Document:

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                                                                    EXHIBIT 10.1

                              EMPLOYMENT AGREEMENT

         THIS AGREEMENT is made and entered into as of this 1st day of July,
2002, by and between LIBERTE INVESTORS INC., a Delaware corporation (the
"COMPANY"), having a business address at 200 Crescent Court, Suite 1365, Dallas,
Texas 75201, and DONALD J. EDWARDS (the "EXECUTIVE"), having a mailing address
at 1857 N. Fremont Street, Chicago, Illinois 60614.

                                    RECITALS

         The Board of Directors of the Company has determined that it is in the
best interests of the Company to retain the Executive's services in accordance
with the terms and conditions set forth herein.

         The Executive also wishes to serve in the employ of the Company in
accordance with such terms and conditions.

                                    AGREEMENT

         NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:

         1. EMPLOYMENT. Upon the terms and subject to the conditions contained
in this Agreement, the Executive agrees to provide full-time services for the
Company during the term of this Agreement. The Executive agrees to devote his
best efforts to the business of the Company, and shall perform his duties in a
diligent, trustworthy, and business-like manner, all for the purpose of
advancing the business of the Company. The parties acknowledge that during the
term of this Agreement, the Executive also may conduct investment activities
through one or more newly organized investment funds (the "EQUITY INVESTMENT
FUNDS"), and as an executor, a trustee, an officer and/or a director of entities
with whom the Executive has had a continuing relationship so long as such
activities do not interfere in any material way with the Executive's duties
hereunder, and furthermore that nothing contained herein shall be deemed to
prevent or limit the Executive's right to (i) engage in religious, charitable or
other non-profit activities, (ii) make passive investments in the securities of
any publicly-owned corporation as contemplated by Section 11 herein, and (iii)
make any other passive investments which do not conflict with Section 11 herein
and which do not otherwise constitute a breach of Executive's duty of loyalty to
the Company or interfere in any material respect with the Executive's duties
hereunder.

         2. CAPACITY AND DUTIES.

                  (a) The Executive shall serve the Company as and shall have
         the title of President and Chief Executive Officer. The duties of the
         Executive shall be those duties which can reasonably be expected to be
         performed by a person with the titles of President and Chief Executive
         Officer, and he will be responsible for supervision and general
         management of the business and operations of the Company. The Executive
         shall report directly and regularly

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         to the Board of Directors of the Company. The duties to be performed
         under this Agreement shall be performed primarily at the office of the
         Company to be established in Chicago, Illinois (the "CHICAGO OFFICE"),
         subject to reasonable travel requirements on behalf of the Company.

                  (b) The Company agrees that the Executive shall be elected as
         a Director of the Company substantially concurrently with the execution
         of this Agreement, and the Company shall nominate and use its
         commercially reasonable efforts to cause the election of the Executive
         as a Director during any period in which he serves as an employee of
         the Company.

                  (c) Each of the Company and the Executive acknowledges that a
         principal goal of the Company and its management will be to purchase a
         controlling interest in and to actively manage one or more operating
         companies (each such transaction involving the acquisition of a
         majority equity interest, an "ACQUISITION TRANSACTION") that can be
         consolidated for tax purposes and to operate such companies; provided
         that the business of the Company may involve the acquisition of
         minority interests from time to time. The Executive will use his
         reasonable best efforts to manage the Company within the budget
         approved by the Board of Directors of the Company from time to time. It
         is envisioned that the initial budget for the Company following the
         Effective Date will provide for total operating expenses of the Company
         (excluding expenses relating to the pursuit of an Acquisition
         Transaction) of not more than $2,000,000 per year (including management
         salaries) in excess of the Company's most recent annual expenditures
         (the "ANNUAL BUDGETED AMOUNT") prior to the consummation of an
         Acquisition Transaction. It is contemplated that this limitation on
         operating expenses will not include initial capital expenditures by the
         Company ("INITIAL CAPITAL EXPENDITURES") arising in connection with the
         Company's establishment of the Chicago Office (e.g., tenant improvement
         expenses and costs relating to initial equipment purchases), and that
         all such Initial Capital Expenditures will be borne by the Company and
         one of the Equity Investment Funds and will be allocated in amounts to
         be determined by the Company and such Equity Investment Fund at a later
         date. The Company hereby agrees to fund operating expenses of not less
         than the Annual Budgeted Amount in pursuit of Acquisition Transactions
         through the consummation of the first such Acquisition Transaction. The
         Executive will submit budgets for approval by the Board of Directors
         from time to time in accordance with requests of the Board of
         Directors.

                  (d) To assist Executive in the performance of his duties
         hereunder, the Company may obtain corporate services from either of the
         following two sources: (i) the Company may hire (on terms reasonably
         similar to those relating to Executive, other than base salary and
         stock arrangements) additional employees to assist Executive in
         sourcing and identifying possible Acquisition Transactions, or (ii) the
         Company may obtain corporate services from employees of the Equity
         Investment Funds.

         3. EMPLOYMENT TERM. Subject to the terms and conditions hereof, the
Company agrees to employ the Executive for a term commencing as of July 1, 2002
(the "EFFECTIVE DATE") and continuing through July 1, 2007,

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unless renewed under this Section 3. Beginning with July 1, 2007, this Agreement
may be renewed by the parties each July 1 for successive one-year terms,
provided that the Company and the Executive agree upon such renewal in writing
at least 270 days before the applicable July 1. As used herein, all references
to the "TERM OF THIS AGREEMENT" shall be deemed to be to the original term of
this Agreement, unless such term is renewed as provided above, in which case
such references shall be deemed to be the original term plus each renewed term.

         4. SALARY AND BENEFITS.

                  (a) Base Salary. The Company shall, during the term of this
         Agreement, pay the Executive an annual base salary of $500,000
         beginning on the Effective Date, pro rated for periods of fewer than 12
         months ("BASE SALARY"). Such Base Salary shall be paid in semi-monthly
         installments less applicable withholding and salary deductions.

                  (b) Bonus. The Executive shall be eligible to be paid an
         annual bonus as determined by the Board of Directors based on the
         recommendations of the Executive.

                  (c) Executive Benefit Plans. The Executive shall receive
         medical and dental insurance coverage for himself and his family on
         terms and in amounts consistent with medical and dental insurance
         coverage generally provided for chief executive officers of public
         companies. In addition, the Executive shall be eligible to participate
         in any benefit plans maintained by the Company for the benefit of its
         senior executives, subject to the terms and conditions of the related
         benefit plans.

                  (d) Paid Time Off. The Executive shall be entitled to paid
         time off ("PTO") during each full year of his employment hereunder in
         accordance with the applicable policies adopted by the Company. In no
         event shall Executive be entitled to fewer than four weeks PTO during
         any calendar year. Such PTO shall be taken at such times as are
         consistent with the reasonable business needs of the Company.

                  (e) Reimbursement of Expenses. The Company shall reimburse the
         Executive for all reasonable out-of-pocket expenses incurred by the
         Executive in the course of his duties, in accordance with normal
         policies, and in connection with the negotiation and preparation of (i)
         this Agreement, and (ii) the Stock Option Agreement (defined below),
         the related registration rights agreement and the indemnification
         agreement executed concurrently herewith (collectively, the
         "TRANSACTION AGREEMENTS").

                  (f) Office. The Company shall establish, or cause to be
         established, and maintain (including the payment of rent, repairs,
         utilities, furnishings, improvements, insurance, and all other
         reasonable ancillary costs), in addition to its offices at 200 Crescent
         Court, Suite 1365, Dallas, Texas 75201, the Chicago Office. The lease
         relating to the Chicago Office will be held in the name of the Company
         or one of the Equity Investment Funds, or by both entities jointly.

                  (g) Insurance. The Company will provide exculpation and
         indemnification (including advancement of expenses) to the maximum
         extent permitted by law under its

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         charter and by-laws and in accordance with the terms and conditions of
         an indemnification agreement executed by the Company and Executive
         contemporaneously herewith. The Company also will use commercially
         reasonable efforts to maintain in effect a director and officer
         insurance policy with a reputable insurer in an amount of not less than
         $10 million, naming Executive as a named insured and subject to the
         terms and conditions set forth in the policy previously delivered by
         the Company to Executive.

                  (h) Stock Arrangements. Substantially concurrently herewith,
         the Company will grant the Executive an aggregate of 2,573,678
         nonqualified stock options ("OPTIONS") pursuant to a Nonqualified Stock
         Option Agreement (the "STOCK OPTION AGREEMENT") in the form attached
         hereto as Exhibit A, representing 10% of the Company's fully diluted
         capital stock as of the date hereof (with such fully diluted
         calculation including the 10% Management Equity pool referred to in the
         following paragraph and the 333,333 shares of the Company's common
         stock (subject to adjustment in the event of stock splits and the like)
         which may be acquired by the Executive within one (1) year of the date
         hereof, as provided below (the "PURCHASED SHARES")); provided, however,
         that in the event that the number of Purchased Shares acquired by the
         Executive within one (1) year of the date hereof is less than 333,333
         shares of common stock, then the number of nonqualified stock options
         granted to the Executive under the Stock Option Agreement shall be
         adjusted accordingly. The Stock Option Agreement also includes the
         agreement of the Company to grant additional stock options (the
         "ADDITIONAL GRANT") to the Executive in order to maintain Executive's
         10% fully diluted equity ownership position in the Company under
         certain circumstances, as set forth in Section 12 of the Stock Option
         Agreement. The grant of Options to the Executive and the adoption of
         the related incentive plan (the "PLAN") are subject to stockholder
         approval. The Company shall use commercially reasonable efforts to
         secure stockholder approval of the Plan and the grant of the Options to
         the Executive (together with approval of the Additional Grant and
         related Plan amendments, if necessary) at its next meeting of
         stockholders following the Effective Date.

                           The Company hereby further agrees to reserve and make
         available for grant to the Company's employees (other than Executive)
         as options, stock awards or otherwise additional shares of its Common
         Stock (the "MANAGEMENT EQUITY"), representing an additional 10% of the
         Company's fully diluted capital stock as of the date hereof (with such
         fully diluted calculation including the Options granted to the
         Executive pursuant to the Stock Option Agreement (as adjusted in
         accordance with the immediately preceding paragraph) and the Purchased
         Shares), and shall reserve additional shares in the event additional
         options are granted to the Executive as part of the Additional Grant to
         enable such Management Equity to maintain a 10% fully diluted equity
         ownership position in the Company including all options granted to the
         Executive pursuant to the Stock Option Agreement and the Purchased
         Shares; provided, however, that in the event that the number of
         Purchased Shares acquired by the Executive is less than 333,333 shares
         of common stock, then the Management Equity granted or issued under the
         Stock Option Agreement shall be adjusted accordingly. Such Management
         Equity shall have the same exercise price as the Executive's stock
         options and shall otherwise be on such terms as the Executive shall
         approve or recommend. The Company agrees that the Executive will have
         full discretion as to the allocation and terms

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         of all Management Equity awards referred to in this Section 4(h);
         provided, however, that the Executive may, at his discretion, request
         that a committee established pursuant to the terms of the Plan grant
         such Management Equity awards.

                           The Company will use commercially reasonable efforts
         to ensure that the Purchased Shares and all options granted to the
         Executive pursuant to the Stock Option Agreement (including the
         Additional Grant, if applicable) will qualify for exemption under Rule
         16b-3 under Section 16 of the Securities Exchange Act of 1934, as
         amended.

                           Within one (1) year of the date hereof, the Executive
         may purchase the Purchased Shares from the Company at a price equal to
         $3.00 per Purchased Share. In connection therewith, the Company will
         make a nonrecourse loan or loans, on substantially the terms of the
         promissory note attached hereto as Exhibit B (the "NOTE"), to the
         Executive in an amount equal to the highest marginal rate of tax
         applicable to such amount for federal, state and local income taxes
         (the "PURCHASED SHARE TAX") incurred by the Executive directly as a
         result of his purchase of the Purchased Shares. The Company further
         agrees to pay a cash bonus to the Executive on each date on which
         interest is due under the terms of the Note in an amount equal to the
         amount of the respective interest payment then due to the Company.

                  (i) Benefits Not in Lieu of Compensation. No benefit or
         perquisite provided to the Executive shall be deemed to be in lieu of
         base salary, bonus, or other compensation.

                  (j) COBRA. Nothing herein shall be construed to limit the
         right of the Executive or his family to receive continuation of group
         health plan benefits to the extent authorized by and consistent with 29
         U.S.C. Section 1161 et seq. (commonly known as "COBRA").

         5. TERMINATION OF EMPLOYMENT. The Board of Directors of the Company may
terminate the employment of the Executive at any time as it deems appropriate,
and the Executive may resign such employment. The following provisions shall
apply with respect to the termination of the Executive's employment:

                  (a) Death. If the Executive shall die before termination of
         his employment hereunder, the Executive's estate shall be entitled to
         receive continued payments in an amount equal to 60% of the Executive's
         Base Salary at the time of his death during the remaining term of this
         Agreement (in accordance with Section 4(a) above).

                  (b) Disability. The Company may terminate the Executive's
         employment for disability if the Executive is incapacitated and absent
         from his duties hereunder on a full-time basis for six consecutive
         months or for at least 180 days during any 12-month period as a result
         of mental or physical illness or physical injury. If, during the term
         of this Agreement, the Executive's employment terminates due to
         disability:

                           (i) The Executive shall be entitled to receive
                  continued payments in an amount equal to 60% of the
                  Executive's Base Salary at the time of such termination

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                  through the remaining term of this Agreement (in accordance
                  with Section 4(a) above).

                           (ii) The Company shall maintain in full force and
                  effect and on substantially the same terms for the continued
                  benefit of the Executive and his family, during the remaining
                  term of this Agreement, medical and dental coverage and all
                  other employee benefit plans and programs or arrangements in
                  which the Executive was entitled to participate immediately
                  prior to the date of termination of employment, provided that
                  his continued participation in such other plans and programs
                  or arrangements is possible under the general terms and
                  provisions of such plans and programs or arrangements. In the
                  event that the participation of the Executive or his family in
                  any such plan and program or arrangement is barred, the
                  Company shall arrange to provide the Executive and his family
                  with benefits substantially similar to those which they are
                  entitled to receive under such plans and programs or
                  arrangements. At the end of the period of coverage, the
                  Executive shall have the option to have assigned to him at no
                  cost and with no apportionment of prepaid premiums, any
                  assignable insurance policy owned by the Company and relating
                  specifically to him. No provision of this Agreement shall be
                  deemed to waive any rights of the Executive under the Family
                  and Medical Leave Act of 1993, 29 U.S.C. Section 2601 et seq.
                  and the Americans with Disabilities Act, 42 U.S.C. Section
                  12101 et seq.

                  (c) Voluntary Resignation or Termination for Cause. If the
         Executive shall voluntarily terminate his employment for other than
         Good Reason or if the Company shall discharge the Executive for Cause,
         this Agreement shall terminate immediately and the Company shall be
         obligated to pay the Executive only the following amounts: (i) any
         unpaid Base Salary due to the Executive in accordance with Section 4(a)
         above for all periods prior to the date of termination of employment,
         and (ii) Executive's accrued PTO. Further, in the event the Executive
         voluntarily terminates his employment other than for Good Reason within
         the 90-day period following any Change of Control (as defined in the
         Company's 2001 Long-Term Incentive Plan as in effect on the date
         hereof), the Company shall promptly make a lump sum payment to
         Executive equal to the present value of one year's Base Salary at the
         rate then in effect (based on an interest rate of 4.75% per annum) and
         shall maintain in full force and effect and on substantially the same
         terms for one year following such termination all benefit plans,
         programs and arrangements in which the Executive and his family were
         entitled to participate immediately prior to the date of the Change of
         Control.

                  (d) Termination Without Cause; Resignation for Good Reason.
         If, during the term of this Agreement, the Executive's employment is
         terminated by the Company without Cause or the Executive voluntarily
         terminates his employment for Good Reason (the date of such termination
         being referred to herein as the "DATE OF TERMINATION"):

                           (i) The Company shall pay the Executive (A) any
                  unpaid Base Salary due to the Executive in accordance with
                  Section 4(a) above for all periods prior to the Date of
                  Termination, (B) the Executive's accrued PTO, and (C) promptly
                  following

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                  the Date of Termination, a lump sum amount equal to the
                  present value (based on a rate of 4.75% per annum) of all
                  remaining Base Salary obligations through the end of the term
                  of this Agreement plus an amount equal to the higher of the
                  Executive's most recent annual bonus or target bonus agreed
                  upon by the Board of Directors for the year in which
                  termination occurs; and

                           (ii) The Company shall maintain in full force and
                  effect and on substantially the same terms for the continued
                  benefit of the Executive and his family, during the remaining
                  term of this Agreement, the medical and dental insurance
                  benefits provided under Section 4(c) herein and all other
                  employee benefit plans and programs or arrangements in which
                  the Executive was entitled to participate immediately prior to
                  the Date of Termination, provided that his continued
                  participation in such other plans and programs or arrangements
                  is possible under the general terms and provisions of such
                  plans and programs or arrangements. In the event that the
                  Executive's participation in any such plan or program or
                  arrangements is barred, the Company shall arrange to provide
                  the Executive with benefits substantially similar to those
                  which he is entitled to receive under such plans and programs.
                  At the end of the period of coverage, the Executive shall have
                  the option to have assigned to him at no cost and with no
                  apportionment of prepaid premiums, any assignable insurance
                  policy owned by the Company and relating specifically to him.

                  (e) Definitions. For the purposes of this Agreement, "CAUSE"
         shall mean (A) the willful and continued failure by the Executive to
         substantially perform his duties with the Company (other than any such
         failure resulting from incapacity due to physical or mental illness),
         after a demand for substantial performance is delivered to the
         Executive by the Board of Directors which specifically identifies the
         manner in which the Board of Directors believes that he has not
         substantially performed his duties and the failure by the Executive to
         cure such failure within 30 days after delivery of such demand, or (B)
         the willful engaging by the Executive in gross misconduct materially
         and demonstrably injurious to the Company, or (C) Executive's personal
         dishonesty, willful misconduct, breach of fiduciary duty of loyalty
         involving personal profit, willful violation of any law, rule, or
         regulation (other than traffic violations or similar offenses) or final
         cease-and-desist order, or (D) Executive's material breach of any
         provision of this Agreement and the failure to cure such breach within
         30 days following notice thereof by the Company. For purposes of this
         paragraph, no act, or failure to act, on the Executive's part shall be
         considered "willful" unless done, or omitted to be done, by him not in
         good faith and without reasonable belief that his action or omission
         was not in the best interest of the Company. Notwithstanding the
         foregoing, the Executive shall not be deemed to have been terminated
         for Cause unless and until there shall have been delivered to him a
         copy of a resolution duly adopted by the affirmative vote of not less
         than two-thirds (2/3) of the entire authorized membership of the Board
         of Directors at a meeting of the Board of Directors called and held for
         the purpose (after reasonable notice and an opportunity for the
         Executive, together with counsel, to be heard before the Board of
         Directors), finding that in the good faith opinion of the Board of
         Directors he was guilty of conduct set forth above in clauses (A), (B),
         (C) or (D) of the first sentence of this paragraph

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         and specifying the particulars thereof in detail. Any such
         determination shall remain subject to review by arbitration in the
         event of a dispute, as described in Section 15 below.

                  For purposes of this Agreement, "GOOD REASON" shall mean:

                           (i) Without the Executive's express written consent,
                  the assignment to the Executive of any duties inconsistent
                  with his positions, duties, responsibilities and status with
                  the Company, or a change in his reporting responsibilities,
                  titles or offices, or any removal of the Executive from or any
                  failure to re-elect the Executive to any of such positions
                  (including, without limitation, the failure of the Executive
                  at any time to be elected as a Director of the Company as
                  provided for herein), except in connection with the
                  termination of his employment by the Company for Cause, by the
                  Executive other than for Good Reason, or as a result of the
                  Executive's disability or death;

                           (ii) The Company's requiring the Executive, without
                  his express written consent, to be based at a location more
                  than 50 miles away from the Chicago Office; or

                           (iii) Any breach by the Company of any of its
                  payment, benefit or other material financial obligations
                  (including obligations with respect to stock option grants)
                  under this Agreement or any of the Transaction Agreements or
                  any event resulting in Executive not receiving one or more of
                  the benefits or rights contemplated by this Agreement or any
                  of the Transaction Agreements (including, without limitation,
                  the Company's failure to obtain stockholder approval of the
                  Plan and the grant of the Options to Executive, as
                  contemplated by Section 4(h) herein, and the Company's failure
                  to fund the Annual Budgeted Amount in pursuit of an
                  Acquisition Transaction as contemplated by Section 2(c)
                  herein), which breach has not been cured within 30 days after
                  written notice from Executive.

                  (f) Effect of Termination on Other Arrangements. The effect of
         any termination of employment of Executive under any stock option plan,
         restricted stock plan, incentive plan, deferred compensation
         arrangement or other benefit plan or program in which Executive is
         participating at the time of termination of his employment shall be
         determined in accordance with the terms, conditions and limitations of
         the relevant agreement between the Executive and the Company; provided,
         however, that the Company shall continue to provide medical and dental
         insurance coverage and the other employee benefits plans and programs
         or arrangements as contemplated by this Section 5. Furthermore, the
         Company agrees that after the termination of the Executive's
         employment, the Executive will no longer be subject to any "insider
         trading" or similar policy of the Company which would have the effect
         of restricting Executive's ability to sell, transfer or assign any
         equity securities of the Company; provided that the Executive shall
         remain subject to all applicable laws proscribing trading in Company
         securities while possessing material, non-public information.

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                  (g) Gross-Up Payments. Anything in this Agreement to the
         contrary notwithstanding, in the event it shall be determined that any
         payment or distribution made, or benefit provided, by the Company to or
         for the benefit of the Executive (whether paid or payable or
         distributed or distributable or provided pursuant to the terms hereof
         or otherwise) would constitute a "parachute payment" as defined in
         Section 280G of the Internal Revenue Code of 1986, as amended (the
         "CODE"), then the Company shall pay to the Executive in cash bonuses
         equal to the amount of (i) any excise taxes imposed on such "parachute
         payment" under Section 4999 of the Code and (ii) any taxes on such
         bonuses.

                  (h) No Mitigation. The Executive shall not be required to
         mitigate the amount of any payment provided for in this Agreement by
         seeking other employment or otherwise, nor shall the amount of any
         payment provided for herein be reduced by any compensation earned by
         the Executive as a result of employment by another employer or by
         retirement benefits after the Date of Termination or otherwise.

         6. CONFIDENTIAL INFORMATION. The Company will provide Executive access
to certain information of members of the Company Group (as defined below),
including information that is confidential and constitutes valuable, special and
unique property of such members of the Company Group. The Executive shall not at
any time, either during or subsequent to the term of this Agreement, disclose to
others, use, copy or permit to be copied, except in pursuance of his duties for
and on behalf of the Company, its successors, assigns or nominees, any
Confidential Information (as defined below) of any member of the Company Group
(regardless of whether developed by the Executive) without the prior written
consent of the Company, except as required (A) at the express direction of any
authorized governmental entity; (B) pursuant to a subpoena or other court
process; (C) as otherwise required by law or the rules, regulations or orders of
any applicable regulatory body; or (D) as otherwise necessary, in the opinion of
counsel for Executive, to be disclosed by Executive in connection with the
prosecution of any legal action or proceeding initiated by Executive against the
Company or any of its subsidiaries or the defense of any legal action or
proceeding initiated against Executive in his capacity as an employee or
director of the Company or any of its subsidiaries.

         As used herein, "COMPANY GROUP" means the Company, and any entity that
directly or indirectly controls, is controlled by, or is under common control
with, the Company, and for purposes of this definition "CONTROL" means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such entity, whether through the
ownership of voting securities, by contract or otherwise; provided that no
entity in which the Company has made an investment but of which the Company owns
less than a 50% interest shall be deemed a member of the "Company Group."

         The term "CONFIDENTIAL INFORMATION" with respect to any person means
any secret or confidential information or know-how and shall include, but shall
not be limited to, the plans, customers, costs, prices, uses, and applications
of products and services, results of investigations, studies or experiments
owned or used by such person, and all apparatus, products, processes,
compositions, samples, formulas, computer programs, computer hardware designs,
computer firmware designs, and servicing, marketing or manufacturing methods and
techniques at any time

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used, developed, investigated, made or sold by such person, before or during the
term of this Agreement, that are not readily available to the public or that are
maintained as confidential by such person; provided, however, that Confidential
Information shall not include (i) information that is generally available to the
public other than by reason of breach of this Agreement by the Executive and
(ii) information received by the Executive from a third party not known to him
to be under an obligation of confidentiality to the Company. The Executive shall
maintain in confidence any Confidential Information of third parties received as
a result of his employment with the Company in accordance with the Company's
obligations to such third parties and the policies established by the Company.

         7. DELIVERY OF DOCUMENTS UPON TERMINATION. The Executive shall deliver
to the Company or its designee at the termination of his employment all
correspondence, memoranda, notes, records, drawings, sketches, plans, customer
lists, product compositions, and other documents and all copies thereof, made,
composed or received by the Executive, solely or jointly with others, that are
in the Executive's possession, custody, or control at termination and that are
related in any manner to the past, present, or anticipated business or any
member of the Company Group. In this regard, the Executive hereby grants and
conveys to the Company all right, title and interest in and to, including
without limitation, the right to possess, print, copy, and sell or otherwise
dispose of, any reports, records, papers, summaries, photographs, drawings or
other documents, and writings, and copies, abstracts or summaries thereof, that
may be prepared by the Executive or under his direction or that may come into
his possession in any way during the term of his employment with the Company
that relate in any manner to the past, present or anticipated business of any
member of the Company Group.

         8. DISCLOSURE AND RECEIPT OF CONFIDENTIAL INFORMATION. The Executive
shall not use or disclose to other employees of the Company, during his
employment with the Company, Confidential Information belonging to his former
employers, former business associates, or any other third parties unless written
permission has been given by such third parties to the Company and accepted by
the Company to allow the Company to use and/or disclose such information.

         9. INTELLECTUAL PROPERTY. The Executive shall hold in trust for the
benefit of the Company, and shall disclose promptly and fully to the Company in
writing, and hereby assigns, and binds his heirs, executors, and administrators
to assign, to the Company any and all inventions, discoveries, ideas, concepts,
improvements, copyrightable works, and other developments (the "DEVELOPMENTS")
conceived, made, discovered or developed by him, solely or jointly with others,
during the term of his employment by the Company, whether during or outside of
usual working hours and whether on the Company's premises or not, that relate in
any manner to the past, present or anticipated business of any member of the
Company Group. All works of authorship created by the Executive, solely or
jointly with others, shall be considered works made for hire under the Copyright
Act of 1976, as amended, and shall be owned entirely by the Company. Any and all
such Developments shall be the sole and exclusive property of the Company,
whether patentable, copyrightable, or neither, and the Executive shall assist
and fully cooperate in every way, at the Company's expense, in securing,
maintaining, and enforcing, for the benefit of the Company or its designee,
patents, copyrights or other types of proprietary or intellectual property
protection for such Developments in any and all countries.

                                       10
<PAGE>

         10. FURTHER ACTS. At the request of the Company (but without additional
compensation from the Company during his employment by the Company) the
Executive shall execute any and all papers and perform all lawful acts that the
Company may deem necessary or appropriate to further evidence or carry out the
transactions contemplated in this Agreement including, without limitation, such
acts as may be necessary for the preparation, filing, prosecution, and
maintenance of applications for United States letters patent and foreign letters
patent, or for United States and foreign copyright, on the Developments.

         11. NO COMPETITION. Beginning on the closing date of the first
Acquisition Transaction and continuing throughout the period in which the
Executive serves as an employee of the Company and for one year thereafter, the
Executive shall not directly or indirectly engage in any business that competes
with the business of the Company as such business may exist from time to time
or, following the termination of the Executive's employment, as such business
may exist on the date of such termination (it being understood that the business
of the Company shall be deemed to refer to the business or businesses of its
operating subsidiaries acquired in Acquisition Transactions and not to the
investment business generally); provided, however, that the restriction in this
Section 11 shall apply only to the reasonable and limited geographic area
consisting of any state in which the Company directly or indirectly conducts
business as contemplated above. For purposes of this Section 11, the Executive
shall be deemed to engage in a business if he directly or indirectly engages or
invests in, owns, manages, operates, controls or participates in the ownership,
management, operation or control of, is employed by, associated or in any manner
connected with, or renders services or advice to, any business which competes
with the business of the Company as defined herein; provided, further, that the
Executive may invest in the securities of any enterprise if (x) such securities
are listed on any national or regional securities exchange or have been
registered under Section 12(g) of the Securities Exchange Act of 1934 and (y)
the Executive does not beneficially own (as defined in Rule 13d-3 promulgated
under the Securities Exchange Act of 1934) in excess of 5% of the outstanding
capital stock of such enterprise. Notwithstanding any of the foregoing, in no
event shall the Executive's activities with any Equity Investment Fund or in
connection with any activities otherwise permitted under or contemplated in
Section 1 of this Agreement be deemed a violation by Executive of this Section
11.

         The Executive agrees that if a court of competent jurisdiction
determines that the length of time or any other restriction, or portion thereof,
set forth in this Section 11 is overly restrictive and unenforceable, the court
may reduce or modify such restrictions to those which it deems reasonable and
enforceable under the circumstances, and as so reduced or modified, the parties
hereto agree that the restrictions of this Section 11 shall remain in full force
and effect. The Executive further agrees that if a court of competent
jurisdiction determines that any provision of this Section 11 is invalid or
against public policy, the remaining provisions of this Section 11 and the
remainder of this Agreement shall not be affected thereby, and shall remain in
full force and effect.

         The Executive acknowledges that the business of the Company is national
in scope and that the restrictions imposed by this Agreement are legitimate,
reasonable and necessary to protect the Company's investment in its businesses
and the goodwill thereof. The Executive acknowledges that the scope and duration
of the restrictions contained herein are reasonable. The Executive further

                                       11
<PAGE>

acknowledges that the restrictions contained herein are not burdensome to the
Executive in light of the consideration paid therefor and the other
opportunities that remain open to the Executive. Moreover, the Executive
acknowledges that he has other means available to him for the pursuit of his
livelihood.

         12. NO TAMPERING. Throughout the period during which the Executive
serves as an employee of the Company and for one year thereafter, the Executive
shall not (a) request, induce or attempt to influence any distributor or
supplier of goods or services to any member of the Company Group to curtail or
cancel any business they may transact with any member of the Company Group; (b)
request, induce or attempt to influence any customers of any member of the
Company Group that is then doing business or which within the two-year period
prior to Executive's termination of employment had done business with any member
of the Company Group to curtail or cancel any business they may transact with
any member of the Company Group; or (c) request, induce or attempt to influence
any employee of any member of the Company Group (other than any employee with
whom the Executive had a relationship prior to his employment relationship with
the Company) to terminate his or her employment with such member of the Company
Group.

         13. PUBLICITY AND ADVERTISING. The Executive agrees that the Company
may use his name, picture, or likeness for any advertising, publicity, or other
business purpose at any time, during the term of this Agreement by the Company
and may continue to use materials generated during the term of his employment
and for a period of six months thereafter. Such use of the Executive's name,
picture, or likeness shall not be deemed to result in any invasion of the
Executive's privacy or in a violation of any property right the Executive may
have; and the Executive shall receive no additional consideration if his name,
picture or likeness is so used. The Executive further agrees that any negatives,
prints or other material for printing or reproduction purposes prepared in
connection with the use of his name, picture or likeness by the Company shall be
and are the sole property of the Company.

         14. REMEDIES. The Executive acknowledges that a remedy at law for any
breach or attempted breach of the Executive's obligations under Sections 6
through 13 may be inadequate, agrees that the Company may be entitled to
specific performance and injunctive and other equitable remedies in case of any
such breach or attempted breach, and further agrees to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any such
injunctive or other equitable relief. The termination of the Executive's
employment pursuant to Section 3, 5(c) or 5(d) shall not be deemed to be a
waiver by the Company of any breach by the Executive of this Agreement or any
other obligation owed the Company, and notwithstanding such a termination the
Executive shall be liable for all damages attributable to such a breach.

         15. DISPUTE RESOLUTION. Subject to the Company's right to seek
injunctive relief in court as provided in Section 14 of this Agreement, any
dispute, controversy or claim arising out of or in relation to or in connection
with this Agreement, including without limitation any dispute as to the
construction, validity, interpretation, enforceability or breach of this
Agreement, shall be exclusively and finally settled by arbitration, and any
party may submit such dispute, controversy or claim, including a claim for
indemnification under this Section 15, to arbitration.

                                       12
<PAGE>

                  (a) Arbitrators. The arbitration shall be heard and determined
         by one arbitrator, who shall be impartial and who shall be selected by
         mutual agreement of the parties; provided, however, that if the dispute
         involves more than $2,000,000, then the arbitration shall be heard and
         determined by three (3) arbitrators. If three (3) arbitrators are
         necessary as provided above, then (i) each side shall appoint an
         arbitrator of its choice within thirty (30) days of the submission of a
         notice of arbitration and (ii) the party-appointed arbitrators shall in
         turn appoint a presiding arbitrator of the tribunal within thirty (30)
         days following the appointment of the last party-appointed arbitrator.
         If (x) the parties cannot agree on the sole arbitrator, (y) one party
         refuses to appoint its party-appointed arbitrator within said thirty
         (30) day period or (z) the party-appointed arbitrators cannot reach
         agreement on a presiding arbitrator of the tribunal, then the
         appointing authority for the implementation of such procedure shall be
         the Senior United States District Judge for the Northern District of
         Illinois, who shall appoint an independent arbitrator who does not have
         any financial interest in the dispute, controversy or claim. If the
         Senior United States District Judge for the Northern District of
         Illinois refuses or fails to act as the appointing authority within
         ninety (90) days after being requested to do so, then the appointing
         authority shall be the Chief Executive Officer of the American
         Arbitration Association, who shall appoint an independent arbitrator
         who does not have any financial interest in the dispute, controversy or
         claim. All decisions and awards by the arbitration tribunal shall be
         made by majority vote.

                  (b) Proceedings. Unless otherwise expressly agreed in writing
         by the parties to the arbitration proceedings:

                           (i) The arbitration proceedings shall be held in
                  Chicago, Illinois, at a site chosen by mutual agreement of the
                  parties, or if the parties cannot reach agreement on a
                  location within thirty (30) days of the appointment of the
                  last arbitrator, then at a site in Chicago, Illinois chosen by
                  the arbitrator(s);

                           (ii) The arbitrator(s) shall be and remain at all
                  times wholly independent and impartial;

                           (iii) The arbitration proceedings shall be conducted
                  in accordance with the Commercial Arbitration Rules of the
                  American Arbitration Association, as amended from time to
                  time;

                           (iv) Any procedural issues not determined under the
                  arbitral rules selected pursuant to item (iii) above shall be
                  determined by the law of the place of arbitration, other than
                  those laws which would refer the matter to another
                  jurisdiction;

                           (v) The costs of the arbitration proceedings
                  (including reasonable attorneys' fees and costs) shall be
                  borne in the manner determined by the arbitrator(s);

                           (vi) The decision of the arbitrator(s) shall be
                  reduced to writing; final and binding without the right of
                  appeal; the sole and exclusive remedy regarding any

                                       13
<PAGE>

                  claims, counterclaims, issues or accounting presented to the
                  arbitrator(s); made and promptly paid in United States dollars
                  free of any deduction or offset; and any costs or fees
                  incident to enforcing the award shall, to the maximum extent
                  permitted by law, be charged against the party resisting such
                  enforcement;

                           (vii) The award shall include interest from the date
                  of any breach or violation of this Agreement, as determined by
                  the arbitral award, and from the date of the award until paid
                  in full, at 6% per annum; and

                           (viii) Judgment upon the award may be entered in any
                  court having jurisdiction over the person or the assets of the
                  party owing the judgment or application may be made to such
                  court for a judicial acceptance of the award and an order of
                  enforcement, as the case may be.

                  (c) Acknowledgment Of Parties. Each party acknowledges that he
         or it has voluntarily and knowingly entered into an agreement to
         arbitration under this Section 15 by executing this Agreement.

         16. MISCELLANEOUS PROVISIONS.

                  (a) Successors of the Company. The Company will require any
         successor (whether direct or indirect, by purchase, merger,
         consolidation or otherwise) to all or substantially all of the business
         and/or assets of the Company, by agreement in form and substance
         satisfactory to the Executive, expressly to assume and agree to perform
         this Agreement in the same manner and to the same extent that the
         Company would be required to perform it if no such succession had taken
         place; provided, that except as otherwise contemplated by the
         foregoing, the Company may not assign this Agreement without the prior
         written consent of the Executive. Failure of the Company to obtain such
         agreement prior to the effectiveness of any such succession shall be a
         breach of this Agreement and shall entitle the Executive to
         compensation from the Company in the same amount and on the same terms
         as the Executive would be entitled hereunder if the Executive
         terminated his employment for Good Reason, except that for purposes of
         implementing the foregoing, the date on which any such succession
         becomes effective shall be deemed the Date of Termination. As used in
         this Agreement, "COMPANY" shall mean the Company as hereinbefore
         defined and any successor to its business and/or assets as aforesaid
         which executes and delivers the agreement provided for in this Section
         16 or which otherwise becomes bound by all the terms and provisions of
         this Agreement by operation of law.

                  (b) Executive's Heirs, etc. The Executive may not assign his
         rights or delegate his duties or obligations hereunder without the
         written consent of the Company. This Agreement shall inure to the
         benefit of and be enforceable by the Executive's personal or legal
         representatives, executors, administrators, successors, heirs,
         distributees, devisees and legatees. If the Executive should die while
         any amounts would still be payable to him hereunder as if he had
         continued to live, all such amounts, unless other provided herein,
         shall

                                       14
<PAGE>

         be paid in accordance with the terms of this Agreement to his designee
         or, if there be no such designee, to his estate.

                  (c) Notice. For the purposes of this Agreement, notices and
         all other communications provide for in this Agreement shall be in
         writing and shall be deemed to have been duly given when delivered or
         mailed by United States registered or certified mail, return receipt
         requested, postage prepaid, addressed to the respective addresses set
         forth on the first page of this Agreement, provided that all notices to
         the Company shall be directed to the attention of the Chairman of the
         Company with a copy to the Secretary of the Company, or to such other
         in writing in accordance herewith, except that notices of change of
         address shall be effective only upon receipt.

                  (d) Amendment; Waiver. No provisions of this Agreement may be
         modified, waived or discharged unless such waiver, modification or
         discharge is agreed to in writing signed by the Executive and such
         officer as may be specifically designated by the Board of Directors of
         the Company. No waiver by either party hereto at any time of any breach
         by the other party hereto of, or compliance with, any condition or
         provision of this Agreement to be performed by such other party shall
         be deemed a waiver of similar or dissimilar provisions or conditions at
         the same or at any prior or subsequent time. No agreements or
         representations, oral or otherwise, express or implied, with respect to
         the subject matter hereof have been made by either party which are not
         set forth expressly or referred to in this Agreement.

                  (e) Invalid Provisions. Should any portion of this Agreement
         be adjudged or held to be invalid, unenforceable or void, such holding
         shall not have the effect of invalidating or voiding the remainder of
         this Agreement and the parties hereby agree that the portion so held
         invalid, unenforceable or void shall, if possible, be deemed amended or
         reduced in scope, or otherwise be stricken from this Agreement to the
         extent required for the purposes of validity and enforcement thereof.

                  (f) Survival of the Executive's Obligations. The Executive's
         obligations under this Agreement shall survive regardless of whether
         the Executive's employment by the Company is terminated, voluntarily or
         involuntarily, by the Company or the Executive, with or without Cause
         or with or without Good Reason.

                  (g) Counterparts. This Agreement may be executed in one or
         more counterparts, each of which shall be deemed to be an original but
         all of which together will constitute one and the same instrument.

                  (h) Governing Law. This Agreement shall be governed by and
         construed under the laws of the State of Texas.

                  (i) Captions and Gender. The use of captions and Section
         headings herein is for purposes of convenience only and shall not
         affect the interpretation or substance of any provisions contained
         herein. Similarly, the use of the masculine gender with respect to
         pronouns in this Agreement is for purposes of convenience and includes
         either sex who may be a signatory.

                                    * * * * *

                                       15
<PAGE>

         IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of
the 1st day of July, 2002.

                                       LIBERTE INVESTORS INC.,
                                       A DELAWARE CORPORATION

                                       By: /s/ Gerald J. Ford
                                          --------------------------------------
                                       Name: Gerald J. Ford
                                       Title: Chief Executive Officer

                                       DONALD J. EDWARDS

                                       /s/ Donald J. Edwards
                                       -----------------------------------------

                                       16<PAGE>

                                                                    EXHIBIT 10.2

                             LIBERTE INVESTORS INC.
                          2002 LONG TERM INCENTIVE PLAN

         The Liberte Investors Inc. 2002 Long Term Incentive Plan (the "Plan")
was adopted by the Board of Directors of Liberte Investors Inc., a Delaware
corporation (the "Company"). This Plan shall become effective upon approval by
the holders of a majority of the votes cast at a meeting of stockholders at
which a quorum is present or by written consent in accordance with applicable
law. Subject to such approval, Stock Options may be granted hereunder on and
after the adoption of this Plan by the Board.

                                    ARTICLE 1
                                     PURPOSE

         The purpose of the Plan is to foster and promote the long-term
financial success of the Company and its Subsidiaries and materially increase
the value of the Company and its Subsidiaries by (a) encouraging the long-term
commitment of the Employees, Consultants, and Outside Directors of the Company
and its Subsidiaries, (b) motivating performance of the Employees, Consultants,
and Outside Directors of the Company and its Subsidiaries by means of long-term
performance related incentives, (c) encouraging and providing Employees,
Consultants, and Outside Directors of the Company and its Subsidiaries with an
opportunity to obtain an ownership interest in the Company, (d) attracting and
retaining outstanding Employees, Consultants, and Outside Directors by providing
incentive compensation opportunities, and (e) enabling participation by
Employees, Consultants, and Outside Directors in the long-term growth and
financial success of the Company and its Subsidiaries.

                                    ARTICLE 2
                                   DEFINITIONS

         For the purpose of the Plan, unless the context requires otherwise, the
following terms shall have the meanings indicated:

         2.1 "Award" means the grant of any Incentive Stock Option, Nonqualified
Stock Option, Restricted Stock, or SAR, whether granted singly or in combination
or in tandem (each individually referred to herein as an "Incentive").

         2.2 "Award Agreement" means a written agreement between a Participant
and the Company which sets out the terms of the grant of an Award.

         2.3 "Award Period" means the period set forth in the Award Agreement
with respect to a Stock Option during which the Stock Option may be exercised,
which shall commence on the Date of Grant and expire at the time set forth in
the Award Agreement.

         2.4 "Board" means the board of directors of the Company.

         2.5 "Change in Control" shall mean any of the following: (i) any
consolidation, merger or share exchange of the Company in which the holders of a
majority of the Company's outstanding voting power prior to such transaction do
not own at least a majority of the outstanding voting power of the Company or
any successor thereto following such transaction; (ii) any sale, lease, exchange
or other transfer (excluding transfer by way of pledge or hypothecation) in one
transaction or a series of related transactions, of all or substantially all of
the assets of the Company; (iii) the stockholders of the Company approve any
plan or proposal for the

<PAGE>

liquidation or dissolution of the Company; (iv) the cessation of control (by
virtue of their not constituting a majority of directors) of the Board by the
individuals (the "Continuing Directors") who (x) at the date of this Plan were
directors or (y) become directors after the date of this Plan and whose election
or nomination for election by the Company's stockholders was approved by a vote
of at least two-thirds of the directors then in office who were directors at the
date of this Plan or whose election or nomination for election was previously so
approved; (v) the acquisition of beneficial ownership (within the meaning of
Rule 13d-3 under the 1934 Act) of an aggregate of 50% or more of the voting
power of the Company's outstanding voting securities by any person or group (as
such term is used in Rule 13d-5 under the 1934 Act) who beneficially owned less
than 50% of the voting power of the Company's outstanding voting securities on
the date of this Plan; provided, however, that notwithstanding the foregoing, an
acquisition shall not constitute a Change in Control hereunder if the acquiror
is (x) a trustee or other fiduciary holding securities under an employee benefit
plan of the Company and acting in such capacity, or (y) a Subsidiary of the
Company or a corporation owned, directly or indirectly, by the stockholders of
the Company in substantially the same proportions as their ownership of voting
securities of the Company; or (vi) in a Title 11 bankruptcy proceeding, the
appointment of a trustee or the conversion of a case involving the Company to a
case under Chapter 7.

         2.6 "Code" means the Internal Revenue Code of 1986, as amended.

         2.7 "Committee" means the committee appointed or designated by the
Board to administer the Plan in accordance with Article 3 of this Plan.

         2.8 "Common Stock" means the common stock, par value $0.01 per share,
which the Company is currently authorized to issue or may in the future be
authorized to issue, or any securities into which or for which the common stock
of the Company may be converted or exchanged, as the case may be, pursuant to
the terms of this Plan.

         2.9 "Company" means Liberte Investors Inc., a Delaware corporation, and
any successor entity.

         2.10 "Consultant" means any person performing advisory or consulting
services for the Company or a Subsidiary, with or without compensation, to whom
the Company chooses to grant an Award in accordance with the Plan, provided that
bona fide services must be rendered by such person and such services shall not
be rendered in connection with the offer or sale of securities in a capital
raising transaction.

         2.11 "Corporation" means any entity that (i) is defined as a
corporation under Code Section 7701 and (ii) is the Company or is in an unbroken
chain of corporations (other than the Company) beginning with the Company, if
each of the corporations other than the last corporation in the unbroken chain
owns stock possessing a majority of the total combined voting power of all
classes of stock in one of the other corporations in the chain. For purposes of
clause (ii) hereof, an entity shall be treated as a "corporation" if it
satisfies the definition of a corporation under Section 7701 of the Code.

         2.12 "Date of Grant" means the effective date on which an Award is made
to a Participant as set forth in the applicable Award Agreement.

         2.13 "Employee" means common law employee (as defined in accordance
with the Regulations and Revenue Rulings then applicable under Section 3401(c)
of the Code) of the Company or any Subsidiary of the Company.

         2.14 "Fair Market Value" means, as of a particular date, (a) if the
shares of Common Stock are listed on a national securities exchange, the closing
sales price per share of Common Stock on the consolidated transaction reporting
system for the principal securities exchange for the Common Stock on that date,
or, if

                                       2
<PAGE>

there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (b) if the shares of Common
Stock are not so listed but are quoted on the Nasdaq National Market System, the
closing sales price per share of Common Stock on the Nasdaq National Market
System on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported, (c)
if the Common Stock is not so listed or quoted, the mean between the closing bid
and asked price on that date, or, if there are no quotations available for such
date, on the last preceding date on which such quotations shall be available, as
reported by Nasdaq, or, if not reported by Nasdaq, by the National Quotation
Bureau, Inc., or (d) if none of the above is applicable, such amount as may be
determined by the Committee (acting on the advice of an Independent Third Party,
should the Committee elect in its sole discretion to utilize an Independent
Third Party for this purpose), in good faith, to be the fair market value per
share of Common Stock.

         "Independent Third Party" means an individual or entity independent of
the Company having experience in providing investment banking or similar
appraisal or valuation services and with expertise generally in the valuation of
securities or other property for purposes of this Plan. The Board Committee may
utilize one or more Independent Third Parties.

         2.15 "Incentive Stock Option" means an incentive stock option within
the meaning of Section 422 of the Code, granted pursuant to this Plan.

         2.16 "Nonpublicly Traded" means not listed on a national securities
exchange registered with the Securities and Exchange Commission or designated
for trading on the Nasdaq National Market.

         2.17 "Nonqualified Stock Option" means a nonqualified stock option,
granted pursuant to this Plan, to which Section 421 of the Code does not apply.

         2.18 "Option Price" means the price that must be paid by a Participant
upon exercise of a Stock Option to purchase a share of Common Stock.

         2.19 "Outside Director" means a director of the Company who is not an
Employee.

         2.20 "Participant" means an Employee, Consultant, or Outside Director
of the Company or a Subsidiary to whom an Award is granted under this Plan.

         2.21 "Plan" means this Liberte Investors Inc. 2002 Long Term Incentive
Plan, as amended from time to time.

         2.22 "Reporting Participant" means a Participant who is subject to the
reporting requirements of Section 16 of the 1934 Act.

         2.23 "Restricted Stock" means shares of Common Stock issued or
transferred to a Participant pursuant to Section 6.5 of this Plan which are
subject to restrictions or limitations set forth in this Plan and in the related
Award Agreement.

         2.24 "Retirement" means any Termination of Service solely due to
retirement upon or after attainment of age sixty-five (65), or permitted early
retirement as determined by the Committee.

         2.25 "SAR" or "stock appreciation right" means the right to receive a
payment, in cash and/or Common Stock, equal to the excess of the Fair Market
Value of a specified number of shares of Common Stock on the date the SAR is
exercised over the SAR Price for such shares.

                                       3
<PAGE>

         2.26 "SAR Price" means the exercise price of each share of Common Stock
covered by a SAR, determined on the Date of Grant of the SAR.

         2.27 "Stock Option" means a Nonqualified Stock Option or an Incentive
Stock Option.

         2.28 "Subsidiary" means (i) any corporation in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than
the last corporation in the unbroken chain owns stock possessing a majority of
the total combined voting power of all classes of stock in one of the other
corporations in the chain, (ii) any limited partnership, if the Company or any
corporation described in item (i) above owns a majority of the general
partnership interest and a majority of the limited partnership interests
entitled to vote on the removal and replacement of the general partner, and
(iii) any partnership or limited liability company, if the partners or members
thereof are composed only of the Company, any corporation listed in item (i)
above or any limited partnership listed in item (ii) above. "Subsidiaries" means
more than one of any such corporations, limited partnerships, partnerships or
limited liability companies.

         2.29 "Termination of Service" occurs when a Participant who is an
Employee or a Consultant of the Company or any Subsidiary shall cease to serve
as an Employee or Consultant of the Company and its Subsidiaries, for any
reason; or, when a Participant who is an Outside Director of the Company or a
Subsidiary shall cease to serve as a director of the Company and its
Subsidiaries for any reason. Except as may be necessary or desirable to comply
with applicable federal or state law, a "Termination of Service" shall not be
deemed to have occurred when a Participant who is an Employee becomes a
Consultant or an Outside Director or vice versa. If, however, a Participant who
is an Employee and who has an Incentive Stock Option ceases to be an Employee
but does not suffer a Termination of Service, and if that Participant does not
exercise the Incentive Stock Option within the time required under Code section
422 upon ceasing to be an Employee, the Incentive Stock Option shall thereafter
become a Nonqualified Stock Option.

         2.30 "Total and Permanent Disability" means a Participant is qualified
for long-term disability benefits under the Company's or Subsidiary's disability
plan or insurance policy; or, if no such plan or policy is then in existence or
if the Participant is not eligible to participate in such plan or policy, that
the Participant is incapacitated and absent from his or her duties with the
Company or any Subsidiary on a full time basis for a period of six (6)
continuous months or for at least one hundred eighty (180) days during any
twelve (12) -month period as a result of mental or physical illness or physical
injury, as determined in good faith by the Committee; provided that, with
respect to any Incentive Stock Option, Total and Permanent Disability shall have
the meaning given it under the rules governing Incentive Stock Options under the
Code.

                                    ARTICLE 3
                                 ADMINISTRATION

         3.1 GENERAL ADMINISTRATION; ESTABLISHMENT OF COMMITTEE. Subject to the
terms of this Article 3, the Plan shall be administered by the Board or such
committee of the Board as is designated by the Board to administer the Plan (the
"Committee"). The Committee shall consist of not fewer than two persons. Any
member of the Committee may be removed at any time, with or without cause, by
resolution of the Board. Any vacancy occurring in the membership of the
Committee may be filled by appointment by the Board. At any time there is no
Committee to administer the Plan, any references in this Plan to the Committee
shall be deemed to refer to the Board.

         Membership on the Committee shall be limited to those members of the
Board who are "outside directors" under Section 162(m) of the Code and
"non-employee directors" as defined in Rule 16b-3

                                       4
<PAGE>

promulgated under the 1934 Act. The Committee shall select one of its members to
act as its Chairman. A majority of the Committee shall constitute a quorum, and
the act of a majority of the members of the Committee present at a meeting at
which a quorum is present shall be the act of the Committee.

         3.2 DESIGNATION OF PARTICIPANTS AND AWARDS.

         (a) The Committee or the Board shall determine and designate from time
to time the eligible persons to whom Awards will be granted and shall set forth
in each related Award Agreement, where applicable, the Award Period, the Date of
Grant, and such other terms, provisions, limitations, and performance
requirements, as are approved by the Committee, but not inconsistent with the
Plan. The Committee shall determine whether an Award shall include one type of
Incentive or two or more Incentives granted in combination or two or more
Incentives granted in tandem (that is, a joint grant where exercise of one
Incentive results in cancellation of all or a portion of the other Incentive).
Although the members of the Committee shall be eligible to receive Awards, no
member of the Committee shall participate in any decisions regarding any Award
granted hereunder to such member. All decisions with respect to any Award, and
the terms and conditions thereof, to be granted under the Plan to any member of
the Committee shall be made solely and exclusively by the other members of the
Committee, or if such member is the only member of the Committee, by the Board.

         In addition, the Chief Executive Officer of the Company may recommend
to the Board or the Committee (i) that Awards be granted to one or more
Employees, Officers, Consultants, or Outside Directors, (ii) the number of
shares of Common Stock to be subject to such Awards, and (iii) the price to be
paid for such Awards and such other terms that the Chief Executive Officer deems
appropriate with respect to such Awards; in such case, the Chief Executive
Officer's recommendations shall not be binding on the Board and the Board may,
in its sole discretion, accept or deny the Chief Executive Officer's
recommendations.

         (b) Notwithstanding Subsection 3.2(a), the Board may, in its discretion
and by a resolution adopted by the Board, authorize one or more officers of the
Company (an "Authorized Officer") to (i) designate one or more Employees as
eligible persons to whom Awards will be granted under the Plan and (ii)
determine the number of shares of Common Stock that will be subject to such
Awards; provided, however, that the resolution of the Board granting such
authority shall (x) specify the total number of shares of Common Stock that may
be made subject to the Awards, (y) set forth the price or prices (or a formula
by which such price or prices may be determined) to be paid for the purchase of
the Common Stock subject to such Awards, and (z) not authorize an officer to
designate himself as a recipient of any Award. The Authorized Officer shall
notify the Committee in writing of the persons designated to receive such
Awards, the type of Award or the type of Incentives subject to the Award, the
Date of Grant, the number of shares of Common Stock that will be subject to such
Awards, and the purchase price to be paid for such shares. If authorized to do
so in the Board's written resolution, the Authorized Officer shall cause the
Company to execute an Award Agreement with the Participant, subject to the
Committee's ratification of such terms of an Award as required by law.

         Within an administratively reasonable time after receipt of the
Authorized Officer's written notice of one or more Awards, the Committee shall
authorize or ratify the grant of such Awards and shall prescribe all other terms
of such Awards pursuant to its authority set forth in Subsection 3(a).

         3.3 AUTHORITY OF THE COMMITTEE. The Committee, in its discretion, shall
(i) interpret the Plan, (ii) prescribe, amend, and rescind any rules and
regulations necessary or appropriate for the administration of the Plan, (iii)
establish performance goals for an Award and certify the extent of their
achievement, and (iv) make such other determinations or certifications and take
such other action as it deems necessary or advisable in the administration of
the Plan. Any interpretation, determination, or other action made or taken by
the Committee shall be final, binding, and conclusive on all interested parties.
The Committee's discretion set

                                       5
<PAGE>

forth herein shall not be limited by any provision of the Plan, including any
provision which by its terms is applicable notwithstanding any other provision
of the Plan to the contrary.

         The Committee may delegate to officers of the Company, pursuant to a
written delegation, the authority to perform specified functions under the Plan.
Any actions taken by any officers of the Company pursuant to such written
delegation of authority shall be deemed to have been taken by the Committee.

         With respect to restrictions in the Plan that are based on the
requirements of Rule 16b-3 promulgated under the 1934 Act, Section 422 of the
Code, Section 162(m) of the Code, the rules of any exchange or inter-dealer
quotation system upon which the Company's securities are listed or quoted, or
any other applicable law, rule or restriction (collectively, "applicable law"),
to the extent that any such restrictions are no longer required by applicable
law, the Committee shall have the sole discretion and authority to grant Awards
that are not subject to such mandated restrictions and/or to waive any such
mandated restrictions with respect to outstanding Awards.

                                    ARTICLE 4
                                   ELIGIBILITY

         Any Employee (including an Employee who is also a director or an
officer), Outside Director, or Consultant of the Company whose judgment,
initiative, and efforts contributed or may be expected to contribute to the
successful performance of the Company is eligible to participate in the Plan;
provided that only Employees of a Corporation shall be eligible to receive
Incentive Stock Options. The Committee, upon its own action, may grant, but
shall not be required to grant, an Award to any Employee, Outside Director, or
Consultant of the Company or any Subsidiary. Awards may be granted by the
Committee at any time and from time to time to new Participants, or to then
Participants, or to a greater or lesser number of Participants, and may include
or exclude previous Participants, as the Committee shall determine. Except as
required by this Plan, Awards granted at different times need not contain
similar provisions. The Committee's determinations under the Plan (including
without limitation determinations of which Employees, Outside Directors, or
Consultants, if any, are to receive Awards, the form, amount and timing of such
Awards, the terms and provisions of such Awards and the agreements evidencing
same) need not be uniform and may be made by it selectively among Participants
who receive, or are eligible to receive, Awards under the Plan.

                                    ARTICLE 5
                             SHARES SUBJECT TO PLAN

         5.1 NUMBER AVAILABLE FOR AWARDS. Subject to adjustment as provided in
Articles 11 and 12, the maximum number of shares of Common Stock that may be
delivered pursuant to Awards granted under the Plan is 6,000,000 shares. Shares
to be issued may be made available from authorized but unissued Common Stock,
Common Stock held by the Company in its treasury, or Common Stock purchased by
the Company on the open market or otherwise. During the term of this Plan, the
Company will at all times reserve and keep available the number of shares of
Common Stock that shall be sufficient to satisfy the requirements of this Plan.

         5.2 REUSE OF SHARES. Subject to Section 5.2(c), if, and to the extent:

                  (a) A Stock Option shall expire or terminate for any reason
         without having been exercised in full, or in the event that a Stock
         Option is exercised or settled in a manner such that some or all of the
         shares of Common Stock relating to the Stock Option are not issued to
         the Participant (or

                                       6
<PAGE>

         beneficiary) (including as the result of the use of shares for
         withholding taxes), the shares of Common Stock subject thereto which
         have not become outstanding shall (unless the Plan shall have sooner
         terminated) become available for issuance under the Plan; in addition,
         with respect to any share-for-share exercise or cashless exercise
         pursuant to Section 8.3 or otherwise, only the "net" shares issued
         shall be deemed to have become outstanding for purposes of the Plan as
         a result thereof.

                  (b) If shares of Restricted Stock under the Plan are forfeited
         for any reason, such shares of Restricted Stock shall (unless the Plan
         shall have sooner terminated) become available for issuance under the
         Plan; provided, however, that if any dividends paid with respect to
         shares of Restricted Stock were paid to the Participant prior to the
         forfeiture thereof, such shares shall not be reused for grants or
         awards.

                  (c) In no event shall the number of shares of Common Stock
         subject to Incentive Stock Options exceed, in the aggregate, 6,000,000
         shares of Common Stock plus shares subject to Incentive Stock Options
         which are forfeited or terminated, or expire unexercised.

                                    ARTICLE 6
                                 GRANT OF AWARDS

         6.1 IN GENERAL. The Company shall execute an Award Agreement with a
Participant after the Committee approves the issuance of an Award. Any Award
granted pursuant to this Plan must be granted within ten (10) years after the
date of adoption of this Plan. The Plan shall be submitted to the Company's
stockholders for approval; however, the Committee may grant Awards under the
Plan prior to the time of stockholder approval. Any Incentive Stock Option,
other Stock Option which the Committee determines may be subject to Code Section
162(m), or Stock Option which requires approval of this Plan by stockholders
under any applicable stock exchange rules which is granted prior to such
stockholder approval shall be made subject to such stockholder approval. The
grant of an Award to a Participant shall not be deemed either to entitle the
Participant to, or to disqualify the Participant from, receipt of any other
Award under the Plan.

         6.2 STOCK OPTIONS. The grant of an Award of Stock Options shall be
authorized by the Committee and shall be evidenced by an Award Agreement setting
forth: (i) the Incentive or Incentives being granted, (ii) the total number of
shares of Common Stock subject to the Incentive(s), (iii) the Option Price, (iv)
the Award Period, (v) the Date of Grant, and (vi) such other terms, provisions,
limitations, and performance objectives, as are approved by the Committee, but
not inconsistent with the Plan.

         6.3 OPTION PRICE. The Option Price for any share of Common Stock which
may be purchased under a Nonqualified Stock Option for any share of Common Stock
may be less than, equal to, or greater than the Fair Market Value of the share
on the Date of Grant. The Option Price for any share of Common Stock which may
be purchased under an Incentive Stock Option must be at least equal to the Fair
Market Value of the share on the Date of Grant; if an Incentive Stock Option is
granted to an Employee who owns or is deemed to own (by reason of the
attribution rules of Section 424(d) of the Code) more than ten percent (10%) of
the combined voting power of all classes of stock of the Company (or any parent
or Subsidiary), the Option Price shall be at least 110% of the Fair Market Value
of the Common Stock on the Date of Grant.

         6.4 MAXIMUM ISO GRANTS. The Committee may not grant Incentive Stock
Options under the Plan to any Employee which would permit the aggregate Fair
Market Value (determined on the Date of Grant) of the Common Stock with respect
to which Incentive Stock Options (under this and any other plan of the Company
and its Subsidiaries) are exercisable for the first time by such Employee during
any calendar year to exceed $100,000. To the extent any Stock Option granted
under this Plan which is designated as an

                                       7
<PAGE>

Incentive Stock Option exceeds this limit or otherwise fails to qualify as an
Incentive Stock Option, such Stock Option (or any such portion thereof) shall be
a Nonqualified Stock Option. In such case, the Committee shall designate which
stock will be treated as Incentive Stock Option stock by causing the issuance of
a separate stock certificate and identifying such stock as Incentive Stock
Option stock on the Company's stock transfer records.

         6.5 RESTRICTED STOCK. If Restricted Stock is granted to or received by
a Participant under an Award (including a Stock Option), the Committee shall set
forth in the related Award Agreement: (i) the number of shares of Common Stock
awarded, (ii) the price, if any, to be paid by the Participant for such
Restricted Stock and the method of payment of the price, (iii) the time or times
within which such Award may be subject to forfeiture, (iv) specified performance
goals of the Company, a Subsidiary, any division thereof or any group of
Employees of the Company, or other criteria, which the Committee determines must
be met in order to remove any restrictions (including vesting) on such Award,
and (v) all other terms, limitations, restrictions, and conditions of the
Restricted Stock, which shall be consistent with this Plan. The provisions of
Restricted Stock need not be the same with respect to each Participant. If the
Committee establishes a purchase price for an Award of Restricted Stock, the
Participant must accept such Award within a period of thirty (30) days (or such
shorter period as the Committee may specify) after the Date of Grant by
executing the applicable Award Agreement and paying such purchase price.

                  (a) LEGEND ON SHARES. Each Participant who is awarded or
         receives Restricted Stock shall be issued a stock certificate or
         certificates in respect of such shares of Common Stock. Such
         certificate(s) shall be registered in the name of the Participant, and
         shall bear an appropriate legend referring to the terms, conditions,
         and restrictions applicable to such Restricted Stock, substantially as
         provided in Section 15.11 of the Plan.

                  (b) RESTRICTIONS AND CONDITIONS. Shares of Restricted Stock
         shall be subject to the following restrictions and conditions:

                           (i) Subject to the other provisions of this Plan and
                  the terms of the particular Award Agreements, during such
                  period as may be determined by the Committee commencing on the
                  Date of Grant or the date of exercise of an Award (the
                  "Restriction Period"), the Participant shall not be permitted
                  to sell, transfer, pledge or assign shares of Restricted
                  Stock. Except for these limitations, the Committee may in its
                  sole discretion, remove any or all of the restrictions on such
                  Restricted Stock whenever it may determine that, by reason of
                  changes in applicable laws or other changes in circumstances
                  arising after the date of the Award, such action is
                  appropriate.

                           (ii) Except as provided in sub-paragraph (i) above or
                  in the applicable Award Agreement, the Participant shall have,
                  with respect to his or her Restricted Stock, all of the rights
                  of a stockholder of the Company, including the right to vote
                  the shares, and the right to receive any dividends thereon.
                  Certificates for shares of Common Stock free of restriction
                  under this Plan shall be delivered to the Participant promptly
                  after, and only after, the Restriction Period shall expire
                  without forfeiture in respect of such shares of Common Stock
                  or after any other restrictions imposed in such shares of
                  Common Stock by the applicable Award Agreement or other
                  agreement have expired. Certificates for the shares of Common
                  Stock forfeited under the provisions of the Plan and the
                  applicable Award Agreement shall be promptly returned to the
                  Company by the forfeiting Participant. Each Award Agreement
                  for shares of Common Stock subject to restrictions shall
                  require that: (x) each Participant, by his or her acceptance
                  of Restricted Stock, shall irrevocably grant to the Company a
                  power of attorney to transfer any shares so forfeited to the
                  Company and agrees to execute any

                                       8
<PAGE>

                  documents requested by the Company in connection with such
                  forfeiture and transfer, and (y) such provisions regarding
                  returns and transfers of stock certificates with respect to
                  forfeited shares of Common Stock shall be specifically
                  performable by the Company in a court of equity or law.

                           (iii) The Restriction Period of Restricted Stock
                  shall commence on the Date of Grant or the date of exercise of
                  an Award, as specified in the Award Agreement, and, subject to
                  Article 12 of the Plan, unless otherwise established by the
                  Committee in the Award Agreement setting forth the terms of
                  the Restricted Stock, shall expire upon satisfaction of the
                  conditions set forth in the Award Agreement; such conditions
                  may provide for vesting based on (i) length of continuous
                  service, (ii) achievement of specific business objectives,
                  (iii) increases in specified indices, (iv) attainment of
                  specified growth rates, or (v) other comparable measurements
                  of Company performance, as may be determined by the Committee
                  in its sole discretion.

                           (iv) Except as otherwise provided in the particular
                  Award Agreement, upon Termination of Service for any reason
                  during the Restriction Period, the nonvested shares of
                  Restricted Stock shall be forfeited by the Participant. In the
                  event a Participant has paid any consideration to the Company
                  for such forfeited Restricted Stock, the Committee shall
                  specify in the Award Agreement that either (i) the Company
                  shall be obligated to, or (ii) the Company may, in its sole
                  discretion, elect to, pay to the Participant, as soon as
                  practicable after the event causing forfeiture, in cash, an
                  amount equal to the lesser of the total consideration paid by
                  the Participant for such forfeited shares or the Fair Market
                  Value of such forfeited shares as of the date of Termination
                  of Service, as the Committee, in its sole discretion shall
                  select. Upon any forfeiture, all rights of a Participant with
                  respect to the forfeited shares of the Restricted Stock shall
                  cease and terminate, without any further obligation on the
                  part of the Company.

         6.6 MAXIMUM INDIVIDUAL GRANTS. No Participant may receive during any
fiscal year of the Company Awards covering an aggregate of more than 3,000,000
shares of Common Stock.

         6.7 SAR. An SAR shall entitle the Participant at his election to
surrender to the Company the SAR, or portion thereof, as the Participant shall
choose, and to receive from the Company in exchange therefor cash in an amount
equal to the excess (if any) of the Fair Market Value (as of the date of the
exercise of the SAR) per share over the SAR Price per share specified in such
SAR, multiplied by the total number of shares of the SAR being surrendered. In
the discretion of the Committee, the Company may satisfy its obligation upon
exercise of a SAR by the distribution of that number of shares of Common Stock
having an aggregate Fair Market Value (as of the date of the exercise of the
SAR) equal to the amount of cash otherwise payable to the Participant, with a
cash settlement to be made for any fractional share interests, or the Company
may settle such obligation in part with shares of Common Stock and in part with
cash.

         6.8 TANDEM AWARDS. The Committee may grant two or more Incentives in
one Award in the form of a "tandem Award," so that the right of the Participant
to exercise one Incentive shall be canceled if, and to the extent, the other
Incentive is exercised. For example, if a Stock Option and an SAR are issued in
a tandem Award, and the Participant exercises the SAR with respect to 100 shares
of Common Stock, the right of the Participant to exercise the related Stock
Option shall be canceled to the extent of 100 shares of Common Stock.

         6.9 SAR PRICE. The SAR Price for any share of Common Stock subject to a
SAR may be less than, equal to, or greater than the Fair Market Value of the
share on the Date of Grant.

                                       9
<PAGE>

                                    ARTICLE 7
                              AWARD PERIOD; VESTING

         7.1 AWARD PERIOD.

                  (a) Subject to the other provisions of this Plan, the
         Committee shall specify in the Award Agreement the Award Period for a
         Stock Option. No Stock Option granted under the Plan may be exercised
         at any time after the end of its Award Period. The Award Period for any
         Stock Option shall be no more than ten (10) years from the Date of
         Grant of the Stock Option. However, if an Employee owns or is deemed to
         own (by reason of the attribution rules of Section 424(d) of the Code)
         more than ten percent (10%) of the combined voting power of all classes
         of stock of the Company (or any parent or Subsidiary) and an Incentive
         Stock Option is granted to such Employee, the Award Period of such
         Incentive Stock Option (to the extent required by the Code at the time
         of grant) shall be no more than five (5) years from the Date of Grant.

                  (b) In the event of a Termination of Service of a Participant,
         the Award Period for a Stock Option shall be reduced or terminated in
         accordance with the Award Agreement.

         7.2 VESTING. The Committee, in its sole discretion, may determine that
an Incentive will be immediately vested in whole or in part, or that all or any
portion may not be vested until a date, or dates, subsequent to its Date of
Grant, or until the occurrence of one or more specified events, subject in any
case to the terms of the Plan. If the Committee imposes conditions upon vesting,
then, subsequent to the Date of Grant, the Committee may, in its sole
discretion, accelerate the date on which all or any portion of the Incentive may
be vested.

                                    ARTICLE 8
                              EXERCISE OF INCENTIVE

         8.1 IN GENERAL. The Committee, in its sole discretion, may determine
that a Stock Option will be immediately exercisable, in whole or in part, or
that all or any portion may not be exercised until a date, or dates, subsequent
to its Date of Grant, or until the occurrence of one or more specified events,
subject in any case to the terms of the Plan. If a Stock Option is exercisable
prior to the time it is vested, the Common Stock obtained on the exercise of the
Stock Option shall be Restricted Stock which is subject to the applicable
provisions of the Plan and the Award Agreement. If the Committee imposes
conditions upon exercise, then subsequent to the Date of Grant, the Committee
may, in its sole discretion, accelerate the date on which all or any portion of
the Stock Option may be exercised. No Stock Option may be exercised for a
fractional share of Common Stock. The granting of a Stock Option shall impose no
obligation upon the Participant to exercise that Stock Option.

         8.2 SECURITIES LAW AND EXCHANGE RESTRICTIONS. In no event may an
Incentive be exercised or shares of Common Stock be issued pursuant to an Award
if a necessary listing or quotation of the shares of Common Stock on a stock
exchange or inter-dealer quotation system or any registration under state or
federal securities laws required under the circumstances has not been
accomplished.

         8.3 EXERCISE OF STOCK OPTION.

                  (a) NOTICE AND PAYMENT. Subject to such administrative
         regulations as the Committee may from time to time adopt, a Stock
         Option may be exercised by the delivery of written notice to the
         Committee setting forth the number of shares of Common Stock with
         respect to which the Stock

                                       10
<PAGE>

         Option is to be exercised and the date of exercise thereof (the
         "Exercise Date") which shall be at least three (3) days after giving
         such notice unless an earlier time shall have been mutually agreed
         upon. On the Exercise Date, the Participant shall deliver to the
         Company consideration with a value equal to the total Option Price of
         the shares to be purchased, payable as provided in the Award Agreement,
         which may provide for payment in any one or more of the following ways:
         (a) cash or check, bank draft, or money order payable to the order of
         the Company, (b) Common Stock (including Restricted Stock) owned by the
         Participant on the Exercise Date, valued at its Fair Market Value on
         the Exercise Date, and which the Participant has not acquired from the
         Company within six (6) months prior to the Exercise Date, (c) if the
         Common Stock is no longer Nonpublicly Traded, by delivery (including by
         FAX) to the Company or its designated agent of an executed irrevocable
         option exercise form together with irrevocable instructions from the
         Participant to a broker or dealer, reasonably acceptable to the
         Company, to sell certain of the shares of Common Stock purchased upon
         exercise of the Stock Option or to pledge such shares as collateral for
         a loan and promptly deliver to the Company the amount of sale or loan
         proceeds necessary to pay such purchase price, and/or (d) in any other
         form of valid consideration that is acceptable to the Committee in its
         sole discretion. In the event that shares of Restricted Stock are
         tendered as consideration for the exercise of a Stock Option, a number
         of shares of Common Stock issued upon the exercise of the Stock Option
         with an Option Price equal to the value of Restricted Stock used as
         consideration therefor shall be subject to the same restrictions and
         provisions as the Restricted Stock so tendered.

                  (b) ISSUANCE OF CERTIFICATE. Except as otherwise provided in
         Section 6.5 hereof (with respect to shares of Restricted Stock) or in
         the applicable Award Agreement, upon payment of all amounts due from
         the Participant, the Company shall cause certificates for the Common
         Stock then being purchased to be delivered as directed by the
         Participant (or the person exercising the Participant's Stock Option in
         the event of his death) at its principal business office promptly after
         the Exercise Date; provided that if the Participant has exercised an
         Incentive Stock Option, the Company may at its option retain physical
         possession of the certificate evidencing the shares acquired upon
         exercise until the expiration of the holding periods described in
         Section 422(a)(1) of the Code. The obligation of the Company to deliver
         shares of Common Stock shall, however, be subject to the condition
         that, if at any time the Committee shall determine in its discretion
         that the listing, registration, or qualification of the Stock Option or
         the Common Stock upon any securities exchange or inter-dealer quotation
         system or under any state or federal law, or the consent or approval of
         any governmental regulatory body, is necessary as a condition of, or in
         connection with, the Stock Option or the issuance or purchase of shares
         of Common Stock thereunder, the Stock Option may not be exercised in
         whole or in part unless such listing, registration, qualification,
         consent, or approval shall have been effected or obtained free of any
         conditions not reasonably acceptable to the Committee.

                  (c) FAILURE TO PAY. Except as may be otherwise provided in an
         Award Agreement, if the Participant fails to pay for any of the Common
         Stock specified in such notice or fails to accept delivery thereof,
         that portion of the Participant's Stock Option and right to purchase
         such Common Stock may be forfeited by the Company.

         8.4 SARS. Subject to the conditions of this Section 8.4 and such
administrative regulations as the Committee may from time to time adopt, a SAR
may be exercised by the delivery (including by FAX) of written notice to the
Committee setting forth the number of shares of Common Stock with respect to
which the SAR is to be exercised and the date of exercise thereof (the "Exercise
Date") which shall be at least three (3) days after giving such notice unless an
earlier time shall have been mutually agreed upon. On the Exercise Date, the
Participant shall receive from the Company in exchange therefor cash in an
amount equal to the excess (if any) of the Fair Market Value (as of the date of
the exercise of the SAR) per share of Common Stock over the SAR Price per share
specified in such SAR, multiplied by the total number of shares of Common

                                       11
<PAGE>

Stock of the SAR being surrendered. In the discretion of the Committee, the
Company may satisfy its obligation upon exercise of a SAR by the distribution of
that number of shares of Common Stock having an aggregate Fair Market Value (as
of the date of the exercise of the SAR) equal to the amount of cash otherwise
payable to the Participant, with a cash settlement to be made for any fractional
share interests, or the Company may settle such obligation in part with shares
of Common Stock and in part with cash.

         8.5 DISQUALIFYING DISPOSITION OF INCENTIVE STOCK OPTION. If shares of
Common Stock acquired upon exercise of an Incentive Stock Option are disposed of
by a Participant prior to the expiration of either two (2) years from the Date
of Grant of such Stock Option or one (1) year from the transfer of shares of
Common Stock to the Participant pursuant to the exercise of such Stock Option,
or in any other disqualifying disposition within the meaning of Section 422 of
the Code, such Participant shall notify the Company in writing of the date and
terms of such disposition. A disqualifying disposition by a Participant shall
not affect the status of any other Stock Option granted under the Plan as an
Incentive Stock Option within the meaning of Section 422 of the Code.

                                    ARTICLE 9
                           AMENDMENT OR DISCONTINUANCE

         Subject to the limitations set forth in this Article 9, the Board may
at any time and from time to time, without the consent of the Participants,
alter, amend, revise, suspend, or discontinue the Plan in whole or in part;
provided, however, that no amendment which requires stockholder approval in
order for the Plan and Incentives awarded under the Plan to continue to comply
with Sections 162(m), 421, and 422 of the Code, including any successors to such
Sections, shall be effective unless such amendment shall be approved by the
requisite vote of the stockholders of the Company entitled to vote thereon.
Except as otherwise provided in any existing Award Agreement, any such amendment
shall, to the extent deemed necessary or advisable by the Committee, be
applicable to any outstanding Incentives theretofore granted under the Plan.
Except as otherwise provided in any Award Agreement, in the event of any such
amendment to the Plan, the holder of any Incentive outstanding under the Plan
shall, upon request of the Committee and as a condition to the exercisability
thereof, execute a conforming amendment in the form prescribed by the Committee
to any Award Agreement relating thereto. Notwithstanding anything contained in
this Plan to the contrary, unless required by law, no action contemplated or
permitted by this Article 9 shall adversely affect any rights of Participants or
obligations of the Company to Participants with respect to any Incentive
theretofore granted under the Plan without the consent of the affected
Participant.

                                   ARTICLE 10
                                      TERM

         The Plan shall be effective from the date that this Plan is approved by
the Board. Unless sooner terminated by action of the Board, the Plan will
terminate on the date that is ten years after the date this Plan is adopted by
the Board, but Incentives granted before that date will continue to be effective
in accordance with their terms and conditions.

                                   ARTICLE 11
                               CAPITAL ADJUSTMENTS

         In the event that the Committee shall determine that any dividend or
other distribution (whether in the form of cash, Common Stock, other securities,
or other property), recapitalization, stock split, reverse stock

                                       12
<PAGE>

split, rights offering, reorganization, merger, consolidation, split-up,
spin-off, split-off, combination, subdivision, repurchase, or exchange of Common
Stock or other securities of the Company, issuance of warrants or other rights
to purchase Common Stock or other securities of the Company, or other similar
corporate transaction or event affects the Common Stock such that an adjustment
is determined by the Committee to be appropriate to prevent the dilution or
enlargement of the benefits or potential benefits intended to be made available
under the Plan, then the Committee shall, in such manner as it may deem
equitable, adjust any or all of the (i) the number of shares and type of Common
Stock (or the securities or property) which thereafter may be made the subject
of Awards, (ii) the number of shares and type of Common Stock (or other
securities or property) subject to outstanding Awards, (iii) the number of
shares and type of Common Stock (or other securities or property) specified as
the annual per-participant limitation under Section 6.6 of the Plan, (iv) the
Option Price of each outstanding Award, (v) the amount, if any, the Company pays
for forfeited shares of Common Stock in accordance with Section 6.5, and (vi)
the number of or SAR Price of shares of Common Stock then subject to outstanding
SARs previously granted and unexercised under the Plan to the end that the same
proportion of the Company's issued and outstanding shares of Common Stock in
each instance shall remain subject to exercise at the same aggregate SAR Price;
provided however, that the number of shares of Common Stock (or other securities
or property) subject to any Award shall always be a whole number. In lieu of the
foregoing, if deemed appropriate, the Committee may make provision for a cash
payment to the holder of an outstanding Award, except as may otherwise be
provided in an applicable Award Agreement. Notwithstanding the foregoing, no
such adjustment or cash payment shall be made or authorized to the extent that
such adjustment or cash payment would cause the Plan or any Stock Option to
violate Code Section 422. Such adjustments shall be made in accordance with the
rules of any securities exchange, stock market, or stock quotation system to
which the Company is subject. No adjustment or cash payment will be required
under this Article 11 for the issuance of Common Stock for such consideration,
not less than the par value of the Common Stock, as may be determined from time
to time by the Board to be fair consideration.

         Upon the occurrence of any such adjustment or cash payment, the Company
shall provide notice to each affected Participant of its computation of such
adjustment or cash payment which shall be conclusive and shall be binding upon
each such Participant.

                                   ARTICLE 12
                   RECAPITALIZATION, MERGER AND CONSOLIDATION

         12.1 NO EFFECT ON COMPANY'S AUTHORITY. The existence of this Plan and
Incentives granted hereunder shall not affect in any way the right or power of
the Company or its stockholders to make or authorize any or all adjustments,
recapitalizations, reorganizations, or other changes in the Company's capital
structure and its business, or any merger or consolidation of the Company, or
any issuance of bonds, debentures, preferred or preference stocks ranking prior
to or otherwise affecting the Common Stock or the rights thereof (or any rights,
options, or warrants to purchase same), or the dissolution or liquidation of the
Company, or any sale or transfer of all or any part of its assets or business,
or any other corporate act or proceeding, whether of a similar character or
otherwise.

         12.2 CONVERSION OF INCENTIVES WHERE COMPANY SURVIVES. Subject to any
required action by the stockholders, if the Company shall be the surviving or
resulting corporation in any merger, consolidation or share exchange, any
Incentive granted hereunder shall pertain to and apply to the securities or
rights (including cash, property, or assets) to which a holder of the number of
shares of Common Stock subject to the Incentive would have been entitled.

         12.3 EXCHANGE OR CANCELLATION OF INCENTIVES WHERE COMPANY DOES NOT
SURVIVE. In the event of any merger, consolidation or share exchange which is a
Change of Control in which the Company does not

                                       13
<PAGE>

survive, there may be substituted for each share of Common Stock subject to the
unexercised portions of outstanding Stock Options or SARs, that number of shares
of each class of stock or other securities or that amount of cash, property, or
assets of the surviving, resulting or consolidated company which were
distributed or distributable to the stockholders of the Company in respect to
each share of Common Stock held by them, such outstanding Stock Options or SARs
to be thereafter exercisable for such stock, securities, cash, or property in
accordance with their terms.

         Notwithstanding the foregoing, however, all Stock Options or SARs may
be canceled by the Company, in its sole discretion, as of the effective date of
any merger, consolidation or share exchange which is a Change of Control in
which the Company does not survive, by either:

                  (a) giving notice to each holder thereof or his personal
         representative of its intention to cancel such Stock Options or SARs
         and permitting the purchase during the thirty (30) day period next
         preceding such effective date of any or all of the shares subject to
         such outstanding Stock Options or SARs, including, in the Board's
         discretion, some or all of the shares as to which such Stock Options or
         SARs would not otherwise be vested and exercisable; or

                  (b) paying the holder thereof an amount equal to a reasonable
         estimate of the difference between the net amount per share payable in
         such transaction or as a result of such transaction, and the exercise
         price per share of such Stock Option (hereinafter the "Spread"),
         multiplied by the number of shares subject to the Stock Option. In
         cases where the shares constitute, or would after exercise, constitute
         Restricted Stock, the Company, in its discretion, may include some or
         all of those shares in the calculation of the amount payable hereunder.
         In estimating the Spread, appropriate adjustments to give effect to the
         existence of the Stock Options shall be made, such as deeming the Stock
         Options to have been exercised, with the Company receiving the exercise
         price payable thereunder, and treating the shares receivable upon
         exercise of the Options as being outstanding in determining the net
         amount per share. In cases where the proposed transaction consists of
         the acquisition of assets of the Company, the net amount per share
         shall be calculated on the basis of the net amount receivable with
         respect to shares of Common Stock upon a distribution and liquidation
         by the Company after giving effect to expenses and charges, including
         but not limited to taxes, payable by the Company before such
         liquidation could be completed.

                  (c) A Stock Option or SAR that by its terms would be vested
         and exercisable upon a Change in Control will be considered vested and
         exercisable for purposes of Section 12.3(a) hereof.

                                   ARTICLE 13
                           LIQUIDATION OR DISSOLUTION

         Subject to Section 12.3 hereof, in case the Company shall, at any time
while any Incentive under this Plan shall be in force and remain unexpired, (i)
sell all or substantially all of its property, or (ii) dissolve, liquidate, or
wind up its affairs, then each Participant shall be entitled to receive, in lieu
of each share of Common Stock of the Company which such Participant would have
been entitled to receive under the Incentive, the same kind and amount of any
securities or assets as may be issuable, distributable, or payable upon any such
sale, dissolution, liquidation, or winding up with respect to each share of
Common Stock of the Company. If the Company shall, at any time prior to the
expiration of any Incentive, make any partial distribution of its assets, in the
nature of a partial liquidation, whether payable in cash or in kind (but
excluding the distribution of a cash dividend payable out of earned surplus and
designated as such) then in such event the purchase price, if any, Option Prices
or SAR Prices then in effect with respect to each Stock Option or SAR shall be
reduced, on the payment date of such distribution, in proportion to the
percentage reduction in the

                                       14
<PAGE>

tangible book value of the shares of the Company's Common Stock (determined in
accordance with generally accepted accounting principles) resulting by reason of
such distribution.

                                   ARTICLE 14
                         INCENTIVES IN SUBSTITUTION FOR
                      INCENTIVES GRANTED BY OTHER ENTITIES

         Incentives may be granted under the Plan from time to time in
substitution for similar instruments held by employees or directors of a
corporation, partnership, or limited liability company who become or are about
to become Employees or Outside Directors of the Company or any Subsidiary as a
result of a merger or consolidation of the employing corporation with the
Company, the acquisition by the Company of equity of the employing entity, or
any other similar transaction pursuant to which the Company becomes the
successor employer. The terms and conditions of the substitute Incentives so
granted may vary from the terms and conditions set forth in this Plan to such
extent as the Committee at the time of grant may deem appropriate to conform, in
whole or in part, to the provisions of the Incentives in substitution for which
they are granted.

                                   ARTICLE 15
                            MISCELLANEOUS PROVISIONS

         15.1 INVESTMENT INTENT. The Company may require that there be presented
to and filed with it by any Participant under the Plan, such evidence as it may
deem necessary to establish that the Incentives granted or the shares of Common
Stock to be purchased or transferred are being acquired for investment and not
with a view to their distribution.

         15.2 NONPUBLICLY TRADED COMMON STOCK. In the event a Participant
receives, as Restricted Stock or pursuant to the exercise of a Stock Option,
shares of Common Stock that are Nonpublicly Traded (as defined herein), the
Committee may impose restrictions and conditions on the transfer or other
disposition of those shares. The restrictions and conditions may be reflected in
the Award Agreement or in a separate stockholders' agreement.

         15.3 NO RIGHT TO CONTINUED EMPLOYMENT. Neither the Plan nor any
Incentive granted under the Plan shall confer upon any Participant any right
with respect to continuance of employment by the Company or any Subsidiary.

         15.4 INDEMNIFICATION OF BOARD AND COMMITTEE. No member of the Board or
the Committee, nor any officer or Employee of the Company acting on behalf of
the Board or the Committee, shall be personally liable for any action,
determination, or interpretation taken or made in good faith with respect to the
Plan, and all members of the Board and the Committee, each officer of the
Company, and each Employee of the Company acting on behalf of the Board or the
Committee shall, to the extent permitted by law, be fully indemnified and
protected by the Company in respect of any such action, determination, or
interpretation.

         15.5 EFFECT OF THE PLAN. Neither the adoption of this Plan nor any
action of the Board or the Committee shall be deemed to give any person any
right to be granted an Award or any other rights except as may be evidenced by
an Award Agreement, or any amendment thereto, duly authorized by the Committee
and executed on behalf of the Company, and then only to the extent and upon the
terms and conditions expressly set forth therein.

                                       15
<PAGE>

         15.6 COMPLIANCE WITH OTHER LAWS AND REGULATIONS. Notwithstanding
anything contained herein to the contrary, the Company shall not be required to
sell or issue shares of Common Stock under any Incentive if the issuance thereof
would constitute a violation by the Participant or the Company of any provisions
of any law or regulation of any governmental authority or any national
securities exchange or inter-dealer quotation system or other forum in which
shares of Common Stock are quoted or traded; and, as a condition of any sale or
issuance of shares of Common Stock under an Incentive, the Committee may require
such agreements or undertakings, if any, as the Committee may deem necessary or
advisable to assure compliance with any such law or regulation. The Plan, the
grant and exercise of Incentives hereunder, and the obligation of the Company to
sell and deliver shares of Common Stock, shall be subject to all applicable
federal and state laws, rules and regulations and to such approvals by any
government or regulatory agency as may be required.

         15.7 LOCK-UP AGREEMENT. The Company may require that an Award Agreement
include a provision requiring a Participant to agree that in connection with an
underwritten public offering of Common Stock, upon the request of the Company or
the principal underwriter managing such public offering, no shares of Common
Stock received by the Participant under such Award Agreement may be sold,
offered for sale or otherwise disposed of without the prior written consent of
the Company or such underwriter, as the case may be, for at least one hundred
eighty (180) days after the effectiveness of the registration statement filed in
connection with such offering, or such longer period of time as the Board may
determine, if all of the Company's directors and officers agree to be similarly
bound. The obligations contained in an Award Agreement, if applicable, shall
remain effective for all underwritten public offerings with respect to which the
Company has filed a registration statement on or before the date five (5) years
after the closing of the Company's initial public offering, provided, however,
that this Section 15.7 shall cease to apply to any such shares of Common Stock
sold to the public pursuant to an effective registration statement or an
exemption from the registration requirements of the Securities Act in a
transaction that complied with the terms of the applicable Award Agreement.

         15.8 TAX REQUIREMENTS. The Company shall have the right to deduct from
all amounts hereunder paid in cash or other form, any Federal, state, or local
taxes required by law to be withheld with respect to such payments. The
Participant receiving shares of Common Stock issued under the Plan shall be
required to pay the Company the amount of any taxes which the Company is
required to withhold with respect to such shares of Common Stock.
Notwithstanding the foregoing, in the event of an assignment of a Nonqualified
Stock Option or SAR pursuant to Section 15.9, the Participant who assigns the
Nonqualified Stock Option or SAR shall remain subject to withholding taxes upon
exercise of the Nonqualified Stock Option or SAR by the transferee to the extent
required by the Code or the rules and regulations promulgated thereunder. Such
payments shall be required to be made prior to the delivery of any certificate
representing such shares of Common Stock. Such payment may be made (i) by the
delivery of cash to the Company in an amount that equals or exceeds (to avoid
the issuance of fractional shares under (iii) below) the required tax
withholding obligation of the Company; (ii) if the Company, in its sole
discretion, so consents in writing, the actual delivery by the exercising
Participant to the Company of shares of Common Stock that the Participant has
not acquired from the Company within six months prior to the date of exercise,
which shares so delivered have an aggregate Fair Market Value that equals or
exceeds (to avoid the issuance of fractional shares under (iii) below) the
required tax withholding payment; (iii) if the Company, in its sole discretion,
so consents in writing, the Company's withholding of a number of shares to be
delivered upon the exercise of the Stock Option, which shares so withheld have
an aggregate fair market value that equals (but does not exceed) the required
tax withholding payment; or (iv) any combination of (i), (ii), or (iii).

         15.9 ASSIGNABILITY. Incentive Stock Options may not be transferred,
assigned, pledged, hypothecated or otherwise conveyed or encumbered other than
by will or the laws of descent and distribution and may be exercised during the
lifetime of the Participant only by the Participant or the Participant's legally

                                       16
<PAGE>

authorized representative, and each Award Agreement in respect of an Incentive
Stock Option shall so provide. The designation by a Participant of a beneficiary
will not constitute a transfer of the Stock Option. The Committee may waive or
modify any limitation contained in the preceding sentences of this Section 15.9
that is not required for compliance with Section 422 of the Code.

         Except as otherwise provided herein, Nonqualified Stock Options and
SARs may not be transferred, assigned, pledged, hypothecated or otherwise
conveyed or encumbered other than by will or the laws of descent and
distribution. The Committee may, in its discretion, authorize all or a portion
of a Nonqualified Stock Option or an SAR granted to a Participant to be on terms
which permit transfer by such Participant to (i) the spouse (or former spouse),
children or grandchildren of the Participant ("Immediate Family Members"), (ii)
a trust or trusts for the exclusive benefit of such Immediate Family Members,
(iii) a partnership in which the only partners are (1) such Immediate Family
Members and/or (2) entities which are controlled by Immediate Family Members,
(iv) an entity exempt from federal income tax pursuant to Section 501(c)(3) of
the Code or any successor provision, or (v) a split interest trust or pooled
income fund described in Section 2522(c)(2) of the Code or any successor
provision, provided that (x) there shall be no consideration for any such
transfer, (y) the Award Agreement pursuant to which such Nonqualified Stock
Option or SAR is granted must be approved by the Committee and must expressly
provide for transferability in a manner consistent with this Section, and (z)
subsequent transfers of transferred Nonqualified Stock Options or SARs shall be
prohibited except those by will or the laws of descent and distribution.

         Following any transfer, any such Nonqualified Stock Option or SAR shall
continue to be subject to the same terms and conditions as were applicable
immediately prior to transfer, provided that for purposes of Articles 8, 9, 11,
13 and 15 hereof the term "Participant" shall be deemed to include the
transferee. The events of Termination of Service shall continue to be applied
with respect to the original Participant, following which the Nonqualified Stock
Options and SARs shall be exercisable by the transferee only to the extent and
for the periods specified in the Award Agreement. The Committee and the Company
shall have no obligation to inform any transferee of a Nonqualified Stock Option
or an SAR of any expiration, termination, lapse or acceleration of such Stock
Option or SAR. The Company shall have no obligation to register with any federal
or state securities commission or agency any Common Stock issuable or issued
under a Nonqualified Stock Option or SAR that has been transferred by a
Participant under this Section 15.9.

         15.10 USE OF PROCEEDS. Proceeds from the sale of shares of Common Stock
pursuant to Incentives granted under this Plan shall constitute general funds of
the Company.

         15.11 LEGEND. Each certificate representing shares of Restricted Stock
issued to a Participant shall bear the following legend, or a similar legend
deemed by the Company to constitute an appropriate notice of the provisions
hereof (any such certificate not having such legend shall be surrendered upon
demand by the Company and so endorsed):

                  On the face of the certificate:

                           "Transfer of this stock is restricted in accordance
                           with conditions printed on the reverse of this
                           certificate."

                  On the reverse:

                           "The shares of stock evidenced by this certificate
                           are subject to and transferable only in accordance
                           with that certain Liberte Investors Inc. Long Term
                           Incentive Plan (the "Plan"), a copy of which is on
                           file at the principal office of the Company in
                           Dallas, Texas. No

                                       17
<PAGE>

                           transfer or pledge of the shares evidenced hereby may
                           be made except in accordance with and subject to the
                           provisions of said Plan. By acceptance of this
                           certificate, any holder, transferee or pledgee hereof
                           agrees to be bound by all of the provisions of said
                           Plan."

         The following legend shall be inserted on a certificate evidencing
Common Stock issued under the Plan if the shares were not issued in a
transaction registered under the applicable federal and state securities laws:

                           "Shares of stock represented by this certificate have
                           been acquired by the holder for investment and not
                           for resale, transfer or distribution, have been
                           issued pursuant to exemptions from the registration
                           requirements of applicable state and federal
                           securities laws, and may not be offered for sale,
                           sold or transferred other than pursuant to effective
                           registration under such laws, or in transactions
                           otherwise in compliance with such laws, and upon
                           evidence satisfactory to the Company of compliance
                           with such laws, as to which the Company may rely upon
                           an opinion of counsel satisfactory to the Company."

         A copy of this Plan shall be kept on file in the principal office of
the Company in Dallas, Texas.

                                    * * * * *

                                       18
<PAGE>

         IN WITNESS WHEREOF, the Company has caused this instrument to be
         executed as of July 1, 2002 by its Chief Executive Officer and
         Secretary pursuant to prior action taken by the Board.

                                            LIBERTE INVESTORS INC.

                                            By:  /s/ Gerald J. Ford
                                                 ------------------------------
                                            Name:  Gerald J. Ford
                                            Title:  Chief Executive Officer

Attest:

/s/ Ellen Billings, Secretary
-------------------------------------------

                                       19

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