Liberte Investors Inc. to Purchase USAuto Holdings

Liberte Investors, Inc. announced that it has entered into a definitive merger agreement under which Liberte will acquire USAuto Holdings, a Tennessee-based provider of non-standard consumer automobile insurance.

As a result of the contemplated merger, Liberte will acquire 100 percent of the stock of USAuto for $76 million in cash and 13.25 million newly issued shares of Liberte. Up to an additional 750,000 shares will be issued to USAuto’s stockholders if certain operating performance criteria are achieved in 2004. Liberte will finance the cash portion of the merger consideration by using the proceeds of a new equity issuance and existing cash.

The acquisition, which has been approved by Liberte’s Board of Directors, is contingent upon various conditions, including approval by Liberte’s stockholders and approval by certain state insurance authorities. Gerald Ford, Liberte’s chairman and 45 percent stockholder, has agreed to vote his shares in favor of the acquisition. Morgan Joseph & Co. Inc. served as a financial advisor to Liberte and rendered a fairness opinion to its Board of Directors.

Upon closing of the transaction, which is expected in approximately 90 days, Liberte will change its name to First Acceptance Corporation and relocate its headquarters to Nashville.

In addition, Stephen Harrison, CEO of USAuto, will replace Donald Edwards as CEO of Liberte, and Thomas Harrison, COO of USAuto, will become executive vice president of Liberte. Ford will remain chairman of the Board and Donald Edwards will remain a director and enter into a four year advisory relationship with the company.

“We are very excited to announce the acquisition of USAuto,” said Edwards. “This transaction provides Liberte with a premier platform in the rapidly growing area of non-standard auto insurance. In USAuto we have acquired one of the most dynamic and highly profitable companies in the industry. USAuto has developed a unique business model, based on a proprietary technology platform, which vertically integrates the agency, underwriting and servicing components of auto insurance.”