributions  which  may be
          payable  or  deliverable  at any  time  upon  or with  respect  to the
          Subordinated Obligations.

                    (d) Payments Held in Trust. In the event that any payment of
          principal or interest or other  payment or  distribution  of assets of
          any Debtor shall be collected  or received by  Subordinated  Lender in
          violation  of the  subordination  provisions  of this  Part D,  before
          payment in full of all of the Senior Obligations,  Subordinated Lender
          shall  forthwith  deliver  the same to Senior  Lenders  (and/or  their
          Agent(s),  as  applicable),  in the form  received,  together with any
          endorsement  and  assignment  necessary  to make  such  delivery,  for
          application to the Senior Obligations, whether then due or not due. If
          Subordinated Lender shall fail to make such endorsement or assignment,
          Senior Lenders (or such Agent(s) or any of their respective  officers)
          are  hereby  irrevocably   authorized  to  make  the  same.  Until  so
          delivered, Subordinated Lender shall hold such payment or distribution
          in trust as the property of Senior Lenders,  segregated from all other
          funds and property held by Subordinated Lender.

               2.3 [Reserved.]

               2.4 Limitation on Exercise of Remedies by Subordinated Lender.

                    (a) In the event that any Subordinated  Default shall occur,
               Subordinated  Lender  shall not be entitled to, and will not, (i)
               ask,  demand or sue for, or take or receive  from any Debtor,  by
               set-off  or  otherwise,  payment  of all or  any  portion  of the
               Subordinated  Obligations  under this Guaranty or any  collateral
               provided therefor; (ii) accelerate any Subordinated  Obligations;
               (iii) exercise any of its remedies in respect of any Subordinated
               Obligations;  (iv)  initiate or join in any  litigation  or other
               proceedings  against,  or  reorganization  of, any Debtor; or (v)
               foreclose  or  otherwise  realize  on any  security  given by any
               Debtor or any other Person  (including  any  guarantor) to secure
               the Subordinated  Obligations;  in any such case unless and until
               the earliest to occur of the following:

                         (A)  Senior   Lenders  shall  have  caused  the  Senior
                    Obligations to become due prior to their stated maturity and
                    shall have commenced the exercise of material remedies under
                    the Senior Security Documents;

                         (B) a Subordinated  Default  pursuant to Section 7.1(h)
                    or 7.1(i) of the Subordinated Note Purchase  Agreement shall
                    have commenced; and

                         (C) any other Subordinated  Default shall have occurred
                    under  the   Subordinated   Note   Purchase   Agreement  and
                    Subordinated  Lender  shall  have  provided  to  the  Senior
                    Lenders (and their Agent(s),  as  applicable),  Borrower and
                    Guarantor  written notice of Subordinated  Lender's  ability
                    (under  the  terms  of  the   Subordinated   Note   Purchase
                    Agreement)  to  accelerate  on account of the  occurrence of
                    such Subordinated  Default (a "Remedy Notice"),  such Remedy
                    Notice shall have been received by Senior  Lenders (and such
                    Agents),  Borrower  and  Guarantor  and 180 days  shall have
                    elapsed  following  such  receipt  (in any  such  case,  the
                    "Remedy Standstill Period").

                    (b)  Notwithstanding  the foregoing,  the Remedy  Standstill
          Period  shall  be  inapplicable  or cease to be  effective  if  Senior
          Lenders shall have caused the Senior  Obligations  to become due prior
          to their  stated  maturity  and shall have  commenced  the exercise of
          material   remedies   under  the  Senior   Security   Documents  or  a
          Subordinated  Default  pursuant  to  Section  7.1(h)  or 7.1(i) of the
          Subordinated Note Purchase Agreement shall have occurred.

                    (c)  Upon  the  expiration  or  termination  of  any  Remedy
          Standstill Period,  Subordinated  Lender shall be entitled to exercise
          any of its rights with respect to the  Subordinated  Obligations  (but
          otherwise  subject to the  subordination  and other provisions of this
          Guaranty)  other than any right to accelerate the maturity date of any
          Subordinated  Obligation based upon the occurrence of any Subordinated
          Default in respect thereto which has been cured or otherwise  remedied
          during such Remedy Standstill Period.

          2.5 Covenants to Cooperate. In addition to its agreements set forth in
     Section  2.4,   Subordinated  Lender,  in  its  capacity  as  a  holder  of
     Subordinated Obligations,  agrees to take such actions as may be reasonably
     necessary or  appropriate,  and otherwise to cooperate  with Senior Lenders
     (and  their  Agent(s),  as  applicable)  to  effectuate  the  subordination
     provided hereby. In furtherance thereof, Subordinated Lender agrees (a) not
     to oppose any motion  filed or  supported  by any Senior  Lender for relief
     from stay or for adequate  protection in respect of the Senior Obligations;
     (b) not to  oppose  any  motion  supported  by any  Senior  Lender  for any
     Debtor's use of cash collateral or post-petition  borrowing from any Senior
     Lender;   (c)  not  to  institute   against  any  Debtor  any   bankruptcy,
     reorganization,  arrangement,  insolvency or  liquidation  proceedings,  or
     other  proceedings  under any United States Federal or state  bankruptcy or
     similar law,  until such time as the Senior  Obligations  have been paid in
     full;  and (d) not otherwise to (i) impede,  interfere  with or restrict or
     restrain the exercise by Senior Lenders (and their Agent(s), as applicable)
     of their rights and remedies under the Senior Credit Documents or (ii) take
     or permit any  action  prejudicial  to or  inconsistent  with the  priority
     position  over  Subordinated  Lender  that is  created  in favor of  Senior
     Lenders by this Guaranty.

          2.6  Violation  of  Agreements  to Take No Action  and  Cooperate.  If
     Subordinated  Lender shall commence,  prosecute or participate in any suit,
     action or  proceeding  against  any Debtor or take any other  action in any
     legal proceeding  involving any Debtor in violation of this Guaranty,  such
     Debtor may interpose  this Guaranty as a defense or plea and each of Senior
     Lenders  (and  each of  their  Agent(s),  as  applicable)  are  irrevocably
     authorized to intervene and to interpose such defense or plea in its or any
     Debtor's  name.  Without  limiting the  generality  of Section 3 below,  if
     Subordinated  Lender  attempts to enforce or realize  upon any security for
     the Subordinated Obligations in violation of this Guaranty, any Debtor, any
     Senior Lender or any Agent (in such Debtor's,  such Senior Lender's or such
     Agent's name) may by virtue of this Guaranty  restrain such  realization or
     enforcement.

          2.7 No  Amendment of  Subordinated  Obligations.  Subordinated  Lender
     shall  not,  without  the prior  written  consent  of the  Required  Senior
     Lenders, amend or permit the amendment of the terms of this Guaranty or any
     other instrument or agreement  evidencing any Subordinated  Obligations the
     effect of which is to (a) increase the maximum  principal amount or rate of
     interest  under  the  Subordinated  Notes  (it  being  understood  that the
     imposition  of a default  rate of interest  contained  in the  Subordinated
     Documents as in effect on the date hereof shall not be  restricted  by this
     clause (a)), (b) accelerate the dates (including maturity dates) upon which
     payments of  principal or interest on the  Subordinated  Notes are due, (c)
     add or make more restrictive any event of default,  any financial  covenant
     (including the definitions  applicable  thereto) or any other covenant with
     respect to the Subordinated  Notes set forth in the Subordinated  Documents
     (as in effect on the date hereof),  (d) change the redemption or prepayment
     provisions of the Subordinated Notes, (e) amend the Warrant Certificates to
     increase the shares of capital  stock of the Parent  issuable upon exercise
     thereof,  (f)  provide  for the  issuance  to  Subordinated  Lender  of any
     additional  warrants or other equity  securities in any Debtor in violation
     of any Senior Credit  Agreement,  or (g) change,  amend or  supplement  any
     other term of the  Subordinated  Documents  if such  change,  amendment  or
     supplementation  would  materially  increase the obligations of Borrower or
     confer  additional  material  rights  on  Subordinated  Lender or any other
     holder of the Subordinated Notes in a manner adverse to Borrower, Guarantor
     or any Senior Lender (or any Agent).

          2.8 No Transfer of Subordinated Obligations.  Subordinated Lender will
     not sell,  assign  or  transfer  any of its  interest  in the  Subordinated
     Obligations,  unless the buyer,  assignee or transferee thereof shall agree
     in writing to become bound by the  provisions  of this Part D pursuant to a
     written agreement in form and substance satisfactory to the Required Senior
     Lenders (or their Agent(s),  as applicable) executed by the buyer, assignee
     or  transferee,  an  original  copy of which shall have been  furnished  to
     Senior Lenders (and such Agent(s)). In addition,  Subordinated Lender shall
     not grant or agree to any  subordination  in  respect  of the  Subordinated
     Obligations  or grant a security  interest or  participation  in any of the
     Subordinated  Obligations to any Person other than the Senior  Lenders.  In
     addition, Subordinated Lender shall not grant or agree to any subordination
     in respect of the Subordinated  Obligations or grant a security interest or
     participation  in any of the  Subordinated  Obligations to any Person other
     than  Senior  Lenders  and to Persons  to whom  Senior  Lenders  shall have
     granted or agreed to any subordination in respect of the Senior Obligations
     or  granted a  security  interest  or  participation  in any of the  Senior
     Obligations.

            3. No  Collateral.  Subordinated  Lender  will not take or enjoy any
collateral  to  secure  the  Subordinated  Obligations.   Without  limiting  the
generality of the foregoing,  none of the Senior Lenders (or their Agent(s),  as
applicable)  shall  have any duty to  Subordinated  Lender  with  respect to the
preservation  or maintenance of any collateral or the manner in which the Senior
Lenders (or such Agent(s)) enforce their respective rights in such collateral or
to  preserve  or  maintain  the  rights  of any  Person in any  collateral,  and
Subordinated  Lender  hereby waives (a) any claims which it may now or hereafter
have  against  Senior   Lenders  (or  such   Agent(s))   which  relate  to  such
preservation,  maintenance  or  enforcement  and (b) the right to require Senior
Lenders (or such  Agent(s)) to marshal any  collateral,  to enforce any security
interest or lien Senior  Lenders (or such Agent(s)) may now or hereafter have in
any  collateral  securing the Senior  Obligations  or to pursue any claim any of
Senior  Lenders (or any such Agent) may have against any guarantor of the Senior
Obligations,  as a condition to Senior Lenders' (and such Agent(s)') entitlement
to receive any payment on account of the Subordinated Obligations.

            4. Agreements with Respect to Loan Documents.

               (a) Subordinated  Lender hereby agrees that at any time, and from
          time to time,  without  the  consent  of, or notice  to,  Subordinated
          Lender, the Senior Lenders (and their Agent(s), as applicable) may, in
          their  sole  discretion,  (i) modify or amend  (with  consent of other
          parties to the  agreements  so  affected),  grant  consents  under and
          waivers  of  or  release  any  of  the  terms  of  the  Senior  Credit
          Agreements,  the Senior Notes, the Senior Security Documents or any of
          the other  Senior  Credit  Documents,  (ii)  exercise or refrain  from
          exercising  any powers or rights  which the Senior  Lenders  (and such
          Agent(s)) may have thereunder and (iii) make loans and other financial
          accommodations  to the  Debtors in  addition  to the loans made on the
          date hereof, it being understood and agreed that no such modification,
          amendment,  consent, waiver, release, exercise, failure to exercise or
          financial  accommodation  shall affect,  release, or impair any of the
          subordination  rights or other  rights and  benefits  afforded  to the
          Senior Lenders (and such Agent(s)) under this Guaranty or give rise to
          any  liabilities  on the part of the Senior Lenders (or such Agent(s))
          to  Subordinated  Lender.   Notwithstanding  the  foregoing,  no  such
          amendment,  restatement,  waiver, or other modification shall, without
          the prior written  consent of  Subordinated  Lender,  (A) increase the
          principal  amount of the Senior  Obligations  in excess of the Maximum
          Senior Debt Amount then in effect,  (B) further limit the right of the
          Debtors to amend or otherwise modify the Subordinated  Agreements,  or
          (C) prohibit or restrict the payment of principal of,  interest on, or
          other  amounts  payable with respect to, the  Subordinated  Notes in a
          manner that is more restrictive than the prohibitions and restrictions
          currently contained in the Senior Credit Documents (as in effect as of
          the date hereof).

               (b) Without limiting the generality of the foregoing, no right of
          Senior  Lenders  (or  their   Agent(s),   as  applicable)  to  enforce
          subordination  as herein  provided  shall at any time or in any way be
          affected  or  impaired by any act or failure to act on the part of any
          Debtor or  Subordinated  Lender,  or by any act or  failure  to act of
          Senior Lenders (or such  Agent(s)),  or by any  non-compliance  by any
          Debtor  with  any of the  terms,  provisions  and  covenants  of  this
          Guaranty  or any  other  Senior  Credit  Document,  regardless  of any
          knowledge  thereof that the Senior Lenders (or such Agent(s)) may have
          or be charged with.

               5.  Relative  Rights.  Nothing  contained  in this  Section  5 is
intended to or shall impair,  as between each Debtor,  its creditors  other than
Senior Lenders, and Subordinated Lender, the obligation of such Debtor, which is
absolute and unconditional, to pay to Subordinated Lender when due the principal
of and the interest on the Subordinated Obligations,  or is intended to or shall
affect the  relative  rights of  Subordinated  Lender and the  creditors of each
Debtor other than Senior Lenders.

               6. Subrogation.  After all amounts payable under or in respect of
Senior  Obligations are indefeasibly paid in full in cash,  Subordinated  Lender
shall be  subrogated to the rights of holders of Senior  Obligations  to receive
payments or  distributions  applicable to Senior  Obligations to the extent that
distributions  otherwise payable to Subordinated Lender have been applied to the
payment of Senior Obligations. A distribution made under this Part D to a holder
of Senior  Obligations  which  otherwise  would  have been made to  Subordinated
Lender  is  not,  as  between  the  applicable  Debtor,  on the  one  hand,  and
Subordinated  Lender,  on the  other  hand,  a payment  by any  Debtor on Senior
Obligations.

               7. Reliance.  Subordinated  Lender  acknowledges  notice that, in
entering  into the Senior  Credit  Agreements  and  electing  to hold the Senior
Obligations,  each  of  Senior  Lenders  is  relying,  and  will  rely,  on  the
subordination of the  Subordinated  Obligations  provided  herein.  Subordinated
Lender  expressly  waives all notice of the  acceptance  of, or reliance on, the
provisions of this Part D by the Senior Lenders.

               8. Miscellaneous.

                  8.1  Conforming  Agreement;  Reinstatement.  The agreements of
         Guarantor  and  Subordinated  Lender  set forth in this Part D shall be
         continuing agreements and shall be irrevocable and shall remain in full
         force and effect so long as there are Senior Obligations outstanding or
         committed  to  be  advanced.   The  liability  of  Subordinated  Lender
         hereunder  shall be  reinstated  and revived,  and the rights of Senior
         Lenders  (and their  Agent(s),  as  applicable)  shall  continue,  with
         respect  to any  amount  at any  time  paid on  account  of the  Senior
         Obligations  which  shall  thereafter  be  required  to be  restored or
         returned by any Senior Lender in any  Bankruptcy or  Liquidation  Event
         (including  without  limitation  any  repayment  made  pursuant  to any
         provision of Chapter 5 of Title 11, United States Code),  all as though
         such amount had not been paid.

                  8.2 Application of Payments. Subordinated Lender hereby agrees
         that all payments  received by Senior  Lenders (or their  Agent(s),  as
         applicable)  may be applied,  reversed  and  reapplied,  in whole or in
         part,  to such part of the Senior  Obligations  as Senior  Lenders,  in
         their  sole  discretion,  deem  appropriate,  in  accordance  with  the
         provisions of their respective Senior Credit Agreements.

                  8.3 Specific  Performance.  Subordinated  Lender hereby waives
         any  defense  based on the  adequacy  of a remedy at law that  might be
         asserted  as a bar  to the  remedy  of  specific  performance  of  this
         Guaranty in any action  brought  therefor by or on behalf of the Senior
         Lenders.

                  8.4  Modification of Part D. The provisions of this Part D are
         for the benefit of the holders from time to time of Senior  Obligations
         and,  so long  as any  Senior  Obligations  remain  unpaid,  may not be
         modified,  rescinded or canceled in whole or in part (except insofar as
         the  effect  thereof  would  be to  cause  such  provisions  to be more
         favorable to Senior Lenders,  without the prior written consent thereto
         of all the Senior Lenders.

                  E. Miscellaneous.

                    1. Notices.  Any notice  delivered under this Guaranty shall
be given in the  manner,  to the  addresses  and with the  effect  set  forth in
Section 8.1 of the Subordinated Note Purchase Agreement.

                    2.  Amendments.  Any term of this  Guaranty  may be amended,
waived, discharged or terminated only by an instrument in writing signed by each
party to this Guaranty and only as permitted  under Section  D(8.4)  hereof.  No
notice  to or  demand  on  Guarantor  shall  be  deemed  to be a  waiver  of the
Obligations  or of the  right of  Subordinated  Lender  to take  further  action
without  notice or demand as  provided  in this  Guaranty.  No course of dealing
between Guarantor and Subordinated Lender shall change, modify or discharge,  in
whole or in part,  this  Guaranty  or any  Obligations.  No  waiver of any term,
covenant or  provision  of this  Guaranty  shall be  effective  unless  given in
writing by  Subordinated  Lender and if so given shall only be  effective in the
specific instance in which given.

                    3.  Successors and Assigns.  The provisions of this Guaranty
shall be binding  upon and inure to the benefit of the parties  hereto and their
respective  successors  and  assigns,  except that  Guarantor  may not assign or
otherwise transfer any of its rights or Obligations  hereunder without the prior
written consent of Subordinated Lender (and any attempted assignment or transfer
by Guarantor without such consent shall be null and void).

                    4.  Severability.  Any provision of this Guaranty held to be
invalid,  illegal  or  unenforceable  in  any  jurisdiction  shall,  as to  such
jurisdiction,  be  ineffective to the extent of such  invalidity,  illegality or
unenforceability without effecting the validity,  legality and enforceability of
the remaining  provisions thereof;  and the invalidity of a particular provision
in a particular  jurisdiction  shall not invalidate  such provision in any other
jurisdiction.

                    5. Right to Deal with Borrower. At any time and from time to
time, without terminating,  affecting or impairing the validity of this Guaranty
or the  obligations of Guarantor  hereunder,  Subordinated  Lender may deal with
Borrower in the same manner and as fully as if this  Guaranty  did not exist and
shall be entitled,  among other things,  to grant  Borrower,  without  notice or
demand and without affecting Guarantor's liability hereunder,  such extension or
extensions of time to perform, renew, compromise, accelerate or otherwise change
the time for payment of or  otherwise  change the terms of  indebtedness  or any
part thereof contained in or arising under any Subordinated Debt Document or any
other document evidencing  Obligations of Borrower to Subordinated Lender, or to
waive any  obligation  of Borrower to perform any act or acts,  as  Subordinated
Lender may deem advisable.

                    6.  GOVERNING  LAW;  JURISDICTION;  CONSENT  TO  SERVICE  OF
PROCESS. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW  YORK.  GUARANTOR  HEREBY  IRREVOCABLY  SUBMITS  TO THE
JURISDICTION  OF ANY  FEDERAL  OR STATE  COURT  IN THE  STATE OF NEW YORK IN ANY
ACTION,  SUIT OR PROCEEDING  BROUGHT  AGAINST IT AND RELATED TO OR IN CONNECTION
WITH THIS GUARANTY OR ANY OF THE TRANSACTIONS  CONTEMPLATED  HEREBY AND CONSENTS
TO THE PLACING OF VENUE IN NEW YORK COUNTY OR OTHER COUNTY  PERMITTED BY LAW. TO
THE EXTENT  PERMITTED BY APPLICABLE LAW,  GUARANTOR HEREBY WAIVES AND AGREES NOT
TO ASSERT BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE,  IN ANY SUCH SUIT, ACTION
OR PROCEEDING ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF
SUCH COURTS,  THAT THE SUIT,  ACTION OR PROCEEDING IS BROUGHT IN AN INCONVENIENT
FORUM, THAT THE VENUE OF THE SUIT, ACTION OR PROCEEDING IS IMPROPER, OR THAT ANY
SUBORDINATED DEBT DOCUMENT OR INSTRUMENT REFERRED TO HEREIN MAY NOT BE LITIGATED
IN OR BY SUCH COURTS.  TO THE EXTENT  PERMITTED  BY  APPLICABLE  LAW,  GUARANTOR
AGREES NOT TO SEEK AND HEREBY  WAIVES THE RIGHT TO ANY REVIEW OF THE JUDGMENT OF
ANY SUCH  COURT BY ANY COURT OF ANY OTHER  NATION OR  JURISDICTION  WHICH MAY BE
CALLED UPON TO GRANT AN ENFORCEMENT  OF SUCH  JUDGMENT.  EXCEPT AS PROHIBITED BY
LAW, GUARANTOR HEREBY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT
OF ANY LITIGATION  DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION
WITH ANY  SUBORDINATED  DEBT DOCUMENT.  EACH PARTY TO THIS GUARANTY  IRREVOCABLY
CONSENTS TO SERVICE OF PROCESS IN THE MANNER PROVIDED FOR NOTICES IN SECTION 8.1
OF THE  SUBORDINATED  NOTE  PURCHASE  AGREEMENT.  NOTHING IN THIS  GUARANTY WILL
AFFECT  THE RIGHT OF ANY PARTY TO THIS  GUARANTY  TO SERVE  PROCESS IN ANY OTHER
MANNER PERMITTED BY LAW.

                    7. Headings; Counterparts.  Article and Section headings and
the table of  contents  (if  applicable)  used  herein  are for  convenience  of
reference  only,  are  not  part of this  Guaranty  and  shall  not  affect  the
construction of, or be taken into consideration in interpreting,  this Guaranty.
This Guaranty may be executed in counterparts  (and by different  parties hereto
on different counterparts),  each of which shall constitute an original, but all
of which when taken together shall constitute a single contract.  Delivery of an
executed  counterpart  of a  signature  page of this  Guaranty  or of any  other
Subordinated  Debt  Document by  telecopy  shall be  effective  as delivery of a
manually  executed  counterpart  of this Guaranty or of such other  Subordinated
Debt Document.

                    8. No  Waiver;  Rights  Cumulative.  No  course  of  dealing
between Guarantor and Subordinated  Lender, or Subordinated  Lender's failure to
exercise or delay in exercising any right,  power or privilege  hereunder  shall
operate as a waiver thereof.  Any single or partial exercise of any right, power
or privilege  hereunder shall not preclude any other or further exercise thereof
or the  exercise of any other right,  power or  privilege.  All of  Subordinated
Lender's rights and remedies  hereunder,  whether  established  hereby or by any
other  agreements,  instruments  or documents or by law, shall be cumulative and
may be exercised singly or concurrently.

                    9. No Partnership.  The  relationship  between  Subordinated
Lender and Guarantor  shall be only of  creditor-debtor  and no  relationship of
agency,  partner or joint- or  co-venturer  shall be created by or inferred from
this  Guaranty  or  the  other  Subordinated  Debt  Documents.  Guarantor  shall
indemnify, defend, and save Subordinated Lender harmless from any and all claims
asserted  against   Subordinated   Lender  as  being  the  agent,   partner,  or
joint-venturer of Guarantor.

                    10.   Entire   Agreement.   This   Guaranty  and  the  other
Subordinated  Debt  Documents  embody the  entire  agreement  and  understanding
between Guarantor and Secured Party with respect to the subject matter hereunder
and supersede all prior  conflicting or  inconsistent  agreements,  consents and
understandings  relating to such  subject  matter.  Guarantor  acknowledges  and
agrees that there is no oral agreement between Guarantor and Subordinated Lender
which has not been  incorporated in this Guaranty or another  Subordinated  Debt
Document.

                    11. Other  Guaranties.  The  execution  and delivery of this
Guaranty shall not supersede,  terminate, modify or supplement in any manner any
other  guaranty  previously  executed and  delivered to  Subordinated  Lender by
Guarantor and no release or  termination  of any guaranty  shall be construed to
terminate or release any other  guaranty  unless such  guaranty is  specifically
referred to in any such termination.

               F. Covenant of Guarantor.  Guarantor  hereby covenants and agrees
that from and after the date hereof,  it will not, nor will it permit  Leasecomm
to,  originate any new lease financing  business (other than through its [_____]
division),  it being  understood  and  agreed  that all new leases  (other  than
[_____] leases) will be financed by Borrower after the date hereof.


               [ REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK ]


<PAGE>



         IN WITNESS  WHEREOF,  the  undersigned  has executed and delivered this
Guaranty as of the day and year first above written.



                                             MICROFINANCIAL INCORPORATED


                                             By:
                                                --------------------------------
                                             Name:
                                                  ------------------------------
                                             Title:
                                                   -----------------------------





<PAGE>



Commonwealth of Massachusetts)
                             )  ss.
County of ___________________)

                  On May __,  2004,  before  me,  a  Notary  Public,  personally
appeared , personally  known to me or proved to me on the basis of  satisfactory
evidence to be the  person(s)  whose  name(s)  is/are  subscribed  to the within
instrument  and  acknowledged  to me  that  he/she/they  executed  the  same  in
his/her/their authorized capacity(ies),  and that by his/her/their  signature(s)
on the  instrument  the  person(s),  or the  entity  upon  behalf  of which  the
person(s) acted, executed the instrument.

Witness my hand and official seal.                                     SEAL


                                   Signature:______________________________

</TEXT>
</DOCUMENT>
