<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1995
COMMISSION FILE NUMBER 1-6802
LIBERTE INVESTORS
(Exact name of registrant as specified in its charter)
MASSACHUSETTS 75-1328153
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
600 N. PEARL STREET, SUITE 420, LB #168, DALLAS, TEXAS 75201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (214) 720-8950
Securities registered pursuant to Section 12(b) of the Act:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------------------ ------------------------
Shares of Beneficial Interest, New York
without par value Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
As of September 15, 1995, the aggregate market value of the Shares of
Beneficial Interest held by non-affiliates was $21,515,323.
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes X* No
----- -----
* The registrant's plan of reorganization under Chapter 11 of the
Bankruptcy Code did not provide for the distribution of securities.
As of September 15, 1995, there were 12,153,658 Shares of Beneficial
Interest outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE> 2
INDEX TO
FORM 10-K/A
<TABLE>
<CAPTION>
Page
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<S> <C> <C>
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS . . . . . . . . . . . . . . . . . . *
PART II . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . *
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. . *
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . *
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . *
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . . . . . . . . . . . . . . . . . . 3
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . 7
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . 9
PART IV . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . *
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . *
SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
* Filed as part of the original Form 10-K.
NOTE: Liberte Investors is filing this Form 10-K/A to add Part III to the
original Form 10-K. Liberte Investors will not file a definitive proxy
statement containing this information by the deadline specified in
Instruction G(3), as it had previously contemplated.
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PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
TRUSTEES
The Board of Trustees is divided into three classes, with each class
elected to serve a three year term. Mr. Edward W. Rose, III is the Class I
Trustee, Mr. Gene H. Bishop is the Class II Trustee, and Mr. Robert Ted Enloe,
III, is the Class III Trustee. The terms of Messrs. Rose and Bishop expire at
this year's annual meeting. Mr. Rose's term would have expired last year
except that Liberte Investors (the "Trust") did not hold an annual meeting in
1994. Mr. Enloe's term as a trustee expires at next year's annual meeting.
The current trustees of the Trust were trustees prior to the Trust's bankruptcy
proceedings and were named as trustees in the Fifth Amendment to the
Declaration of Trust, which became effective in connection with the Trust's
emergence from such proceedings in April 1994. The Board of Trustees has
formed two standing committees, an audit committee and a compensation committee
(the "Compensation Committee").
The following table sets forth certain information concerning the trustees.
<TABLE>
<CAPTION>
TRUSTEE YEAR TERM POSITIONS WITH THE TRUST/
NAME AGE CLASS EXPIRES COMMITTEE MEMBERSHIPS
----------------------- --- ------- --------- ------------------------------
<S> <C> <C> <C> <C>
Edward W. Rose, III 54 I 1995 Audit and Compensation
Committees
Gene H. Bishop 65 II 1995 Audit and Compensation
Committees
Robert Ted Enloe, III 56 III 1996 President and Chief Executive
Officer
</TABLE>
MR. ROSE. Edward W. Rose, III has served as a trustee since April 1992.
From February 1974 Mr. Rose has been the President and sole shareholder of
Cardinal Investment Company, Inc. From November 1985 Mr. Rose has also been
the sole proprietor of Cardinal Portfolio Company, an investment management
firm that is the general partner of Willowwood Partners, L.P. ("Willowwood"),
which is a principal shareholder of the Trust. In addition, from April 1989
Mr. Rose has been the Co-Managing General Partner of the partnership that owns
the Texas Rangers, a major league baseball team. Mr. Rose is the Chairman of
Drew Industries, Inc., a manufacturing conglomerate, and Leslie Building
Products Inc., a building products manufacturer, and a director of Ace Cash
Express, Inc., a check cashing company, and DF&R Restaurants, Inc., a
restaurant company.
MR. BISHOP. Gene H. Bishop has served as a trustee since the Trust's
formation in June 1969. From November 1991 until his retirement in October
1994, Mr. Bishop served as the Chairman and Chief Executive Officer of Life
Partners Group, Inc., a life insurance holding company. From October 1990 to
October 1991, Mr. Bishop was the Vice Chairman and Chief Financial Officer of
Lomas Financial Corporation ("Lomas Financial"), a financial services company
and the original sponsor of the Trust. From March 1975 to July 1990, Mr.
Bishop was Chairman and Chief Executive Officer of MCorp, a bank holding
company. Lomas Financial emerged from bankruptcy proceedings in January 1992
and MCorp emerged from bankruptcy proceedings in July 1994. Mr. Bishop is a
director of Drew Industries, Inc., First USA, Inc., a credit card company, Life
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Partners Group, Inc., Southwest Airlines Co., a passenger airline, and
Southwestern Public Service Company, an electric utility.
MR. ENLOE. Robert Ted Enloe, III has served as a trustee since October
1970. Mr. Enloe has also served as the Trust's President since March 1975 and
as its Chief Executive Officer since April 1992. From March 1975 until August
1991 Mr. Enloe was the President and a director of Lomas Financial. The Trust
emerged from bankruptcy proceedings in April 1994 and Lomas Financial emerged
from bankruptcy proceedings in January 1992. Mr. Enloe is a director of Compaq
Computer Corporation, a manufacturer of personal computers and servers, Epikon,
Inc., a developer of nuclear magnetic imaging equipment, Leggett & Platt, Inc.,
a diversified manufacturer of foam, plastic, steel, and wire components for the
automotive, home furnishings, and office equipment industries, LNH REIT, Inc.,
a real estate investment trust that owns commercial real property and mortgage
notes on such property, and SIXX Holdings, Incorporated, a restaurant company
that operates the Patrizio Italian restaurants in Dallas, Texas.
EXECUTIVE OFFICERS
The following table sets forth the current executive officers of the
Trust. Each executive officer serves at the pleasure of the Board of Trustees.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Robert Ted Enloe, III 56 President, Chief Executive Officer,
and Trustee
Bradley S. Buttermore 39 Senior Vice President, Treasurer, and
Secretary
</TABLE>
The business experience of Mr. Enloe is described above.
MR. BUTTERMORE. Bradley S. Buttermore has served as Senior Vice
President, Treasurer, and Secretary of the Trust since January 1995. Mr.
Buttermore served as Senior Vice President of Finance with Lomas Management,
Inc., the former manager of the Trust ("Lomas Management"), from December 1988
to June 1994. Concurrent with his service to Lomas Management, Mr. Buttermore
served as Senior Vice President and Treasurer of the Trust. Mr. Buttermore
served as Senior Vice President--Control with Lomas Financial from March 1983
to December 1988, and prior to March 1983 held various accounting and finance
positions with Advance Mortgage Company, LTD, Chrysler Motors Corporation, and
CIT Financial Services, Inc. The Trust emerged from bankruptcy proceedings in
April 1994 and Lomas Financial emerged from bankruptcy proceedings in January
1992.
SECTION 16(A)
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Trust's trustees, executive officers, and holders
of more than 10% of its shares of beneficial interest (collectively,
"Insiders") to file with the Securities and Exchange Commission (the
"Commission") and the New York Stock Exchange initial reports of ownership of
shares of beneficial interest in the Trust (the "Shares") and reports of
changes in such ownership. The Commission's rules require such Insiders to
furnish the Trust with copies of all Section 16(a) reports that they file.
Based solely upon a review of the copies of such reports furnished to the Trust
and written representations that no other reports were
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required with respect to the year ended June 30, 1995, the Trust believes that
its Insiders have complied with all applicable Section 16(a) filing
requirements for such year on a timely basis, except that FMR Corp. ("FMR") did
not file an Initial Statement of Beneficial Ownership of Securities on Form 3
and FMR and Mr. Edward C. Johnson 3d did not file an Annual Statement of
Beneficial Ownership of Securities on Form 5 or make a written representation
that they were not required to file a Form 5.
ITEM 11.EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information with respect to
compensation paid or accrued by the Trust during the years ended June 30, 1995,
1994, and 1993 to the Trust's Chief Executive Officer, Mr. Enloe. As no other
executive officer of the Trust earned more than $100,000 during those years,
the table does not include any other individuals.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION/
ANNUAL SECURITIES
COMPENSATION UNDERLYING ALL OTHER
SALARY BONUS OPTIONS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) (#) ($)
- ----------------------------------- ---- ------- ------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Robert Ted Enloe, III, 1995 396,671 --- --- 499,893(1)
President and Chief Executive 1994 435,400 361,590 --- 26,600(2)
Officer 1993 408,333 --- 650,000(3) 26,600(2)
</TABLE>
(1) This amount is comprised of: (i) a severance payment of $472,679 paid
in connection with the non-renewal of Mr. Enloe's employment agreement,
(ii) fees for service as a trustee of $16,700, and (iii) term life
insurance premiums of $10,514.
(2) This amount was for service as a trustee.
(3) The Trust granted Mr. Enloe options to purchase 250,000 Shares in
January 1993 and options to purchase 400,000 Shares in May 1993. In
August 1993 the Board of Trustees accelerated the vesting of these
options and in October 1993 Mr. Enloe exercised them. See Item 13,
entitled "Certain Relationships and Related Transactions--Promissory
Note from Mr. Enloe."
EMPLOYMENT AGREEMENT
In January 1993, the Trust entered into an employment agreement with
Mr. Enloe that paid him a minimum base salary of $420,000, subject to annual
increases of 5%, and annual incentive compensation in such amounts as the Board
of Trustees determined. The agreement provided for annual one-year extensions
following February 28, 1994, unless either the Trust or Mr. Enloe notified the
other of a desire not to extend the agreement. If Mr. Enloe's employment
terminated because of his death, disability, resignation for good reason, or
failure of the Trust to extend the employment agreement, or if the Trust
terminated Mr. Enloe without cause, the agreement provided that the Trust would
pay Mr. Enloe a lump-sum severance payment equal to the amount of his annual
base salary. In addition, the Trust would continue to provide retirement and
other benefits to Mr. Enloe for the first year after termination, except in the
case of termination for cause.
During the past fiscal year, the Board of Trustees decided not to extend
Mr. Enloe's employment agreement.
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The Trust paid Mr. Enloe the $472,679 in severance benefits provided for under
the agreement. The Board of Trustees and Mr. Enloe agreed that Mr. Enloe would
remain as the President and Chief Executive Officer of the Trust, but that Mr.
Enloe would only be required to devote a portion of his time to the business
affairs of the Trust. Accordingly, in addition to his duties as President and
Chief Executive Officer of the Trust, Mr. Enloe may pursue other business
opportunities. Mr. Enloe's current annual salary is $120,000 per year.
ABANDONED STOCK OPTION PLAN
In contemplation of implementing the new business plan, in February 1995
the Board of Trustees adopted a stock option plan and the Compensation
Committee granted Messrs. Enloe and Buttermore options to purchase Shares
pursuant to it. The adoption of the stock option plan and the granting of the
options, however, were subject to the shareholders approving the stock option
plan within one year. As the Special Committee decided not to implement the
business plan as discussed above, the rationale for the stock option plan and
these options ceased. Accordingly, the Compensation Committee and Messrs.
Enloe and Buttermore agreed that the Trust would not seek shareholder approval
of the stock option plan and the Trust has abandoned it. Messrs. Enloe and
Buttermore have surrendered any claim to the options granted to them under the
stock option plan. Any references in other parts of this Form 10-K, including
the financial statements, to the stock option plan and the options granted
under it should be considered in light of this development.
TRUSTEE COMPENSATION
The Trust currently pays each trustee a monthly retainer of $900 and $500
for each meeting attended. In addition, the Trust reimburses each trustee for
his travel and related expenses when attending meetings or otherwise performing
services on behalf of the Trust. The Trust has also adopted a retirement plan
for trustees who attain the age of 75 during their term of office or who attain
the age of 65 during their term of office and have served as a trustee for at
least 15 years. Pursuant to this retirement plan, a retiring trustee serves as
a trustee emeritus for the year immediately after his retirement and receives
compensation equal to the other trustees for such service. For the four years
immediately following service as a trustee emeritus, the Trust will then pay
the retired trustee an annual retirement benefit of $18,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Bishop and Rose, neither
of which was an employee or officer of the Trust or any of its subsidiaries
during the year ended June 30, 1995. Mr. Bishop, however, was formerly an
officer of the Trust. As described below, Mr. Rose is the beneficial owner of
more than 5% of the Shares. The Compensation Committee reviews and approves
the salaries and other compensation that the Trust pays to its executive
officers.
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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS
The following table sets forth the persons and groups who beneficially
owned more than 5% of the outstanding Shares as of October 20, 1995. The Trust
compiled this information from the Schedules 13D filed with the Trust. Unless
otherwise indicated, these persons and groups possess sole voting and
investment power with respect to the Shares that they beneficially own.
<TABLE>
<CAPTION>
NAME AND ADDRESS OF BENEFICIAL NUMBER OF SHARES PERCENTAGE OF
OWNER BENEFICIALLY OWNED OUTSTANDING SHARES
- -------------------------------- ------------------ ------------------
<S> <C> <C>
Mr. Edward C. Johnson 3d 1,242,300(1) 10.22%
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109
Mr. Edward W. Rose, III 1,097,700(2) 9.03%
Willowwood Partners, L.P.
500 Crescent Court, Suite 250
Dallas, Texas 75201
Mr. Robert Ted Enloe, III 759,000(3) 6.25%
600 N. Pearl St., Suite 420
Dallas, Texas 75201
Mr. Jeffrey S. Halis
Halo Capital Partners, L.P. 617,400(4) 5.08%
500 Park Avenue, Fifth Floor
New York, New York 10022
</TABLE>
(1) FMR is a holding company. FMR owns Fidelity Management & Research
Company ("Fidelity Research"), which serves as an investment advisor to
various investment companies and other limited groups of investors
(collectively, the "Fidelity Funds"). FMR also owns Fidelity Management
Trust Company ("Fidelity Management"), a bank acting as managing agent or
trustee for various private investment accounts and as an investment
advisor to certain funds offered to limited groups of investors
(collectively, the "Accounts"). FMR beneficially owns: (i) 800,000
Shares that Fidelity Research beneficially owns as the investment advisor
to the Fidelity Funds, and (ii) 442,300 Shares that Fidelity Management
beneficially owns as managing agent for the Accounts. Mr. Edward C.
Johnson 3d is the Chairman of FMR and owner of 24.9% of FMR's voting
stock. Mr. Johnson may therefore beneficially own the Shares that FMR
beneficially owns, although he disclaims such ownership. FMR, Fidelity
Research, and Fidelity Management also disclaim ownership of the Shares
owned by other corporations. FMR has reported sole voting power with
respect to the 442,300 Shares beneficially owned through Fidelity
Management and sole dispositive power with respect to all 1,242,300
Shares.
(2) Willowwood owns 1,097,700 Shares. As Mr. Rose is the owner of Cardinal
Portfolio Company, the general partner of Willowwood, he is also
considered the beneficial owner of the Shares that Willowwood owns. The
limited partners of Willowwood include the Rebecca/Elizabeth Trust, a
trust established for certain members of Mr. Enloe's family. Mr. Enloe
is the trustee of this trust, but disclaims any beneficial ownership with
respect to the Shares that Willowwood owns. Willowwood and Mr. Rose
share voting and investment power over these Shares. In addition,
several individuals joined in the filing of the Schedule 13D filed by
Willowwood and Mr. Rose, although these individuals disclaimed beneficial
ownership of the 1,097,700 Shares. These individuals and the number of
Shares that they own are: (i) Mr. Marshall B. Payne, an officer of an
affiliate of Cardinal Portfolio Company--36,400 Shares, (ii) Mrs. Evelyn
P. Rose, the wife of Mr. Rose, as the trustee of the trusts described
below--20,000 Shares, (iii) Lela Helen Rose Trust--10,000 Shares, and
(iv) William Edward Rose Trust--10,000 Shares. Mrs. Rose and the trusts
share voting and investment power over the Shares that the trusts
own.
(3) Mr. Enloe owns 757,000 Shares and claims beneficial ownership of an
additional 2,000 Shares owned by his wife. Mr. Enloe possesses sole
voting and investment power over all 759,000 Shares except that Mr.
Enloe
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shares investment power over the 2,000 Shares owned by his wife and lacks
voting power with respect to them. These Shares include: (i) 69,000 of
the 100,000 Shares that the Trust granted to Mr. Enloe in June 1992, Mr.
Enloe subsequently transferred 31,000 of the 100,000 Shares back to the
Trust for federal income tax withholding purposes, and (ii) 650,000
Shares purchased pursuant to the exercise of options in October 1993, the
Trust had granted Mr. Enloe options to purchase 250,000 Shares in January
1993 and options to purchase 400,000 Shares in May 1993. Mr. Enloe has
pledged these 650,000 Shares as security for the promissory note that he
delivered to the Trust in partial payment for the aggregate exercise
price for these options. In addition, Mr. Enloe holds 38,000 Shares in a
Keogh Plan. See Item 13, entitled "Certain Relationships and Related
Transactions--Promissory Note from Mr. Enloe."
(4) Mr. Jeffrey S. Halis is a general partner of Halo Capital Partners,
L.P. ("Halo Capital") and therefore beneficially owns any Shares that it
owns. Halo Capital, in turn, is the sole general partner of Tyndall
Partners, L.P. and Madison Avenue Partners, L.P., and therefore
beneficially owns the 548,500 Shares and 68,900 Shares that they
respectively own. Pursuant to an agreement, Mr. Halis possesses sole
voting and investment power over these Shares.
TRUSTEES AND EXECUTIVE OFFICERS
The following table sets forth the number of Shares beneficially owned as
of October 20, 1995 by each trustee and executive officer of the Trust, and all
trustees and executive officers of the Trust as a group. The Trust obtained
this information from its trustees and executive officers. Unless otherwise
indicated, these individuals possess sole voting and investment power with
respect to the Shares that they beneficially own.
<TABLE>
<CAPTION>
Percentage of
Number of Shares Outstanding
Name Beneficially Owned Shares
- ------------------------------------------ ---------------------- -------------
<S> <C> <C>
Gene H. Bishop 150,000 1.23%
Bradley S. Buttermore 2,800 *
Robert Ted Enloe, III 759,000(1) 6.25%
Edward W. Rose, III 1,097,700(1) 9.03%
All trustees and executive officers as a 2,009,500 16.53%
group (4 individuals)
</TABLE>
* Less than 1%.
(1) The ownership of Shares by Messrs. Enloe and Rose is described above
under the section entitled "Principal Shareholders."
RESTRICTIONS ON THE TRANSFER OF SHARES
The Declaration of Trust contains certain restrictions upon the transfer
of Shares to preserve the Trust's net operating loss carryforwards and other
tax attributes. Generally, without the consent of the Board of Trustees, a
person may not acquire Shares if such acquisition would: (i) cause such
person, or any other person, to own 5% or more of the outstanding Shares, or
(ii) increase the Share ownership of any person that already owns 5% or more of
the outstanding Shares. For this purpose, percentage ownership of Shares is
determined based on certain tax rules in the Internal Revenue Code. Of the
principal shareholders described above, the Shares reported as owned by Mr.
Rose and Mr. Enloe were acquired prior to the time that the Declaration of
Trust was amended to place these restrictions upon the transfer of Shares. The
Shares reported on Schedule 13D as owned by Mr. Halis and his affiliates are
treated as owned by separate "persons" for purposes of the Internal Revenue
Code, none of which are considered to own 5% or more of the outstanding Shares.
With
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respect to the Shares reported on Schedule 13D as owned by Mr. Johnson, FMR and
their affiliates, the Board of Trustees has consulted legal counsel to
determine whether such Shares were acquired before or after the effective date
of the Declaration of Trust restrictions, and the status of these parties as
one or more "persons" for purposes of the Internal Revenue Code. Under the
Declaration of Trust, if the Board of Trustees finds that any person is in
violation of the 5% restrictions described above, and the Board of Trustees
does not consent to the ownership by such person of Shares in excess of such
restrictions, such person will be deemed not to own any Shares which were
purchased in violation of the restrictions.
ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
TRANSACTIONS WITH LOMAS FINANCIAL
The Trust was managed by Lomas Management, Inc. ("LMI") since its
inception in 1969 until February 28, 1995. LMI is a wholly owned subsidiary of
Lomas Financial Corp. ("LFC"), the original sponsor of the Trust. Mr. Enloe
was hired by the Trust as its full-time president and chief executive officer
and the Trust's first direct employee in 1992. Under the management agreement
in effect prior to July 1, 1992, whenever the Trust invested in any first
mortgage construction or acquisition and development note recommended by LMI,
LFC was required to participate, directly or through one or more of its
subsidiaries. Subsequent management agreements made no provision for this
required participation arrangement. On February 28, 1995, the Trust continued
its movement toward self administration by terminating its management agreement
with LMI and assuming all remaining operating and accounting responsibilities.
Any remaining property management requirements on assets owned with LFC are
provided for in the asset disposition agreement described below.
Effective February 28, 1995, the Trust entered into an "Asset
Disposition Agreement" with ST Lending, Inc. ("STL"), a wholly owned
subsidiary of LFC, whereby the Trust and STL exchanged their respective
ownership positions in a group of assets. No gain or loss was recognized as a
result of this transaction. Therefore, at June 30, 1995, the Trust owned 100%
of its foreclosed real estate and note receivable portfolio with the exception
of one real estate asset that remains 80% owned by the Trust (the Trust's
portion equals $1,164,000, net of reserves), and approximately 50% of a
mortgage note receivable originated to construct houses in California (the
Trust's portion equals $262,165, net of reserves). The Trust had no further
funding obligation under this note at June 30, 1995, and expects to receive
repayments out of the sale proceeds from the completed houses in sufficient
amounts to retire this note during the next fiscal year.
A group of approximately 14 receivables, which have no carrying value
and relate primarily to deficiency judgments obtained during foreclosures or
remedial collection activities, remain 80% owned by the Trust and 20% owned by
STL. The Asset Disposition Agreement stipulates that the Trust will pay STL
10% of its gross proceeds received, in addition to STL's 20% ownership, from
this pool of loans in return for STL's asset administration. On or about March
1, 1996, STL will transfer its 20% ownership in this pool of assets to the
Trust.
Under the management agreement in effect prior to February 28, 1995 (the
"Management Agreement"), LMI was entitled to basic compensation at an annual
rate of 1% of the daily average book value of the Trust's Invested Assets (as
defined in the Management Agreement) plus $81,000 per year for accounting
services. During the fiscal year ended June 30, 1995, LMI received
compensation of $157,907. Additionally, STL received compensation of $10,898
which represents 10% of the Trust's gross proceeds received on the portion of
its portfolio described above.
The foregoing descriptions of the Management Agreement and the Asset
Disposition Agreement do not purport to be complete but are summaries of the
material provisions thereof.
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<PAGE> 10
PROMISSORY NOTE FROM MR. ENLOE
In October 1993, Mr. Enloe exercised options to purchase 650,000 Shares
at the Trust's request, even though the options would not expire for a number
of years after the Trust accelerated the vesting of such options to permit such
exercise. When exercising these options, Mr. Enloe delivered cash of $121,875
and a promissory note to the Trust in payment of the aggregate exercise price.
This promissory note had an original principal balance of $365,625 and is due
in April 1999. Under the terms of the note, interest accrues at 5% per annum
and is added to the principal balance semi-annually. The promissory note is
secured by the 650,000 Shares that Mr. Enloe received when he exercised the
options. The current value of the Shares securing payment of the promissory
note is approximately three times the amount of the unpaid balance of the
promissory note. Mr. Enloe's personal liability on the note, however, is
limited to $53,304. During the year ended June 30, 1995, the largest amount of
principal and accrued but unpaid interest owed under the note was $396,993. As
of September 30, 1995, the principal and accrued but unpaid interest owed was
$401,914. See Item 11, entitled "Executive Compensation--Summary Compensation
Table," and Item 12, entitled "Security Ownership of Certain Beneficial Owners
and Management--Principal Shareholders."
There is a question under the Declaration of Trust (specifically
Sections 3.18, 3.21, and 7.6) concerning whether the Trust had the authority to
accept this promissory note from Mr. Enloe. This issue was not brought to the
attention of the Board of Trustees at the time Mr. Enloe delivered the
promissory note.
During the year ended June 30, 1995, Mr. Enloe also owed the Trust
$26,210 resulting from a combination of transactions in 1993 which were made on
the basis of estimates. Upon the conclusion of the transactions, it was
determined that an overpayment to Mr. Enloe by the Trust, and an overpayment to
the Trust by Mr. Enloe had been made and resulted in this non-interest-bearing
receivable from Mr. Enloe. Mr. Enloe repaid this indebtedness on October 30,
1995.
[SIGNATURES ON THE NEXT PAGE]
10
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Trust has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Date:October 30, 1995 LIBERTE INVESTORS
REGISTRANT
By: /s/ Bradley S. Buttermore
------------------------------------
Bradley S. Buttermore
Senior Vice President,
Treasurer, and Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
/s/ Ted Enloe Trustee and Principal Executive October 30, 1995
- ----------------------------------- Officer
TED ENLOE
/s/ Bradley S. Buttermore Principal Financial and October 30, 1995
- ----------------------------------- Accounting Officer
BRADLEY S. BUTTERMORE
/s/ Gene H. Bishop Trustee October 30, 1995
- -----------------------------------
GENE H. BISHOP
/s/ Edward W. Rose, III Trustee October 30, 1995
- -----------------------------------
EDWARD W. ROSE, III
</TABLE>
11
