-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, N5yfwUsLavKHbJAUN6KHwBKry4cThH+qsI3fZNkbN17H8pXi11JAdgzzyScwiLHs M2KzwcBWls968I08U/9/bw== 0000950134-02-008377.txt : 20020712 0000950134-02-008377.hdr.sgml : 20020711 20020711160834 ACCESSION NUMBER: 0000950134-02-008377 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20020701 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020711 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LIBERTE INVESTORS INC CENTRAL INDEX KEY: 0001017907 STANDARD INDUSTRIAL CLASSIFICATION: BLANK CHECKS [6770] IRS NUMBER: 751328153 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12117 FILM NUMBER: 02701154 BUSINESS ADDRESS: STREET 1: 200 CRESCENT COURT STREET 2: SUITE 1365 CITY: DALLAS STATE: TX ZIP: 75201 BUSINESS PHONE: 2148715935 MAIL ADDRESS: STREET 1: 200 CRESCENT COURT STREET 2: SUITE 1365 CITY: DALLAS STATE: TX ZIP: 75201 8-K 1 d98262e8vk.txt FORM 8-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported): JULY 1, 2002 LIBERTE INVESTORS INC. (Exact name of registrant as specified in its charter) DELAWARE 1-6802 75-1328153 (State of incorporation) (Commission File No.) (IRS Employer Identification No.)
200 CRESCENT COURT, SUITE 1365 DALLAS, TEXAS 75201 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (214) 871-5935 ================================================================================ ITEM 5. OTHER EVENTS Enclosed herewith as Exhibit 99.1 is a copy of the Registrant's press release dated July 9, 2002, announcing that the Board of Directors of the Registrant has approved the election of Donald J. Edwards as President and Chief Executive Officer of the Registrant effective as of July 1, 2002. The press release contained in Exhibit 99.1 is incorporated herein by reference. A copy of the employment agreement between the Registrant and Donald J. Edwards and certain other related agreements also approved by the Board of Directors of the Registrant are attached hereto. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. 4.1 Registration Rights Agreement dated as of July 1, 2002, by and between Liberte Investors Inc. and Donald J. Edwards. 10.1 Employment Agreement dated as of July 1, 2002, by and between Liberte Investors Inc. and Donald J. Edwards. 10.2 Liberte Investors Inc. 2002 Long Term Incentive Plan. 10.3 Nonqualified Stock Option Agreement dated as of July 9, 2002, by and between Liberte Investors Inc. and Donald J. Edwards. 10.4 Indemnification Agreement dated as of July 1, 2002, by and between Liberte Investors Inc. and Donald J. Edwards. 99.1 Press Release dated July 9, 2002. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. LIBERTE INVESTORS INC. Date: July 11, 2002 By: /s/ ELLEN V. BILLINGS ----------------------------------- Name: Ellen V. Billings Title: Vice President, Secretary and Treasurer EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION ------ ----------- 4.1 Registration Rights Agreement dated as of July 1, 2002, by and between Liberte Investors Inc. and Donald J. Edwards. 10.1 Employment Agreement dated as of July 1, 2002, by and between Liberte Investors Inc. and Donald J. Edwards. 10.2 Liberte Investors Inc. 2002 Long Term Incentive Plan. 10.3 Nonqualified Stock Option Agreement dated as of July 9, 2002, by and between Liberte Investors Inc. and Donald J. Edwards. 10.4 Indemnification Agreement dated as of July 1, 2002, by and between Liberte Investors Inc. and Donald J. Edwards. 99.1 Press Release dated July 9, 2002.
EX-4.1 3 d98262exv4w1.txt REGISTRATION RIGHTS AGREEMENT EXHIBIT 4.1 REGISTRATION RIGHTS AGREEMENT This Registration Rights Agreement (the "AGREEMENT") is made and entered into as of July 1, 2002, by and between Liberte Investors Inc., a Delaware corporation (the "COMPANY"), and Donald J. Edwards, an individual (the "INVESTOR"). RECITALS: A. Pursuant to that certain Nonqualified Stock Option Agreement (herein so called) dated as of July 9, 2002, between the Investor and the Company, the Company has granted to the Investor options (the "OPTIONS") exercisable for an aggregate of 2,573,678 shares of Common Stock (hereinafter defined), subject to certain adjustments, conditions and limitations described therein, including the receipt of stockholder approval with respect to such grant, and has agreed to grant to the Investor additional options (the "ADDITIONAL OPTIONS") under certain circumstances as set forth therein. B. The Investor may acquire up to 333,333 shares of Common Stock from the Company within one (1) year of the date hereof (the "PURCHASED SHARES"). C. The Company has agreed to grant certain registration rights with respect to the shares of Common Stock issuable upon exercise of the Options and the Additional Options and the Purchased Shares, subject to the terms and conditions set forth herein. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: AGREEMENTS: 1. Certain Definitions. As used in this Agreement, the following capitalized terms shall have the following meanings: Additional Options: See the recitals to this Agreement. Affiliate: A Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with a specified Person. Common Stock: The common stock, par value $.01 per share, of the Company. Exchange Act: The Securities Exchange Act of 1934, as amended from time to time, and the rules and regulations promulgated thereunder. Options: See the recitals to this Agreement. Market Price: That price of a security determined as follows: (i) if the security is listed on any established stock exchange or a national market system, including, without limitation, the National Market System of the National Association of Securities Dealers Automated Quotation System, its fair market value shall be the closing sales price or the closing bid if no sales were reported, as quoted on such system or exchange (or the largest such exchange) on the business day immediately preceding the date of the S-3 Request (or if there are no sales or bids for such date, then for the last preceding business day for such sales or bids), as reported in The Wall Street Journal or similar publication; (ii) if the security is regularly quoted by a recognized securities dealer but selling prices are not reported, its fair market value shall be the mean between the high bid and low asked prices for the security on the date of the S-3 Request (or if there are no quoted prices for such date, then for the last preceding business day on which there were quoted prices); or (iii) in the absence of an established market for the security, the fair market value shall be determined in good faith by the Company's Board of Directors, with reference to the Company's net worth, prospective earning power, dividend-paying capacity and other relevant factors, including the goodwill of the Company, the economic outlook in the Company's industry, the Company's position in the industry and its management, and the values of stock of other corporations in the same or a similar line of business (all of such factors determined as of the date of the S-3 Request). Person: An individual, partnership, corporation, limited liability company, trust or unincorporated organization, or a government or agency or political subdivision thereof. Prospectus: The prospectus included in any Registration Statement, as amended or supplemented by any prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by such Registration Statement and by all other amendments and supplements to the prospectus, including all material incorporated by reference into such prospectus. Registrable Securities: (a) any shares of Common Stock issued or issuable upon the exercise of the Options or the Additional Options (collectively, the "OPTIONED SHARES"), (b) the shares of Common Stock comprising the Purchased Shares and (c) any securities issued or issuable with respect to the Optioned Shares by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. Any Registrable Security will cease to be a Registrable Security when (i) a registration statement covering such Registrable Security has been declared effective by the SEC and the Registrable Security has been disposed of pursuant to such effective registration statement, (ii) the Registrable Security is sold under circumstances in which all of the applicable conditions of Rule 144 (or any similar provisions then in force) under the Securities Act are met, (iii) the Registrable Security has been otherwise transferred, the Company has delivered a new certificate or other evidence of ownership for it not bearing a legend restricting further transfer under securities laws, and it may be resold without subsequent registration under the Securities Act, or (iv) the Registrable Security may be sold under Rule 144(k) of the Securities Act. Registration Expenses: See Section 5 hereof. 2 Registration Statement: The Registration Statement of the Company that covers any of the Registrable Securities pursuant to the provisions of this Agreement, including the Prospectus included therein, all amendments and supplements to such Registration Statement, including post-effective amendments, all exhibits and all material incorporated by reference in such Registration Statement. SEC: The Securities and Exchange Commission. Securities Act: The Securities Act of 1933, as amended from time to time, and the rules and regulations promulgated thereunder. Underwritten Registration and Underwritten Offering: A registration in which securities of the Company are sold to an underwriter for reoffering to the public. 2. Registration Rights. (a) Shelf Registration. On or before 180 days after the date hereof, the Company shall prepare and file with the SEC a "shelf" registration statement (the "Shelf Registration Statement") on the appropriate form for an offering to be made on a continuous basis pursuant to Rule 415 under the Securities Act covering all of the Registrable Securities, which registration statement shall consist of a resale prospectus comprising part of the Company's registration statement on Form S-8 with respect to the Purchased Shares and the Optioned Shares. The Company shall use its reasonable best efforts to have the Shelf Registration Statement declared effective and to keep such Shelf Registration Statement continuously effective until the later of (i) the date which is 36 months following the date upon which the Shelf Registration Statement becomes effective, and (ii) the date which is three months after the date on which the Investor ceases to be an Affiliate of the Company in the opinion of counsel for the Company. Any holder of Registrable Securities (individually, a "Holder," and collectively, the "Holders") shall be permitted to withdraw all or any part of the Registrable Securities from a Shelf Registration Statement at any time prior to the effective date of such Shelf Registration Statement. The Company agrees, subject to Section 4(j), if necessary, to supplement or amend the Shelf Registration Statement, as required by the rules, regulations or instructions applicable to the registration form used by the Company for such Shelf Registration Statement or by the Securities Act or as requested (which request shall result in the filing of a supplement or amendment) by any holder of Registrable Securities to which such Shelf Registration Statement relates, and the Company agrees to furnish to such holders, such holders' counsel and any managing underwriter copies of any such supplement or amendment prior to its being used and/or filed with the SEC. A registration statement will not be deemed to have been effected as a Shelf Registration Statement unless such Shelf Registration Statement has been declared effective by the SEC and the Company has complied in all material respects with its obligations under this Agreement with respect thereto; provided, however, that if, after a Shelf Registration Statement has been declared effective, the offering of Registrable Securities pursuant to such Shelf Registration Statement is interfered with by any stop order, injunction or other order or 3 requirement of the Commission or any other governmental agency or court, such Shelf Registration Statement will be deemed not to have become effective during the period of such interference until the offering of Registrable Securities pursuant to such Shelf Registration Statement may legally resume. If a Shelf Registration Statement is deemed not to have been effected, then the Company shall continue to be obligated to effect such Shelf Registration Statement pursuant to this Section 2. (b) Incidental Registration. If, at any time after the date hereof, the Company proposes to file a registration statement under the Securities Act (other than in connection with a Registration Statement on Form S-4 or S-8 or any form substituting therefor or a registration statement relating to issuances of securities other than Common Stock (or securities convertible into Common Stock) by the Company) with respect to an offering of any class of security by the Company for its own account or for the account of any of its security holders, then the Company shall give written notice of such proposed filing to the holders of the Registrable Securities at least 20 days before the anticipated filing date, and such notice shall offer such holders the opportunity to register such number of Registrable Securities as each such holder may request; provided, however, that if such registration is not underwritten and such Registrable Securities are then covered by an effective Shelf Registration Statement, then the Company shall not have the obligation to give such notice with respect to such Registrable Securities or register any such Registrable Securities under this Section 2(b). Each holder of Registrable Securities desiring to have its Registrable Securities registered under this Section 2(b) shall so advise the Company in writing within 15 days after the date of receipt of such notice from the Company (which request shall set forth the number of Registrable Securities for which registration is requested). The Company shall include in such Registration Statement all such Registrable Securities so requested to be therein, and, if such registration is an Underwritten Registration, the Company shall use commercially reasonable efforts to cause the managing underwriter or underwriters to permit the Registrable Securities requested to be included in the registration statement for such offering to be included (on the same terms and conditions as similar securities of the Company included therein to the extent appropriate); provided, however, that if the managing underwriter or underwriters of such offering informs the holder of such Registrable Securities that the total number of securities that the Company, the holders of such Registrable Securities, or other persons propose to include in such offering is such that the success of the offering would be materially and adversely affected by inclusion of the securities requested to be included, then the amount of securities to be offered for the accounts of the Company, the holders of Registrable Securities and other holders registering securities pursuant to registration rights shall be allocated as follows: (i) if such registration has been initiated by the Company as a primary offering, first to the securities sought to be included by the Company, second to the Registrable Securities sought to be included by the holders thereof and the securities sought to be included by other holders of registration rights whose rights are not expressly subordinated to the rights of holders of Registrable Securities, pro rata, on the basis of the number of securities proposed to be included in such offering by each such holder, and third to all other securities sought to be included by holders of registration rights whose rights are expressly subordinated to the rights of holders of Registrable Securities, pro rata, on the basis of the number of 4 securities proposed to be included in such offering by each such holder; and (ii) if such registration has been initiated by another holder of registration rights (other than pursuant to Section 2(a) hereof), first to the securities sought to be included by such demanding holder, second to the Registrable Securities sought to be included by the holders thereof and the securities sought to be included by other holders of registration rights whose rights are not expressly subordinated to the rights of holders of Registrable Securities, pro rata, on the basis of the number of securities proposed to be included in such offering, and third to the securities sought to be included by the Company and to all other securities sought to be included by other holders of registration rights whose rights are expressly subordinated to the rights of holders of Registrable Securities, pro rata, on the basis of the number of securities proposed to be included in such offering by the Company and each such holder. If the number of Registrable Securities sought to be registered pursuant to this Section 2(b) by a holder of Registrable Securities is reduced as provided above, such holder shall have the right to withdraw such holder's request for registration with respect to all of the Registrable Securities initially sought to be registered. 3. Hold-Back Agreements. Each holder of Registrable Securities agrees that, in connection with an underwritten public offering of Common Stock, upon the request of the Company or the principal underwriter managing such public offering, no shares of Common Stock held by such holder may be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such underwriter, as the case may be, for up to one hundred eighty (180) days after the effectiveness of the registration statement filed in connection with such offering, if all of the Company's directors and officers agree to be similarly bound, and releases from any and all lock-up agreements in connection with such offering are granted on a pro-rata basis. This Section 3 shall no longer apply six (6) months after the holder ceases to be an officer, director or 5% or more stockholder of the Company, as the case may be. 4. Registration Procedures. In connection with the Company's registration obligations pursuant to Section 2 hereof, the Company will use commercially reasonable efforts to effect such registration to permit the sale of such Registrable Securities in accordance with the intended method or methods of distribution thereof, and pursuant thereto the Company will use its commercially reasonable efforts to, as expeditiously as possible: (a) prepare and file with the SEC, as soon as practicable, a Registration Statement relating to the applicable registration on the appropriate form under the Securities Act, which form shall be available for the sale of the Registrable Securities in accordance with the intended method or methods of distribution thereof and shall include all financial statements of the Company, and use commercially reasonable efforts to cause such Registration Statement to become effective; provided that before filing a Registration Statement or Prospectus or any amendments or supplements thereto, including documents incorporated by reference after the filing of the Registration Statement, the Company will furnish one counsel selected by the 5 holders of a majority of the shares of Registrable Securities covered by such Registration Statement, copies of all such documents proposed to be filed, which documents, subject to compliance with applicable securities laws, will be subject to the review of such counsel, and the Company will not file any Registration Statement or amendment thereto or any Prospectus or any supplement thereto (excluding any documents incorporated by reference) to which such counsel shall reasonably object; and provided, further, that the Company shall have the right to delay filing or effectiveness of a Registration Statement filed pursuant to Section 2(a) hereto for up to 120 days if the Company's Board of Directors determines, in good faith, that the filing or effectiveness thereof could materially interfere with a pending extraordinary transaction involving the Company or bona fide financing plans of the Company or would require disclosure of information, the premature disclosure of which would not be in the best interests of the Company, but no further delays will be permitted; (b) prepare and file with the SEC such amendments and post-effective amendments to the Registration Statement as may be necessary to keep the Registration Statement effective for the applicable period specified, or such shorter period which will terminate when all Registrable Securities covered by such Registration Statement have been sold (and in connection therewith provide the Investor with the right to review and reasonably approve the description of the "plan of distribution" therein); cause the Prospectus to be supplemented by any required Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424 under the Securities Act; and comply with the provisions of all securities covered by such Registration Statement during the applicable period in accordance with the intended method or methods of distribution by the sellers thereof set forth in such Registration Statement or supplement to the Prospectus; the Company shall not be deemed to have used commercially reasonable efforts to keep a Registration Statement effective during the applicable period if it voluntarily takes any action that would result in selling holders of the Registrable Securities covered thereby not being able to sell such Registrable Securities during that period unless such action is required under applicable law; provided that the foregoing shall not apply to actions taken by the Company in good faith and for valid business reasons, including without limitation, merger, acquisition or divesture of assets or other material transaction, so long as the Company promptly thereafter complies with the requirements of Section 4(j) hereof, if applicable; (c) notify the selling holders of Registrable Securities promptly, and (if requested by any such Person) confirm such advice in writing, (1) when the Prospectus or any Prospectus supplement or post-effective amendment has been filed, and with respect to the Registration Statement or any post-effective amendment, when the same has become effective, (2) of any request by the SEC for amendments or supplements to the Registration Statement or the Prospectus or for additional information, (3) of the issuance by the SEC of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose, (4) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose and (5) of the happening of any event which makes any statement made in the Registration Statement, the Prospectus or any document incorporated therein by reference untrue or which requires the making of any changes in the Registration Statement, the Prospectus or any document incorporated therein by reference in order to make the statements therein not misleading; 6 (d) make every reasonable effort to obtain the withdrawal of any order suspending the effectiveness of the Registration Statement at the earliest possible moment; (e) furnish to each selling holder of Registrable Securities, without charge, at least one signed copy of the Registration Statement and any post-effective amendment thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits (including those incorporated by reference); (f) deliver to each selling holder of Registrable Securities, without charge, as many copies of the Prospectus (including each preliminary prospectus) and any amendment or supplement thereto as such Persons may reasonably request in order to facilitate the disposition of the Registrable Securities owned by such Person; the Company consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling holders of Registrable Securities in connection with the offering and sale of the Registrable Securities covered by the Prospectus or any amendment or supplement thereto; (g) prior to any public offering of Registrable Securities, use commercially reasonable efforts to register or qualify or cooperate with the selling holders of Registrable Securities and their respective counsel in connection with the registration or qualification of such Registrable Securities for offer and sale under the securities or blue sky laws of such jurisdictions as any seller reasonable requests in writing and do any and all other acts or things reasonably necessary or advisable to enable the disposition in such jurisdictions of the Registrable Securities covered by the Registration Statement; (h) cooperate with the selling holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends except as required by the Certificate of Incorporation of the Company; and enable such Registrable Securities to be in such denominations and registered in such names as the holders of such Registrable Securities may request at least two business days prior to any sale of Registrable Securities (i) use commercially reasonable efforts to cause the Registrable Securities covered by the applicable Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to enable the seller or sellers thereof to consummate the disposition of such Registrable Securities; (j) upon the occurrence of any event contemplated by Section 4(c)(5) above, subject to the Company's ability to postpone the preparation of such supplement or amendment pending the public announcement of a material event such as a merger or acquisition or divestiture of assets, prepare a supplement or post-effective amendment to the Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to the purchasers of the Registrable Securities, the Prospectus will not contain an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading; 7 (k) cause all shares owned by the holders of Registrable Securities covered by the Registration Statement to be listed on each securities exchange on which similar securities issued by the Company are then listed; (l) make available for inspection by representatives of the holders of the Registrable Securities and any attorney or accountant retained by the sellers, all financial and other records, pertinent corporate documents and properties of the Company and cause the Company's officers, directors and employees to supply all information reasonably requested by any such representative, attorney or accountant in connection with such registration; provided that any records, information or documents that are designated by the Company in writing as confidential shall be kept confidential by such Persons unless disclosure of such records, information or documents is required by court or administrative order; The Company may require each seller of Registrable Securities as to which any registration is being effected to furnish to the Company such information regarding the distribution of such securities as the Company may from time to time reasonably request in writing and to enter into agreements related to the distribution of the Registrable Securities that are designed to ensure compliance with the Exchange Act. Each holder of Registrable Securities agrees by acquisition of such Registrable Securities that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(j) hereof, such holder will forthwith discontinue disposition of Registrable Securities until such holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 4(j) hereof, or until it is advised in writing (the "ADVICE") by the Company that the use of the Prospectus may be resumed, and has received copies of any additional or supplemental filings which are incorporated by reference in the Prospectus, and, if so directed by the Company such holder will deliver to the Company (at the Company's expense), all copies, other than permanent file copies then in such holder's possession, of the Prospectus covering such Registrable Securities current at the time of receipt of such notice. 5. Registration Expenses. All expenses incident to the Company's performance of or compliance with this Agreement, including without limitation: all registration and filing fees; all fees associated with a required listing of the Registrable Securities on any securities exchange; fees and expenses with respect to filings required to be made with the NASD; fees and expenses of compliance with securities or blue sky laws (including fees and disbursements of counsel for the underwriters in connection with blue sky qualifications of the Registrable Securities and determination of their eligibility for investment under the laws of such jurisdictions as the managing underwriters or holders of a majority of the Registrable Securities being sold may designate); printing expenses, messenger, telephone and delivery expenses; fees and disbursements of counsel for the Company and customary fees and expenses for independent certified public accountants retained by the Company (including the expenses of any comfort letters or costs associated with the delivery by independent certified public accountants of a comfort letter or comfort letters requested pursuant to Section 4(m) hereof); securities acts liability insurance, if the Company so desires; all internal expenses of the Company (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties); the expense of any annual audit; and the fees and expenses of any Person, including special experts, retained by the Company (all such expenses being herein called 8 "REGISTRATION EXPENSES") will be borne by the Company regardless of whether the Registration Statement becomes effective. The Company shall not have any obligation to pay any underwriting fees, discounts, or commissions attributable to the sale of Registrable Securities or fees and expenses of counsel to the holders of Registrable Securities. 6. Indemnification Contribution. (a) Indemnification by Company. The Company agrees to indemnify and hold harmless each holder of Registrable Securities and its partners, and their respective officers, directors, employees, and Affiliates, and each Person who controls such Person (within the meaning of section 15 of the Securities Act or Section 20 of the Exchange Act) against all losses, claims, damages, liabilities and expenses arising out of or based (i) upon any untrue or alleged untrue statement of a material fact contained in any Registration Statement, Prospectus or preliminary prospectus (including any amendments or supplements thereto), (ii) any omission or alleged omission to state therein a material required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation by the Company of the Securities Act, any state securities or "blue sky" laws or any rule or regulation thereunder, except insofar as the same are caused by or contained in any information furnished in writing to the Company by the holders of Registrable Securities expressly for use therein. The Company will also indemnify underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, their officers and directors and each Person who controls such Persons (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) to the same extent as provided above with respect to the indemnification of the holders of Registrable Securities, if requested. (b) Indemnification by Holder of Registrable Securities. Each holder of Registrable Securities agrees to indemnify and hold harmless the Company, each other holder and their respective directors, officers, employees, and Affiliates and each Person who controls the Company and as such other Person (within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act) against any losses, claims, damages, liabilities and expenses resulting from any untrue statement of a material fact or any omission of a material fact required to be stated in the Registration Statement or Prospectus or preliminary prospectus or necessary to make the statements therein not misleading, to the extent, but only to the extent, that such untrue statement or omission is contained in any information or affidavit so furnished in writing by such holder to the Company specifically for inclusion in such Registration Statement or Prospectus. In no event shall the liability of any selling holder of Registrable Securities hereunder exceed the lesser of (i) that proportion of the losses, claims, damages, expenses and liabilities against which is equal to such selling holder's proportion of the total securities sold under such registration statement, and (ii) the dollar amount of the proceeds received by such holder upon the sale of the Registrable Securities giving rise to such indemnification obligation. The Company shall be entitled to receive indemnities from underwriters, selling brokers, dealer managers and similar securities industry professionals participating in the distribution, to the same extent as provided above with respect to information so furnished in writing by such Persons specifically for inclusion in any Prospectus or Registration Statement. (c) Conduct of Indemnification Proceedings. Any Person entitled to indemnification hereunder will (i) give prompt notice to the indemnifying party of any claim 9 with respect to which it seeks indemnification and (ii) permit such indemnifying party to assume the defense of such claim with counsel reasonably satisfactory to the indemnified party; provided, however, that any Person entitled to indemnification hereunder shall have the right to employ separate counsel and to participate in the defense of such claim, but the fees and expenses of such counsel shall be at the expense of such Person unless (a) the indemnifying party has agreed to pay such fees or expenses, (b) the indemnifying party shall have failed to assume the defense of such claim and employ counsel reasonably satisfactory to such Person or (c) based upon advice of counsel of such Person, a conflict of interest may exist between such Person and the indemnifying party with respect to such claims (in which case, if the Person notifies the indemnifying party in writing that such Person elects to employ separate counsel at the expense of the indemnifying party, the indemnifying party shall not be permitted to assume the defense of such claim on behalf of such Person), in each of which events the fees and expenses of such counsel shall be at the expense of the indemnifying party. The indemnifying party will not be subject to any liability for any settlement made without its consent (but such consent will not be unreasonably withheld), but if settled with its written consent, or if there be a final judgment for the plaintiff in any such action or proceeding, the indemnifying party shall indemnify and hold harmless the indemnified parties from and against any loss or liability (to the extent stated above) by reason of such settlement or judgment. No indemnified party will be required to consent to entry of any judgment or enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of a release from all liability in respect to such claim or litigation. (d) Contribution. If for any reason the indemnification provided for in the preceding clauses (a) and (b) is unavailable to an indemnified party or insufficient to hold it harmless as contemplated by the preceding clauses (a) and (b), then each indemnifying party shall contribute to the amount paid or payable by the indemnified party as a result of such loss, claim, damage or liability in such proportion as is appropriate to reflect not only the relative benefits received by the indemnified party and each such indemnifying party, but also the relative fault of the indemnified party and each such indemnifying party, as well as any other relevant equitable considerations, provided, that no holder of Registrable Securities shall be required to contribute an amount which exceeds the lesser of (i) that proportion of the losses, claims, damages, expenses and liabilities against which is equal to such selling holder's proportion of the total securities sold under such registration statement, and (ii) the dollar amount of the proceeds received by such holder with respect to the sale of the Registrable Securities giving rise to such indemnification obligation. The relative fault of the Company on the one hand and of the selling holders on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by such party, and the parties' relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentations. 7. Rule 144. The Company hereby agrees that it will file the reports required to be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted by the SEC thereunder, and it will take such further action as any holder of Registrable Securities may reasonably request, all to the extent required from time to time to enable such 10 holder to sell Registrable Securities without registration under the Securities Act within the limitation of the exemptions provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time, or (b) any similar rule or regulation hereafter adopted by the SEC. Upon the request of any holder of Registrable Securities, the Company will deliver to such holder a written statement as to whether it has complied with such information and requirements. 8. Participation in Underwritten Registrations. No Person may participate in any Underwritten Registration hereunder unless such Person (i) agrees to sell such Person's securities on the basis provided in any underwriting arrangements approved by the Persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents required under the terms of such underwriting arrangements. Nothing in this Section 8 shall be construed to create any additional rights regarding the registration of Registrable Securities in any Person otherwise than as set forth herein. 9. Miscellaneous. (a) Remedies. Each party hereto, in addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, will be entitled to specific performance of its rights under this Agreement to the extent available under applicable law. Each party hereto agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) Amendment and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given without the written consent of the Company and holders of at least 75% of the then outstanding Registrable Securities. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telecopier, or air courier guaranteeing overnight delivery: (i) if to the Investor, at the most current address given by the Investor to the Company, in accordance with the provisions of this subsection, which address initially is 1857 N. Fremont Street, Chicago, Illinois 60614; (ii) if the Company, at the most current address given by the Company to the Investor, in accordance with the provision of this subsection, which address initially is 200 Crescent Court, Suite 1365, Dallas, Texas 75201, Attention: Chairman; and (iii) if to any transferee, at the address given by such transferee to the Company in accordance with the provisions of this subsection. 11 (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent holders of Registrable Securities; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Nonqualified Stock Option Agreement; and provided, further, that holders of Registrable Securities may not assign their rights under this Agreement except in connection with the permitted transfer of Registrable Securities and then only insofar as relates to such Registrable Securities. If any transferee shall acquire Registrable Securities, in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all of the terms of this Agreement, and such Person shall be entitled to receive the benefits hereof. (e) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (f) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof. (g) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF DELAWARE, WITHOUT REGARD TO ITS CONFLICTS OF LAWS PRINCIPLES. (h) Severability. In the event that any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected or impaired thereby. (i) Entire Agreement. This Agreement and the other related agreements executed concurrently herewith by the Company and the Investor are intended by the parties as a final expression of their agreement and intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein. Such agreements supersede all prior agreements and understandings between the parties with respect to such subject matter. * * * * * 12 IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement as of the date first set forth above. THE COMPANY: LIBERTE INVESTORS INC., a Delaware corporation By: /s/ Gerald J. Ford ----------------------------------------------- Name: Gerald J. Ford Title: Chairman INVESTOR: /s/ Donald J. Edwards ---------------------------------------------------- Donald J. Edwards 13 EX-10.1 4 d98262exv10w1.txt EMPLOYMENT AGREEMENT EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS AGREEMENT is made and entered into as of this 1st day of July, 2002, by and between LIBERTE INVESTORS INC., a Delaware corporation (the "COMPANY"), having a business address at 200 Crescent Court, Suite 1365, Dallas, Texas 75201, and DONALD J. EDWARDS (the "EXECUTIVE"), having a mailing address at 1857 N. Fremont Street, Chicago, Illinois 60614. RECITALS The Board of Directors of the Company has determined that it is in the best interests of the Company to retain the Executive's services in accordance with the terms and conditions set forth herein. The Executive also wishes to serve in the employ of the Company in accordance with such terms and conditions. AGREEMENT NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the Company and the Executive hereby agree as follows: 1. EMPLOYMENT. Upon the terms and subject to the conditions contained in this Agreement, the Executive agrees to provide full-time services for the Company during the term of this Agreement. The Executive agrees to devote his best efforts to the business of the Company, and shall perform his duties in a diligent, trustworthy, and business-like manner, all for the purpose of advancing the business of the Company. The parties acknowledge that during the term of this Agreement, the Executive also may conduct investment activities through one or more newly organized investment funds (the "EQUITY INVESTMENT FUNDS"), and as an executor, a trustee, an officer and/or a director of entities with whom the Executive has had a continuing relationship so long as such activities do not interfere in any material way with the Executive's duties hereunder, and furthermore that nothing contained herein shall be deemed to prevent or limit the Executive's right to (i) engage in religious, charitable or other non-profit activities, (ii) make passive investments in the securities of any publicly-owned corporation as contemplated by Section 11 herein, and (iii) make any other passive investments which do not conflict with Section 11 herein and which do not otherwise constitute a breach of Executive's duty of loyalty to the Company or interfere in any material respect with the Executive's duties hereunder. 2. CAPACITY AND DUTIES. (a) The Executive shall serve the Company as and shall have the title of President and Chief Executive Officer. The duties of the Executive shall be those duties which can reasonably be expected to be performed by a person with the titles of President and Chief Executive Officer, and he will be responsible for supervision and general management of the business and operations of the Company. The Executive shall report directly and regularly to the Board of Directors of the Company. The duties to be performed under this Agreement shall be performed primarily at the office of the Company to be established in Chicago, Illinois (the "CHICAGO OFFICE"), subject to reasonable travel requirements on behalf of the Company. (b) The Company agrees that the Executive shall be elected as a Director of the Company substantially concurrently with the execution of this Agreement, and the Company shall nominate and use its commercially reasonable efforts to cause the election of the Executive as a Director during any period in which he serves as an employee of the Company. (c) Each of the Company and the Executive acknowledges that a principal goal of the Company and its management will be to purchase a controlling interest in and to actively manage one or more operating companies (each such transaction involving the acquisition of a majority equity interest, an "ACQUISITION TRANSACTION") that can be consolidated for tax purposes and to operate such companies; provided that the business of the Company may involve the acquisition of minority interests from time to time. The Executive will use his reasonable best efforts to manage the Company within the budget approved by the Board of Directors of the Company from time to time. It is envisioned that the initial budget for the Company following the Effective Date will provide for total operating expenses of the Company (excluding expenses relating to the pursuit of an Acquisition Transaction) of not more than $2,000,000 per year (including management salaries) in excess of the Company's most recent annual expenditures (the "ANNUAL BUDGETED AMOUNT") prior to the consummation of an Acquisition Transaction. It is contemplated that this limitation on operating expenses will not include initial capital expenditures by the Company ("INITIAL CAPITAL EXPENDITURES") arising in connection with the Company's establishment of the Chicago Office (e.g., tenant improvement expenses and costs relating to initial equipment purchases), and that all such Initial Capital Expenditures will be borne by the Company and one of the Equity Investment Funds and will be allocated in amounts to be determined by the Company and such Equity Investment Fund at a later date. The Company hereby agrees to fund operating expenses of not less than the Annual Budgeted Amount in pursuit of Acquisition Transactions through the consummation of the first such Acquisition Transaction. The Executive will submit budgets for approval by the Board of Directors from time to time in accordance with requests of the Board of Directors. (d) To assist Executive in the performance of his duties hereunder, the Company may obtain corporate services from either of the following two sources: (i) the Company may hire (on terms reasonably similar to those relating to Executive, other than base salary and stock arrangements) additional employees to assist Executive in sourcing and identifying possible Acquisition Transactions, or (ii) the Company may obtain corporate services from employees of the Equity Investment Funds. 3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the Company agrees to employ the Executive for a term commencing as of July 1, 2002 (the "EFFECTIVE DATE") and continuing through July 1, 2007, 2 unless renewed under this Section 3. Beginning with July 1, 2007, this Agreement may be renewed by the parties each July 1 for successive one-year terms, provided that the Company and the Executive agree upon such renewal in writing at least 270 days before the applicable July 1. As used herein, all references to the "TERM OF THIS AGREEMENT" shall be deemed to be to the original term of this Agreement, unless such term is renewed as provided above, in which case such references shall be deemed to be the original term plus each renewed term. 4. SALARY AND BENEFITS. (a) Base Salary. The Company shall, during the term of this Agreement, pay the Executive an annual base salary of $500,000 beginning on the Effective Date, pro rated for periods of fewer than 12 months ("BASE SALARY"). Such Base Salary shall be paid in semi-monthly installments less applicable withholding and salary deductions. (b) Bonus. The Executive shall be eligible to be paid an annual bonus as determined by the Board of Directors based on the recommendations of the Executive. (c) Executive Benefit Plans. The Executive shall receive medical and dental insurance coverage for himself and his family on terms and in amounts consistent with medical and dental insurance coverage generally provided for chief executive officers of public companies. In addition, the Executive shall be eligible to participate in any benefit plans maintained by the Company for the benefit of its senior executives, subject to the terms and conditions of the related benefit plans. (d) Paid Time Off. The Executive shall be entitled to paid time off ("PTO") during each full year of his employment hereunder in accordance with the applicable policies adopted by the Company. In no event shall Executive be entitled to fewer than four weeks PTO during any calendar year. Such PTO shall be taken at such times as are consistent with the reasonable business needs of the Company. (e) Reimbursement of Expenses. The Company shall reimburse the Executive for all reasonable out-of-pocket expenses incurred by the Executive in the course of his duties, in accordance with normal policies, and in connection with the negotiation and preparation of (i) this Agreement, and (ii) the Stock Option Agreement (defined below), the related registration rights agreement and the indemnification agreement executed concurrently herewith (collectively, the "TRANSACTION AGREEMENTS"). (f) Office. The Company shall establish, or cause to be established, and maintain (including the payment of rent, repairs, utilities, furnishings, improvements, insurance, and all other reasonable ancillary costs), in addition to its offices at 200 Crescent Court, Suite 1365, Dallas, Texas 75201, the Chicago Office. The lease relating to the Chicago Office will be held in the name of the Company or one of the Equity Investment Funds, or by both entities jointly. (g) Insurance. The Company will provide exculpation and indemnification (including advancement of expenses) to the maximum extent permitted by law under its 3 charter and by-laws and in accordance with the terms and conditions of an indemnification agreement executed by the Company and Executive contemporaneously herewith. The Company also will use commercially reasonable efforts to maintain in effect a director and officer insurance policy with a reputable insurer in an amount of not less than $10 million, naming Executive as a named insured and subject to the terms and conditions set forth in the policy previously delivered by the Company to Executive. (h) Stock Arrangements. Substantially concurrently herewith, the Company will grant the Executive an aggregate of 2,573,678 nonqualified stock options ("OPTIONS") pursuant to a Nonqualified Stock Option Agreement (the "STOCK OPTION AGREEMENT") in the form attached hereto as Exhibit A, representing 10% of the Company's fully diluted capital stock as of the date hereof (with such fully diluted calculation including the 10% Management Equity pool referred to in the following paragraph and the 333,333 shares of the Company's common stock (subject to adjustment in the event of stock splits and the like) which may be acquired by the Executive within one (1) year of the date hereof, as provided below (the "PURCHASED SHARES")); provided, however, that in the event that the number of Purchased Shares acquired by the Executive within one (1) year of the date hereof is less than 333,333 shares of common stock, then the number of nonqualified stock options granted to the Executive under the Stock Option Agreement shall be adjusted accordingly. The Stock Option Agreement also includes the agreement of the Company to grant additional stock options (the "ADDITIONAL GRANT") to the Executive in order to maintain Executive's 10% fully diluted equity ownership position in the Company under certain circumstances, as set forth in Section 12 of the Stock Option Agreement. The grant of Options to the Executive and the adoption of the related incentive plan (the "PLAN") are subject to stockholder approval. The Company shall use commercially reasonable efforts to secure stockholder approval of the Plan and the grant of the Options to the Executive (together with approval of the Additional Grant and related Plan amendments, if necessary) at its next meeting of stockholders following the Effective Date. The Company hereby further agrees to reserve and make available for grant to the Company's employees (other than Executive) as options, stock awards or otherwise additional shares of its Common Stock (the "MANAGEMENT EQUITY"), representing an additional 10% of the Company's fully diluted capital stock as of the date hereof (with such fully diluted calculation including the Options granted to the Executive pursuant to the Stock Option Agreement (as adjusted in accordance with the immediately preceding paragraph) and the Purchased Shares), and shall reserve additional shares in the event additional options are granted to the Executive as part of the Additional Grant to enable such Management Equity to maintain a 10% fully diluted equity ownership position in the Company including all options granted to the Executive pursuant to the Stock Option Agreement and the Purchased Shares; provided, however, that in the event that the number of Purchased Shares acquired by the Executive is less than 333,333 shares of common stock, then the Management Equity granted or issued under the Stock Option Agreement shall be adjusted accordingly. Such Management Equity shall have the same exercise price as the Executive's stock options and shall otherwise be on such terms as the Executive shall approve or recommend. The Company agrees that the Executive will have full discretion as to the allocation and terms 4 of all Management Equity awards referred to in this Section 4(h); provided, however, that the Executive may, at his discretion, request that a committee established pursuant to the terms of the Plan grant such Management Equity awards. The Company will use commercially reasonable efforts to ensure that the Purchased Shares and all options granted to the Executive pursuant to the Stock Option Agreement (including the Additional Grant, if applicable) will qualify for exemption under Rule 16b-3 under Section 16 of the Securities Exchange Act of 1934, as amended. Within one (1) year of the date hereof, the Executive may purchase the Purchased Shares from the Company at a price equal to $3.00 per Purchased Share. In connection therewith, the Company will make a nonrecourse loan or loans, on substantially the terms of the promissory note attached hereto as Exhibit B (the "NOTE"), to the Executive in an amount equal to the highest marginal rate of tax applicable to such amount for federal, state and local income taxes (the "PURCHASED SHARE TAX") incurred by the Executive directly as a result of his purchase of the Purchased Shares. The Company further agrees to pay a cash bonus to the Executive on each date on which interest is due under the terms of the Note in an amount equal to the amount of the respective interest payment then due to the Company. (i) Benefits Not in Lieu of Compensation. No benefit or perquisite provided to the Executive shall be deemed to be in lieu of base salary, bonus, or other compensation. (j) COBRA. Nothing herein shall be construed to limit the right of the Executive or his family to receive continuation of group health plan benefits to the extent authorized by and consistent with 29 U.S.C. Section 1161 et seq. (commonly known as "COBRA"). 5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may terminate the employment of the Executive at any time as it deems appropriate, and the Executive may resign such employment. The following provisions shall apply with respect to the termination of the Executive's employment: (a) Death. If the Executive shall die before termination of his employment hereunder, the Executive's estate shall be entitled to receive continued payments in an amount equal to 60% of the Executive's Base Salary at the time of his death during the remaining term of this Agreement (in accordance with Section 4(a) above). (b) Disability. The Company may terminate the Executive's employment for disability if the Executive is incapacitated and absent from his duties hereunder on a full-time basis for six consecutive months or for at least 180 days during any 12-month period as a result of mental or physical illness or physical injury. If, during the term of this Agreement, the Executive's employment terminates due to disability: (i) The Executive shall be entitled to receive continued payments in an amount equal to 60% of the Executive's Base Salary at the time of such termination 5 through the remaining term of this Agreement (in accordance with Section 4(a) above). (ii) The Company shall maintain in full force and effect and on substantially the same terms for the continued benefit of the Executive and his family, during the remaining term of this Agreement, medical and dental coverage and all other employee benefit plans and programs or arrangements in which the Executive was entitled to participate immediately prior to the date of termination of employment, provided that his continued participation in such other plans and programs or arrangements is possible under the general terms and provisions of such plans and programs or arrangements. In the event that the participation of the Executive or his family in any such plan and program or arrangement is barred, the Company shall arrange to provide the Executive and his family with benefits substantially similar to those which they are entitled to receive under such plans and programs or arrangements. At the end of the period of coverage, the Executive shall have the option to have assigned to him at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company and relating specifically to him. No provision of this Agreement shall be deemed to waive any rights of the Executive under the Family and Medical Leave Act of 1993, 29 U.S.C. Section 2601 et seq. and the Americans with Disabilities Act, 42 U.S.C. Section 12101 et seq. (c) Voluntary Resignation or Termination for Cause. If the Executive shall voluntarily terminate his employment for other than Good Reason or if the Company shall discharge the Executive for Cause, this Agreement shall terminate immediately and the Company shall be obligated to pay the Executive only the following amounts: (i) any unpaid Base Salary due to the Executive in accordance with Section 4(a) above for all periods prior to the date of termination of employment, and (ii) Executive's accrued PTO. Further, in the event the Executive voluntarily terminates his employment other than for Good Reason within the 90-day period following any Change of Control (as defined in the Company's 2001 Long-Term Incentive Plan as in effect on the date hereof), the Company shall promptly make a lump sum payment to Executive equal to the present value of one year's Base Salary at the rate then in effect (based on an interest rate of 4.75% per annum) and shall maintain in full force and effect and on substantially the same terms for one year following such termination all benefit plans, programs and arrangements in which the Executive and his family were entitled to participate immediately prior to the date of the Change of Control. (d) Termination Without Cause; Resignation for Good Reason. If, during the term of this Agreement, the Executive's employment is terminated by the Company without Cause or the Executive voluntarily terminates his employment for Good Reason (the date of such termination being referred to herein as the "DATE OF TERMINATION"): (i) The Company shall pay the Executive (A) any unpaid Base Salary due to the Executive in accordance with Section 4(a) above for all periods prior to the Date of Termination, (B) the Executive's accrued PTO, and (C) promptly following 6 the Date of Termination, a lump sum amount equal to the present value (based on a rate of 4.75% per annum) of all remaining Base Salary obligations through the end of the term of this Agreement plus an amount equal to the higher of the Executive's most recent annual bonus or target bonus agreed upon by the Board of Directors for the year in which termination occurs; and (ii) The Company shall maintain in full force and effect and on substantially the same terms for the continued benefit of the Executive and his family, during the remaining term of this Agreement, the medical and dental insurance benefits provided under Section 4(c) herein and all other employee benefit plans and programs or arrangements in which the Executive was entitled to participate immediately prior to the Date of Termination, provided that his continued participation in such other plans and programs or arrangements is possible under the general terms and provisions of such plans and programs or arrangements. In the event that the Executive's participation in any such plan or program or arrangements is barred, the Company shall arrange to provide the Executive with benefits substantially similar to those which he is entitled to receive under such plans and programs. At the end of the period of coverage, the Executive shall have the option to have assigned to him at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Company and relating specifically to him. (e) Definitions. For the purposes of this Agreement, "CAUSE" shall mean (A) the willful and continued failure by the Executive to substantially perform his duties with the Company (other than any such failure resulting from incapacity due to physical or mental illness), after a demand for substantial performance is delivered to the Executive by the Board of Directors which specifically identifies the manner in which the Board of Directors believes that he has not substantially performed his duties and the failure by the Executive to cure such failure within 30 days after delivery of such demand, or (B) the willful engaging by the Executive in gross misconduct materially and demonstrably injurious to the Company, or (C) Executive's personal dishonesty, willful misconduct, breach of fiduciary duty of loyalty involving personal profit, willful violation of any law, rule, or regulation (other than traffic violations or similar offenses) or final cease-and-desist order, or (D) Executive's material breach of any provision of this Agreement and the failure to cure such breach within 30 days following notice thereof by the Company. For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done, or omitted to be done, by him not in good faith and without reasonable belief that his action or omission was not in the best interest of the Company. Notwithstanding the foregoing, the Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to him a copy of a resolution duly adopted by the affirmative vote of not less than two-thirds (2/3) of the entire authorized membership of the Board of Directors at a meeting of the Board of Directors called and held for the purpose (after reasonable notice and an opportunity for the Executive, together with counsel, to be heard before the Board of Directors), finding that in the good faith opinion of the Board of Directors he was guilty of conduct set forth above in clauses (A), (B), (C) or (D) of the first sentence of this paragraph 7 and specifying the particulars thereof in detail. Any such determination shall remain subject to review by arbitration in the event of a dispute, as described in Section 15 below. For purposes of this Agreement, "GOOD REASON" shall mean: (i) Without the Executive's express written consent, the assignment to the Executive of any duties inconsistent with his positions, duties, responsibilities and status with the Company, or a change in his reporting responsibilities, titles or offices, or any removal of the Executive from or any failure to re-elect the Executive to any of such positions (including, without limitation, the failure of the Executive at any time to be elected as a Director of the Company as provided for herein), except in connection with the termination of his employment by the Company for Cause, by the Executive other than for Good Reason, or as a result of the Executive's disability or death; (ii) The Company's requiring the Executive, without his express written consent, to be based at a location more than 50 miles away from the Chicago Office; or (iii) Any breach by the Company of any of its payment, benefit or other material financial obligations (including obligations with respect to stock option grants) under this Agreement or any of the Transaction Agreements or any event resulting in Executive not receiving one or more of the benefits or rights contemplated by this Agreement or any of the Transaction Agreements (including, without limitation, the Company's failure to obtain stockholder approval of the Plan and the grant of the Options to Executive, as contemplated by Section 4(h) herein, and the Company's failure to fund the Annual Budgeted Amount in pursuit of an Acquisition Transaction as contemplated by Section 2(c) herein), which breach has not been cured within 30 days after written notice from Executive. (f) Effect of Termination on Other Arrangements. The effect of any termination of employment of Executive under any stock option plan, restricted stock plan, incentive plan, deferred compensation arrangement or other benefit plan or program in which Executive is participating at the time of termination of his employment shall be determined in accordance with the terms, conditions and limitations of the relevant agreement between the Executive and the Company; provided, however, that the Company shall continue to provide medical and dental insurance coverage and the other employee benefits plans and programs or arrangements as contemplated by this Section 5. Furthermore, the Company agrees that after the termination of the Executive's employment, the Executive will no longer be subject to any "insider trading" or similar policy of the Company which would have the effect of restricting Executive's ability to sell, transfer or assign any equity securities of the Company; provided that the Executive shall remain subject to all applicable laws proscribing trading in Company securities while possessing material, non-public information. 8 (g) Gross-Up Payments. Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution made, or benefit provided, by the Company to or for the benefit of the Executive (whether paid or payable or distributed or distributable or provided pursuant to the terms hereof or otherwise) would constitute a "parachute payment" as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the "CODE"), then the Company shall pay to the Executive in cash bonuses equal to the amount of (i) any excise taxes imposed on such "parachute payment" under Section 4999 of the Code and (ii) any taxes on such bonuses. (h) No Mitigation. The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor shall the amount of any payment provided for herein be reduced by any compensation earned by the Executive as a result of employment by another employer or by retirement benefits after the Date of Termination or otherwise. 6. CONFIDENTIAL INFORMATION. The Company will provide Executive access to certain information of members of the Company Group (as defined below), including information that is confidential and constitutes valuable, special and unique property of such members of the Company Group. The Executive shall not at any time, either during or subsequent to the term of this Agreement, disclose to others, use, copy or permit to be copied, except in pursuance of his duties for and on behalf of the Company, its successors, assigns or nominees, any Confidential Information (as defined below) of any member of the Company Group (regardless of whether developed by the Executive) without the prior written consent of the Company, except as required (A) at the express direction of any authorized governmental entity; (B) pursuant to a subpoena or other court process; (C) as otherwise required by law or the rules, regulations or orders of any applicable regulatory body; or (D) as otherwise necessary, in the opinion of counsel for Executive, to be disclosed by Executive in connection with the prosecution of any legal action or proceeding initiated by Executive against the Company or any of its subsidiaries or the defense of any legal action or proceeding initiated against Executive in his capacity as an employee or director of the Company or any of its subsidiaries. As used herein, "COMPANY GROUP" means the Company, and any entity that directly or indirectly controls, is controlled by, or is under common control with, the Company, and for purposes of this definition "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such entity, whether through the ownership of voting securities, by contract or otherwise; provided that no entity in which the Company has made an investment but of which the Company owns less than a 50% interest shall be deemed a member of the "Company Group." The term "CONFIDENTIAL INFORMATION" with respect to any person means any secret or confidential information or know-how and shall include, but shall not be limited to, the plans, customers, costs, prices, uses, and applications of products and services, results of investigations, studies or experiments owned or used by such person, and all apparatus, products, processes, compositions, samples, formulas, computer programs, computer hardware designs, computer firmware designs, and servicing, marketing or manufacturing methods and techniques at any time 9 used, developed, investigated, made or sold by such person, before or during the term of this Agreement, that are not readily available to the public or that are maintained as confidential by such person; provided, however, that Confidential Information shall not include (i) information that is generally available to the public other than by reason of breach of this Agreement by the Executive and (ii) information received by the Executive from a third party not known to him to be under an obligation of confidentiality to the Company. The Executive shall maintain in confidence any Confidential Information of third parties received as a result of his employment with the Company in accordance with the Company's obligations to such third parties and the policies established by the Company. 7. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver to the Company or its designee at the termination of his employment all correspondence, memoranda, notes, records, drawings, sketches, plans, customer lists, product compositions, and other documents and all copies thereof, made, composed or received by the Executive, solely or jointly with others, that are in the Executive's possession, custody, or control at termination and that are related in any manner to the past, present, or anticipated business or any member of the Company Group. In this regard, the Executive hereby grants and conveys to the Company all right, title and interest in and to, including without limitation, the right to possess, print, copy, and sell or otherwise dispose of, any reports, records, papers, summaries, photographs, drawings or other documents, and writings, and copies, abstracts or summaries thereof, that may be prepared by the Executive or under his direction or that may come into his possession in any way during the term of his employment with the Company that relate in any manner to the past, present or anticipated business of any member of the Company Group. 8. DISCLOSURE AND RECEIPT OF CONFIDENTIAL INFORMATION. The Executive shall not use or disclose to other employees of the Company, during his employment with the Company, Confidential Information belonging to his former employers, former business associates, or any other third parties unless written permission has been given by such third parties to the Company and accepted by the Company to allow the Company to use and/or disclose such information. 9. INTELLECTUAL PROPERTY. The Executive shall hold in trust for the benefit of the Company, and shall disclose promptly and fully to the Company in writing, and hereby assigns, and binds his heirs, executors, and administrators to assign, to the Company any and all inventions, discoveries, ideas, concepts, improvements, copyrightable works, and other developments (the "DEVELOPMENTS") conceived, made, discovered or developed by him, solely or jointly with others, during the term of his employment by the Company, whether during or outside of usual working hours and whether on the Company's premises or not, that relate in any manner to the past, present or anticipated business of any member of the Company Group. All works of authorship created by the Executive, solely or jointly with others, shall be considered works made for hire under the Copyright Act of 1976, as amended, and shall be owned entirely by the Company. Any and all such Developments shall be the sole and exclusive property of the Company, whether patentable, copyrightable, or neither, and the Executive shall assist and fully cooperate in every way, at the Company's expense, in securing, maintaining, and enforcing, for the benefit of the Company or its designee, patents, copyrights or other types of proprietary or intellectual property protection for such Developments in any and all countries. 10 10. FURTHER ACTS. At the request of the Company (but without additional compensation from the Company during his employment by the Company) the Executive shall execute any and all papers and perform all lawful acts that the Company may deem necessary or appropriate to further evidence or carry out the transactions contemplated in this Agreement including, without limitation, such acts as may be necessary for the preparation, filing, prosecution, and maintenance of applications for United States letters patent and foreign letters patent, or for United States and foreign copyright, on the Developments. 11. NO COMPETITION. Beginning on the closing date of the first Acquisition Transaction and continuing throughout the period in which the Executive serves as an employee of the Company and for one year thereafter, the Executive shall not directly or indirectly engage in any business that competes with the business of the Company as such business may exist from time to time or, following the termination of the Executive's employment, as such business may exist on the date of such termination (it being understood that the business of the Company shall be deemed to refer to the business or businesses of its operating subsidiaries acquired in Acquisition Transactions and not to the investment business generally); provided, however, that the restriction in this Section 11 shall apply only to the reasonable and limited geographic area consisting of any state in which the Company directly or indirectly conducts business as contemplated above. For purposes of this Section 11, the Executive shall be deemed to engage in a business if he directly or indirectly engages or invests in, owns, manages, operates, controls or participates in the ownership, management, operation or control of, is employed by, associated or in any manner connected with, or renders services or advice to, any business which competes with the business of the Company as defined herein; provided, further, that the Executive may invest in the securities of any enterprise if (x) such securities are listed on any national or regional securities exchange or have been registered under Section 12(g) of the Securities Exchange Act of 1934 and (y) the Executive does not beneficially own (as defined in Rule 13d-3 promulgated under the Securities Exchange Act of 1934) in excess of 5% of the outstanding capital stock of such enterprise. Notwithstanding any of the foregoing, in no event shall the Executive's activities with any Equity Investment Fund or in connection with any activities otherwise permitted under or contemplated in Section 1 of this Agreement be deemed a violation by Executive of this Section 11. The Executive agrees that if a court of competent jurisdiction determines that the length of time or any other restriction, or portion thereof, set forth in this Section 11 is overly restrictive and unenforceable, the court may reduce or modify such restrictions to those which it deems reasonable and enforceable under the circumstances, and as so reduced or modified, the parties hereto agree that the restrictions of this Section 11 shall remain in full force and effect. The Executive further agrees that if a court of competent jurisdiction determines that any provision of this Section 11 is invalid or against public policy, the remaining provisions of this Section 11 and the remainder of this Agreement shall not be affected thereby, and shall remain in full force and effect. The Executive acknowledges that the business of the Company is national in scope and that the restrictions imposed by this Agreement are legitimate, reasonable and necessary to protect the Company's investment in its businesses and the goodwill thereof. The Executive acknowledges that the scope and duration of the restrictions contained herein are reasonable. The Executive further 11 acknowledges that the restrictions contained herein are not burdensome to the Executive in light of the consideration paid therefor and the other opportunities that remain open to the Executive. Moreover, the Executive acknowledges that he has other means available to him for the pursuit of his livelihood. 12. NO TAMPERING. Throughout the period during which the Executive serves as an employee of the Company and for one year thereafter, the Executive shall not (a) request, induce or attempt to influence any distributor or supplier of goods or services to any member of the Company Group to curtail or cancel any business they may transact with any member of the Company Group; (b) request, induce or attempt to influence any customers of any member of the Company Group that is then doing business or which within the two-year period prior to Executive's termination of employment had done business with any member of the Company Group to curtail or cancel any business they may transact with any member of the Company Group; or (c) request, induce or attempt to influence any employee of any member of the Company Group (other than any employee with whom the Executive had a relationship prior to his employment relationship with the Company) to terminate his or her employment with such member of the Company Group. 13. PUBLICITY AND ADVERTISING. The Executive agrees that the Company may use his name, picture, or likeness for any advertising, publicity, or other business purpose at any time, during the term of this Agreement by the Company and may continue to use materials generated during the term of his employment and for a period of six months thereafter. Such use of the Executive's name, picture, or likeness shall not be deemed to result in any invasion of the Executive's privacy or in a violation of any property right the Executive may have; and the Executive shall receive no additional consideration if his name, picture or likeness is so used. The Executive further agrees that any negatives, prints or other material for printing or reproduction purposes prepared in connection with the use of his name, picture or likeness by the Company shall be and are the sole property of the Company. 14. REMEDIES. The Executive acknowledges that a remedy at law for any breach or attempted breach of the Executive's obligations under Sections 6 through 13 may be inadequate, agrees that the Company may be entitled to specific performance and injunctive and other equitable remedies in case of any such breach or attempted breach, and further agrees to waive any requirement for the securing or posting of any bond in connection with the obtaining of any such injunctive or other equitable relief. The termination of the Executive's employment pursuant to Section 3, 5(c) or 5(d) shall not be deemed to be a waiver by the Company of any breach by the Executive of this Agreement or any other obligation owed the Company, and notwithstanding such a termination the Executive shall be liable for all damages attributable to such a breach. 15. DISPUTE RESOLUTION. Subject to the Company's right to seek injunctive relief in court as provided in Section 14 of this Agreement, any dispute, controversy or claim arising out of or in relation to or in connection with this Agreement, including without limitation any dispute as to the construction, validity, interpretation, enforceability or breach of this Agreement, shall be exclusively and finally settled by arbitration, and any party may submit such dispute, controversy or claim, including a claim for indemnification under this Section 15, to arbitration. 12 (a) Arbitrators. The arbitration shall be heard and determined by one arbitrator, who shall be impartial and who shall be selected by mutual agreement of the parties; provided, however, that if the dispute involves more than $2,000,000, then the arbitration shall be heard and determined by three (3) arbitrators. If three (3) arbitrators are necessary as provided above, then (i) each side shall appoint an arbitrator of its choice within thirty (30) days of the submission of a notice of arbitration and (ii) the party-appointed arbitrators shall in turn appoint a presiding arbitrator of the tribunal within thirty (30) days following the appointment of the last party-appointed arbitrator. If (x) the parties cannot agree on the sole arbitrator, (y) one party refuses to appoint its party-appointed arbitrator within said thirty (30) day period or (z) the party-appointed arbitrators cannot reach agreement on a presiding arbitrator of the tribunal, then the appointing authority for the implementation of such procedure shall be the Senior United States District Judge for the Northern District of Illinois, who shall appoint an independent arbitrator who does not have any financial interest in the dispute, controversy or claim. If the Senior United States District Judge for the Northern District of Illinois refuses or fails to act as the appointing authority within ninety (90) days after being requested to do so, then the appointing authority shall be the Chief Executive Officer of the American Arbitration Association, who shall appoint an independent arbitrator who does not have any financial interest in the dispute, controversy or claim. All decisions and awards by the arbitration tribunal shall be made by majority vote. (b) Proceedings. Unless otherwise expressly agreed in writing by the parties to the arbitration proceedings: (i) The arbitration proceedings shall be held in Chicago, Illinois, at a site chosen by mutual agreement of the parties, or if the parties cannot reach agreement on a location within thirty (30) days of the appointment of the last arbitrator, then at a site in Chicago, Illinois chosen by the arbitrator(s); (ii) The arbitrator(s) shall be and remain at all times wholly independent and impartial; (iii) The arbitration proceedings shall be conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association, as amended from time to time; (iv) Any procedural issues not determined under the arbitral rules selected pursuant to item (iii) above shall be determined by the law of the place of arbitration, other than those laws which would refer the matter to another jurisdiction; (v) The costs of the arbitration proceedings (including reasonable attorneys' fees and costs) shall be borne in the manner determined by the arbitrator(s); (vi) The decision of the arbitrator(s) shall be reduced to writing; final and binding without the right of appeal; the sole and exclusive remedy regarding any 13 claims, counterclaims, issues or accounting presented to the arbitrator(s); made and promptly paid in United States dollars free of any deduction or offset; and any costs or fees incident to enforcing the award shall, to the maximum extent permitted by law, be charged against the party resisting such enforcement; (vii) The award shall include interest from the date of any breach or violation of this Agreement, as determined by the arbitral award, and from the date of the award until paid in full, at 6% per annum; and (viii) Judgment upon the award may be entered in any court having jurisdiction over the person or the assets of the party owing the judgment or application may be made to such court for a judicial acceptance of the award and an order of enforcement, as the case may be. (c) Acknowledgment Of Parties. Each party acknowledges that he or it has voluntarily and knowingly entered into an agreement to arbitration under this Section 15 by executing this Agreement. 16. MISCELLANEOUS PROVISIONS. (a) Successors of the Company. 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, by agreement in form and substance satisfactory to the Executive, expressly to assume 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; provided, that except as otherwise contemplated by the foregoing, the Company may not assign this Agreement without the prior written consent of the Executive. Failure of the Company to obtain such agreement prior to the effectiveness of any such succession shall be a breach of this Agreement and shall entitle the Executive to compensation from the Company in the same amount and on the same terms as the Executive would be entitled hereunder if the Executive terminated his employment for Good Reason, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 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 executes and delivers the agreement provided for in this Section 16 or which otherwise becomes bound by all the terms and provisions of this Agreement by operation of law. (b) Executive's Heirs, etc. The Executive may not assign his rights or delegate his duties or obligations hereunder without the written consent of the Company. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive should die while any amounts would still be payable to him hereunder as if he had continued to live, all such amounts, unless other provided herein, shall 14 be paid in accordance with the terms of this Agreement to his designee or, if there be no such designee, to his estate. (c) Notice. For the purposes of this Agreement, notices and all other communications provide for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States registered or certified mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notices to the Company shall be directed to the attention of the Chairman of the Company with a copy to the Secretary of the Company, or to such other in writing in accordance herewith, except that notices of change of address shall be effective only upon receipt. (d) Amendment; Waiver. No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and such officer as may be specifically designated by the Board of Directors of the Company. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not set forth expressly or referred to in this Agreement. (e) Invalid Provisions. Should any portion of this Agreement be adjudged or held to be invalid, unenforceable or void, such holding shall not have the effect of invalidating or voiding the remainder of this Agreement and the parties hereby agree that the portion so held invalid, unenforceable or void shall, if possible, be deemed amended or reduced in scope, or otherwise be stricken from this Agreement to the extent required for the purposes of validity and enforcement thereof. (f) Survival of the Executive's Obligations. The Executive's obligations under this Agreement shall survive regardless of whether the Executive's employment by the Company is terminated, voluntarily or involuntarily, by the Company or the Executive, with or without Cause or with or without Good Reason. (g) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. (h) Governing Law. This Agreement shall be governed by and construed under the laws of the State of Texas. (i) Captions and Gender. The use of captions and Section headings herein is for purposes of convenience only and shall not affect the interpretation or substance of any provisions contained herein. Similarly, the use of the masculine gender with respect to pronouns in this Agreement is for purposes of convenience and includes either sex who may be a signatory. * * * * * 15 IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the 1st day of July, 2002. LIBERTE INVESTORS INC., A DELAWARE CORPORATION By: /s/ Gerald J. Ford -------------------------------------- Name: Gerald J. Ford Title: Chief Executive Officer DONALD J. EDWARDS /s/ Donald J. Edwards ----------------------------------------- 16 EX-10.2 5 d98262exv10w2.txt 2002 LONG TERM INCENTIVE PLAN EXHIBIT 10.2 LIBERTE INVESTORS INC. 2002 LONG TERM INCENTIVE PLAN The Liberte Investors Inc. 2002 Long Term Incentive Plan (the "Plan") was adopted by the Board of Directors of Liberte Investors Inc., a Delaware corporation (the "Company"). This Plan shall become effective upon approval by the holders of a majority of the votes cast at a meeting of stockholders at which a quorum is present or by written consent in accordance with applicable law. Subject to such approval, Stock Options may be granted hereunder on and after the adoption of this Plan by the Board. ARTICLE 1 PURPOSE The purpose of the Plan is to foster and promote the long-term financial success of the Company and its Subsidiaries and materially increase the value of the Company and its Subsidiaries by (a) encouraging the long-term commitment of the Employees, Consultants, and Outside Directors of the Company and its Subsidiaries, (b) motivating performance of the Employees, Consultants, and Outside Directors of the Company and its Subsidiaries by means of long-term performance related incentives, (c) encouraging and providing Employees, Consultants, and Outside Directors of the Company and its Subsidiaries with an opportunity to obtain an ownership interest in the Company, (d) attracting and retaining outstanding Employees, Consultants, and Outside Directors by providing incentive compensation opportunities, and (e) enabling participation by Employees, Consultants, and Outside Directors in the long-term growth and financial success of the Company and its Subsidiaries. ARTICLE 2 DEFINITIONS For the purpose of the Plan, unless the context requires otherwise, the following terms shall have the meanings indicated: 2.1 "Award" means the grant of any Incentive Stock Option, Nonqualified Stock Option, Restricted Stock, or SAR, whether granted singly or in combination or in tandem (each individually referred to herein as an "Incentive"). 2.2 "Award Agreement" means a written agreement between a Participant and the Company which sets out the terms of the grant of an Award. 2.3 "Award Period" means the period set forth in the Award Agreement with respect to a Stock Option during which the Stock Option may be exercised, which shall commence on the Date of Grant and expire at the time set forth in the Award Agreement. 2.4 "Board" means the board of directors of the Company. 2.5 "Change in Control" shall mean any of the following: (i) any consolidation, merger or share exchange of the Company in which the holders of a majority of the Company's outstanding voting power prior to such transaction do not own at least a majority of the outstanding voting power of the Company or any successor thereto following such transaction; (ii) any sale, lease, exchange or other transfer (excluding transfer by way of pledge or hypothecation) in one transaction or a series of related transactions, of all or substantially all of the assets of the Company; (iii) the stockholders of the Company approve any plan or proposal for the liquidation or dissolution of the Company; (iv) the cessation of control (by virtue of their not constituting a majority of directors) of the Board by the individuals (the "Continuing Directors") who (x) at the date of this Plan were directors or (y) become directors after the date of this Plan and whose election or nomination for election by the Company's stockholders was approved by a vote of at least two-thirds of the directors then in office who were directors at the date of this Plan or whose election or nomination for election was previously so approved; (v) the acquisition of beneficial ownership (within the meaning of Rule 13d-3 under the 1934 Act) of an aggregate of 50% or more of the voting power of the Company's outstanding voting securities by any person or group (as such term is used in Rule 13d-5 under the 1934 Act) who beneficially owned less than 50% of the voting power of the Company's outstanding voting securities on the date of this Plan; provided, however, that notwithstanding the foregoing, an acquisition shall not constitute a Change in Control hereunder if the acquiror is (x) a trustee or other fiduciary holding securities under an employee benefit plan of the Company and acting in such capacity, or (y) a Subsidiary of the Company or a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of voting securities of the Company; or (vi) in a Title 11 bankruptcy proceeding, the appointment of a trustee or the conversion of a case involving the Company to a case under Chapter 7. 2.6 "Code" means the Internal Revenue Code of 1986, as amended. 2.7 "Committee" means the committee appointed or designated by the Board to administer the Plan in accordance with Article 3 of this Plan. 2.8 "Common Stock" means the common stock, par value $0.01 per share, which the Company is currently authorized to issue or may in the future be authorized to issue, or any securities into which or for which the common stock of the Company may be converted or exchanged, as the case may be, pursuant to the terms of this Plan. 2.9 "Company" means Liberte Investors Inc., a Delaware corporation, and any successor entity. 2.10 "Consultant" means any person performing advisory or consulting services for the Company or a Subsidiary, with or without compensation, to whom the Company chooses to grant an Award in accordance with the Plan, provided that bona fide services must be rendered by such person and such services shall not be rendered in connection with the offer or sale of securities in a capital raising transaction. 2.11 "Corporation" means any entity that (i) is defined as a corporation under Code Section 7701 and (ii) is the Company or is in an unbroken chain of corporations (other than the Company) beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain. For purposes of clause (ii) hereof, an entity shall be treated as a "corporation" if it satisfies the definition of a corporation under Section 7701 of the Code. 2.12 "Date of Grant" means the effective date on which an Award is made to a Participant as set forth in the applicable Award Agreement. 2.13 "Employee" means common law employee (as defined in accordance with the Regulations and Revenue Rulings then applicable under Section 3401(c) of the Code) of the Company or any Subsidiary of the Company. 2.14 "Fair Market Value" means, as of a particular date, (a) if the shares of Common Stock are listed on a national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal securities exchange for the Common Stock on that date, or, if 2 there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, (b) if the shares of Common Stock are not so listed but are quoted on the Nasdaq National Market System, the closing sales price per share of Common Stock on the Nasdaq National Market System on that date, or, if there shall have been no such sale so reported on that date, on the last preceding date on which such a sale was so reported, (c) if the Common Stock is not so listed or quoted, the mean between the closing bid and asked price on that date, or, if there are no quotations available for such date, on the last preceding date on which such quotations shall be available, as reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation Bureau, Inc., or (d) if none of the above is applicable, such amount as may be determined by the Committee (acting on the advice of an Independent Third Party, should the Committee elect in its sole discretion to utilize an Independent Third Party for this purpose), in good faith, to be the fair market value per share of Common Stock. "Independent Third Party" means an individual or entity independent of the Company having experience in providing investment banking or similar appraisal or valuation services and with expertise generally in the valuation of securities or other property for purposes of this Plan. The Board Committee may utilize one or more Independent Third Parties. 2.15 "Incentive Stock Option" means an incentive stock option within the meaning of Section 422 of the Code, granted pursuant to this Plan. 2.16 "Nonpublicly Traded" means not listed on a national securities exchange registered with the Securities and Exchange Commission or designated for trading on the Nasdaq National Market. 2.17 "Nonqualified Stock Option" means a nonqualified stock option, granted pursuant to this Plan, to which Section 421 of the Code does not apply. 2.18 "Option Price" means the price that must be paid by a Participant upon exercise of a Stock Option to purchase a share of Common Stock. 2.19 "Outside Director" means a director of the Company who is not an Employee. 2.20 "Participant" means an Employee, Consultant, or Outside Director of the Company or a Subsidiary to whom an Award is granted under this Plan. 2.21 "Plan" means this Liberte Investors Inc. 2002 Long Term Incentive Plan, as amended from time to time. 2.22 "Reporting Participant" means a Participant who is subject to the reporting requirements of Section 16 of the 1934 Act. 2.23 "Restricted Stock" means shares of Common Stock issued or transferred to a Participant pursuant to Section 6.5 of this Plan which are subject to restrictions or limitations set forth in this Plan and in the related Award Agreement. 2.24 "Retirement" means any Termination of Service solely due to retirement upon or after attainment of age sixty-five (65), or permitted early retirement as determined by the Committee. 2.25 "SAR" or "stock appreciation right" means the right to receive a payment, in cash and/or Common Stock, equal to the excess of the Fair Market Value of a specified number of shares of Common Stock on the date the SAR is exercised over the SAR Price for such shares. 3 2.26 "SAR Price" means the exercise price of each share of Common Stock covered by a SAR, determined on the Date of Grant of the SAR. 2.27 "Stock Option" means a Nonqualified Stock Option or an Incentive Stock Option. 2.28 "Subsidiary" means (i) any corporation in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing a majority of the total combined voting power of all classes of stock in one of the other corporations in the chain, (ii) any limited partnership, if the Company or any corporation described in item (i) above owns a majority of the general partnership interest and a majority of the limited partnership interests entitled to vote on the removal and replacement of the general partner, and (iii) any partnership or limited liability company, if the partners or members thereof are composed only of the Company, any corporation listed in item (i) above or any limited partnership listed in item (ii) above. "Subsidiaries" means more than one of any such corporations, limited partnerships, partnerships or limited liability companies. 2.29 "Termination of Service" occurs when a Participant who is an Employee or a Consultant of the Company or any Subsidiary shall cease to serve as an Employee or Consultant of the Company and its Subsidiaries, for any reason; or, when a Participant who is an Outside Director of the Company or a Subsidiary shall cease to serve as a director of the Company and its Subsidiaries for any reason. Except as may be necessary or desirable to comply with applicable federal or state law, a "Termination of Service" shall not be deemed to have occurred when a Participant who is an Employee becomes a Consultant or an Outside Director or vice versa. If, however, a Participant who is an Employee and who has an Incentive Stock Option ceases to be an Employee but does not suffer a Termination of Service, and if that Participant does not exercise the Incentive Stock Option within the time required under Code section 422 upon ceasing to be an Employee, the Incentive Stock Option shall thereafter become a Nonqualified Stock Option. 2.30 "Total and Permanent Disability" means a Participant is qualified for long-term disability benefits under the Company's or Subsidiary's disability plan or insurance policy; or, if no such plan or policy is then in existence or if the Participant is not eligible to participate in such plan or policy, that the Participant is incapacitated and absent from his or her duties with the Company or any Subsidiary on a full time basis for a period of six (6) continuous months or for at least one hundred eighty (180) days during any twelve (12) -month period as a result of mental or physical illness or physical injury, as determined in good faith by the Committee; provided that, with respect to any Incentive Stock Option, Total and Permanent Disability shall have the meaning given it under the rules governing Incentive Stock Options under the Code. ARTICLE 3 ADMINISTRATION 3.1 GENERAL ADMINISTRATION; ESTABLISHMENT OF COMMITTEE. Subject to the terms of this Article 3, the Plan shall be administered by the Board or such committee of the Board as is designated by the Board to administer the Plan (the "Committee"). The Committee shall consist of not fewer than two persons. Any member of the Committee may be removed at any time, with or without cause, by resolution of the Board. Any vacancy occurring in the membership of the Committee may be filled by appointment by the Board. At any time there is no Committee to administer the Plan, any references in this Plan to the Committee shall be deemed to refer to the Board. Membership on the Committee shall be limited to those members of the Board who are "outside directors" under Section 162(m) of the Code and "non-employee directors" as defined in Rule 16b-3 4 promulgated under the 1934 Act. The Committee shall select one of its members to act as its Chairman. A majority of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee present at a meeting at which a quorum is present shall be the act of the Committee. 3.2 DESIGNATION OF PARTICIPANTS AND AWARDS. (a) The Committee or the Board shall determine and designate from time to time the eligible persons to whom Awards will be granted and shall set forth in each related Award Agreement, where applicable, the Award Period, the Date of Grant, and such other terms, provisions, limitations, and performance requirements, as are approved by the Committee, but not inconsistent with the Plan. The Committee shall determine whether an Award shall include one type of Incentive or two or more Incentives granted in combination or two or more Incentives granted in tandem (that is, a joint grant where exercise of one Incentive results in cancellation of all or a portion of the other Incentive). Although the members of the Committee shall be eligible to receive Awards, no member of the Committee shall participate in any decisions regarding any Award granted hereunder to such member. All decisions with respect to any Award, and the terms and conditions thereof, to be granted under the Plan to any member of the Committee shall be made solely and exclusively by the other members of the Committee, or if such member is the only member of the Committee, by the Board. In addition, the Chief Executive Officer of the Company may recommend to the Board or the Committee (i) that Awards be granted to one or more Employees, Officers, Consultants, or Outside Directors, (ii) the number of shares of Common Stock to be subject to such Awards, and (iii) the price to be paid for such Awards and such other terms that the Chief Executive Officer deems appropriate with respect to such Awards; in such case, the Chief Executive Officer's recommendations shall not be binding on the Board and the Board may, in its sole discretion, accept or deny the Chief Executive Officer's recommendations. (b) Notwithstanding Subsection 3.2(a), the Board may, in its discretion and by a resolution adopted by the Board, authorize one or more officers of the Company (an "Authorized Officer") to (i) designate one or more Employees as eligible persons to whom Awards will be granted under the Plan and (ii) determine the number of shares of Common Stock that will be subject to such Awards; provided, however, that the resolution of the Board granting such authority shall (x) specify the total number of shares of Common Stock that may be made subject to the Awards, (y) set forth the price or prices (or a formula by which such price or prices may be determined) to be paid for the purchase of the Common Stock subject to such Awards, and (z) not authorize an officer to designate himself as a recipient of any Award. The Authorized Officer shall notify the Committee in writing of the persons designated to receive such Awards, the type of Award or the type of Incentives subject to the Award, the Date of Grant, the number of shares of Common Stock that will be subject to such Awards, and the purchase price to be paid for such shares. If authorized to do so in the Board's written resolution, the Authorized Officer shall cause the Company to execute an Award Agreement with the Participant, subject to the Committee's ratification of such terms of an Award as required by law. Within an administratively reasonable time after receipt of the Authorized Officer's written notice of one or more Awards, the Committee shall authorize or ratify the grant of such Awards and shall prescribe all other terms of such Awards pursuant to its authority set forth in Subsection 3(a). 3.3 AUTHORITY OF THE COMMITTEE. The Committee, in its discretion, shall (i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, (iii) establish performance goals for an Award and certify the extent of their achievement, and (iv) make such other determinations or certifications and take such other action as it deems necessary or advisable in the administration of the Plan. Any interpretation, determination, or other action made or taken by the Committee shall be final, binding, and conclusive on all interested parties. The Committee's discretion set 5 forth herein shall not be limited by any provision of the Plan, including any provision which by its terms is applicable notwithstanding any other provision of the Plan to the contrary. The Committee may delegate to officers of the Company, pursuant to a written delegation, the authority to perform specified functions under the Plan. Any actions taken by any officers of the Company pursuant to such written delegation of authority shall be deemed to have been taken by the Committee. With respect to restrictions in the Plan that are based on the requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer quotation system upon which the Company's securities are listed or quoted, or any other applicable law, rule or restriction (collectively, "applicable law"), to the extent that any such restrictions are no longer required by applicable law, the Committee shall have the sole discretion and authority to grant Awards that are not subject to such mandated restrictions and/or to waive any such mandated restrictions with respect to outstanding Awards. ARTICLE 4 ELIGIBILITY Any Employee (including an Employee who is also a director or an officer), Outside Director, or Consultant of the Company whose judgment, initiative, and efforts contributed or may be expected to contribute to the successful performance of the Company is eligible to participate in the Plan; provided that only Employees of a Corporation shall be eligible to receive Incentive Stock Options. The Committee, upon its own action, may grant, but shall not be required to grant, an Award to any Employee, Outside Director, or Consultant of the Company or any Subsidiary. Awards may be granted by the Committee at any time and from time to time to new Participants, or to then Participants, or to a greater or lesser number of Participants, and may include or exclude previous Participants, as the Committee shall determine. Except as required by this Plan, Awards granted at different times need not contain similar provisions. The Committee's determinations under the Plan (including without limitation determinations of which Employees, Outside Directors, or Consultants, if any, are to receive Awards, the form, amount and timing of such Awards, the terms and provisions of such Awards and the agreements evidencing same) need not be uniform and may be made by it selectively among Participants who receive, or are eligible to receive, Awards under the Plan. ARTICLE 5 SHARES SUBJECT TO PLAN 5.1 NUMBER AVAILABLE FOR AWARDS. Subject to adjustment as provided in Articles 11 and 12, the maximum number of shares of Common Stock that may be delivered pursuant to Awards granted under the Plan is 6,000,000 shares. Shares to be issued may be made available from authorized but unissued Common Stock, Common Stock held by the Company in its treasury, or Common Stock purchased by the Company on the open market or otherwise. During the term of this Plan, the Company will at all times reserve and keep available the number of shares of Common Stock that shall be sufficient to satisfy the requirements of this Plan. 5.2 REUSE OF SHARES. Subject to Section 5.2(c), if, and to the extent: (a) A Stock Option shall expire or terminate for any reason without having been exercised in full, or in the event that a Stock Option is exercised or settled in a manner such that some or all of the shares of Common Stock relating to the Stock Option are not issued to the Participant (or 6 beneficiary) (including as the result of the use of shares for withholding taxes), the shares of Common Stock subject thereto which have not become outstanding shall (unless the Plan shall have sooner terminated) become available for issuance under the Plan; in addition, with respect to any share-for-share exercise or cashless exercise pursuant to Section 8.3 or otherwise, only the "net" shares issued shall be deemed to have become outstanding for purposes of the Plan as a result thereof. (b) If shares of Restricted Stock under the Plan are forfeited for any reason, such shares of Restricted Stock shall (unless the Plan shall have sooner terminated) become available for issuance under the Plan; provided, however, that if any dividends paid with respect to shares of Restricted Stock were paid to the Participant prior to the forfeiture thereof, such shares shall not be reused for grants or awards. (c) In no event shall the number of shares of Common Stock subject to Incentive Stock Options exceed, in the aggregate, 6,000,000 shares of Common Stock plus shares subject to Incentive Stock Options which are forfeited or terminated, or expire unexercised. ARTICLE 6 GRANT OF AWARDS 6.1 IN GENERAL. The Company shall execute an Award Agreement with a Participant after the Committee approves the issuance of an Award. Any Award granted pursuant to this Plan must be granted within ten (10) years after the date of adoption of this Plan. The Plan shall be submitted to the Company's stockholders for approval; however, the Committee may grant Awards under the Plan prior to the time of stockholder approval. Any Incentive Stock Option, other Stock Option which the Committee determines may be subject to Code Section 162(m), or Stock Option which requires approval of this Plan by stockholders under any applicable stock exchange rules which is granted prior to such stockholder approval shall be made subject to such stockholder approval. The grant of an Award to a Participant shall not be deemed either to entitle the Participant to, or to disqualify the Participant from, receipt of any other Award under the Plan. 6.2 STOCK OPTIONS. The grant of an Award of Stock Options shall be authorized by the Committee and shall be evidenced by an Award Agreement setting forth: (i) the Incentive or Incentives being granted, (ii) the total number of shares of Common Stock subject to the Incentive(s), (iii) the Option Price, (iv) the Award Period, (v) the Date of Grant, and (vi) such other terms, provisions, limitations, and performance objectives, as are approved by the Committee, but not inconsistent with the Plan. 6.3 OPTION PRICE. The Option Price for any share of Common Stock which may be purchased under a Nonqualified Stock Option for any share of Common Stock may be less than, equal to, or greater than the Fair Market Value of the share on the Date of Grant. The Option Price for any share of Common Stock which may be purchased under an Incentive Stock Option must be at least equal to the Fair Market Value of the share on the Date of Grant; if an Incentive Stock Option is granted to an Employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary), the Option Price shall be at least 110% of the Fair Market Value of the Common Stock on the Date of Grant. 6.4 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock Options under the Plan to any Employee which would permit the aggregate Fair Market Value (determined on the Date of Grant) of the Common Stock with respect to which Incentive Stock Options (under this and any other plan of the Company and its Subsidiaries) are exercisable for the first time by such Employee during any calendar year to exceed $100,000. To the extent any Stock Option granted under this Plan which is designated as an 7 Incentive Stock Option exceeds this limit or otherwise fails to qualify as an Incentive Stock Option, such Stock Option (or any such portion thereof) shall be a Nonqualified Stock Option. In such case, the Committee shall designate which stock will be treated as Incentive Stock Option stock by causing the issuance of a separate stock certificate and identifying such stock as Incentive Stock Option stock on the Company's stock transfer records. 6.5 RESTRICTED STOCK. If Restricted Stock is granted to or received by a Participant under an Award (including a Stock Option), the Committee shall set forth in the related Award Agreement: (i) the number of shares of Common Stock awarded, (ii) the price, if any, to be paid by the Participant for such Restricted Stock and the method of payment of the price, (iii) the time or times within which such Award may be subject to forfeiture, (iv) specified performance goals of the Company, a Subsidiary, any division thereof or any group of Employees of the Company, or other criteria, which the Committee determines must be met in order to remove any restrictions (including vesting) on such Award, and (v) all other terms, limitations, restrictions, and conditions of the Restricted Stock, which shall be consistent with this Plan. The provisions of Restricted Stock need not be the same with respect to each Participant. If the Committee establishes a purchase price for an Award of Restricted Stock, the Participant must accept such Award within a period of thirty (30) days (or such shorter period as the Committee may specify) after the Date of Grant by executing the applicable Award Agreement and paying such purchase price. (a) LEGEND ON SHARES. Each Participant who is awarded or receives Restricted Stock shall be issued a stock certificate or certificates in respect of such shares of Common Stock. Such certificate(s) shall be registered in the name of the Participant, and shall bear an appropriate legend referring to the terms, conditions, and restrictions applicable to such Restricted Stock, substantially as provided in Section 15.11 of the Plan. (b) RESTRICTIONS AND CONDITIONS. Shares of Restricted Stock shall be subject to the following restrictions and conditions: (i) Subject to the other provisions of this Plan and the terms of the particular Award Agreements, during such period as may be determined by the Committee commencing on the Date of Grant or the date of exercise of an Award (the "Restriction Period"), the Participant shall not be permitted to sell, transfer, pledge or assign shares of Restricted Stock. Except for these limitations, the Committee may in its sole discretion, remove any or all of the restrictions on such Restricted Stock whenever it may determine that, by reason of changes in applicable laws or other changes in circumstances arising after the date of the Award, such action is appropriate. (ii) Except as provided in sub-paragraph (i) above or in the applicable Award Agreement, the Participant shall have, with respect to his or her Restricted Stock, all of the rights of a stockholder of the Company, including the right to vote the shares, and the right to receive any dividends thereon. Certificates for shares of Common Stock free of restriction under this Plan shall be delivered to the Participant promptly after, and only after, the Restriction Period shall expire without forfeiture in respect of such shares of Common Stock or after any other restrictions imposed in such shares of Common Stock by the applicable Award Agreement or other agreement have expired. Certificates for the shares of Common Stock forfeited under the provisions of the Plan and the applicable Award Agreement shall be promptly returned to the Company by the forfeiting Participant. Each Award Agreement for shares of Common Stock subject to restrictions shall require that: (x) each Participant, by his or her acceptance of Restricted Stock, shall irrevocably grant to the Company a power of attorney to transfer any shares so forfeited to the Company and agrees to execute any 8 documents requested by the Company in connection with such forfeiture and transfer, and (y) such provisions regarding returns and transfers of stock certificates with respect to forfeited shares of Common Stock shall be specifically performable by the Company in a court of equity or law. (iii) The Restriction Period of Restricted Stock shall commence on the Date of Grant or the date of exercise of an Award, as specified in the Award Agreement, and, subject to Article 12 of the Plan, unless otherwise established by the Committee in the Award Agreement setting forth the terms of the Restricted Stock, shall expire upon satisfaction of the conditions set forth in the Award Agreement; such conditions may provide for vesting based on (i) length of continuous service, (ii) achievement of specific business objectives, (iii) increases in specified indices, (iv) attainment of specified growth rates, or (v) other comparable measurements of Company performance, as may be determined by the Committee in its sole discretion. (iv) Except as otherwise provided in the particular Award Agreement, upon Termination of Service for any reason during the Restriction Period, the nonvested shares of Restricted Stock shall be forfeited by the Participant. In the event a Participant has paid any consideration to the Company for such forfeited Restricted Stock, the Committee shall specify in the Award Agreement that either (i) the Company shall be obligated to, or (ii) the Company may, in its sole discretion, elect to, pay to the Participant, as soon as practicable after the event causing forfeiture, in cash, an amount equal to the lesser of the total consideration paid by the Participant for such forfeited shares or the Fair Market Value of such forfeited shares as of the date of Termination of Service, as the Committee, in its sole discretion shall select. Upon any forfeiture, all rights of a Participant with respect to the forfeited shares of the Restricted Stock shall cease and terminate, without any further obligation on the part of the Company. 6.6 MAXIMUM INDIVIDUAL GRANTS. No Participant may receive during any fiscal year of the Company Awards covering an aggregate of more than 3,000,000 shares of Common Stock. 6.7 SAR. An SAR shall entitle the Participant at his election to surrender to the Company the SAR, or portion thereof, as the Participant shall choose, and to receive from the Company in exchange therefor cash in an amount equal to the excess (if any) of the Fair Market Value (as of the date of the exercise of the SAR) per share over the SAR Price per share specified in such SAR, multiplied by the total number of shares of the SAR being surrendered. In the discretion of the Committee, the Company may satisfy its obligation upon exercise of a SAR by the distribution of that number of shares of Common Stock having an aggregate Fair Market Value (as of the date of the exercise of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests, or the Company may settle such obligation in part with shares of Common Stock and in part with cash. 6.8 TANDEM AWARDS. The Committee may grant two or more Incentives in one Award in the form of a "tandem Award," so that the right of the Participant to exercise one Incentive shall be canceled if, and to the extent, the other Incentive is exercised. For example, if a Stock Option and an SAR are issued in a tandem Award, and the Participant exercises the SAR with respect to 100 shares of Common Stock, the right of the Participant to exercise the related Stock Option shall be canceled to the extent of 100 shares of Common Stock. 6.9 SAR PRICE. The SAR Price for any share of Common Stock subject to a SAR may be less than, equal to, or greater than the Fair Market Value of the share on the Date of Grant. 9 ARTICLE 7 AWARD PERIOD; VESTING 7.1 AWARD PERIOD. (a) Subject to the other provisions of this Plan, the Committee shall specify in the Award Agreement the Award Period for a Stock Option. No Stock Option granted under the Plan may be exercised at any time after the end of its Award Period. The Award Period for any Stock Option shall be no more than ten (10) years from the Date of Grant of the Stock Option. However, if an Employee owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more than ten percent (10%) of the combined voting power of all classes of stock of the Company (or any parent or Subsidiary) and an Incentive Stock Option is granted to such Employee, the Award Period of such Incentive Stock Option (to the extent required by the Code at the time of grant) shall be no more than five (5) years from the Date of Grant. (b) In the event of a Termination of Service of a Participant, the Award Period for a Stock Option shall be reduced or terminated in accordance with the Award Agreement. 7.2 VESTING. The Committee, in its sole discretion, may determine that an Incentive will be immediately vested in whole or in part, or that all or any portion may not be vested until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If the Committee imposes conditions upon vesting, then, subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Incentive may be vested. ARTICLE 8 EXERCISE OF INCENTIVE 8.1 IN GENERAL. The Committee, in its sole discretion, may determine that a Stock Option will be immediately exercisable, in whole or in part, or that all or any portion may not be exercised until a date, or dates, subsequent to its Date of Grant, or until the occurrence of one or more specified events, subject in any case to the terms of the Plan. If a Stock Option is exercisable prior to the time it is vested, the Common Stock obtained on the exercise of the Stock Option shall be Restricted Stock which is subject to the applicable provisions of the Plan and the Award Agreement. If the Committee imposes conditions upon exercise, then subsequent to the Date of Grant, the Committee may, in its sole discretion, accelerate the date on which all or any portion of the Stock Option may be exercised. No Stock Option may be exercised for a fractional share of Common Stock. The granting of a Stock Option shall impose no obligation upon the Participant to exercise that Stock Option. 8.2 SECURITIES LAW AND EXCHANGE RESTRICTIONS. In no event may an Incentive be exercised or shares of Common Stock be issued pursuant to an Award if a necessary listing or quotation of the shares of Common Stock on a stock exchange or inter-dealer quotation system or any registration under state or federal securities laws required under the circumstances has not been accomplished. 8.3 EXERCISE OF STOCK OPTION. (a) NOTICE AND PAYMENT. Subject to such administrative regulations as the Committee may from time to time adopt, a Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock 10 Option is to be exercised and the date of exercise thereof (the "Exercise Date") which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. On the Exercise Date, the Participant shall deliver to the Company consideration with a value equal to the total Option Price of the shares to be purchased, payable as provided in the Award Agreement, which may provide for payment in any one or more of the following ways: (a) cash or check, bank draft, or money order payable to the order of the Company, (b) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (c) if the Common Stock is no longer Nonpublicly Traded, by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option with an Option Price equal to the value of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. (b) ISSUANCE OF CERTIFICATE. Except as otherwise provided in Section 6.5 hereof (with respect to shares of Restricted Stock) or in the applicable Award Agreement, upon payment of all amounts due from the Participant, the Company shall cause certificates for the Common Stock then being purchased to be delivered as directed by the Participant (or the person exercising the Participant's Stock Option in the event of his death) at its principal business office promptly after the Exercise Date; provided that if the Participant has exercised an Incentive Stock Option, the Company may at its option retain physical possession of the certificate evidencing the shares acquired upon exercise until the expiration of the holding periods described in Section 422(a)(1) of the Code. The obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that, if at any time the Committee shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Common Stock upon any securities exchange or inter-dealer quotation system or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee. (c) FAILURE TO PAY. Except as may be otherwise provided in an Award Agreement, if the Participant fails to pay for any of the Common Stock specified in such notice or fails to accept delivery thereof, that portion of the Participant's Stock Option and right to purchase such Common Stock may be forfeited by the Company. 8.4 SARS. Subject to the conditions of this Section 8.4 and such administrative regulations as the Committee may from time to time adopt, a SAR may be exercised by the delivery (including by FAX) of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the SAR is to be exercised and the date of exercise thereof (the "Exercise Date") which shall be at least three (3) days after giving such notice unless an earlier time shall have been mutually agreed upon. On the Exercise Date, the Participant shall receive from the Company in exchange therefor cash in an amount equal to the excess (if any) of the Fair Market Value (as of the date of the exercise of the SAR) per share of Common Stock over the SAR Price per share specified in such SAR, multiplied by the total number of shares of Common 11 Stock of the SAR being surrendered. In the discretion of the Committee, the Company may satisfy its obligation upon exercise of a SAR by the distribution of that number of shares of Common Stock having an aggregate Fair Market Value (as of the date of the exercise of the SAR) equal to the amount of cash otherwise payable to the Participant, with a cash settlement to be made for any fractional share interests, or the Company may settle such obligation in part with shares of Common Stock and in part with cash. 8.5 DISQUALIFYING DISPOSITION OF INCENTIVE STOCK OPTION. If shares of Common Stock acquired upon exercise of an Incentive Stock Option are disposed of by a Participant prior to the expiration of either two (2) years from the Date of Grant of such Stock Option or one (1) year from the transfer of shares of Common Stock to the Participant pursuant to the exercise of such Stock Option, or in any other disqualifying disposition within the meaning of Section 422 of the Code, such Participant shall notify the Company in writing of the date and terms of such disposition. A disqualifying disposition by a Participant shall not affect the status of any other Stock Option granted under the Plan as an Incentive Stock Option within the meaning of Section 422 of the Code. ARTICLE 9 AMENDMENT OR DISCONTINUANCE Subject to the limitations set forth in this Article 9, the Board may at any time and from time to time, without the consent of the Participants, alter, amend, revise, suspend, or discontinue the Plan in whole or in part; provided, however, that no amendment which requires stockholder approval in order for the Plan and Incentives awarded under the Plan to continue to comply with Sections 162(m), 421, and 422 of the Code, including any successors to such Sections, shall be effective unless such amendment shall be approved by the requisite vote of the stockholders of the Company entitled to vote thereon. Except as otherwise provided in any existing Award Agreement, any such amendment shall, to the extent deemed necessary or advisable by the Committee, be applicable to any outstanding Incentives theretofore granted under the Plan. Except as otherwise provided in any Award Agreement, in the event of any such amendment to the Plan, the holder of any Incentive outstanding under the Plan shall, upon request of the Committee and as a condition to the exercisability thereof, execute a conforming amendment in the form prescribed by the Committee to any Award Agreement relating thereto. Notwithstanding anything contained in this Plan to the contrary, unless required by law, no action contemplated or permitted by this Article 9 shall adversely affect any rights of Participants or obligations of the Company to Participants with respect to any Incentive theretofore granted under the Plan without the consent of the affected Participant. ARTICLE 10 TERM The Plan shall be effective from the date that this Plan is approved by the Board. Unless sooner terminated by action of the Board, the Plan will terminate on the date that is ten years after the date this Plan is adopted by the Board, but Incentives granted before that date will continue to be effective in accordance with their terms and conditions. ARTICLE 11 CAPITAL ADJUSTMENTS In the event that the Committee shall determine that any dividend or other distribution (whether in the form of cash, Common Stock, other securities, or other property), recapitalization, stock split, reverse stock 12 split, rights offering, reorganization, merger, consolidation, split-up, spin-off, split-off, combination, subdivision, repurchase, or exchange of Common Stock or other securities of the Company, issuance of warrants or other rights to purchase Common Stock or other securities of the Company, or other similar corporate transaction or event affects the Common Stock such that an adjustment is determined by the Committee to be appropriate to prevent the dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the Committee shall, in such manner as it may deem equitable, adjust any or all of the (i) the number of shares and type of Common Stock (or the securities or property) which thereafter may be made the subject of Awards, (ii) the number of shares and type of Common Stock (or other securities or property) subject to outstanding Awards, (iii) the number of shares and type of Common Stock (or other securities or property) specified as the annual per-participant limitation under Section 6.6 of the Plan, (iv) the Option Price of each outstanding Award, (v) the amount, if any, the Company pays for forfeited shares of Common Stock in accordance with Section 6.5, and (vi) the number of or SAR Price of shares of Common Stock then subject to outstanding SARs previously granted and unexercised under the Plan to the end that the same proportion of the Company's issued and outstanding shares of Common Stock in each instance shall remain subject to exercise at the same aggregate SAR Price; provided however, that the number of shares of Common Stock (or other securities or property) subject to any Award shall always be a whole number. In lieu of the foregoing, if deemed appropriate, the Committee may make provision for a cash payment to the holder of an outstanding Award, except as may otherwise be provided in an applicable Award Agreement. Notwithstanding the foregoing, no such adjustment or cash payment shall be made or authorized to the extent that such adjustment or cash payment would cause the Plan or any Stock Option to violate Code Section 422. Such adjustments shall be made in accordance with the rules of any securities exchange, stock market, or stock quotation system to which the Company is subject. No adjustment or cash payment will be required under this Article 11 for the issuance of Common Stock for such consideration, not less than the par value of the Common Stock, as may be determined from time to time by the Board to be fair consideration. Upon the occurrence of any such adjustment or cash payment, the Company shall provide notice to each affected Participant of its computation of such adjustment or cash payment which shall be conclusive and shall be binding upon each such Participant. ARTICLE 12 RECAPITALIZATION, MERGER AND CONSOLIDATION 12.1 NO EFFECT ON COMPANY'S AUTHORITY. The existence of this Plan and Incentives granted hereunder shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations, or other changes in the Company's capital structure and its business, or any merger or consolidation of the Company, or any issuance of bonds, debentures, preferred or preference stocks ranking prior to or otherwise affecting the Common Stock or the rights thereof (or any rights, options, or warrants to purchase same), or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. 12.2 CONVERSION OF INCENTIVES WHERE COMPANY SURVIVES. Subject to any required action by the stockholders, if the Company shall be the surviving or resulting corporation in any merger, consolidation or share exchange, any Incentive granted hereunder shall pertain to and apply to the securities or rights (including cash, property, or assets) to which a holder of the number of shares of Common Stock subject to the Incentive would have been entitled. 12.3 EXCHANGE OR CANCELLATION OF INCENTIVES WHERE COMPANY DOES NOT SURVIVE. In the event of any merger, consolidation or share exchange which is a Change of Control in which the Company does not 13 survive, there may be substituted for each share of Common Stock subject to the unexercised portions of outstanding Stock Options or SARs, that number of shares of each class of stock or other securities or that amount of cash, property, or assets of the surviving, resulting or consolidated company which were distributed or distributable to the stockholders of the Company in respect to each share of Common Stock held by them, such outstanding Stock Options or SARs to be thereafter exercisable for such stock, securities, cash, or property in accordance with their terms. Notwithstanding the foregoing, however, all Stock Options or SARs may be canceled by the Company, in its sole discretion, as of the effective date of any merger, consolidation or share exchange which is a Change of Control in which the Company does not survive, by either: (a) giving notice to each holder thereof or his personal representative of its intention to cancel such Stock Options or SARs and permitting the purchase during the thirty (30) day period next preceding such effective date of any or all of the shares subject to such outstanding Stock Options or SARs, including, in the Board's discretion, some or all of the shares as to which such Stock Options or SARs would not otherwise be vested and exercisable; or (b) paying the holder thereof an amount equal to a reasonable estimate of the difference between the net amount per share payable in such transaction or as a result of such transaction, and the exercise price per share of such Stock Option (hereinafter the "Spread"), multiplied by the number of shares subject to the Stock Option. In cases where the shares constitute, or would after exercise, constitute Restricted Stock, the Company, in its discretion, may include some or all of those shares in the calculation of the amount payable hereunder. In estimating the Spread, appropriate adjustments to give effect to the existence of the Stock Options shall be made, such as deeming the Stock Options to have been exercised, with the Company receiving the exercise price payable thereunder, and treating the shares receivable upon exercise of the Options as being outstanding in determining the net amount per share. In cases where the proposed transaction consists of the acquisition of assets of the Company, the net amount per share shall be calculated on the basis of the net amount receivable with respect to shares of Common Stock upon a distribution and liquidation by the Company after giving effect to expenses and charges, including but not limited to taxes, payable by the Company before such liquidation could be completed. (c) A Stock Option or SAR that by its terms would be vested and exercisable upon a Change in Control will be considered vested and exercisable for purposes of Section 12.3(a) hereof. ARTICLE 13 LIQUIDATION OR DISSOLUTION Subject to Section 12.3 hereof, in case the Company shall, at any time while any Incentive under this Plan shall be in force and remain unexpired, (i) sell all or substantially all of its property, or (ii) dissolve, liquidate, or wind up its affairs, then each Participant shall be entitled to receive, in lieu of each share of Common Stock of the Company which such Participant would have been entitled to receive under the Incentive, the same kind and amount of any securities or assets as may be issuable, distributable, or payable upon any such sale, dissolution, liquidation, or winding up with respect to each share of Common Stock of the Company. If the Company shall, at any time prior to the expiration of any Incentive, make any partial distribution of its assets, in the nature of a partial liquidation, whether payable in cash or in kind (but excluding the distribution of a cash dividend payable out of earned surplus and designated as such) then in such event the purchase price, if any, Option Prices or SAR Prices then in effect with respect to each Stock Option or SAR shall be reduced, on the payment date of such distribution, in proportion to the percentage reduction in the 14 tangible book value of the shares of the Company's Common Stock (determined in accordance with generally accepted accounting principles) resulting by reason of such distribution. ARTICLE 14 INCENTIVES IN SUBSTITUTION FOR INCENTIVES GRANTED BY OTHER ENTITIES Incentives may be granted under the Plan from time to time in substitution for similar instruments held by employees or directors of a corporation, partnership, or limited liability company who become or are about to become Employees or Outside Directors of the Company or any Subsidiary as a result of a merger or consolidation of the employing corporation with the Company, the acquisition by the Company of equity of the employing entity, or any other similar transaction pursuant to which the Company becomes the successor employer. The terms and conditions of the substitute Incentives so granted may vary from the terms and conditions set forth in this Plan to such extent as the Committee at the time of grant may deem appropriate to conform, in whole or in part, to the provisions of the Incentives in substitution for which they are granted. ARTICLE 15 MISCELLANEOUS PROVISIONS 15.1 INVESTMENT INTENT. The Company may require that there be presented to and filed with it by any Participant under the Plan, such evidence as it may deem necessary to establish that the Incentives granted or the shares of Common Stock to be purchased or transferred are being acquired for investment and not with a view to their distribution. 15.2 NONPUBLICLY TRADED COMMON STOCK. In the event a Participant receives, as Restricted Stock or pursuant to the exercise of a Stock Option, shares of Common Stock that are Nonpublicly Traded (as defined herein), the Committee may impose restrictions and conditions on the transfer or other disposition of those shares. The restrictions and conditions may be reflected in the Award Agreement or in a separate stockholders' agreement. 15.3 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any Incentive granted under the Plan shall confer upon any Participant any right with respect to continuance of employment by the Company or any Subsidiary. 15.4 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or the Committee, nor any officer or Employee of the Company acting on behalf of the Board or the Committee, shall be personally liable for any action, determination, or interpretation taken or made in good faith with respect to the Plan, and all members of the Board and the Committee, each officer of the Company, and each Employee of the Company acting on behalf of the Board or the Committee shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination, or interpretation. 15.5 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any action of the Board or the Committee shall be deemed to give any person any right to be granted an Award or any other rights except as may be evidenced by an Award Agreement, or any amendment thereto, duly authorized by the Committee and executed on behalf of the Company, and then only to the extent and upon the terms and conditions expressly set forth therein. 15 15.6 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding anything contained herein to the contrary, the Company shall not be required to sell or issue shares of Common Stock under any Incentive if the issuance thereof would constitute a violation by the Participant or the Company of any provisions of any law or regulation of any governmental authority or any national securities exchange or inter-dealer quotation system or other forum in which shares of Common Stock are quoted or traded; and, as a condition of any sale or issuance of shares of Common Stock under an Incentive, the Committee may require such agreements or undertakings, if any, as the Committee may deem necessary or advisable to assure compliance with any such law or regulation. The Plan, the grant and exercise of Incentives hereunder, and the obligation of the Company to sell and deliver shares of Common Stock, shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any government or regulatory agency as may be required. 15.7 LOCK-UP AGREEMENT. The Company may require that an Award Agreement include a provision requiring a Participant to agree that in connection with an underwritten public offering of Common Stock, upon the request of the Company or the principal underwriter managing such public offering, no shares of Common Stock received by the Participant under such Award Agreement may be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such underwriter, as the case may be, for at least one hundred eighty (180) days after the effectiveness of the registration statement filed in connection with such offering, or such longer period of time as the Board may determine, if all of the Company's directors and officers agree to be similarly bound. The obligations contained in an Award Agreement, if applicable, shall remain effective for all underwritten public offerings with respect to which the Company has filed a registration statement on or before the date five (5) years after the closing of the Company's initial public offering, provided, however, that this Section 15.7 shall cease to apply to any such shares of Common Stock sold to the public pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act in a transaction that complied with the terms of the applicable Award Agreement. 15.8 TAX REQUIREMENTS. The Company shall have the right to deduct from all amounts hereunder paid in cash or other form, any Federal, state, or local taxes required by law to be withheld with respect to such payments. The Participant receiving shares of Common Stock issued under the Plan shall be required to pay the Company the amount of any taxes which the Company is required to withhold with respect to such shares of Common Stock. Notwithstanding the foregoing, in the event of an assignment of a Nonqualified Stock Option or SAR pursuant to Section 15.9, the Participant who assigns the Nonqualified Stock Option or SAR shall remain subject to withholding taxes upon exercise of the Nonqualified Stock Option or SAR by the transferee to the extent required by the Code or the rules and regulations promulgated thereunder. Such payments shall be required to be made prior to the delivery of any certificate representing such shares of Common Stock. Such payment may be made (i) by the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding obligation of the Company; (ii) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock that the Participant has not acquired from the Company within six months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (iii) below) the required tax withholding payment; (iii) if the Company, in its sole discretion, so consents in writing, the Company's withholding of a number of shares to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate fair market value that equals (but does not exceed) the required tax withholding payment; or (iv) any combination of (i), (ii), or (iii). 15.9 ASSIGNABILITY. Incentive Stock Options may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution and may be exercised during the lifetime of the Participant only by the Participant or the Participant's legally 16 authorized representative, and each Award Agreement in respect of an Incentive Stock Option shall so provide. The designation by a Participant of a beneficiary will not constitute a transfer of the Stock Option. The Committee may waive or modify any limitation contained in the preceding sentences of this Section 15.9 that is not required for compliance with Section 422 of the Code. Except as otherwise provided herein, Nonqualified Stock Options and SARs may not be transferred, assigned, pledged, hypothecated or otherwise conveyed or encumbered other than by will or the laws of descent and distribution. The Committee may, in its discretion, authorize all or a portion of a Nonqualified Stock Option or an SAR granted to a Participant to be on terms which permit transfer by such Participant to (i) the spouse (or former spouse), children or grandchildren of the Participant ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership in which the only partners are (1) such Immediate Family Members and/or (2) entities which are controlled by Immediate Family Members, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code or any successor provision, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code or any successor provision, provided that (x) there shall be no consideration for any such transfer, (y) the Award Agreement pursuant to which such Nonqualified Stock Option or SAR is granted must be approved by the Committee and must expressly provide for transferability in a manner consistent with this Section, and (z) subsequent transfers of transferred Nonqualified Stock Options or SARs shall be prohibited except those by will or the laws of descent and distribution. Following any transfer, any such Nonqualified Stock Option or SAR shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer, provided that for purposes of Articles 8, 9, 11, 13 and 15 hereof the term "Participant" shall be deemed to include the transferee. The events of Termination of Service shall continue to be applied with respect to the original Participant, following which the Nonqualified Stock Options and SARs shall be exercisable by the transferee only to the extent and for the periods specified in the Award Agreement. The Committee and the Company shall have no obligation to inform any transferee of a Nonqualified Stock Option or an SAR of any expiration, termination, lapse or acceleration of such Stock Option or SAR. The Company shall have no obligation to register with any federal or state securities commission or agency any Common Stock issuable or issued under a Nonqualified Stock Option or SAR that has been transferred by a Participant under this Section 15.9. 15.10 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock pursuant to Incentives granted under this Plan shall constitute general funds of the Company. 15.11 LEGEND. Each certificate representing shares of Restricted Stock issued to a Participant shall bear the following legend, or a similar legend deemed by the Company to constitute an appropriate notice of the provisions hereof (any such certificate not having such legend shall be surrendered upon demand by the Company and so endorsed): On the face of the certificate: "Transfer of this stock is restricted in accordance with conditions printed on the reverse of this certificate." On the reverse: "The shares of stock evidenced by this certificate are subject to and transferable only in accordance with that certain Liberte Investors Inc. Long Term Incentive Plan (the "Plan"), a copy of which is on file at the principal office of the Company in Dallas, Texas. No 17 transfer or pledge of the shares evidenced hereby may be made except in accordance with and subject to the provisions of said Plan. By acceptance of this certificate, any holder, transferee or pledgee hereof agrees to be bound by all of the provisions of said Plan." The following legend shall be inserted on a certificate evidencing Common Stock issued under the Plan if the shares were not issued in a transaction registered under the applicable federal and state securities laws: "Shares of stock represented by this certificate have been acquired by the holder for investment and not for resale, transfer or distribution, have been issued pursuant to exemptions from the registration requirements of applicable state and federal securities laws, and may not be offered for sale, sold or transferred other than pursuant to effective registration under such laws, or in transactions otherwise in compliance with such laws, and upon evidence satisfactory to the Company of compliance with such laws, as to which the Company may rely upon an opinion of counsel satisfactory to the Company." A copy of this Plan shall be kept on file in the principal office of the Company in Dallas, Texas. * * * * * 18 IN WITNESS WHEREOF, the Company has caused this instrument to be executed as of July 1, 2002 by its Chief Executive Officer and Secretary pursuant to prior action taken by the Board. LIBERTE INVESTORS INC. By: /s/ Gerald J. Ford ------------------------------ Name: Gerald J. Ford Title: Chief Executive Officer Attest: /s/ Ellen Billings, Secretary - ------------------------------------------- 19 EX-10.3 6 d98262exv10w3.txt NONQUALIFIED STOCK OPTION AGREEMENT EXHIBIT 10.3 NONQUALIFIED STOCK OPTION AGREEMENT LIBERTE INVESTORS INC. 2002 LONG TERM INCENTIVE PLAN 1. Grant of Option. Pursuant to the Liberte Investors Inc. 2002 Long Term Incentive Plan (the "PLAN") for employees, consultants and outside directors of Liberte Investors Inc., a Delaware corporation (the "COMPANY"), subject to approval by the Company's stockholders, the Company hereby grants to Donald J. Edwards (the "PARTICIPANT"), an option to purchase shares of Common Stock ("COMMON STOCK") of the Company as follows: On the date hereof, the Company grants to the Participant an option (the "OPTION" or "STOCK OPTION") to purchase 2,573,678 full shares or such other number of full shares as adjusted in accordance with Section 4(h) of the Employment Agreement (as adjusted, the "OPTIONED SHARES") of Common Stock at an Option Price equal to Three Dollars ($3.00) per share (subject to adjustment as herein provided). The Date of Grant of this Stock Option is July 9, 2002. The "OPTION PERIOD" shall commence on the Date of Grant and shall expire on the date immediately preceding the tenth (10th) anniversary of the Date of Grant. The Stock Option is a Nonqualified Stock Option. 2. Capitalized Terms. The capitalized terms used herein that are defined in the Plan shall have the same meanings assigned to them in the Plan as in effect on the date hereof; any amendments to the Plan shall not affect this Stock Option unless agreed to in writing by the Participant. If there is a conflict between any of the terms and provisions of this Stock Option and the Plan, the terms and provisions of this Stock Option shall govern. 3. Vesting; Time of Exercise. (a) Prior to Acquisition Transaction. Except as specifically provided in this Agreement and Section 15.6 of the Plan, prior to the date of the Company's first Acquisition Transaction (as defined in that certain agreement of employment entered into by and between the Company and the Participant, dated as of July 1, 2002, as the same may be amended from time to time (the "EMPLOYMENT AGREEMENT")), the Optioned Shares shall be vested and the Stock Option shall be exercisable with respect thereto as follows: as of the first day of each month following the Date of Grant, an additional number of Optioned Shares shall be vested in an amount equal to the product obtained by multiplying (i) the total number of Optioned Shares granted hereunder, by (ii) a fraction equal to one-sixtieth (1/60th), until all such Optioned Shares are fully vested and exercisable; provided, however, that for any Optioned Shares to vest on any particular date under this paragraph, the Participant must be employed by the Company or a Subsidiary from the Date of Grant to such date. (b) After an Acquisition Transaction. Following the date of the Company's first Acquisition Transaction, the total number of Optioned Shares which are unvested as of the date of consummation of such Acquisition Transaction (the "CLOSING DATE") shall be vested and the Stock Option shall be exercisable with respect thereto as follows: as of the first day of each month following the Closing Date, an additional number of Optioned Shares shall be vested in an amount equal to the product obtained by multiplying (i) the total number of Optioned Shares granted hereunder, by (ii) a fraction equal to one-fortieth (1/40th), until all such Optioned Shares are fully vested and exercisable; provided, however, that for any Optioned Shares to vest on any particular date under this paragraph, the Participant must be employed by the Company or a Subsidiary from the Date of Grant to such date. (c) Accelerated Vesting Upon Certain Terminations of Service. All of the Optioned Shares not previously vested shall immediately become fully vested, and this Stock Option shall become fully exercisable, if not previously exercisable, upon the effective date of the earliest to occur of the following: (i) a Change of Control, (ii) the Participant's Termination of Service by the Participant for Good Reason, (iii) the Participant's Termination of Service by the Company without Cause, or (iv) the Participant's Termination of Service due to the Participant's permanent disability or death in accordance with the terms of the Employment Agreement. For purposes of this Stock Option, "GOOD REASON," and "CAUSE" shall be given the same meanings assigned to such terms in the Employment Agreement. 4. Term; Forfeiture. Except as otherwise provided in this Agreement, to the extent the unexercised portion of the Stock Option relates to Optioned Shares that are not vested or do not become vested on the date of the Participant's Termination of Service pursuant to Section 3, such unvested portion of this Stock Option will be terminated on that date. The unexercised portion of the Stock Option that relates to Optioned Shares which are or which become vested will terminate at the first of the following to occur: (a) 5 p.m. on the date the Option Period terminates; (b) 5 p.m. on the date that is twelve (12) months following the Participant's Termination of Service by the Company for Cause; or (c) 5 p.m. on the date that is twenty-four (24) months following the date of the Participant's Termination of Service for any reason other than by the Company for Cause, including a Termination of Service due to the Participant's death or disability, Termination of the Service by the Participant with or without Good Reason, and Termination of Service by the Company without Cause. 5. Who May Exercise. Subject to the terms and conditions set forth in Sections 3 and 4 above, during the lifetime of the Participant, the Stock Option may be exercised only by the Participant, or by the Participant's guardian or personal or legal representative, or by any transferee as permitted under Section 8 herein. If the Participant's Termination of Service is due to his death prior to the date specified in Section 4(a) hereof, or Participant dies prior to the termination dates specified in Sections 4(a) - (c) hereof, and the Participant has not exercised the Stock Option as to the maximum number of vested Optioned Shares as set forth in Section 3 hereof as of the date of death, the following persons may exercise the exercisable portion of the Stock Option on behalf of the Participant at any time prior to the earliest of the dates specified in Section 4 hereof: the personal representative of his estate, or the person who acquired the right to exercise the Stock Option by bequest or inheritance or by reason of the death of the Participant or a transferee as permitted in Section 8 herein; provided that the Stock Option shall remain subject to the other terms of this Agreement, Section 15.6 of the Plan and applicable laws, rules, and regulations. 6. No Fractional Shares. The Stock Option may be exercised only with respect to full shares, and no fractional share of stock shall be issued. 7. Manner of Exercise. Subject to such administrative regulations as the Committee may from time to time adopt, the Stock Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Common Stock with respect to which the Stock Option is to be exercised, the date of exercise thereof (the "EXERCISE DATE") which shall be the day upon which such notice is given in accordance herewith. On the Exercise Date, the Participant shall deliver to the Company consideration with 2 a value equal to the total Option Price of the shares to be purchased, payable as follows: (a) cash, check, bank draft, or money order payable to the order of the Company, (b) Common Stock (including Restricted Stock) owned by the Participant on the Exercise Date, valued at its Fair Market Value on the Exercise Date, and which the Participant has not acquired from the Company within six (6) months prior to the Exercise Date, (c) if the Optioned Shares are no longer Nonpublicly Traded, by delivery (including by FAX) to the Company or its designated agent of an executed irrevocable option exercise form together with irrevocable instructions from the Participant to a broker or dealer, reasonably acceptable to the Company, to sell certain of the shares of Common Stock purchased upon exercise of the Stock Option or to pledge such shares as collateral for a loan and promptly deliver to the Company the amount of sale or loan proceeds necessary to pay such purchase price, and/or (d) in any other form of valid consideration that is acceptable to the Committee in its sole discretion. In the event that shares of Restricted Stock are tendered as consideration for the exercise of a Stock Option, a number of shares of Common Stock issued upon the exercise of the Stock Option with an Option Price equal to the value of Restricted Stock used as consideration therefor shall be subject to the same restrictions and provisions as the Restricted Stock so tendered. For example, if 250 shares of Restricted Stock valued at $6.00 per share are used to purchase 500 Optioned Shares at an Option Price of $3.00 per share, all 500 Optioned Shares shall be Restricted Stock. Upon payment of all amounts due from the Participant, the Company shall cause certificates for the Optioned Shares then being purchased to be delivered to the Participant (or the person exercising the Participant's Stock Option in the event of his death) at its principal business office as soon as practicable (but in no case more than three (3) days) after the Exercise Date in order to permit timely sales under applicable exchange rules or to permit timely participation in any liquidity event. Without limitation of any of the Company's obligations under the Employment Agreement, the obligation of the Company to deliver shares of Common Stock shall, however, be subject to the condition that if at any time the Company shall determine in its discretion that the listing, registration, or qualification of the Stock Option or the Optioned Shares upon any securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary as a condition of, or in connection with, the Stock Option or the issuance or purchase of shares of Common Stock thereunder, then the Stock Option may not be exercised in whole or in part unless such listing, registration, qualification, consent, or approval shall have been effected or obtained free of any conditions not reasonably acceptable to the Committee. 8. Transfer and Assignment. Except as otherwise provided in this Section 8, this Stock Option may not be assigned, transferred, pledged, hypothecated, or otherwise conveyed or encumbered by the Participant, except by will or by the laws of descent and distribution. Notwithstanding the foregoing, this Stock Option may be transferred, assigned or otherwise conveyed to (i) any of the Participant's Immediate Family Members, (ii) a trust or trusts for the exclusive benefit of such Immediate Family Members, (iii) a partnership in which the only partners are (1) such Immediate Family Members and/or (2) entities, a majority of the beneficial ownership of which is owned by Immediate Family Members, (iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of the Code, or (v) a split interest trust or pooled income fund described in Section 2522(c)(2) of the Code; provided, that (x) there shall be no consideration for any such transfer, (y) subsequent transfers may not be made hereunder except those by will or the laws of decent and distribution, and (z) a Termination of Service of Participant shall continue to have the effects in Sections 3 and 4 as if Participant had not transferred, assigned or otherwise conveyed this Stock Option. 9. Rights as Stockholder. The Participant will have no rights as a stockholder with respect to any shares covered by the Stock Option until the issuance of a certificate or certificates to the Participant for the Optioned Shares, subject to the Company's obligation to issue such certificate(s) as soon as practicable in accordance with Section 7 above. The Optioned Shares shall be subject to the terms and conditions of this Agreement regarding such Shares. Except as otherwise provided in Section 10 hereof, no adjustment shall 3 be made for dividends or other rights for which the record date is prior to the issuance of such certificate or certificates. 10. Registration Rights. (a) The Company shall use commercially reasonable efforts to cause to be filed with the Commission, within 180 days after the date hereof, a Registration Statement on Form S-8 (together with any successor forms thereto, the "REGISTRATION STATEMENT") covering the shares of Common Stock that may be delivered pursuant to Awards granted under the Plan, including the Optioned Shares and shares of Common Stock relating to the Additional Options (as defined in Section 12 below), if applicable, and shall use commercially reasonable efforts to have such Registration Statement declared and remain effective as soon as practicable thereafter. (b) Substantially concurrently with the execution of this Stock Option, the Company and the Participant are executing a Registration Rights Agreement (herein so called) relating to the Purchased Shares (as such term is defined in the Employment Agreement), Optioned Shares and the Additional Options, if applicable, together with any securities issued or issuable with respect to the Optioned Shares and the Additional Options, if applicable, by way of stock dividend or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization or otherwise. 11. Adjustment of Number of Optioned Shares and Related Matters. The number of shares of Common Stock covered by the Stock Option, and the Option Prices thereof, shall be subject to adjustment in accordance with Articles 11 - 13 of the Plan. 12. Future Offerings. (a) The Company may engage in one or more equity offerings (each, an "OFFERING") at some time before or after the consummation of an Acquisition Transaction. The timing of such Offerings would be determined by the Board of Directors of the Company. With respect to the first $60 million of additional equity capital raised by the Company in connection with such Offerings, Participant will receive additional Options under the Plan so that the number of shares of common stock issuable under this Stock Option (and/or which have been issued and sold under this Stock Option) plus such additional Options (but not including the "PURCHASED SHARES" (as defined in the Employment Agreement)) represents ten percent (10%) of the fully diluted ownership of the Company following such Offerings (with such fully diluted calculation including all shares issued and outstanding on the date hereof, plus all shares reserved for issuance in connection with the exercise of this Stock Option and the other Management Equity (as such term is defined in the Employment Agreement) and the Purchased Shares (to the extent actually purchased by Participant), but excluding any Excluded Shares (as defined below)). All Options so issued ("ADDITIONAL OPTIONS") would be subject to the same rights, conditions and limitations as the Options granted herein, including, without limitation, applicable vesting restrictions (which would treat all Additional Options as if they were granted on the Date of Grant of the Options granted herein), an exercise price equal to Three Dollars ($3.00) per share (subject to adjustments for stock splits, stock dividends and the like) and applicable adjustments pursuant to Section 11 above. Upon the grant of any Additional Options pursuant to this Section 12, the Company and the Participant would undertake to file a Registration Statement on Form S-8 (or any successor form thereto) to cover the additional shares of Common Stock issuable under the Plan following the grant of the Additional Options and any related amendments to the Plan. The granting of the Additional Options shall be subject to all applicable legal requirements and the 4 requirements of any stock exchange or inter-dealer quotation system on which the Company's shares are listed or traded. (b) For all purposes herein, "EXCLUDED SHARES" shall mean any of the following: (i) other than the Management Equity, securities issuable or issued pursuant to equity compensation grants to employees, consultants or directors pursuant to plans or other arrangements approved by the Board of Directors of the Company; (ii) securities issuable or issued in connection with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock or otherwise, provided that such issuance is approved by the Board of Directors of the Company; (iii) securities issuable or issued in connection with lease lines, bank financings or similar transactions that are primarily of a non-equity financing nature and are approved by the Board of Directors of the Company; (iv) securities issuable or issued in connection with corporate or strategic partnering agreements or agreement to license technology, provided that such issuance is approved by the Board of Directors of the Company; and (v) any other securities issuable or issued by the Company for which an adjustment would otherwise be made pursuant to Section 11 above. 13. Nonqualified Stock Option. The Stock Option shall not be treated as an Incentive Stock Option. 14. Voting. The Participant, as record holder of some or all of the Optioned Shares following exercise of this Stock Option, has the exclusive right to vote, or consent with respect to, such Optioned Shares until such time as the Optioned Shares are transferred in accordance with this Agreement; provided, however, that this Section shall not create any voting right where the holders of such Optioned Shares otherwise have no such right. 15. Community Property. Each spouse individually is bound by, and such spouse's interest, if any, in any Optioned Shares is subject to, the terms of this Agreement. Nothing in this Agreement shall create a community property interest where none otherwise exists. 16. Dispute Resolution. All disputes and controversies of every kind and nature between any parties hereto arising out of or in connection with this Agreement or the transactions described herein as to the construction, validity, interpretation or meaning, performance, non-performance, enforcement, operation or breach, shall be submitted to arbitration pursuant to the arbitration procedures set forth in the Employment Agreement. 17. Participant's Representations. Notwithstanding any of the provisions hereof, the Participant hereby agrees that he will not exercise the Stock Option granted hereby, and that the Company will not be obligated to issue any shares to the Participant hereunder, if the exercise thereof or the issuance of such shares shall constitute a violation by the Participant or the Company of any provision of any law or regulation of any governmental authority or any rule of any stock exchange or inter-dealer quotation system on which such 5 shares are listed or traded, provided that the foregoing shall not be deemed to be a limitation of any other obligation of the Company hereunder or under the Employment Agreement. 18. Investment Representation. Unless the Common Stock is issued to him in a transaction registered under applicable federal and state securities laws, by his execution hereof, the Participant represents and warrants to the Company that all Common Stock which may be purchased hereunder will be acquired by the Participant for investment purposes for his own account and not with any intent for resale or distribution in violation of federal or state securities laws. Unless the Common Stock is issued to him in a transaction registered under the applicable federal and state securities laws, all certificates issued with respect to the Common Stock shall bear an appropriate restrictive investment legend and shall be held indefinitely, unless they are subsequently registered under the applicable federal and state securities laws or the Participant obtains an opinion of counsel, in form and substance satisfactory to the Company and its counsel, that such registration is not required. The Company hereby agrees that from and after the time the Participant ceases to be an employee of the Company, it will not apply any policy or procedure to preclude hedging transactions with respect to the shares of the Company held by the Participant and that any policy relating to trading in the Company's capital stock shall not apply to the Participant. 19. Lock Up. In connection with an underwritten public offering of Common Stock, upon the request of the Company or the principal underwriter managing such public offering, no shares of Common Stock received by the Participant under this Award Agreement may be sold, offered for sale or otherwise disposed of without the prior written consent of the Company or such underwriter, as the case may be, for up to one hundred eighty (180) days after the effectiveness of the registration statement filed in connection with such offering, if all of the Company's directors and officers agree to be similarly bound, and releases from any and all lock-up agreements in connection with such offering are granted on a pro-rata basis. This Section 19 shall cease to apply to any such shares of Common Stock sold to the public pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act in a transaction that otherwise complied with the terms of this Award Agreement and the Plan, and shall no longer apply six (6) months after the Participant ceases to be an officer, director, or 5% or more stockholder of the Company. 20. Participant's Acknowledgments. The Participant acknowledges receipt of a copy of the Plan, which is annexed hereto, and represents that he or she is familiar with the terms and provisions thereof. 21. Law Governing. This Agreement shall be governed by, construed, and enforced in accordance with the laws of the State of Delaware (excluding any conflict of laws rule or principle of Delaware law that might refer the governance, construction, or interpretation of this agreement to the laws of another state). 22. No Right to Continue Service or Employment. Nothing herein shall be construed to confer upon the Participant the right to continue in the employ or to provide services to the Company or any Subsidiary, whether as an employee or as a consultant or as an Outside Director, or interfere with or restrict in any way the right of the Company or any Subsidiary to discharge the Participant as an employee, consultant or Outside Director at any time; provided, that the foregoing shall in no way limit any right to which Executive is entitled under the Employment Agreement. 23. Legal Construction. In the event that any one or more of the terms, provisions, or agreements that are contained in this Agreement shall be held by a Court of competent jurisdiction to be invalid, illegal, or unenforceable in any respect for any reason, the invalid, illegal, or unenforceable term, provision, or agreement shall not affect any other term, provision, or agreement that is contained in this Agreement and this Agreement shall be construed in all respects as if the invalid, illegal, or unenforceable term, provision, or agreement had never been contained herein. 6 24. Covenants and Agreements as Independent Agreements. Each of the covenants and agreements that is set forth in this Agreement shall be construed as a covenant and agreement independent of any other provision of this Agreement. The existence of any claim or cause of action of the Participant against the Company, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Company of the covenants and agreements that are set forth in this Agreement. 25. Entire Agreement. This Agreement, together with the Employment Agreement and the other Transaction Agreements (as defined in the Employment Agreement) executed concurrently herewith (the "OTHER AGREEMENTS"), supersede any and all other prior understandings and agreements, either oral or in writing, between the parties with respect to the subject matter hereof and constitute the sole and only agreements between the parties with respect to the said subject matter. All prior negotiations and agreements between the parties with respect to the subject matter hereof are merged into this Agreement and the Other Agreements. Each party to this Agreement acknowledges that no representations, inducements, promises, or agreements, orally or otherwise, have been made by any party or by anyone acting on behalf of any party, which are not embodied in this Agreement, the Other Agreements and that any agreement, statement or promise that is not contained in this Agreement, the Other Agreements shall not be valid or binding or of any force or effect. 26. Parties Bound. The terms, provisions, and agreements that are contained in this Agreement shall apply to, be binding upon, and inure to the benefit of the parties and their respective heirs, executors, administrators, legal representatives, and permitted successors and assigns, subject to the limitation on assignment expressly set forth herein. 27. Modification. No change or modification of this Agreement shall be valid or binding upon the parties unless the change or modification is in writing and signed by the parties. 28. Headings. The headings that are used in this Agreement are used for reference and convenience purposes only and do not constitute substantive matters to be considered in construing the terms and provisions of this Agreement. 29. Gender and Number. Words of any gender used in this Agreement shall be held and construed to include any other gender, and words in the singular number shall be held to include the plural, and vice versa, unless the context requires otherwise. 30. Notice. Any notice required or permitted to be delivered hereunder shall be deemed to be delivered only when actually received by the Company or by the Participant, as the case may be, at the addresses set forth below, or at such other addresses as they have theretofore specified by written notice delivered in accordance herewith: a. Notice to the Company shall be addressed and delivered as follows: Liberte Investors Inc. 200 Crescent Court, Suite 1365 Dallas, Texas 75201 Attn: Chairman Facsimile: (214) 871-5942 b. Notice to the Participant shall be addressed and delivered as set forth on the signature page. 7 31. Tax Requirements. The Participant, upon exercise of any portion of the Stock Option, shall be required to pay the Company the amount of all taxes which the Company is required to withhold as a result of the exercise of the Stock Option; such obligation to pay such taxes may be satisfied by any of the following or any combination thereof: (a) the delivery of cash to the Company in an amount that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding obligation of the Company; (b) if the Company, in its sole discretion, so consents in writing, the actual delivery by the exercising Participant to the Company of shares of Common Stock other than (i) Restricted Stock or (ii) Common Stock that the Participant owns but has acquired from the Company within six months prior to the date of exercise, which shares so delivered have an aggregate Fair Market Value that equals or exceeds (to avoid the issuance of fractional shares under (c) below) the required tax withholding payment; or (c) the Company's withholding of a number of shares to be delivered upon the exercise of the Stock Option, which shares so withheld have an aggregate Fair Market Value that equals (but does not exceed) the required tax withholding payment; provided that, shares cannot be withheld in connection with the exercise of a Stock Option in excess of the minimum number required for tax withholding, and to permit the Stock Option to be accounted for as a fixed award. Any such withholding payments with respect to the exercise of any portion of the Stock Option in cash or by actual delivery of shares of Common Stock shall be required to be made within thirty (30) days after the delivery to the Participant of any certificate representing the shares of Common Stock acquired upon exercise of the Stock Option. The Company may, in its discretion, withhold such taxes from any other remuneration paid by the Company or a Subsidiary to the Participant. 32. Option Cash-out. The Company may only make provisions for a cash payment to the holder of this Stock Option, as contemplated by Article 11 or Section 12.3 of the Plan, in the event and subject to the consummation of the sale of substantially all of the assets or capital stock of the Company for cash. 33. Failure to Pay Option Price; Notice to Participant. Section 8.3(c) of the Plan shall not apply to this Option unless the Participant receives from the Company written notice of an event giving rise to the forfeiture right described in Section 8.3(c) of the Plan and the Participant fails to cure such event within five (5) days after his receipt of such notice. * * * * * * * * 8 IN WITNESS WHEREOF, the Company has caused this Award Agreement to be executed by its duly authorized officer, and the Participant, to evidence his consent and approval of all the terms hereof, has duly executed this Agreement, as of the date specified in Section 1 hereof. LIBERTE INVESTORS INC.: By: /s/ Gerald J. Ford -------------------------------------- Name: Gerald J. Ford Title: Chairman DONALD J. EDWARDS: /s/ Donald J. Edwards ----------------------------------------- Signature Address: 1857 N. Fremont Street Chicago, Illinois 60614 9 EX-10.4 7 d98262exv10w4.txt INDEMNIFICATION AGREEMENT EXHIBIT 10.4 INDEMNIFICATION AGREEMENT This INDEMNIFICATION AGREEMENT (the "AGREEMENT") is made and entered into as of the 1st day of July, 2002, by and between Liberte Investors Inc., a Delaware corporation (including any successors thereto, the "COMPANY"), and Donald J. Edwards ("INDEMNITEE"). RECITALS: A. Competent and experienced persons are reluctant to serve or to continue to serve corporations as directors, officers, or in other capacities unless they are provided with adequate protection through insurance or indemnification (or both) against claims and actions against them arising out of their service to and activities on behalf of those corporations. B. The current uncertainties relating to the availability of adequate insurance for directors and officers have increased the difficulty for corporations to attract and retain competent and experienced persons. C. The Board of Directors of the Company (the "BOARD") has determined that the continuation of present trends in litigation will make it more difficult to attract and retain competent and experienced persons, that this situation is detrimental to the best interests of the Company's stockholders, and that the Company should act to assure its directors and officers that there will be increased certainty of adequate protection in the future. D. It is reasonable, prudent, and necessary for the Company to obligate itself contractually to indemnify its directors and officers to the fullest extent permitted by applicable law in order to induce them to serve or continue to serve the Company. E. Indemnitee is willing to serve and continue to serve the Company on the condition that he be indemnified to the fullest extent permitted by law. F. Concurrently with the execution of this Agreement, Indemnitee is agreeing to serve or to continue to serve as a director or officer of the Company. AGREEMENTS: NOW, THEREFORE, in consideration of the foregoing premises, Indemnitee's agreement to serve or continue to serve as a director or officer of the Company, and the covenants contained in this Agreement, the Company and Indemnitee hereby covenant and agree as follows: 1. Certain Definitions: For purposes of this Agreement: (a) Change of Control: shall mean the occurrence of any of the following events: (i) The acquisition by any individual, entity, or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"))(a "PERSON") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (x) the then outstanding shares of common stock of the Company (the "OUTSTANDING COMPANY COMMON STOCK") or (y) 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"); provided, however, that for purposes of this paragraph (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Company or any Subsidiary thereof, (B) any acquisition by the Company or any Subsidiary thereof, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary of the Company, or (D) any acquisition by any entity or its security holders pursuant to a transaction which complies with clauses (A) and (B) of paragraph (iii) below; or (ii) Individuals who, as of the date of this Agreement, constitute the Board (the "INCUMBENT BOARD") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date of this Agreement whose election, or nomination for election by the Company's stockholders, 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, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (iii) Consummation of a reorganization, merger, or consolidation or sale or other disposition of all or substantially all of the assets of the Company or an acquisition of assets of another entity (a "BUSINESS COMBINATION"), in each case, unless, immediately following such Business Combination, (A) 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 Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock or other equity interests and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors (or similar governing body), as the case may be, of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more Subsidiaries) in proportions not materially different from their ownership, immediately prior to such Business Combination, of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, and (B) at least a majority of the members of the board of directors (or similar governing body) of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination, or (iv) Approval by the stockholders of the Company of a complete liquidation or dissolution of the Company. 2 (b) Claim: shall mean any threatened, pending, or completed action, suit, or proceeding (including, without limitation, securities laws actions, suits, and proceedings and also any cross claim or counterclaim in any action, suit, or proceeding), whether civil, criminal, arbitral, administrative, or investigative in nature, or any inquiry or investigation (including discovery), whether conducted by the Company or any other Person. (c) Expenses: shall mean all costs, fees and expenses (including, without limitation, attorneys' and expert witnesses' fees and disbursements, fees of private investigators and professional advisors, court costs, transcript costs and travel expenses), and obligations paid or incurred in connection with investigating, defending (including affirmative defenses and counterclaims), being a witness in, or participating in (including on appeal), or preparing to defend, be a witness in, or participate in, any Claim relating to any Indemnifiable Event. (d) Indemnifiable Event: shall mean any actual or alleged act, omission, statement, misstatement, event, or occurrence related to the fact that Indemnitee is or was a director, officer, agent, or fiduciary of the Company, or is or was serving at the request of the Company as a director, officer, trustee, agent, or fiduciary of another corporation, partnership, joint venture, employee benefit plan, trust, or other enterprise, or by reason of any actual or alleged thing done or not done by Indemnitee in any such capacity. For purposes of this Agreement, the Company agrees that Indemnitee's service on behalf of or with respect to any Subsidiary or employee benefits plan of the Company or any Subsidiary of the Company shall be deemed to be at the request of the Company. (e) Indemnifiable Liabilities: shall mean all Expenses and all other liabilities, damages (including, without limitation, punitive, exemplary, and the multiplied portion of any damages), judgments, payments, fines, penalties, amounts paid in settlement, and awards paid or incurred that arise out of, or in any way relate to, any Indemnifiable Event. (f) Potential Change of Control: shall be deemed to have occurred if (i) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change of Control; (ii) any Person (including the Company) publicly announces an intention to take or to consider taking actions that, if consummated, would constitute a Change in Control; or (iii) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change of Control has occurred. (g) Reviewing Party: shall mean (i) a member or members of the Board who are not parties to the particular Claim for which Indemnitee is seeking indemnification or (ii) if a Change of Control has occurred and Indemnitee so requests, or if the members of the Board so elect, or if all of the members of the Board are parties to such Claim, Special Counsel. (h) Special Counsel: shall mean special, independent legal counsel selected by Indemnitee and approved by the Company (which approval shall not be unreasonably withheld), and who has not otherwise performed material services for the Company or for Indemnitee within the last three years (other than as Special Counsel under this Agreement or similar agreement). 3 (i) Subsidiary: shall mean, with respect to any Person, any corporation or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by that Person. 2. Indemnification and Expense Advancement. (a) The Company shall indemnify Indemnitee and hold Indemnitee harmless to the fullest extent permitted by law, as soon as practicable but in any event no later than 30 days after written demand is presented to the Company, from and against any and all Indemnifiable Liabilities. In connection with the foregoing obligation, the Company agrees that the Reviewing Party shall make a determination (in a written opinion, in any case in which Special Counsel is involved) as to Indemnitee's entitlement to indemnification under Section 145 of the Delaware General Corporation Law, as amended from time to time ("APPLICABLE LAW"). Notwithstanding the foregoing, nothing contained in this Agreement shall require any determination under this Section 2(a) to be made by the Reviewing Party prior to the disposition or conclusion of the Claim against the Indemnitee. If there has been a Change of Control, the Reviewing Party shall be Special Counsel, if Indemnitee so requests, in accordance with the terms of Section 3 hereof. (b) If so requested by Indemnitee, the Company shall advance to Indemnitee all reasonable Expenses incurred by Indemnitee to the fullest extent permitted by law (or, if applicable, reimburse Indemnitee for any and all reasonable Expenses incurred by Indemnitee and previously paid by Indemnitee) within ten business days after such request (an "EXPENSE ADVANCE"). The Company shall be obligated from time to time at the request of Indemnitee to make or pay an Expense Advance in advance of the final disposition or conclusion of any Claim and in advance of any determination by the Reviewing Party as to Indemnitee's entitlement to indemnification hereunder. (c) If, when, and to the extent that the Reviewing Party determines that Indemnitee would not permitted to be indemnified with respect to a Claim under Applicable Law, the Company shall be entitled to be reimbursed by Indemnitee and Indemnitee hereby agrees to reimburse the Company without interest (which agreement shall be an unsecured obligation of Indemnitee) for all related Expense Advances theretofore made or paid by the Company in the event that it is determined that indemnification would not be permitted under Applicable Law, if and only to the extent such reimbursement is required by Applicable Law; provided, however, that if Indemnitee commences legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee could be indemnified under Applicable Law, any determination made by the Reviewing Party that Indemnitee would not be permitted to be indemnified under Applicable Law shall not be binding, and the Company shall be obligated to continue to make Expense Advances until a final judicial determination is made with respect thereto (as to which all rights of appeal therefrom have been exhausted or lapsed), which determination shall be conclusive and binding. If there has been no determination by the Reviewing Party or if the Reviewing Party determines that Indemnitee substantively is not permitted to be indemnified in whole or part under Applicable Law, Indemnitee shall have the right to commence litigation in the Delaware Court of Chancery to enforce the Company's obligations and the Indemnitee's rights under this Agreement or to challenge any adverse determination made by the Reviewing Party or any aspect thereof, and the Company hereby consents to service of process and to appear in any such proceeding. 4 (d) Nothing in this Agreement, however, shall require the Company to indemnify Indemnitee with respect to any Claim initiated by Indemnitee, other than a Claim solely seeking enforcement of the Company's indemnification obligations to Indemnitee or the Indemnitee's rights under this Agreement, any counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee, or a Claim authorized by the Board. 3. Change of Control. The Company agrees that if there is a Change of Control and if Indemnitee requests in writing that Special Counsel be the Reviewing Party, then Special Counsel shall be the Reviewing Party. In such a case, the Company agrees not to request or seek reimbursement from Indemnitee of any indemnification payment or Expense Advances unless Special Counsel has rendered its written opinion to the Company and Indemnitee that the Company was not or is not permitted under Applicable Law to indemnify Indemnitee. However, if Indemnitee has commenced legal proceedings in a court of competent jurisdiction to secure a determination that Indemnitee could be indemnified under Applicable Law, any determination made by Special Counsel that Indemnitee would not be permitted to be indemnified under Applicable Law shall not be binding, and the Company shall be obligated to continue to make Expense Advances, until a final judicial determination is made with respect thereto (as to which all rights of appeal therefore have been exhausted or lapsed), which determination shall be conclusive and binding. The Company agrees to pay the fees of Special Counsel and to indemnify Special Counsel against any and all expenses (including attorneys' fees), claims, liabilities, and damages arising out of or relating to this Agreement or Special Counsel's engagement pursuant hereto. 4. Establishment of Trust. In the event of a Potential Change of Control or a Change of Control, the Company shall, upon written request by Indemnitee, create a trust for the benefit of Indemnitee (the "TRUST") and from time to time upon written request of Indemnitee shall fund the Trust in an amount equal to all Indemnifiable Liabilities reasonably anticipated at the time to be incurred in connection with any Claim. The amount to be deposited in the Trust pursuant to the foregoing funding obligation shall be determined by the Reviewing Party. The terms of the Trust shall provide that, upon a Change of Control, (i) the Trust shall not be revoked or the principal thereof invaded, without the written consent of Indemnitee; (ii) the trustee of the Trust shall advance, within ten business days of a request by Indemnitee, any and all reasonable Expenses to Indemnitee (and Indemnitee hereby agrees to reimburse the Trust under the circumstances in which Indemnitee would be required to reimburse the Company for Expense Advances under this Agreement), (iii) the Trust shall continue to be funded by the Company in accordance with the funding obligation set forth above; (iv) the trustee of the Trust shall promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to indemnification pursuant to this Agreement; and (v) all unexpended funds in the Trust shall revert to the Company upon a final determination by the Reviewing Party or a court of competent jurisdiction, as the case may be, that Indemnitee has been fully indemnified under the terms of this Agreement. The trustee of the Trust shall be chosen by Indemnitee, and shall be an institution that is not affiliated with Indemnitee. Nothing in this Section 4 shall relieve the Company of any of its obligation under this Agreement. 5. Indemnification for Additional Expenses. The Company shall indemnify Indemnitee against any and all costs and expenses (including attorneys' and expert witnesses' fees) and, if requested by Indemnitee, shall (within two business days of that request) advance those costs and 5 expenses to Indemnitee, that are incurred by Indemnitee if Indemnitee, whether by formal proceedings or through demand and negotiation without formal proceedings: (a) seeks to enforce Indemnitee's rights under this Agreement, (b) seeks to enforce Indemnitee's rights to expense advancement or indemnification under any other agreement or provision of the Company's Certificate of Incorporation (the "CERTIFICATE OF INCORPORATION") or Bylaws (the "BYLAWS") now or hereafter in effect relating to Claims for Indemnifiable Events, or (c) seeks recovery under any directors' and officers' liability insurance policies maintained by the Company, in each case regardless of whether Indemnitee ultimately prevails; provided that a court of competent jurisdiction has not found Indemnitee's claim for indemnification or expense advancements under the foregoing clauses (a), (b) or (c) to be frivolous, presented for an improper purpose, without evidentiary support, or otherwise sanctionable under Federal Rule of Civil Procedure No. 11 or an analogous rule or law, and provided further, that if a court makes such a finding, Indemnitee shall reimburse the Company for all amounts previously advanced to Indemnitee pursuant to this Section 5. Subject to the provisos contained in the preceding sentence, to the fullest extent permitted by law, the Company waives any and all rights that it may have to recover its costs and expenses from Indemnitee. 6. Partial Indemnity. If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some, but not all, of Indemnitee's Indemnifiable Liabilities, the Company shall indemnify Indemnitee for the portion thereof to which Indemnitee is entitled. 7. Contribution. (a) Contribution Payment. To the extent the indemnification provided for under any provision of this Agreement is determined (in the manner hereinabove provided) not to be permitted under applicable law, the Company, in lieu of indemnifying Indemnitee, shall, to the extent permitted by law, contribute to the amount of any and all Indemnifiable Liabilities incurred or paid by Indemnitee for which such indemnification is no permitted. The amount the Company contributes shall be in such proportion as is appropriate to reflect the relative fault of Indemnitee, on the one hand, and of the Company and any and all other parties (including officers and directors of the Company other than Indemnitee) who may be at fault (collectively, including the Company, the "THIRD PARTIES"), on the other hand. (b) Relative Fault. The relative fault of the Third Parties and the Indemnitee shall be determined (i) by reference to the relative fault of Indemnitee as determined by the court or other governmental agency or (ii) to the extent such court or other governmental agency does not apportion relative fault, by the Reviewing Party after giving effect to, among other things, the relative intent, knowledge, access to information, and opportunity to prevent or correct the relevant events, of each party, and other relevant equitable considerations. The Company and Indemnitee agree that it would not be just and equitable if contribution were determined by pro rata allocation or by any other method of allocation that does take account of the equitable considerations referred to in this Section 7(b). 8. Burden of Proof. In connection with any determination by the Reviewing Party or in any judicial proceeding to determine whether Indemnitee is entitled to be indemnified under any provisions of this Agreement or to receive contribution pursuant to Section 7 of this Agreement, to 6 the extent permitted by law the burden of proof shall be on the Company to establish that Indemnitee is not so entitled. 9. No Presumption. For purposes of this Agreement, the termination of any Claim by judgment, order, settlement (whether with or without court approval), or conviction, or upon a plea on nolo contendere, or its equivalent, or an entry of an order of probation prior to judgment shall not create a presumption (other than any presumption arising as a matter of law that the parties may not contractually agree to disregard) that Indemnitee did not meet any particular standard of conduct or have any particular belief or that a court has determined that indemnification is not permitted by applicable law. 10. Non-exclusivity; Changes in Law. The rights of Indemnitee hereunder shall be in addition to any other rights Indemnitee may have under the Bylaws or Certificate of Incorporation or the Delaware General Corporation Law or otherwise. To the extent that a change in the Delaware General Corporation Law (whether by statute or judicial decision) permits greater indemnification or advancement of expenses by agreement than would be afforded currently under this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by that change, and this Agreement shall be deemed to be amended to such extent. Indemnitee's rights under this Agreement shall not be diminished by any amendment to the Certificate of Incorporation or Bylaws, or of any other agreement or instrument to which Indemnitee is not a party, and shall not diminish any other rights that Indemnitee now or in the future has against the Company. 11. Liability Insurance. The Company shall use commercially reasonable efforts to obtain and maintain in effect an insurance policy or policies with a reputable insurer providing directors' and officers' liability insurance coverage to Indemnitee in an amount which is not less than the greater of (i) $10 million, or (ii) the maximum amount of coverage available for the most favorably insured of the Company's officers and directors, which policy or policies shall name the Indemnitee as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably insured of the Company's officers and directors. 12. Period of Limitations. No action, lawsuit, or proceeding may be brought against Indemnitee or Indemnitee's spouse, heirs, executors, or personal or legal representatives, nor may any cause of action be asserted in any such action, lawsuit, or proceeding, by or on behalf of the Company, after the expiration of two years after the statute of limitations commences with respect to Indemnitee's act or omission that gave rise to the action, lawsuit, proceeding, or cause of action; provided, however, that, if any shorter period of limitations is otherwise applicable to any such action, lawsuit, proceeding, or cause of action, the shorter period shall govern. 13. Amendments. No supplement, modification, or amendment of this Agreement shall be binding unless executed in writing by both of the parties hereto. No waiver of any provision of this Agreement shall be effective unless in a writing signed by the party granting the waiver. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute a waiver of any other provisions hereof (whether or not similar) nor shall that waiver constitute a continuing waiver. 7 14. Other Sources. Indemnitee shall not be required to exercise any rights that Indemnitee may have against any other Person (for example, under an insurance policy) before Indemnitee enforces his rights under this Agreement. However, to the extent the Company actually indemnifies Indemnitee or advances him Expenses, the Company shall be subrogated to the rights of Indemnitee and shall be entitled to enforce any such rights which Indemnitee may have against third parties. Indemnitee shall assist the Company in enforcing those rights if it pays his costs and expenses of doing so. If Indemnitee is actually indemnified or advanced Expenses by any third party, then, for so long as Indemnitee is not required to disgorge the amounts so received, to that extent the Company shall be relieved of its obligation to indemnify Indemnitee or advance Indemnitee Expenses. 15. Binding Effect. This Agreement shall be binding upon and inure to the benefit of and be enforceable by the parties hereto and their respective successors, assigns (including any direct or indirect successor by merger or consolidation), spouses, heirs, and personal and legal representatives. This Agreement shall continue in effect regardless of whether Indemnitee continues to service as an officer or director of the Company or another enterprise at the Company's request. 16. Severability. If any provision of this Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term hereof, that provision shall be fully severable; this Agreement shall be construed and enforced as if that illegal, invalid, or unenforceable provision had never comprised a part hereof; and the remaining provisions shall remain in full force and effect and shall not be affected by the illegal, invalid, or unenforceable provision or by its severance from this Agreement. Furthermore, in lieu of that illegal, invalid, or unenforceable provision, there shall be added automatically as a part of this Agreement a provision as similar in terms to the illegal, invalid, or unenforceable provision as may be possible and be legal, valid, and enforceable. 17. Governing Law; Consent to Jurisdiction; Service of Process. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts made and to be performed in that state without giving effect to the principles of conflicts of laws. Each of the Company and the Indemnitee hereby irrevocably and unconditionally consents to submit to the exclusive jurisdiction of the Court of Chancery of the State of Delaware and the courts of the United States of America located in the State of Delaware (the "DELAWARE COURTS") for any litigation arising out of or relating to this Agreement and the transactions contemplated hereby (and agrees not to commence any litigation relating thereto except in such courts), waives any objection to the laying of venue of any such litigation in the Delaware Courts and agrees not to plead or claim in any Delaware Court that such litigation brought therein has been brought in an inconvenient forum. Each of the parties hereto agrees (a) to the extent such party is not otherwise subject to service of process in the State of Delaware, to appoint and maintain an agent in the State of Delaware as such party's agent for acceptance of legal process, and (b) that service of process may also be made on such party by prepaid certified mail with a proof of mailing receipt validated by the United States Postal Service constituting evidence of valid service. Service made pursuant to (a) or (b) above shall have the same legal force and effect as if served upon such party personally within the State of Delaware. 8 18. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 19. Notices. Whenever this Agreement requires or permits notice to be given by one party to the other, such notice shall be in writing and shall be deemed to have been duly given (a) when delivered by hand, (b) when transmitted by facsimile and receipt is acknowledged, or (c) if mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed, to the address of the respective party as listed on the signature page hereto, or to such other address as may have been furnished in the same manner by any party to the other. Receipt of a notice by the Secretary of the Company shall be deemed receipt of such notice by the Company. 20. Complete Agreement. This Agreement and the other agreements entered into concurrently herewith by the Company and the Indemnitee constitute the complete understanding and agreement among the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect to the subject matter hereof, other than any indemnification rights that Indemnitee may enjoy under the Certificate of Incorporation, the Bylaws, or the Delaware General Corporation Law. 21. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but in making proof hereof it shall not be necessary to produce or account for more than one such counterpart. * * * * * 9 EXECUTED as of the date first written above. LIBERTE INVESTORS INC. By: /s/ Gerald J. Ford ------------------------------------- Name: Gerald J. Ford Title: Chairman INDEMNITEE /s/ Donald J. Edwards ----------------------------------------- Donald J. Edwards 10 EX-99.1 8 d98262exv99w1.txt PRESS RELEASE DATED JULY 9, 2002 EXHIBIT 99.1 LIBERTE INVESTORS INC. ELECTS NEW PRESIDENT DALLAS, July 9, 2002 -- The Board of Directors of Liberte Investors Inc. (NYSE: LBI) today announced that it had elected Donald J. Edwards of Chicago, Illinois, President and Chief Executive Officer of Liberte effective July 1, 2002. Mr. Edwards will be employed pursuant to a five year Employment Agreement approved by the Board of Liberte and will also become a member of the Board. Gerald J. Ford will continue to serve as Chairman of the Board of Directors of Liberte. Prior to his association with Liberte, Mr. Edwards has been a Principal in GTCR Golder Rauner ("GTCR"), a Chicago based private equity firm with over $4 billion in capital under management. Mr. Edwards has been with GTCR since 1994. Prior to joining GTCR, Mr. Edwards was an associate at Lazard Freres & Co. Mr. Edwards holds a BS degree in finance from the University of Illinois and an MBA from Harvard Business School where he was a Baker Scholar. In connection with Mr. Edwards' hiring, the principal corporate offices of Liberte will be relocated from Dallas to Chicago. The Board further announced that, in connection with Mr. Edwards' employment, Liberte had, subject to stockholder approval, adopted a Long Term Incentive Plan and as part of such has granted Mr. Edwards an option to purchase 10% of the fully-diluted outstanding shares of Liberte at an option price of $3.00 per share, subject to certain vesting limitations. Under certain circumstances, Mr. Edwards will also receive additional options to purchase Liberte shares sufficient to keep his option percentage at 10% of the fully-diluted outstanding shares. The Long Term Incentive Plan adopted by Board is for 6,000,000 shares of Liberte (approximately 25% of the fully- diluted outstanding shares). This release may contain forward-looking statements relating to future financial results or business expectations. Business plans may change as circumstances warrant. Actual results may differ materially from those predicted as a result of factors over which Liberte has no control. Such factors include, but are not limited to: acquisitions, recruiting and new business solicitation efforts, regulatory changes and general economic conditions. These risk factors and additional information are included in Liberte's reports on file with the Securities and Exchange Commission. -----END PRIVACY-ENHANCED MESSAGE-----