BXXX Brooke Corp (MM)

On the Closing Date, Brooke Corp. completed a merger pursuant to the Merger Agreement in which Brooke Franchise was merged with and into Capital, resulting in Capital being the surviving company. At the Closing Date, Brooke Corp. received merger consideration of 5,000,000 shares of Capital common stock, par value $0.01 per share. An additional 2,250,000 shares of Capital common stock will be reserved for issuance to Brooke Corp. as merger consideration pursuant to contingent earn-out payments tied to adjusted earnings of Capital (excluding its subsidiaries) in fiscal years 2007 and 2008. Capital has also reserved 2,000,000 additional shares of Capital common stock for issuance in connection with stock or options expected to be granted pursuant to Capital’s 2007 Equity Incentive Plan, as amended. Pursuant to the Merger Agreement, Brooke Corp. has agreed it will not transfer Capital common stock that it received in the Merger for a period of 180 days after the Closing Date, unless Capital otherwise consents.

Prior to the merger, Brooke Corp. owned 100% of Brooke Franchise and 53% of Capital. As a result of the closing of the merger, Brooke Corp. now owns approximately 81% of Capital. Robert Orr, the Chairman of the Board, President and Chief Executive Officer of Capital immediately prior to the Closing Date, is also the Chairman of the Board of Brooke Corp. He is also a member of a group that controls Brooke Corp. Michael Hess, Vice Chairman of the Board and President of Capital’s subsidiary, Brooke Capital Advisors, Inc., is an original investor in, and a current stockholder of, Brooke Corp. Keith Bouchey, a member of the Board of Capital, became the President and Chief Executive Officer of Brooke Corp. on October 1, 2007.

The number of shares of Capital common stock issued by Capital to Brooke Corp. as merger consideration was the result of negotiations among the Independent Committee of the Board of Directors of Capital and the management of Capital and Brooke Corp. As more fully discussed in the definitive Information Statement filed by Capital with the Securities and Exchange Commission on October 16, 2007 and distributed to Capital stockholders regarding a special meeting of Capital stockholders to consider approval of the merger, the Brooke Corp. management actively participated in the negotiation and approval of the Merger Agreement. The execution and delivery of the Merger Agreement by Brooke Corp. followed a determination by the Brooke Corp. board of directors that the transaction contemplated by the Merger Agreement is entirely fair to the Brooke Corp. stockholders. In making this determination, the Brooke Corp. board of directors relied in part on a fairness opinion issued to it by a financial advisor engaged by Brooke Corp. to act as its independent financial advisor with respect to analyzing the fairness, from a financial point of view, of the merger and in connection with the related agreement whereby Brooke Corp. will contribute to Capital 100% of the shares of common stock of a non-standard automobile insurance company, in exchange for additional shares of Capital common stock (the “Delta Plus Exchange Agreement”). In its opinion, the financial advisor determined that the transactions contemplated by the Merger Agreement and the Delta Plus Exchange Agreement were entirely fair, from a financial point of view, to the Brooke Corp. stockholders.

The transactions contemplated by the Delta Plus Exchange Agreement are anticipated to close at a future date subject to satisfaction of conditions contained within the Delta Plus Exchange Agreement.

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As described in the section entitled “Information about Business of Brooke Franchise” in the Information Statement, Brooke Franchise’s business prior to the merger consisted primarily of distributing property and casualty insurance through a network of independent agencies franchised under the “Brooke” name.

(a) Exhibits

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