STOCK REPURCHASE AGREEMENT

 

STOCK REPURCHASE AGREEMENT

 

          THIS STOCK REPURCHASE AGREEMENT (the "Agreement") is made and entered

into this 2nd day of March, 2005, by and between First American Capital

Corporation, a Kansas corporation ("FACC"), and Brooke Corporation, a Kansas

corporation ("Brooke").

 

          WHEREAS, Brooke is the owner of four hundred fifty thousand five

hundred (450,500) shares of the common stock of FACC (the "Brooke Shares"),

constituting approximately nine and seven-tenths percent (9.7%) of the issued

and outstanding common stock of FACC (the "Common Stock"); and

 

          WHEREAS, FACC desires to repurchase the Brooke Shares from Brooke, and

Brooke desires to sell the Brooke Shares to FACC, all on the terms and

conditions set forth herein.

 

          NOW THEREFORE, in consideration of the mutual promises contained

herein and consideration, the receipt and sufficiency of which is hereby

acknowledged, the parties hereto agree as follows:

 

                                    ARTICLE I

                       REPURCHASE AND SALE OF BROOKE SHARES

 

1.1. Repurchase and Sale of Brooke Shares. At the Closing (as defined below) and

subject to the terms and conditions of this Agreement, FACC agrees to repurchase

the Brooke Shares from Brooke, and Brooke agrees to sell, assign, transfer,

convey and deliver the Brooke Shares to FACC, for the consideration specified in

Section 1.2 below. At the Closing, Brooke shall deliver to FACC one or more

certificates representing ownership of all of the Brooke Shares, endorsed in a

form acceptable to FACC to transfer ownership of the Brooke Shares to FACC (the

"Certificate").

 

1.2. Consideration.

 

     (a)   At the Closing, FACC agrees to deliver to Brooke:

 

          (i) Seven Hundred Seventy Thousand Three Hundred Fifty-Five Dollars

($770,355) (the "Purchase Price") by wire delivery of immediately available

funds to an account designated by Brooke prior to the Closing; and

 

          (ii) warrants, in substantially the form attached hereto as Exhibit A

(the "Warrant"), to purchase up to Fifty Thousand (50,000) shares of Common

Stock at One Dollar and Seventy-One Cents ($1.71) per share, up to an additional

Fifty Thousand (50,000) shares of Common Stock at Three Dollars and Thirty-Five

Cents ($3.35) per share; and up to an additional Fifty Thousand (50,000) shares

of Common Stock at Five Dollars ($5) per share. The Warrant shall be exercisable

anytime after the earlier of the date that is (x) seven (7) years after the date

of this Agreement; or (y) immediately prior to the consummation of a Change of

Control Transaction. As used herein, the term "Change of Control Transaction"

shall mean (i) the purchase or other acquisition (other than from FACC) by any

person, entity or group of persons, within the meaning of Section 13(d) or 14(d)

of the Securities Exchange Act of 1934, as

 

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amended (the "Exchange Act") (excluding, for this purpose, FACC or any of its

subsidiaries or any employee benefit plan of FACC or its subsidiaries), of

beneficial ownership (within the meaning of Rule 13d-3 promulgated under the

Exchange Act) of a majority of either the then-outstanding shares of Common

Stock of FACC or the combined voting power of FACC's then-outstanding voting

securities entitled to vote generally in the election of directors; (ii) any

merger, reorganization or other consolidation, in each case with respect to

which persons or entities who were shareholders of FACC immediately prior to the

consummation do not, immediately thereafter, own more than a majority of,

respectively, the Common Stock of FACC and the combined voting power entitled to

vote generally in the election of directors of the merged, reorganized or

consolidated entity's then-outstanding voting securities; (iii) the sale of all

or substantially all of the assets of FACC to a person or entity that was not an

"affiliate" (as defined in this Section 1.2(a)(ii)) of FACC immediately prior to

such sale, (iv) a liquidation or dissolution of FACC, or (v) the date upon which

individuals who, as of the Closing, constitute the Board of Directors of FACC

(the "Board" and, as of the date of Closing, the "Incumbent Board") cease for

any reason to constitute at least a majority of the Board, provided that any

person who becomes a director subsequent to the Closing whose election, or

nomination for election by FACC's shareholders, was approved by a vote of at

least a majority of the directors then comprising the Incumbent Board or by

persons whom they have approved for election by the Incumbent Board or by

persons they have so approved (other than an individual whose initial assumption

of office is in connection with an actual or threatened election contest

relating to the election of directors of FACC, as such terms are used in Rule

14a-11 of Regulation 14A promulgated under the Exchange Act) shall be, for

purposes of this item v, considered as though such person was a member of the

Incumbent Board. The Warrant shall expire at the earlier of: (x) ten (10) years

after the date of this Agreement; (y) ten (10) days after Brooke receives notice

by FACC that Brooke is in material breach of the covenants set forth in Article

III of this Agreement and such breach is not cured, within such period; or (z)

the consummation of a Change of Control Transaction. The Warrant shall not be

transferable. For purposes of this Agreement, an "affiliate" of a corporation

means any nonhuman entity directly or indirectly owned and controlled by such

corporation or under common control with such corporation.

 

1.3. Loan. Contemporaneously with the Closing, Brooke agrees to cause its

affiliate, Brooke Credit Corporation, to loan to FACC the principal amount of

Five Hundred Seventy Thousand, Three Hundred Fifty Five Dollars ($570,355) (the

"Loan"). In connection with the Loan, FACC will execute and deliver the

following documents:

 

     (a) a Commercial Loan Agreement substantially in the form of Exhibit B

attached hereto (the "Loan Agreement");

 

     (b) a promissory note substantially in the form of Exhibit C attached

hereto (the "Promissory Note") in the principal amount of the Loan bearing

interest at eight percent (8%) per annum; and

 

     (c) as security for the Loan and Promissory Note (the "Security Interest"),

a second mortgage, in substantially the form attached hereto as Exhibit D (the

"Second Mortgage"), to Brooke on FACC's real property located at 1303 SW First

American Place, Topeka, Kansas (the "Property").

 

 

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1.4. Substitution of Collateral. After Closing and upon thirty (30) days prior

written notice to Brooke, FACC at its sole discretion may elect to substitute

the Second Mortgage with cash equivalents or investment grade securities that

have a market value equal to one hundred percent (100%) of the then unpaid

principal amount of the Promissory Note; provided, that if FACC elects to

replace the Second Mortgage with cash equivalents or investment grade

securities, FACC shall execute (i) a Commercial Security Agreement, in

substantially the form attached hereto as Exhibit E; and (ii) a Control

Agreement, in substantially the form attached hereto as Exhibit F.

 

                                   ARTICLE II

                           ACKNOWLEDGEMENT AND RELEASE

 

2.1. Access to Information. Brooke has received all publicly available

information and certain nonpublic information about the business and financial

condition of FACC and has had full opportunity to ask and have answered any and

all questions that it has that it deems relevant to the value of the Brooke

Shares.

 

2.2. Confidentiality Agreement. Brooke and FACC acknowledge that they continue

to be bound by the terms of that certain confidentiality agreement between

Brooke and FACC, dated November 26, 2003 (the "Confidentiality Agreement") and

will continue to be bound by such Confidentiality Agreement for a period of two

(2) years after the Closing Date.

 

2.3. Release by Brooke. Brooke and its affiliates, officers, and directors (the

"Brooke Parties"), in consideration of the payments made to Brooke pursuant to

Article I, agree to forever release and discharge FACC and its subsidiaries and

the former, current, or future officers, employees, directors, attorneys,

agents, representatives, fiduciaries, attorneys, shareholders, insurers,

predecessors, parents, affiliates, and benefit plans of FACC or its subsidiaries

(the "FACC Released Parties") and the heirs, successors and assigns of the FACC

Released Parties from any and all claims, liabilities, causes of action,

damages, losses, demands or obligations of every kind or nature, whether now

known or unknown, suspected or unsuspected, which the Brooke Parties ever had,

now have, or hereafter can, shall, or may have for, upon or by reason of any

act, transaction, practice, conduct, matter, cause, or thing of any kind

whatsoever, relating to or based upon, in whole or in part, any act,

transaction, practice or conduct prior to the date hereof, including but not

limited to, claims arising from all debts, obligations, claims, demands, dues,

sums of money, accounts, covenants, contracts, controversies, agreements,

promises, variances, trespasses, losses, earnings, costs, expenses, injuries,

judgments, extents, executions or causes of action of any kind whatsoever, known

or unknown, in tort, contract, by statute or on any other basis, for equitable

relief, compensatory, punitive or other damages, expenses (including attorneys'

fees), reimbursement of costs of any kind, including, but not limited to, any

and all claims, demands, rights and/or causes of action, which might arise out

allegations relating to the Brooke Shares or the Common Stock. The foregoing

release shall not affect, release or terminate any of the obligations of any of

the FACC Released Parties under this Stock Repurchase Agreement or under any

agreements, notes, mortgages or other documents related to the Loan.

 

 

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2.4. Release by FACC. FACC and its affiliates, officers and directors (the "FACC

Parties") in consideration of the acknowledgements and covenants made by Brooke

pursuant to Sections 2.1 and 2.2 and Article III, agree to forever release and

discharge Brooke and its subsidiaries and the former, current, or future

officers, employees, directors, attorneys, agents, representatives, fiduciaries,

attorneys, shareholders, insurers, predecessors, parents, affiliates, and

benefit plans of Brooke or its subsidiaries (the "Brooke Released Parties") and

the heirs, successors and assigns of the Brooke Released Parties from any and

all claims, liabilities, causes of action, damages, losses, demands or

obligations of every kind or nature, whether now known or unknown, suspected or

unsuspected, which the FACC Parties ever had, now have, or hereafter can, shall,

or may have for, upon or by reason of any act, transaction, practice, conduct,

matter, cause, or thing of any kind whatsoever, relating to or based upon, in

whole or in part, any act, transaction, practice or conduct prior to the date

hereof, including but not limited to, claims arising from all debts,

obligations, claims, demands, dues, sums of money, accounts, covenants,

contracts, controversies, agreements, promises, variances, trespasses, losses,

earnings, costs, expenses, injuries, judgments, extents, executions or causes of

action of any kind whatsoever, known or unknown, in tort, contract, by statute

or on any other basis, for equitable relief, compensatory, punitive or other

damages, expenses (including attorneys' fees), reimbursement of costs of any

kind, including, but not limited to, any and all claims, demands, rights and/or

causes of action, which might arise out allegations relating to the Brooke

Shares or the Common Stock. The foregoing release shall not affect, release or

terminate any of the obligations of any of the Brooke Released Parties under

this Stock Purchase Agreement or under any agreements or notes related to the

Loan.

 

                                   ARTICLE III

                                     COVENANTS

 

3.1. Negative Covenants. Brooke hereby agrees that for a period of five (5)

years after the date of this Agreement, the Brooke Parties shall not, directly

or indirectly:

 

     (a) Purchase, own or hold any legal or beneficial interest in any

securities of FACC or its affiliates other than the Promissory Note, the

Security Interest therefor, the Warrant and the Common Stock purchased in

accordance with the Warrant;

 

     (b) Solicit offers to sell or make any offers to purchase any securities of

FACC or its affiliates;

 

     (c) Solicit proxies or in any way participate in any proxy contest or other

effort to take control of FACC or its affiliates; and

 

     (d) Assist, encourage, consult with, provide or loan money or other assets

to, or otherwise in any way facilitate any person or entity in doing anything

that would be prohibited by this Article III if such person or entity had made

such covenants.

 

     (e) Participate in any "group" as defined under Section 13D of the

Securities Exchange Act of 1934, as amended, to do anything prohibited by this

Article III if any person in such group had made such covenants.

 

 

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3.2. No Public Statements. Brooke agrees that for a period of five (5) years

after the date of this Agreement, neither it nor any of the other Brooke Parties

will make any press releases or other public statements or statements to any

other entities or any persons who are not employees, officers, or directors of

Brooke regarding the Brooke Shares, the Common Stock, or the subjects of or

terms of this Agreement, except as required by applicable law and except with

respect to a press release announcing this stock repurchase transaction. FACC

agrees that for a period of five (5) years after the date of this Agreement, it

will not make any press releases or other public statements regarding the Brooke

Shares or the subjects of or terms of this Agreement except as required by

applicable law and except with respect to a press release announcing this stock

repurchase transaction. The text of the press releases announcing this stock

repurchase transaction and the requisite securities filings agreed to by FACC

and Brooke are attached hereto as Exhibi