Brooke Founder Declares Bankruptcy Trying to Save Companies

  Robert Orr filed personal bankruptcy
yesterday after pledging his family fortune trying to save Brooke Capital
Corporation and Aleritas Capital Corp.  Brooke Capital was an insurance
agency franchisor and a public company (AMEX: BCP) of which Orr's family
indirectly owned approximately 30%.  Aleritas was a finance company
specializing in insurance lending and a public company (OTCBB: ARTA) of
which Orr's family indirectly owned approximately 29%.

Aleritas loaned money to insurance agencies, then packaged the loans as securities and sold them to Wall Street investors. To enhance the credit quality of these securities, Brooke Capital provided franchising and consulting services to insurance agency borrowers on behalf of the Wall Street investors. The refusal of Wall Street investors to pay servicing fees for the consulting and collateral preservation services provided by Brooke Capital caused the insurance agency franchisor to collapse from cash flow shortages and the finance company to collapse from deterioration of loan quality because the insurance agency franchisor could no longer afford to provide these critical services to the finance company's borrowers. The meltdown of these companies accelerated when a special master, who was appointed by the court to maintain the status quo until Brooke Capital's differences with Wall Street investors were resolved, instead liquidated assets and released insurance agency franchisees from their agreements.

With Brooke Capital in bankruptcy and Aleritas in liquidation, it is unlikely Orr will see repayment of approximately $12,000,000 that his family loaned to the companies in recent months. Another result of the companies' collapse is that Orr will be required to repay approximately $25,000,000 of debt that was personally guaranteed by him as part of Orr's efforts in recent months to turn around the companies.

Orr said, "Last year I retired as a company executive, but I came out of retirement in April of this year to help Aleritas, and later Brooke Capital, through difficult economic times. With the benefit of hindsight, I regret returning as a company executive because the price paid by my family has been extraordinary. I have endured financial ruin and unwarranted personal attacks. As an executive taking over management of these troubled companies just prior to their collapse and as an executive responsible for making the difficult decisions required to turnaround these troubled companies, I have become the target of attack for anyone with a complaint."

Last year, as a result of merging wholly owned Brooke Capital and wholly owned Aleritas into existing public companies, most of the stock of Aleritas and Brooke Capital became directly, or indirectly, owned by public investors. Orr said, "When Aleritas and Brooke Capital became public companies last year, I believed that I could slow down after a lifetime of 60-70 hour weeks. I believed that my involvement as an executive was not required because, as an investor in public companies, my investment would be protected by the management accountability demanded by independent directors, exchange listing provisions, sophisticated investors and auditors." After Aleritas became a public company, Orr did not serve as a director or officer. After Brooke Capital became a public company, Orr remained as a director but relinquished all executive responsibilities.

Orr said, "In March of this year it became apparent that I was naive to rely on public company safeguards to protect my investment in Aleritas." Aleritas had become financially troubled primarily as a result of increased loan losses, a failed refinancing transaction and rapid expansion in a difficult economy. In response to a request from Aleritas' largest purchaser of loan participations, Orr asked for an emergency meeting of the Aleritas board on March 31, 2008 to demand the changes required for a turnaround of the company, including the appointment of Orr as interim chief executive officer of Aleritas until the company found a capable replacement with turnaround experience. Over the next several weeks, Orr announced to investors: a) a $24 million charge for loan losses and credit impairments, 2) suspension of the company's growth plans, 3) and the proposed steps to complete the failed refinancing transaction.

During the five months that Orr and Michael Hess were Aleritas executives, many unpopular and difficult decisions were implemented which they believed were required to turn the company around, including: a) working with Brooke Capital to mitigate loan losses despite previous tensions between Aleritas and Brooke Capital, b) negotiating with recalcitrant Wall Street investors for payment of servicing fees to assure Brooke Capital's continued assistance, c) negotiating with lenders to remedy liquidity concerns d) and reducing the amounts of collateral pledge and loan payment discrepancies existing on March 31st when Orr and Hess became Aleritas executives.

Especially difficult were the decisions made to reduce collateral pledge and loan payment discrepancies because this involved decisions regarding payment priorities and collateral quality. Orr and Hess first required the completion of conversion to a new loan accounting process to better track and control collateral pledges and loan payments. Although discrepancies were significantly reduced after March 31st, the resolution of those discrepancies existing on March 31st sometimes evolved into different discrepancies as Orr and Hess tried to fairly resolve these issues.

Brooke Capital has historically provided critical assistance to franchise agency borrowers as part of a servicing agreement with Wall Street investors. During August Brooke Capital experienced significant cash flow problems because Wall Street investors refused to pay past due servicing fees owed to Brooke Capital. Apparently frustrated that they could not collect past due servicing fees and resolve the company's cash flow problems, Brooke Capital's chief executive officer, chief operating officer, senior vice president and general counsel resigned. Orr reluctantly stepped in on August 19th to fill the management void in Brooke Capital and aggressively pursued collection of past due servicing fees during the ensuring month that he served as Brooke Capital's chief executive officer. Allegations of funds misappropriation leveled against Orr by Wall Street investors were primarily the result of Brooke Capital offsetting the past due amounts it was owed from Wall Street investors by the amounts that Brooke Capital owed to Wall Street investors. These offsets were approved by Brooke Capital's legal counsel and summarized in a court motion. The dispute between Wall Street investors and Brooke Capital culminated in the appointment of a special master on September 17, 2008 and the resulting collapses of Aleritas and Brooke Capital.

Orr summarized by saying, "Until the meltdown caused by Wall Street investors, I was confident that Aleritas and Brooke Capital were taking the difficult steps required to turn around the companies. As a result, my family did not sell any stock (until it was seized by the creditors for repayment of a company loan) and instead purchased approximately $2,000,000 in additional stock during 2008. I believed in Aleritas and Brooke Capital."