<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
OR
_____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR TRANSITION PERIOD FROM __________ TO __________
COMMISSION FILE NUMBER 1-6802
LIBERTE INVESTORS
(Exact name of Registrant as specified in its Charter)
CREATED UNDER DECLARATION OF TRUST 75-1328153
PURSUANT TO THE LAWS OF (I.R.S. Employer
THE COMMONWEALTH OF MASSACHUSETTS Identification No.)
(State or other jurisdiction
of incorporation or organization)
600 N. PEARL ST., SUITE 420 75201
DALLAS, TEXAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code (214) 720-8950
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
------ ------
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
DURING THE PRECEDING FIVE YEARS:
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 confirmed plan of reorganization under Chapter 11 of the
Bankruptcy code did not provide for the distribution of securities.
APPLICABLE ONLY TO CORPORATE ISSUERS:
The number of shares outstanding of each of the issuer's classes of securities
as of May 10, 1996: Shares of Beneficial Interest, no par value - 12,153,658
shares.
<PAGE> 2
FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
LIBERTE INVESTORS
INDEX
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Consolidated Balance Sheet - March 31, 1996 and June 30, 1995 . . . . . . . . . . . . . . 3
Consolidated Statement of Operations - Quarter and Nine Months Ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Consolidated Statement of Cash Flows - Nine Months Ended
March 31, 1996 and 1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . . . . . . . 10
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . . . . 14
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
INDEX TO EXHIBITS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET (Unaudited)
LIBERTE INVESTORS AND SUBSIDIARY
<TABLE>
<CAPTION>
March 31, June 30,
1996 1995
--------------- --------------
<S> <C> <C>
Assets
Notes Receivable:
Earning $ 5,342,270 $ 5,415,306
Nonearning 284,530 392,066
Foreclosed real estate held for sale:
Nonearning - NOTE B 3,770,119 15,385,214
-------------- -------------
9,396,919 21,192,586
Less: Allowance for possible losses 69,282 10,498,922
-------------- -------------
9,327,637 10,693,664
Unrestricted cash and cash equivalents 22,637,781 20,576,517
Restricted cash and cash equivalents 58,375 59,245
Accrued interest and other receivables 133,096 103,888
Other assets 759,354 602,664
-------------- -------------
$ 32,916,243 $ 32,035,978
============== =============
- ------------------------------------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Liabilities
Accrued and other liabilities $ 496,922 $ 416,164
Shareholders' Equity
Shares of Beneficial Interest, no par value,
unlimited authorization:
12,423,208 issued and 12,153,658 outstanding,
net of 269,550 shares held in Treasury, at
March 31, 1996 and June 30, 1995 32,419,321 31,619,814
-------------- -------------
$ 32,916,243 $ 32,035,978
============== =============
</TABLE>
See notes to consolidated financial statements.
3
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CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)
LIBERTE INVESTORS AND SUBSIDIARY
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
March 31, March 31,
------------------------------ -----------------------------------------
1996 1995 1996 1995
------------ ------------- ------------ --------------
<S> <C> <C> <C> <C>
Income
Interest Income
Notes receivable $ 119,717 $ 125,381 $ 370,558 $ 525,828
Other 305,519 303,232 917,002 586,575
Gain on disposition of real estate 106,652 -- 552,652 --
Consulting and other 178,190 7,110 458,525 608,320
------------ ------------- ------------ --------------
710,078 435,723 2,298,737 1,720,723
------------ ------------- ------------ --------------
Expenses
Provision for possible losses -- 1,000,000 -- 3,192,000
Salaries and related costs 266,829 150,228 512,931 523,672
General and administrative 97,881 100,770 293,677 278,338
Legal, audit and advisory 52,622 29,051 507,400 70,804
Foreclosed real estate 16,888 37,329 106,952 223,693
Management fees -- 26,895 -- 155,856
Trustees' fees and expenses 8,100 22,215 63,300 44,115
------------ ------------- ------------ -------------
442,320 1,366,488 1,484,260 4,488,478
------------ ------------- ------------ --------------
Net income (loss) $ 267,758 $ (930,765) $ 814,477 $ (2,767,755)
============ ============= ============ =============
Net income (loss) per Share
of Beneficial Interest $.02 $(0.07) $.07 $(.22)
Weighted average number of
Shares of Beneficial Interest 12,153,658 12,288,433 12,153,658 12,378,939
Cash dividends declared per share -- -- -- --
</TABLE>
See notes to consolidated financial statements.
4
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CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
LIBERTE INVESTORS AND SUBSIDIARY
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
----------------------------------------------
1996 1995
-------------- -------------------------
<S> <C> <C>
Operating activities:
Net income (loss) $ 814,477 $ (2,767,755)
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for possible losses -- 3,192,000
Net change in:
Accrued interest and other receivables (29,208) 191,293
Other assets (202,897) 39,734
Accrued and other liabilities 80,758 (305,507)
Non-cash interest on executive stock option loan (14,969) (9,369)
Income from impaired loans (444,075) --
Gains from disposition of foreclosed real estate (552,652) --
-------------- -------------
Net cash provided (used) by operating activities (348,566) 340,396
-------------- -------------
Investing activities:
Collections on mortgage loans 501,602 1,343,510
Collections on RPI note receivable 1,148,144 475,094
Advances on mortgage loans -- (306,949)
Expenditures on foreclosed real estate -- (186,865)
Sales of foreclosed real estate 759,214 10,195,898
Net sales of restricted cash investments 870 63,970
-------------- -------------
Net cash provided by investing activities 2,409,830 11,584,658
-------------- -------------
Financing activities:
Purchase of treasury stock -- (404,325)
-------------- -------------
Net cash used by financing activities -- (404,325)
-------------- ------------
Net increase in unrestricted cash and cash equivalents 2,061,264 11,520,729
Unrestricted cash and cash equivalents at beginning of period 20,576,517 9,157,640
-------------- -------------
Unrestricted cash and cash equivalents at end of period $ 22,637,781 $ 20,678,369
============== =============
Schedule of noncash investing activities:
Transfer of mortgage loans to foreclosed real estate $ -- $ 4,792,781
Write-up of value of impaired note $ 71,950 $ --
Write-up of value of long-lived asset to be disposed of $ 53,751 $ --
Charge-offs to allowance for possible losses, net - NOTE B $ 10,429,640 $ 4,243,496
Sales of foreclosed real estate financed by mortgage loans $ 1,076,800 $ 138,400
</TABLE>
See notes to consolidated financial statements.
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
LIBERTE INVESTORS AND SUBSIDIARY
March 31, 1996
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals other than
those described in NOTE E) considered necessary for a fair presentation have
been included. Operating results for the quarter ended and nine months ended
March 31, 1996, are not necessarily indicative of the results that may be
expected for the fiscal year ending June 30, 1996. For further information,
refer to the financial statements and footnotes included in the Annual Report on
Form 10-K of Liberte Investors for the fiscal year ended June 30, 1995, as
amended. See NOTE E -- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
This Form 10-Q contains both disclosures concerning historical matters and
forward looking statements. For purposes of the Private Securities Litigation
Reform Act of 1995, the reader should consider any statements not solely
addressing historical matters to be forward looking statements subject to the
protection of the act. Such forward looking statements involve risks and
uncertainties that could cause the Trust's actual results to differ
significantly from such statements. These risks and uncertainties include the
strength or weakness of the real estate markets in California and Texas at any
particular time and the uncertainty concerning the Trust's ability to expand its
business of making and purchasing real estate mortgage loans through the
acquisition of other companies.
The accompanying financial statements include the accounts of Liberte Investors
and Liberte Corp., a wholly-owned subsidiary which is currently inactive. All
intercompany balances and transactions have been eliminated. As used herein,
the "Trust" refers to Liberte Investors and its subsidiary.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Adoption of Authoritative Statements: Effective July 1, 1995, the Trust
adopted Statement of Financial Accounting Standards ("SFAS") No. 114,
"Accounting by Creditors for Impairment of a Loan," as amended by SFAS No. 118,
"Accounting by Creditors for Impairment of a Loan - Income Recognition and
Disclosures." SFAS No. 114 requires that the impaired value of a loan be based
on either (i) the present value of expected future cash flows discounted at the
loan's effective interest rate, or (ii) the fair value of the collateral if the
repayment of the loan is expected to be provided solely by the collateral. The
adoption of the new statement did not have a material effect on the Trust's
financial condition, results of operations, or cash flows.
At March 31, 1996, the Trust had two impaired loans with a carrying value of
$285,000 and eight impaired loans, from prior foreclosure related deficiency
notes and or judgments, with no carrying value. There is no allowance allocated
to these impaired assets. At March 31, 1996 the Trust had ownership interest
in these deficiency notes and or judgments ranging from 40% to 80%, the balance
of which is owned by participants in the original loan receivable. In
accordance with the asset disposition agreement with ST Lending ("STL"), the
principal participant other than the Trust, the Trust received STL's remaining
interest in these notes. This transfer occurred on April 15, 1996. See NOTE G
- - NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
Income from impaired loans during the quarter ended March 31, 1996, totaled
$171,000. Of this amount, $72,000 of income was recognized by a valuation
adjustment on a foreclosure related deficiency judgment, which had no carrying
value until circumstances indicated that a collection was likely. During the
quarter ended March 31, 1996, the average month-end recorded investment in
impaired loans was $237,000.
Effective July 1, 1995, the Trust adopted SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of."
The statement requires that assets held for disposal be carried at the lower of
their carrying amount or fair value less cost to sell. The adoption of the new
statement did not have a material effect on the Trust's financial condition,
results of operations, or cash flows, as foreclosed real estate was previously
carried at fair value less estimated cost to sell. The balance sheet effect of
adopting SFAS No. 121 was the netting of allocated reserves against the related
foreclosed real estate. Restatement of previously issued financial statements
to comply with SFAS No. 121 is neither permitted nor required.
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At March 31, 1996, the Trust held assets to be disposed of consisting of
foreclosed real estate in the form of land and developed single-family lots.
The March 31, 1996, carrying amount of these assets was $3,770,000.
The single family lots are being sold on a quarterly basis and are expected to
be liquidated by the end of fiscal 1997. The carrying amount of these lots was
$915,000 at March 31, 1996.
The balance of the Trust's foreclosed real estate consists of 14 parcels of
land totaling approximately 608 acres in San Antonio, Texas. Certain parcels
are under contract for sale and the balance are being marketed for sale at
prices comparable to similar assets in the San Antonio area. The Trust expects
to liquidate these parcels over the next two fiscal years.
Reclassifications: Certain amounts in previously issued financial statements
have been reclassified to conform to the March 31, 1996, presentation.
NOTE C - COMMITMENTS AND CONTINGENCIES
At March 31, 1996, the Trust had commitments for indemnification of development
bond issuers and other guarantees totaling $109,045.
Cash and cash equivalents at March 31, 1996, included restricted cash of
$58,375 for unpaid claims related to the Trust's previous bankruptcy. At June
30, 1995, restricted cash included $59,245 for such claims.
The Trust is involved in routine litigation incidental to its business, which,
in the opinion of management, will not result in a material adverse impact on
the Trust's financial condition, results of operations, or cash flows.
NOTE D - SHARE TRANSFER RESTRICTIONS
In order to avoid limitations on the use of the Trust's tax attributes, the
Declaration of Trust as amended, generally prohibits the transfer of shares of
beneficial interest in the Trust (the "Shares") to any Person who is, or would
become, a holder of 5% or more of the Shares, and prohibits any transfer of
Shares if, as a result of the transfer, any Person would become a holder of 5%
or more of the Shares or increase a 5% or more ownership position, in each case
after giving effect to the transfer, directly or by attribution. "Person" for
this purpose is defined broadly to mean any individual, corporation, estate,
debtor, association, company, partnership, joint venture or similar
organization.
If a transfer violates this prohibition, either (i) the Shares that were
purported to be transferred in excess of the 5% limit will be deemed to remain
the property of the initial transferor, or (ii) upon election by the Trust,
such Shares shall be transferred to an agent designated by the Trust, who will
sell them in an arm's-length transaction, the proceeds of such sale to be
allocated to the purported transferee up to (x) the amount paid by such
transferee for such Shares and (y) where the purported transfer was by gift
inheritance or any similar transfer, the fair market value of such Shares at
the time of the purported transfer.
If the purported transferee has resold the Shares to an unrelated party in an
arm's length transaction, the purported transferee will be deemed to have sold
the Shares as an agent for the initial transferor, and will be required to
transfer the proceeds of such sale to the agent designated by the Trust, except
to the extent
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that the agent grants written permission to the purported transferee to retain
a portion of the proceeds up to the amount that would have been payable to such
transferee had the Shares been sold by the agent rather than by the purported
transferee.
The Declaration of Trust further provides that the Trust may require, as a
condition to the registration of the transfer of any Shares, that the proposed
transferee furnish to the Trust all information reasonably requested by the
Trust with respect to the proposed transferee's direct or indirect ownership
interests in Shares.
The Board of Trustees of the Trust will have the power to approve transfers
that would otherwise be prohibited under the foregoing provisions.
New certificates evidencing ownership of Shares bear a conspicuous legend
referencing the transfer restrictions and are held by the Trust's transfer
agent for replacement of old certificates when submitted for transfer.
NOTE E - STOCK PURCHASE AGREEMENT
On January 16, 1996, the Trust entered into a Stock Purchase Agreement (as
amended, the "Stock Purchase Agreement") with Hunter's Glen/Ford, Ltd., a Texas
limited partnership ("Hunter's Glen"), pursuant to which the Trust agreed to
sell 8,102,439 newly issued Shares to Hunter's Glen for $23,091,951 ($2.85 per
Share). After the sale, Hunter's Glen would own 40% of the outstanding Shares.
The partners of Hunter's Glen are Gerald J. Ford and certain family interests.
Hunter's Glen has made a down-payment of $2,000,000, to be held in escrow
pending the closing.
The Trust has received a written opinion from Bear, Stearns & Co. Inc. that the
proposed sale is fair, from a financial point of view, to the Trust's public
shareholders.
Prior to the sale of the Shares pursuant to the Stock Purchase Agreement, the
Trust will reorganize into a Delaware corporation that will succeed to all of
the Trust's assets and liabilities. Upon such reorganization, shareholders of
the Trust will automatically become shareholders of the Delaware corporation on
a share for share basis.
Consummation of the transactions contemplated by the Stock Purchase Agreement
is subject to a number of conditions, including the reorganization of the Trust
into the Delaware corporation. Accordingly, Hunter's Glen would actually
purchase shares of common stock from the Delaware corporation, rather than
shares of beneficial interest from the Trust. In addition, the reorganization
of the Trust and the sale of the shares are subject to the approval of the
Trust's shareholders. The solicitation of the approval of the reorganization
and the sale of the Shares to Hunter's Glen and the exchange of shares of
beneficial interest in the Trust for shares of common stock in the Delaware
corporation will be made only by means of a proxy statement/prospectus
transmitted to the Trust's shareholders.
At the closing, Mr. Ford will become the initial Chief Executive Officer of the
Delaware corporation. The corporation's board of directors will consist of
three directors, Mr. Ford, and two of the Trust's three trustees. In addition,
Mr. Enloe, the Trust's current Chief Executive Officer and Mr. Buttermore, the
Trust's current Chief Financial Officer will receive bonus payments of $100,000
and $50,000, respectively, for services rendered in connection with the
transaction.
NOTE F - FEDERAL INCOME TAXES
Though the Trust had net income for the quarter and nine months ended March 31,
1996, no tax liability has been recognized. At June 30, 1995, the Trust had,
for federal tax purposes, net operating loss carryforwards in sufficient amount
to mitigate any significant tax liability for fiscal year 1996.
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NOTE G - SUBSEQUENT EVENT
On April 24, 1996, the Trust entered into a supplement (the "Supplement") to
the Asset Disposition Agreement, dated as of February 28, 1995 (the
"Disposition Agreement"), by and among the Trust, ST Lending, Inc. ("STL") and
Lomas Management, Inc. ("LMI"). The Disposition Agreement set forth certain
agreements between the Trust, STL and LMI with respect to certain assets in
which both the Trust and STL had interests. STL's remaining interest in eight
deficiency notes and or judgments, which have no carrying value, were
transferred to the Trust, in accordance with the Disposition Agreement. These
assets have no carrying value because future collections are unlikely. The
Supplement transfers ownership of an entity, whose sole asset is approximately
40 acres of undeveloped commercial real estate that is fully encumbered by tax
liens, to the Trust and sets forth the terms under which LMI will continue to
manage the asset. The supplement further describes the method of allocating the
funds to be paid to the Trust and STL with respect to a proposed settlement
agreement for a deficiency note receivable, the gross proceeds of which are
expected to be less than $11,000. The Trust also exchanged its 50% interest,
representing $212,000 of principal, in a note the Trust had classified as
non-earning, which has a legal interest rate of 1-1/2% over the prime rate per
annum, for STL's 20% interest, representing $269,000 of principal, in a note
the Trust classified as earning, bearing interest at the rate of 2% over the
prime rate per annum. The exchange of these notes resulted in the Trust owning
100% of an interest bearing note, secured by 75 lots in Murrieta, California.
The difference in the exchange values resulted in the recording of $31,000 of
interest income, which the Trust was owed on the nonearning asset. The remaining
difference of $26,000 was applied as a discount to the carrying value on the
note received and will be amortized to income over the life of the loan.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Operations resulted in net income of $268,000 for the quarter ended March 31,
1996, compared to a net loss of $931,000 for the same period in fiscal 1995.
Operations for the nine months ended March 31, 1996, resulted in net income of
$814,000 compared to a net loss of $2,768,000 for the same period in fiscal
1995. The substantial change in operating results for both the quarter and
nine months were due to various factors discussed below.
Notes receivable interest income decreased to $371,000 for the first nine
months of fiscal 1996 from $526,000 for the first nine months of fiscal 1995 as
a result of a lower average outstanding balance of earning notes. Average
earning notes decreased to $5.6 million for the first nine months of fiscal
1996 from $8.4 million for the first nine months of fiscal 1995. The reduction
in average earning notes is primarily a result of the foreclosure of a $4.8
million note receivable (the underlying collateral has since been disposed of
for cash), and repayments of indebtedness by borrowers, partially offset by the
addition of an earning note from the sale of real estate. Average nonearning
notes for the first nine months of fiscal 1996 totaled $239,000 compared to
$218,000 for the same period in fiscal 1995.
Included in earning notes receivable at March 31, 1996, and June 30, 1995, was
a note receivable from Resurgence Properties, Inc. ("RPI") which was received
by the Trust as part of its emergence from Chapter 11 bankruptcy on April 7,
1994. This note carries a floating rate of interest which is 200 basis points
over the London Interbank offered rate ("LIBOR"). The Trust received a
scheduled principal payment of $911,000 during the quarter ended March 31, 1996.
The principal balance of the note was $4,257,988 and $5,406,132 as of March 31,
1996, and June 30, 1995, respectively.
Other interest income derives from cash and cash equivalents and increased to
$917,000 for the first nine months of fiscal 1996 from $587,000 for the first
nine months of fiscal 1995. This increase is due to a growth in the daily
average balance of unrestricted cash and cash equivalents to $21.5 million for
the first nine months of fiscal 1996, from $14.8 million for the first nine
months of fiscal 1995. The increase in unrestricted cash and cash equivalents
is primarily a result of the sale of foreclosed real estate and collections of
principal and interest on notes receivable.
The gain on dispositions of real estate represents proceeds received from the
sale of foreclosed real estate in excess of its carrying value, and the
write-up of value of long lived assets to be disposed of that were previously
written down. The gain in the third quarter of fiscal 1996 includes a $54,000
write-up in value of a group of developed single family lots, that were
previously written down, located in San Antonio, Texas, to more accurately
reflect their fair value less cost to sell. The gain for the nine months ended
March 31, 1996, includes the sale of single family lots located in Murrieta,
California. The Trust initially reduced the carrying value of this California
asset during the third quarter of fiscal 1995 after failing to close on a sales
contract, the sale price of which was negatively affected by the increasing
impact of fees levied by the municipality and agencies of the State of
California. The Trust received an offer to purchase these single family lots
during the second quarter of fiscal 1996 and was able to negotiate a sales
price in excess of its carrying value. The Trust accepted a significant cash
down payment and a note receivable (carrying a market rate of interest) from
the buyer of the lots.
Consulting and other income increased significantly in the quarter ended March
31, 1996, as compared to the quarter ended March 31, 1995. The increase is due
mainly to cash collections on impaired loans, which had no carrying value, that
were received in the quarter ended March 31, 1996. In addition, one impaired
loan, which had no carrying value, was written up by $72,000 when circumstances
indicated that a collection was likely. This write up did not result in the
value of the
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asset being recorded in excess of the original recorded investment in the loan.
Approximately $72,000 was received in full settlement of this receivable on
April 9, 1996.
Consulting and other income decreased for the nine months ended March 31, 1996,
as compared to the nine months ended March 31, 1995. For the nine months ended
March 31, 1995, consulting and other income consisted primarily of consulting
fees paid by Resurgence Properties, Inc. ("RPI"), and fees paid for an early
buyout of the consulting agreement between the Trust and RPI. For the nine
months ended March 31, 1996, consulting and other income consisted primarily of
cash collections on impaired loans, which had no carrying value.
No provision for possible losses was made in the quarter ended or nine months
ended March 31, 1996, compared to a provision of $1.0 million in the quarter
ended, and $3.2 million for the nine months ended, March 31, 1995. The
allowance for possible losses was $69,000 at March 31, 1996, compared to $10.5
million at June 30, 1995, and $10.7 million at March 31, 1995. The substantial
reduction in the allowance is a result of applying such allowance to the
carrying value of foreclosed real estate upon the adoption of SFAS No. 121,
beginning in fiscal year 1996. The Trust believes the allowance for possible
losses is adequate at March 31, 1996. See NOTE B - NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
The following is a summary of transactions affecting the Trust's allowance for
possible losses for the nine months ended March 31, 1996.
<TABLE>
<CAPTION>
Nine Months Ended March 31, 1996
----------------------------------------------------
Mortgage Foreclosed
Loans Real Estate Total
----------------------------------------------------
<S> <C> <C> <C>
Balance at July 1, 1995 $ 129,901 $ 10,369,021 $ 10,498,922
Reclassifications - SFAS No. 121 -- (10,331,733) (10,331,733)
Amounts charged off, net of recoveries (23,496) (37,288) (60,784)
-------------- -------------- -------------
Balance at September 30, 1995 106,405 -- 106,405
Provision for possible losses -- -- --
Amounts charged off, net of recoveries (14,400) -- (14,400)
-------------- -------------- -------------
Balance at December 31, 1995 92,005 -- 92,005
-------------- -------------- -------------
Provision for possible losses -- -- --
Amounts charged off, net of recoveries (22,723) -- (22,723)
-------------- -------------- -------------
Balance at March 31, 1996 $ 69,282 $ -- $ 69,282
============== ============== =============
</TABLE>
Salaries and related costs increased by $117,000 for the quarter ended March
31, 1996, as compared to the same period in the prior year principally due to
the accrual of incentive bonuses in the amount of $150,000 to be paid to
certain officers of the Trust upon the closing of the Stock Purchase Agreement
with Hunter's Glen. Salaries and related costs for the nine months ended March
31, 1996, are less than such costs for the nine months ended March 31, 1995,
primarily as a result of a reduced compensation package for the Chief Executive
Officer beginning in the last quarter of fiscal 1995.
General and administrative costs increased slightly for the nine months ended
March 31, 1996, as compared to the same period in the prior year. This
increase is primarily due to the fact that the Trust became a self managed
entity as of February 28, 1995, and therefore has general and administrative
expenses that, for eight of the nine months in the same period of fiscal 1995,
were
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the responsibility of the former manager of the Trust. The increase in general
and administrative costs is more than offset by the elimination of management
fees paid during fiscal 1995.
Legal, audit, and advisory expenses increased for the quarter ended and nine
months ended March 31, 1996, as compared to the same periods in the prior year.
The increase in the nine month period ended March 31, 1996, is mainly due to
activities during the first and second quarter of fiscal 1996 related to
potential acquisition candidates. The increase for the quarter ended March 31,
1996 is mainly due to fees paid for impaired loan collections and sales of
foreclosed real estate.
Foreclosed real estate expenses decreased for both the quarter ended and nine
months ended March 31, 1996, as compared to the same periods in the prior year.
This was due to a reduction in the size of the real estate portfolio, including
the sale of operating real estate properties during fiscal 1995. Foreclosed
real estate expenses include property taxes and costs to maintain the
properties.
Management fees were eliminated in the fourth quarter of fiscal 1995 due to the
termination of the Management Agreement with Lomas Management in February 1995.
The Trust is currently self managed.
LIQUIDITY AND CAPITAL RESOURCES
The Trust is virtually debt free. Its principal funding requirements are
operating expenses, including legal, audit, and advisory expenses expected to
be incurred in connection with closing the Stock Purchase Agreement with
Hunter's Glen and the continued evaluation of potential acquisition candidates
and other strategic opportunities. The Trust's primary sources of funding
operating expenses are principal and interest collections on notes receivable,
proceeds from the sale of foreclosed real estate, and interest on cash and cash
equivalents.
As described in a note to the financial statements, the Trust has entered into
an agreement to sell Shares to Hunter's Glen constituting 40% of the Trust's
fully diluted Shares immediately after the sale. The proceeds from this sale
will be approximately $22.0 million (net of expected costs which are being
capitalized). This additional cash will assist the Trust in its efforts to
expand its business through acquisitions. Hunter's Glen is an affiliate of Mr.
Gerald J. Ford, who the Trust anticipates will become the initial Chief
Executive Officer of the Trust following the closing and the Trust's
reorganization into a Delaware corporation. Mr. Ford has considerable
experience in the acquisition of various companies, specifically in the
financial services industry. Mr. Ford's involvement with the Trust could
therefore facilitate the Trust's acquisition of another company. See NOTE E -
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
MATERIAL CHANGES IN FINANCIAL CONDITION
The adoption of certain authoritative accounting statements during the first
quarter of fiscal 1996 resulted in a netting of substantially all of the
Trust's allowance for possible losses on its foreclosed real estate against the
previously reported gross carrying value. See NOTE B - NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS.
SHARE TRANSFER RESTRICTIONS
In order to avoid limitations on the use of the Trust's tax attributes, the
Declaration of Trust as amended generally prohibits the transfer of Shares to
any Person who is, or would become, a holder of 5% or more of the Shares, and
prohibits any transfer of Shares if, as a result of the transfer, any Person
would become a holder of 5% or more of the Shares or increase a 5% or more
ownership position, in each case after giving effect to the transfer, directly
or by attribution. "Person" for this purpose is defined broadly to
12
<PAGE> 13
mean any individual, corporation, estate, debtor, association, company,
partnership, joint venture or similar organization. SEE NOTE D - NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
13
<PAGE> 14
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
2.1 Stock Purchase Agreement, dated as of January 16, 1996, between
the Trust and Hunter's Glen, as amended by the Amendment to the
Stock Purchase Agreement, dated as of February 27, 1996, and
the Second Amendment to the Stock Purchase Agreement, dated as
of March 28, 1996.
2.2 Confidentiality and Standstill Agreement, dated as of January
16, 1996, between the Trust and Hunter's Glen.
3.1 The Trust's Bylaws, restated to give effect to the First
Amendment to the Bylaws.
27.1 Financial Data Schedules (submitted to the SEC for its
information).
(b) Reports on Form 8-K.
On January 24, 1996, the Registrant filed a report on Form 8-K to
report that on January 16, 1996, Liberte Investors entered into a Stock
Purchase Agreement with Hunter's Glen/Ford, Ltd. SEE NOTE E - NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS.
14
<PAGE> 15
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 thereunder duly authorized.
LIBERTE INVESTORS
Date: May 14, 1996 By: /s/ TED ENLOE
Ted Enloe
President and Chief Executive Officer
Date: May 14, 1996 By: /s/ BRADLEY S. BUTTERMORE
Bradley S. Buttermore
Principal Accounting and Financial
Officer
15
<PAGE> 16
LIBERTE INVESTORS
INDEX TO EXHIBITS
Exhibit No.
2.1 Stock Purchase Agreement, dated as of January 16, 1996, between
the Trust and Hunter's Glen (Incorporated by reference to Exhibit
4.1 of the Trusts Form 8-K, filed with the SEC on January 24,
1996), as amended by the Amendment to the Stock Purchase
Agreement, dated as of February 27, 1996, and the Second
Amendment to the Stock Purchase Agreement, dated as of March 28,
1996.
2.2 Confidentiality and Standstill Agreement, dated as of January
16, 1996, between the Trust and Hunter's Glen.
3.1 The Trust's Bylaws, restated to give effect to the First
Amendment to the Bylaws.
27 Financial Data Schedules (submitted to the SEC for its
information).
16
<PAGE> 1
AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This Amendment to the Stock Purchase Agreement (this
"Amendment"), dated as of February 27, 1996, is between Liberte Investors, a
Massachusetts business trust (the "Company"), and Hunter's Glen/Ford, Ltd.,
a Texas limited partnership (the "Purchaser").
RECITALS
WHEREAS, THE COMPANY AND THE PURCHASER ENTERED INTO A STOCK
PURCHASE AGREEMENT (THE "STOCK PURCHASE AGREEMENT"), DATED AS OF JANUARY 16,
1996, PURSUANT TO WHICH THE PURCHASER AGREED TO PURCHASE SHARES OF THE COMMON
STOCK OF NEWCO, A DELAWARE CORPORATION INTO WHICH THE COMPANY WILL REORGANIZE
(TERMS WITH INITIAL CAPITAL LETTERS NOT OTHERWISE DEFINED IN THIS AMENDMENT
HAVE THE MEANINGS GIVEN TO THEM IN THE STOCK PURCHASE AGREEMENT); AND
WHEREAS, THE COMPANY AND THE PURCHASER DESIRE TO ENTER INTO
THIS AMENDMENT TO ADD CERTAIN PROVISIONS TO THE STOCK PURCHASE AGREEMENT.
AGREEMENT
NOW, THEREFORE, IN CONSIDERATION OF THE FOREGOING RECITALS AND
THE TERMS AND CONDITIONS OF THIS AMENDMENT, AND OTHER GOOD AND VALUABLE
CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH ARE HEREBY ACKNOWLEDGED,
AND INTENDING TO BE LEGALLY BOUND BY THIS AMENDMENT, THE COMPANY AND THE
PURCHASER AGREE AS FOLLOWS:
SECTION 1 HSR ACT REPRESENTATION OF THE COMPANY.
SECTION 3.1 OF THE STOCK PURCHASE AGREEMENT IS AMENDED TO ADD THE FOLLOWING
SUBSECTION 3.1(X):
(X) NO HSR FILING. NEITHER THE COMPANY NOR
ANY PERSON THAT CONSTITUTES THE ULTIMATE PARENT ENTITY OF THE
COMPANY FOR PURPOSES OF THE HSR ACT HAS TOTAL ASSETS OR ANNUAL
NET SALES OF $100,000,000 OR MORE.
SECTION 2 HSR ACT REPRESENTATION OF THE PURCHASER.
SECTION 3.2 OF THE STOCK PURCHASE AGREEMENT IS AMENDED TO ADD THE FOLLOWING
SUBSECTION 3.2(J):
(J) NO HSR FILING. NEITHER THE PURCHASER
NOR ANY PERSON THAT CONSTITUTES THE ULTIMATE PARENT ENTITY OF
THE PURCHASER FOR PURPOSES OF THE HSR ACT HAS TOTAL ASSETS OR
ANNUAL NET SALES OF $100,000,000 OR MORE.
SECTION 3 NO TRUSTEE LIABILITY. ARTICLE VIII OF THE
STOCK PURCHASE AGREEMENT IS AMENDED TO ADD THE FOLLOWING SECTION 8.21:
SECTION 8.21 NO TRUSTEE LIABILITY. A COPY OF
THE DECLARATION OF TRUST IS ON FILE WITH THE SECRETARY OF
STATE OF THE COMMONWEALTH OF MASSACHUSETTS, AND NOTICE IS
HEREBY GIVEN THAT THIS AGREEMENT IS EXECUTED ON BEHALF OF THE
TRUSTEES OF THE COMPANY AS TRUSTEES AND NOT INDIVIDUALLY AND
THAT THE OBLIGATIONS OF THIS AGREEMENT ARE NOT BINDING UPON
ANY OF THE TRUSTEES, OFFICERS, AGENTS, OR SHAREHOLDERS
<PAGE> 2
OF THE COMPANY INDIVIDUALLY, BUT ARE BINDING ONLY UPON THE ASSETS AND PROPERTY
OF THE COMPANY.
SECTION 4 EFFECT OF THIS AMENDMENT. EXCEPT AS AMENDED
BY THIS AMENDMENT, THE STOCK PURCHASE AGREEMENT REMAINS IN FULL FORCE AND
EFFECT.
IN WITNESS WHEREOF, THE COMPANY AND THE PURCHASER HAVE EACH
EXECUTED AND DELIVERED THIS AMENDMENT AS OF THE DATE FIRST WRITTEN ABOVE.
LIBERTE INVESTORS
BY: /S/ BRADLEY S. BUTTERMORE
------------------------------
NAME: BRADLEY S. BUTTERMOR
TITLE: SENIOR VICE PRESIDENT
HUNTER'S GLEN/FORD, LTD.
BY: /S/ GERALD J. FORD
-------------------------------
NAME: GERALD J. FORD
TITLE: GENERAL PARTNER
<PAGE> 3
SECOND AMENDMENT TO THE STOCK PURCHASE AGREEMENT
This Second Amendment to the Stock Purchase Agreement (this
"Amendment"), dated as of March 28, 1996, is between Liberte Investors, a
Massachusetts business trust (the "Company"), and Hunter's Glen/Ford, Ltd., a
Texas limited partnership (the "Purchaser").
RECITALS
WHEREAS, the Company and the Purchaser entered into a Stock
Purchase Agreement (as amended, the "Stock Purchase Agreement"), dated as of
January 16, 1996, pursuant to which the Purchaser agreed to purchase shares of
the Common Stock of Newco, a Delaware corporation into which the Company will
reorganize (terms with initial capital letters not otherwise defined in this
Amendment have the meanings given to them in the Stock Purchase Agreement);
WHEREAS, the Company and the Purchaser entered into the
Amendment to the Stock Purchase Agreement (the "First Amendment"), dated as of
February 27, 1996, to add certain provisions to the Stock Purchase Agreement;
and
WHEREAS, the Company and the Purchaser desire to enter into
this Amendment to change certain provisions of the Stock Purchase Agreement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and
the terms and conditions of this Amendment, and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
and intending to be legally bound by this Amendment, the Company and the
Purchaser agree as follows:
SECTION 1 CHARTER AND BYLAWS. Section 4.4 of the Stock
Purchase Agreement is amended to read as follows:
SECTION 4.4 CHARTER AND BYLAWS. The
Company, Newco, and the Purchaser acknowledge that Newco's
Certificate of Incorporation shall include provisions
concerning the restrictions on the transfer of equity
securities in Newco to preserve certain tax attributes. The
Company shall deliver to the Purchaser a form of proposed
Certificate of Incorporation and Bylaws for Newco, which
Certificate of Incorporation and Bylaws shall be reasonably
acceptable to the Purchaser, prior to the initial filing of
the Proxy Statement/Prospectus with the Commission, along with
an opinion of Morris, Nichols, Arsht & Tunnell or such other
Delaware counsel as is acceptable to the Purchaser, in the
form andsubstance satisfactorily to the Purchaser in its
reasonable discretion, that the transfer restrictions
contained in such Certificate of Incorporation are enforceable
(the "Transfer Restriction Opinion").
SECTION 2 NEWCO MATTERS. Section 4.19 of the Stock
Purchase Agreement is amended to read as follows:
<PAGE> 4
SECTION 4.19 NEWCO MATTERS. At or before
the Closing, if the conditions set forth in Section 2.2 have
been satisfied or waived, the Company shall: (a) cause the
appointment of one designee of the Purchaser as a director of
Newco, (b) cause Newco to enter into an indemnity agreement in
form and substance reasonably satisfactory to the Purchaser
with the Purchaser's designee for director, (c) cause Newco's
Certificate of Incorporation and Bylaws to be in the form
referred to in Section 4.4 of this Agreement, (d) transfer all
of the assets and liabilities of the Company to Newco pursuant
to Section 8.2 of the Company's Declaration of Trust, as
amended, (e) distribute the Common Stock of Newco that the
Company receives in exchange for its assets and liabilities to
the Company's shareholders, and (f) cause Newco to assume the
Company's obligations under this Agreement. Immediately after
the Closing, Newco's Board of Directors shall consist of the
Purchaser's designee and two of the three trustees of the
Company immediately before the Closing, thereafter to serve in
accordance with Applicable Law and Newco's Certificate of
Incorporation and Bylaws.
SECTION 3 EFFECT OF THIS AMENDMENT. Except as amended
by the First Amendment and this Amendment, the Stock Purchase Agreement remains
in full force and effect.
IN WITNESS WHEREOF, the Company and the Purchaser have each
executed and delivered this Amendment as of the date first written above.
LIBERTE INVESTORS
By: /s/ Bradley S. Buttermore
------------------------------------
Name: Bradley S.Buttermore
Title: Senior Vice President
HUNTER'S GLEN/FORD, LTD.
By: /s/ Gerald J. Ford
------------------------------------
Name: Gerald J. Ford
Title: General Partner
<PAGE> 1
EXHIBIT (2.2)
LIBERTE INVESTORS
600 N. PEARL STREET
SUITE 420, LB #168
DALLAS, TEXAS 75201
January 16, 1996
Hunter's Glen/Ford, Ltd.
200 Crescent Court, Suite 1350
Dallas, Texas 75202
Attn: Gerald J. Ford
Re: CONFIDENTIALITY AND STANDSTILL AGREEMENT
Dear Mr. Ford:
Hunter's Glen/Ford, Ltd. (the "Possible Investor") has
expressed an interest in making an investment (an "Investment") in Liberte
Investors (including any successor entity, the "Company"). To assist the
Possible Investor in determining the desirability of such an Investment, the
Company may provide certain Information (as hereinafter defined) to the
Possible Investor and its Advisors (as hereinafter defined). In consideration
of the Company's disclosure of such Information, the Possible Investor hereby
agrees as follows:
SECTION 1. DISCUSSIONS. The Possible Investor and its
Advisors shall keep all discussions with the Company and its Advisors
concerning any Investment confidential and shall not disclose the existence or
substance of such discussions to any person.
SECTION 2. CONFIDENTIALITY OF INFORMATION. The Possible
Investor and its Advisors shall keep the Information confidential, and shall
not: (a) disclose or distribute any Information to any person, (b) permit any
person access to the Information, or (c) use the Information for any purpose
other than evaluating whether an Investment is advisable. The Possible
Investor and its Advisors may, however, disclose the Information to financing
sources, their respective directors, officers, and employees, and pursuant to
Section 6.
SECTION 3. INFORMATION. For purposes of this letter
agreement (this "Letter Agreement"), the term "Information" shall mean any
information concerning the Company's assets, cash flows, business, financial
condition, results of operations, or prospects, whether supplied orally, in
writing, or by any other medium, such as a computer diskette. The term
<PAGE> 2
All persons dealing with Liberte Investors, a Massachusetts business trust,
must look solelyto the Trust property for the enforcement of any claims against
the Trust as neither the Trustees, officers, agents or shareholders assume any
personal liability for obligations entered into on behalf of the Trust.
<PAGE> 3
Information, however, shall exclude any information: (a) available publicly
other than through a breach of this Letter Agreement, (b) available to the
Possible Investor or its Advisors from a source other than the Company and its
Advisors, which source is not under any obligation of confidentiality to the
Company with respect to such information, or (c) developed by the Possible
Investor or its Advisors without reference to the Information.
SECTION 4. ADVISORS. The Possible Investor may
distribute or disclose the Information only to its Advisors: (a) who need to
know the Information in order to assist the Possible Investor in evaluating the
advisability of an Investment, (b) who are informed of this Letter Agreement,
and (c) who agree in writing to be bound by this Letter Agreement, which
agreement shall specifically provide that the Company can enforce this Letter
Agreement against such Advisor as if it were a party to this Letter Agreement,
provided that neither any director, officer, or employee of the Possible
Investor nor any accountant or lawyer engaged by the Possible Investor shall be
required to execute a writing evidencing such agreement. A person's "Advisors"
shall be such person's accountants, advisors, Affiliates (as hereinafter
defined), agents, consultants, investment bankers, lawyers, and
representatives.
SECTION 5. STANDSTILL. During the three year period
beginning on the date of the Possible Investor's acceptance of this Letter
Agreement, without the prior written consent of the Company, the Possible
Investor shall not directly or indirectly: (a) purchase, sell, or otherwise
deal in any equity security or property of the Company, and the Possible
Investor shall cause its Affiliates not to purchase, sell, or otherwise deal in
any such security or property, (b) propose to enter into in any merger or
business combination involving the Company, (c) make or participate in any
"solicitation" of "proxies" (as such terms are used in Regulation 14A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act")) of any voting
securities of the Company, (d) form, join, or participate in a "group" (within
the meaning of Section 13(d)(3) of the Exchange Act) with respect to any voting
securities of the Company, or (e) formulate any plan or proposal to do any of
the foregoing acts or assist or encourage any other person to do them. The
Possible Investor has indicated immediately below its signature block in this
Letter Agreement the number of shares of beneficial interest in the Company
(the "Shares") that the Possible Investor and its Affiliates beneficially own
in the Company as of the date of its acceptance of this Letter Agreement,
determined in accordance with Rule 13d-3 under the Exchange Act. For purposes
of this Letter Agreement, a person's "Affiliates" shall be such person's
directors, employees, family members, members, officers, partners, trustees,
and persons directly or indirectly controlling, controlled by, or under common
control with such person.
SECTION 6. DISCLOSURE REQUIRED. If applicable law,
governmental regulation, or legal process requires the Possible Investor or any
of its Advisors to disclose any Information, the Possible Investor shall
promptly notify the Company of such requirement so that the Company may seek a
protective order. The Possible Investor and its Advisors shall use their best
efforts to assist the Company in obtaining such protective order. If the
<PAGE> 4
Company cannot obtain a protective order prior to the time such disclosure is
required, this Letter Agreement shall not prohibit the Possible Investor and
its Advisors from disclosing any Information that such applicable law,
governmental regulation, or legal process requires them to disclose.
SECTION 7. ACCURACY OF THE INFORMATION. Notwithstanding
anything in this Letter Agreement or any subsequent verbal assurance to the
contrary, neither the Company nor its Advisors make any representation or
warranty as to the accuracy or completeness of any of the Information. In
addition, neither the Company nor any of its Advisors shall be liable to the
Possible Investor or any of its Advisors with respect to any inaccuracy or
incompleteness of any of the Information.
SECTION 8. DESTRUCTION OR RETURN OF INFORMATION. Upon
the Company's request, the Possible Investor shall destroy or return to the
Company: (a) all Information, along with all copies of the Information, and
(b) all documents, memoranda, and other written material that the Possible
Investor or any of its Advisors have prepared that incorporate any Information,
along with all copies of such items. Upon the written request of the Company,
the Possible Investor shall certify to the Company that the Possible Investor
and all of its Advisors have complied with this section.
SECTION 9. AMENDMENT. No amendment, modification, or
waiver of any of the provisions of this Letter Agreement shall be effective
unless in a writing signed by the Company and the Possible Investor.
SECTION 10. EQUITABLE RELIEF. The Company shall be
entitled to equitable relief, including an injunction, if the Possible Investor
or any of its Advisors violate any provision of this Letter Agreement.
SECTION 11. GOVERNING LAW. This Letter Agreement shall
be construed and interpreted according to, and governed by, the laws of the
State of Texas, without regard to the principle of conflicts of law of such
state.
SECTION 12. NO BROKER. The Possible Investor represents
and warrants to the Company that the Possible Investor has no obligation or
liability to any broker or finder with respect to any Investment. The Possible
Investor shall indemnify the Company and its Advisors and hold them harmless
from any and all liabilities and expenses with respect to any claim for
brokerage commissions, finder's fees, or similar compensation owed because of
broker or similar services purportedly rendered to the Possible Investor.
***
<PAGE> 5
Hunter's Glen/Ford, Ltd.
January 16, 1996
Page 4
Please confirm your agreement with the terms of this Letter
Agreement by executing a copy of it in the space provided below, indicating
your date of acceptance and the number of Shares beneficially owned, and
delivering such copy to the Company. Upon your delivery of an executed copy of
this Letter Agreement to the Company, the terms set forth in this Letter
Agreement shall constitute a binding and enforceable agreement between the
Company and the Possible Investor.
Very truly yours,
LIBERTE INVESTORS
/s/ Robert Ted Enloe III
Robert Ted Enloe III
President and Chief Executive Officer
ACCEPTED AND AGREED TO:
HUNTER'S GLEN/FORD, LTD.
By: /s/ Gerald J. Ford
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
Date of Acceptance: January 16, 1996
Number of Shares
beneficially owned by the
Possible Investor and its
Affiliates:
0
- ------------------------------
<PAGE> 1
EXHIBIT (3.1)
LIBERTE' INVESTORS
(Formerly Lomas & Nettleton Mortgage Investors)
BY-LAWS
These Articles are the By-Laws of Liberte' Investors, a business trust
organized under the laws of the Commonwealth of Massachusetts by a Declaration
of Trust made the 26th day of June, 1969, and recorded in the Registry of Deeds
of Suffolk County. These By-Laws have been adopted by the Trustees pursuant to
Section 2.6 of the Declaration of Trust.
All words and terms capitalized in these By-Laws, unless otherwise
defined herein, shall have the same meanings as they have in the Declaration of
Trust.
ARTICLE 1
SHAREHOLDERS AND SHAREHOLDERS' MEETINGS
SECTION 1.1. The Annual Meeting of Shareholders shall be held
after delivery to the Shareholders of the Annual Report described in Section
2.9 of the Declaration and within six months of the end of each fiscal year
commencing with the end of the first full fiscal year. Annual Meetings of
Shareholders shall be held at such time, on such day and at such place, as the
Trustee may from time to time determine by resolution.
SECTION 1.2. Special meetings of Shareholders shall be held in
accordance with Section 6.3 of the Declaration and shall be at such time, on
such day and at such place as provided for therein. Notice of special meetings
of Shareholders requested by Shareholders as provided in Section 6.3 of the
Declaration shall be given by the President no later than thirty (30) days
after receipt by the President of such request.
SECTION 1.3. A Majority of the Trustees may designate or elect a
Trustee to preside at any Shareholders' meeting as "Chairman of the Meeting."
In the absence of such designation or election, the President shall preside at
Shareholders' meetings as Chairman of the Meeting; in his absence, the Trustees
present at each meeting shall elect one of their number as Chairman of the
Meeting. Unless otherwise provided for by the Trustees, the Secretary of the
Trust shall be the secretary of such meetings.
SECTION 1.4. At any Shareholders' meeting the Chairman of the
Meeting shall determine the construction or interpretation of the Declaration
or the By-Laws, or any part thereof, and the ruling of the Chairman of the
Meeting shall be final.
SECTION 1.5. At each meeting of Shareholders, except as
otherwise provided by the Declaration, every holder of record of Shares
entitled to vote shall be entitled to one vote in person or by proxy for each
full Share standing in his name on the register of the Trust. The form of any
such proxy may be prescribed from time to time by resolution or approval of the
Trustees. Except as provided in the Declaration, all action shall be
determined by a majority of the votes cast at such meeting. At all meetings of
the Shareholders, voting shall be by ballot for
<PAGE> 2
the approval required by Section 6.10 of the Declaration and for all matters
which may be binding upon the Trustees pursuant to Section 6.6 of the
Declaration. On all other matters, voting of Shareholders need not be by
ballot unless otherwise provided for by the Declaration or by the Trustees.
SECTION 1.6. The Board of Trustees in advance of any meeting of
Shareholders may appoint one or more "Inspectors of Election" to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman of the Meeting may, and on the request of any
Shareholder entitled to vote shall, appoint one or more Inspectors of Election.
Each Inspector of Election, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of Inspector of
Election at such meeting with strict impartiality and according to the best of
his ability. If appointed, Inspectors of Election shall take charge of the
polls and, when the vote is completed, shall make a certificate of the result
of the vote taken and of such other facts as may be required by law.
SECTION 1.7. In the event that any certificate for Shares is
lost, stolen, destroyed or mutilated, the Board of Trustees may authorize the
issuance of a new certificate of the same tenor and for the same number of
Shares in lieu thereof. The Board may in its discretion, before the issuance
of such new certificate, require the owner of the lost, stolen, destroyed or
mutilated certificate, or the legal representative of the owner to make an
affidavit or affirmation setting forth such facts as to the loss, destruction
or mutilation as it deems necessary, and to give the Trust a bond in such
reasonable sum as it directs to indemnify the Trust.
ARTICLE 2
TRUSTEES AND TRUSTEES' MEETING
SECTION 2.1. The Board of Trustees shall consist of three
persons and, thereafter, shall consist of such number of Trustees, not less
than three (3) nor more than seven (7), as from time to time shall be fixed by
a resolution passed by a majority of the whole Board.
SECTION 2.2. An annual meeting of the Trustees shall be held
immediately following the Annual Meeting of Shareholders, as provided in
Section 2.7 of the Declaration. Other meetings of the Trustees shall be called
in accordance with Section 2.7 of the Declaration at such time, on such day and
at such place as shall be designated by the notice provided for therein.
Notice of each Trustees' meeting shall be mailed or delivered to the last known
address of the Trustee or to such other address as may be specified by the
Trustee to the President or Secretary. Written notices need not be manually
signed. Unless otherwise specified in the notice, any and all business may be
transacted at any Trustees' meeting.
SECTION 2.3. All meetings of the Trustees may be held within or
without the Commonwealth of Massachusetts.
SECTION 2.4. A majority of the Trustees may designate or elect a
Trustee to preside at Trustees' meetings. In the absence of such designation
or election, the President shall preside at Trustees' meetings; in his absence,
the Trustees present at each meeting shall elect one of their number as
chairman.
2
<PAGE> 3
SECTION 2.5. Voting at Trustees' Meetings may be conducted
orally, by show of hands, or, if requested by any Trustee, by written ballot.
The results of all voting shall be recorded by the Secretary in the minute
book.
SECTION 2.6. All other rules of conduct adopted and used at
Trustees' meetings shall be determined by the chairman whose ruling on all
procedural matters shall be final.
SECTION 2.7. Nothing in this Article 2 shall limit the power of
the Trustees to take action by means of a written instrument without a meeting
as provided in Section 2.7 of the Declaration.
ARTICLE 3
OFFICERS
SECTION 3.1. The Officers of the Trust shall be a President, who
shall be a Trustee, a Secretary and a Treasurer, who need not be a Trustee, and
may include such other officers (any of whom need not be Trustees) as may be
determined from time to time by the Trustees. The Trustees may also elect from
among their number a Chairman of the Board of Trustees.
SECTION 3.2. The President, Secretary and Treasurer shall be
elected by the Trustees at their first meeting and thereafter at the annual
meeting of the Trustees, as provided in Section 2.5 of the Declaration. The
President, Secretary and Treasurer shall hold office until the next annual
meeting of the Trustees and until their successors have been duly elected and
qualified and may be removed at any meeting by an affirmative vote of a
Majority of the Trustees.
SECTION 3.3. All officers of the Trust other than the President,
Secretary and Treasurer, may be elected or appointed at any meeting of the
Trustees or may be appointed by the President. Such officers shall hold office
for any term, or indefinitely, as determined by the Trustees or President,
subject to removal. With or without cause, at any time by the Trustees or
President. The names of all such officers appointed by the President shall be
submitted at the next succeeding meeting of the Trustees and recorded in the
minutes of said meeting.
SECTION 3.4. Any officer may resign at any time by giving
written notice to the Board of Trustees or to the President. Such resignation
shall take effect at the time specified therein, and, unless otherwise
specified therein, the acceptance of such resignation shall not be necessary to
make it effective. If the office of any officer or agent becomes vacant by
reason of death, resignation, retirement, disqualification, removal from office
or otherwise, the Trustees may choose a successor, who shall hold office for
the unexpired term in respect of which such vacancy occurred.
SECTION 3.5. The Trustees may, at their discretion, direct any
officer appointed by them to furnish at the expense of the Trust a fidelity
bond approved by the Trustees, in such amount as the Trustees may prescribe.
SECTION 3.6. The Chairman of the Board of Trustees. If one be
elected, shall have and perform such duties as from time to time may be
assigned to him by the Board of Trustees.
3
<PAGE> 4
SECTION 3.7. The President shall be the chief executive officer
of the Trust and shall, unless otherwise provided by the Trustees, preside at
all meetings of the Board of Trustees and of the Shareholders. He shall
exercise the powers and perform the duties usual to the chief executive officer
and, subject to the control of the Board of Trustees, shall have general
management and control of the affairs and business of the Trust; he shall
appoint and discharge employees and agents of the Trust (other than officers
elected by the Board of Trustees); and he shall see that all orders and
resolutions of the Board of Trustees are carried into effect. He shall have
the power to execute bonds, mortgages and other contracts, agreements and
instruments of the Trust, and shall do and perform such other duties as from
time to time may be assigned to him by the Board of Trustees.
SECTION 3.8. If chosen, the Vice Presidents, in the order of
their seniority, shall, in the absence or disability of the President, exercise
all of the powers and duties of the President. Such Vice Presidents shall have
the power to execute bonds, notes, mortgages and other contracts, agreements
and instruments of the Trust, and shall do and perform such other duties
incident to the office of Vice President and as the Board of Trustees or the
President shall direct.
SECTION 3.9. The Secretary shall, if requested by the Trustees,
attend all sessions of the Board of Trustees and all meetings of the
Shareholders and record all votes and the minutes of proceedings in a book to
be kept for that purpose. He shall, if requested, give, or cause to be given,
notice of all meetings of the Shareholders and of the Board of Trustees, and
shall perform such other duties as may be prescribed by the Board of Trustees.
The Secretary shall affix the corporate seal to any instrument requiring it,
and when so affixed, it shall be attested by the signature of the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer who may affix
the seal to any such instrument in the event of the absence or disability of
the Secretary. The Secretary shall have and be the custodian of the Share
records and all other books, records and papers of the Trust (other than
financial) and shall see that all books, reports, statements, certificates and
other documents and records required by law are properly kept and filed.
SECTION 3.10. The Treasurer shall have the custody of the
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Trust and shall deposit
all moneys, and other valuable effects in the name and to the credit of the
Trust, in such depositories as may be designated by the Board of Trustees. He
shall disburse the funds of the Trust as may be ordered by the Board, taking
proper vouchers for such disbursements, and shall render to the Trustees
whenever they may require it, an account of all his transactions as Treasurer
and of the financial condition of the Trust.
SECTION 3.11. Duties of Officers may be Delegated. In case of
the absence or disability of any officer of the Trust, or for any other reason
that the Board may deem sufficient, the Board may delegate, for the time being,
the powers or duties, or any of them, of such officer to any other officer, or
to any Trustee.
4
<PAGE> 5
ARTICLE 4
COMMITTEES
SECTION 4.1. The Trustees may at any time, at their discretion,
elect an Executive Committee consisting of not less than two Trustees, to serve
for such term as the Trustees may decide. The Executive Committee may exercise
such powers of the Trustees as may be delegated to it by the Trustees. Minutes
of each meeting of the Executive Committee shall be distributed by the
Secretary to all of the Trustees at or prior to the meeting of the Trustees
next succeeding such meeting of the Executive Committee. If the Executive
Committee consists of two members, the presence of both members shall be
necessary to constitute a quorum for the transaction of business of any meeting
of the Executive Committee. If the Executive Committee consists of three or
more members, the presence in person of two-thirds of its members shall be
necessary to constitute a quorum for the transaction of business at any meeting
of the Executive Committee. Meetings shall be called upon request of any
member of the Executive Committee.
SECTION 4.2. The Trustees may appoint from among their number
such other committees as they may from time to time deem desirable, to continue
for such time and to exercise such powers as the Trustees may prescribe. Any
action permitted to be taken at any meeting of any committee may be taken
without a meeting if all members of the committee consent thereto in writing,
and the writing or writings are filed with the minutes of proceedings of the
committee.
SECTION 4.3. Each committee (including the Executive Committee)
elected or appointed by the Trustees may adopt such standing rules and
regulations for the conduct of its affairs as it may deem desirable, subject to
review and approval of such rules and regulations by the Trustees at the next
succeeding meeting of the Trustees.
ARTICLE 5
AMENDMENTS
SECTION 5.1. These By-Laws may be amended or repealed, or new
by-laws adopted, at any meeting of the Board of Trustees by the vote of at
least a majority of the entire Board.
SECTION 5.2. Any proposal to amend or repeal these By-Laws or to
adopt new by-laws shall be stated in the notice of the meeting of the Board of
Trustees, or in the waiver of notice thereof, as the case may be, unless all of
the Trustees are present at such meeting.
5
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FIANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S UNAUDITED FINANCIAL STATEMENTS DATED AS OF MARCH 31, 1996 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 22,696,156
<SECURITIES> 0
<RECEIVABLES> 6,519,250
<ALLOWANCES> 69,282
<INVENTORY> 3,770,119
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 32,916,243
<CURRENT-LIABILITIES> 496,922
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 32,419,321
<TOTAL-LIABILITY-AND-EQUITY> 32,916,243
<SALES> 0
<TOTAL-REVENUES> 710,078
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 442,320
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 267,758
<INCOME-TAX> 0
<INCOME-CONTINUING> 267,758
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 267,758
<EPS-PRIMARY> .02
<EPS-DILUTED> 0
</TABLE>
