Brooke Corporation Announces Sale of Convertible Preferred Stock
September 15 2006 - 5:25PM
PR Newswire (US)
OVERLAND PARK, Kan., Sept. 15 /PRNewswire-FirstCall/ -- Brooke
Corporation (NASDAQ:BXXX) announced today the sale of 20,000
shares, representing $20 million stated value, of its newly
designated Perpetual Convertible Preferred Stock Series 2006,
coupled with warrants, to an accredited institutional investor in a
negotiated private placement transaction. Antaeus Capital, Inc.
served as the placement agent for the offering. The net proceeds
will be used to repay a $10 million promissory note issued during
the second quarter of 2006 for the purpose of contributing capital
to Brooke Corporation's finance company subsidiary to help it fund
a growing loan portfolio. It is expected that the remaining net
offering proceeds will be used to support the further growth of
Brooke Corporation's subsidiaries, including growth through
additional product and service offerings made available to Brooke
insurance agency franchisees. Dividends on the Preferred Stock will
be paid in cash at a rate of 13 percent per annum; however, subject
to certain exceptions, no dividends will be accrued or paid on the
Preferred Stock for the first two years after closing. The purchase
price of $14.6 million represented a $5.4 million discount from the
$20 million stated value. The Preferred Stock is convertible into
Brooke common stock at a fixed conversion price of $17 per share of
common stock, subject to anti-dilution adjustments. This conversion
price represents a 40 percent premium to yesterday's closing price.
Based on a $17 per share conversion price, approximately 1.2
million shares of Brooke common stock would be issued if all of the
Preferred Stock is converted into common stock. The purchaser may
convert the Preferred Stock into Brooke common stock pursuant to
the terms of the transaction documents. After two years, under
certain circumstances, Brooke Corporation may also require the
investor to convert the Preferred Stock if Brooke's common stock
price exceeds $29.75 per share for a specified number of days.
After two years, subject to certain conditions, Brooke Corporation
may redeem up to 50 percent of the Preferred Stock for a cash
payment equal to 115 percent of the investment amount being
redeemed and, after five years, may redeem the remaining Preferred
Stock upon the same terms. In conjunction with the Preferred Stock
sale, Brooke Corporation also issued warrants to purchase
approximately 235,000 shares of Brooke common stock at an exercise
price of approximately $24 per share, subject to anti- dilution
adjustments, which is approximately 200 percent of the weighted
average price for the five trading days preceding the closing date.
These warrants are exercisable immediately and expire after 48
months. In connection with this sale, the company signed a
registration rights agreement with the holder of the Preferred
Stock. Among other things, this registration rights agreement
requires the company, within 30 days after closing, to file a
registration statement relating to the resale of the common stock
issuable upon conversion of the Preferred Stock and upon exercise
of the warrants. The sale of the Preferred Stock was not registered
under the Securities Act of 1933 and was offered and sold pursuant
to the exemption from registration afforded by Section 4(2) of the
Securities Act of 1933. This announcement is made as a matter of
record only and no Preferred Stock or other securities are offered
hereby. About our company ... Brooke Corporation is listed on the
Nasdaq Global market under the symbol "BXXX." Brooke Corporation is
a holding company with three operating subsidiaries. Brooke
Franchise Corporation is a subsidiary that distributes insurance
and financial services through a network of more than 650 franchise
locations. Brooke Credit Corporation is a subsidiary that
originated loans to insurance agencies and other businesses that
sell insurance or financial services, including Brooke franchisees.
Brooke Brokerage Corporation is a subsidiary that brokers
hard-to-place insurance and brokers loans for general insurance
agencies specializing in hard-to-place insurance sales. For more
information, visit http://www.brookecorp.com/ . E-mail Distribution
... To receive electronic press alerts, visit the Brooke
Corporation Media Room at http://brookecorp.mediaroom.com/ and
subscribe to our e-mail alerts online. This press release contains
forward-looking statements. All forward- looking statements involve
risks and uncertainties, and several factors could cause actual
results to differ materially from those in the forward-looking
statements. The following factors, among others, could cause actual
results to differ from those indicated in the forward-looking
statements: uncertainties associated with the conversion price for
the Preferred Stock and the number of shares of common stock
actually issued as a result of the conversion of the Preferred
Stock and exercise of the warrants, uncertainties associated with
the use of proceeds from the sale of Preferred Stock and warrants,
uncertainties associated with adjustments, conditions, restrictions
and protections included in the terms of the agreements, the
Preferred Stock, the warrants and other documents related to the
sale of the Preferred stock and warrants and related transactions,
the uncertainty that the Company will achieve its short-term and
long-term profitability and growth goals, uncertainties associated
with market acceptance of and demand for the Company's products and
services, the impact of competitive products and pricing, the
dependence on third-party suppliers and their pricing, its ability
to meet product demand, the availability of funding sources, the
exposure to market risks, uncertainties associated with the
development of technology, changes in the law and in economic,
political and regulatory environments, changes in management, the
dependence on intellectual property rights, the effectiveness of
internal controls, and risks and factors described from time to
time in reports and registration statements filed by Brooke
Corporation with the Securities and Exchange Commission. A more
complete description of Brooke's business is provided in Brooke
Corporation's most recent annual, quarterly and current reports,
which are available from Brooke Corporation without charge or at
http://www.sec.gov/ . DATASOURCE: Brooke Corporation CONTACT: Anita
Larson, Brooke Corporation, , or +1-913-661-0123 Web site:
http://www.brookecorp.com/ http://brookecorp.mediaroom.com/
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