As filed with the Securities and Exchange Commission on _______________
Registration No. _____________
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
BNL FINANCIAL CORPORATION
(Exact name of registrant as specified in charter)
-------------
IOWA 6311 42-1239454 (State or other jurisdiction of (Primary Standard
Industrial (IRS Employer incorporation or organization) Classification Code)
Identification No.)
301 Camp Craft Road, Suite 200
Austin, Texas 78746
(512) 327-3065
(Address, including zip code and telephone number, including area code, of
registrant's principal offices)
HARLEY A. WHITFIELD, ESQ. COPY TO:
WHITFIELD & EDDY, P.L.C.
317 SIXTH AVENUE, SUITE 1200 Wendy L. Carlson, Esq.
DES MOINES, IOWA 50309-4110 WHITFIELD & EDDY, P.L.C.
(515) 288-6041 317 Sixth Avenue, Suite 1200
Des Moines, Iowa 50309-4110
(Address, including zip code and telephone number,
including area code, of agent for service) (515) 288-6041
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [X]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
Amount Proposed Maximum Proposed Maximum
Title of each class of to be Offering Price Aggregate Amount of
Securities to be Registered Registered Per Share Offering Price Registration Fee
============================================ ===================== ===================== ===================== ==================
<S> <C> <C> <C> <C>
Stock Options(1) 250,000(2) 0 0 0
Common Stock(4) 250,000 $.35(3) $87,500 $100(3)
============================================ ===================== ===================== ===================== ==================
<FN>
(1) To be issued pursuant to the 1994 Brokers' and Agents' Non-qualified Stock
Option Plan (the "Plan").
(2) Represents the maximum number of Stock Options that may be issued or
exercised.
(3) Calculated on the basis of the sales price of the last transaction executed
by Starmont Capital, Ltd., Des Moines, Iowa.
(4) Represents shares issuable upon the exercise of the Stock Options.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
- -------------------------------------------------------------------------------
<PAGE>
Prospectus
of
BNL FINANCIAL CORPORATION
250,000 Stock Options
to be Issued Pursuant to the
1994 Brokers' and Agents' Nonqualified Stock Option Plan
250,000 Shares
Common Stock, No Par Value
THIS PROSPECTUS IS INTENDED TO PROVIDE INFORMATION MATERIAL TO THE DISTRIBUTION
AND EXERCISE OF 250,000 STOCK OPTIONS ISSUABLE UNDER THE 1994 BROKERS' AND
AGENTS' NONQUALIFED STOCK OPTION PLAN (THE "PLAN") ADOPTED BY BNL FINANCIAL
CORPORATION (THE "COMPANY") ON DECEMBER 14, 1994, TO CERTAIN AGENTS AND BROKERS
WHO MARKET THE CORPORATION'S INSURANCE PRODUCTS; AND TO EFFECT THE REGISTRATION
OF THE ISSUANCE, OFFER AND SALE OF SHARES OF COMMON STOCK TO THE OPTION
RECIPIENTS. SUCH RECIPIENTS SHALL HEREAFTER BE REFERRED TO AS "OPTIONHOLDERS"
AND THE STOCK OPTIONS ISSUABLE UNDER THE PLAN ARE REFERRED TO AS THE "STOCK
OPTIONS." THE STOCK OPTIONS MAY BE ISSUED FROM TIME TO TIME UNTIL DECEMBER 14,
2004, WHICH IS THE TERMINATION DATE OF THE PLAN. THE STOCK OPTIONS AND THE
COMMON STOCK ISSUABLE UPON EXERCISE OF THE STOCK OPTIONS ARE SUBJECT TO
RESTRICTIONS ON TRANSFER. THE STOCK OPTIONS ARE EXERCISABLE AT A PRICE TO BE
DETERMINED BY THE BOARD OF DIRECTORS AT THE TIME OF GRANT. FOR MORE INFORMATION
REGARDING THE STOCK OPTIONS, SEE "THE STOCK OPTIONS." THERE IS NO PUBLIC MARKET
FOR THE COMPANY'S SECURITIES AND THERE IS NO ASSURANCE THAT A PUBLIC MARKET WILL
DEVELOP. A LIMITED TRADING MARKET EXISTS THROUGH STARMONT CAPITAL, Ltd., Des
Moines, Iowa.
-----------------------------------
THE SECURITIES OFFERED HEREBY INVOLVE SUBSTANTIAL RISKS.
SEE "RISK FACTORS."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Proceeds to
Price to Underwriting Corporation Upon Proceeds to
Public Discount Exercise(1)(3) Optionholders(3)
<S> <C> <C> <C> <C>
===================================== ================== ================== ====================== ==================
Stock Options(1) None None $87,500 (3)
Common Stock, No Par Value(2)(3) $.35(4) None $0 (3)
===================================== ================== ================== ====================== ===================
<FN>
(1) THE STOCK OPTIONS WILL BE ISSUED PURSUANT TO THE PLANS. THE "PROCEEDS TO
CORPORATION" ASSUMES THAT ALL THE STOCK OPTIONS ARE EXERCISED AND DOES NOT
REFLECT THE DEDUCTION OF $5,000 IN ESTIMATED OFFERING EXPENSES. THERE CAN
BE NO ASSURANCE THAT ANY OF THE STOCK OPTIONS WILL BE EXERCISED. THERE IS
NO PUBLIC MARKET FOR SHARES OF THE COMPANY'S COMMON STOCK. SEE "RISK
FACTORS."
(2) ISSUABLE UPON EXERCISE OF THE STOCK OPTIONS.
(3) ANY PROCEEDS FROM THE SALE OR OTHER DISPOSITION OF THE SHARES OF COMMON
STOCK ISSUED UPON THE EXERCISE OF THE STOCK OPTIONS WILL INURE TO THE
BENEFIT OF THE EXERCISING OPTIONHOLDER(S) AND NOT TO THE COMPANY.
(4) THE EXERCISE PRICE HAS BEEN ESTIMATED AT THE SALES PRICE OF THE LAST
TRANSACTION EXECUTED BY STARMONT CAPITAL, LTD..
</FN>
</TABLE>
THE DATE OF THIS PROSPECTUS IS April 15, 1996.
1
<PAGE>
TABLE OF CONTENTS
PAGE
AVAILABLE INFORMATION ........................................................ 1
SUMMARY ...................................................................... 2
RISK FACTORS ................................................................ 4
USE OF PROCEEDS ............................................................. 4
THE COMPANY ................................................................. 4
PROPERTIES .................................................................. 13
LEGAL PROCEEDINGS ........................................................... 13
DESCRIPTION OF THE COMPANY'S CAPITAL STOCK................................... 14
MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.... 14
THE STOCK OPTIONS ........................................................... 15
FEDERAL TAX CONSEQUENCES .................................................... 17
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS .......................................... 18
FINANCIAL STATEMENTS AND SCHEDULES.......................................... 19
BENEFICIAL OWNERSHIP OF COMMON STOCK........................................ 20
MANAGEMENT.................................................................. 22
BACKGROUND OF MANAGEMENT ................................................. 23
EXECUTIVE COMPENSATION...................................................... 26
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS............................... 28
LEGAL MATTERS ............................................................... 28
EXPERTS ..................................................................... 28
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY ................... 28
2
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended ("Exchange Act") and in accordance
therewith files reports and other information with the Securities and Exchange
Commission ("SEC") relating to its business, financial statements, and other
matters. The Company has filed a Registration Statement on Form SB-2
("Registration Statement") under the Securities Act of 1933, as amended
("Securities Act"), with the SEC covering the Stock Options and the Common Stock
to be issued upon exercise of the Stock Options. Statements contained in this
Prospectus relating to the contents of any contract or other document referred
to herein or therein are not necessarily complete and, in each instance,
reference is made to the copy of such document filed as an exhibit to the
Registration Statement or such other document. Each such statement is qualified
in its entirety by such reference. Reference is made to the Registration
Statement and to the exhibits thereto for further information. The Registration
Statement and the exhibits thereto, as well as the reports, proxy statements and
other information filed with the SEC by the Company under the Exchange Act can
be inspected and copied at the public reference facilities maintained by the SEC
at 450 Fifth Street, N.W., Washington, D.C. 20549 or at certain of its Regional
Offices located at Suite 1400, Citicorp Center, 500 West Madison Street,
Chicago, Illinois 60661-2511; and 13th Floor, Seven World Trade Center, New
York, New York 10048. Copies of this material may be obtained from the Public
Reference Section of the SEC at 450 Fifth Street, Washington, D.C. 20549, at
prescribed rates.
As permitted by the rules and regulations of the SEC, this Prospectus
does not contain all of the information set forth in the Registration Statement
(of which this Prospectus is a part) and exhibits thereto which the Company has
filed with the Securities and Exchange Commission in Washington, D.C. For
further information, reference is made to the Registration Statement including
the exhibits filed or incorporated as a part thereof, which may be examined
without charge at the Public Reference Section of the SEC at 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies thereof may be obtained from the SEC at
prescribed rates.
--------------------
No person is authorized in connection with any offering made hereby to give any
information or to make any representation other than as contained in this
Prospectus, and if given or made, such information or representation must not be
relied upon as having been authorized by the Company. This Prospectus does not
constitute an offer to sell, or a solicitation of an offer to buy, by any person
in any jurisdiction in which it is unlawful for such person to make such an
offer or solicitation. Neither the delivery of this Prospectus nor any issuance
of securities made hereunder shall under any circumstances create any
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
1
<PAGE>
SUMMARY
The following summary is intended to highlight certain information
contained elsewhere in this Prospectus. This summary is not intended to be
complete and is qualified in its entirety by reference to the more detailed
information contained elsewhere in this Prospectus, the Appendices hereto, and
the documents referred to herein. Optionholders are encouraged to read this
Prospectus, the Exhibits, and the Appendices hereto in their entirety.
The Company
Business of the Company. The Company is an insurance holding company
incorporated in Iowa in 1984. The Company owns and operates its wholly-owned
subsidiary, Brokers National Life Assurance Company ("Brokers
National")(formerly known as Iowa Life Assurance Company"), which is a life
insurance company originally domiciled in Iowa and now domiciled in Arkansas
following a redomestication in 1994. Brokers National began marketing insurance
products to the public in Iowa in 1987. On December 3, 1991 Brokers National
merged with Statesman Life Insurance Company ("Statesman"), the surviving
company, and its name was changed at that time to Iowa Life Assurance Company
and later changed to Brokers National Life Assurance Company in connection with
a subsequent merger described more fully below. As a result of the merger with
Statesman, Brokers National became authorized to transact insurance business in
24 additional states. As of December 31, 1995, Brokers National was authorized
to transact insurance business in 27 states.
Effective August 1, 1994, the Company merged its wholly-owned
subsidiary, USSA Acquisition, Inc. ("USSA"), an Arkansas corporation, with and
into BNL Equity Corporation ("BNLE"), formerly known as United Arkansas
Corporation, an Arkansas insurance holding corporation and BNLE became a
wholly-owned subsidiary of the Company. In March, 1994, the name of the Company
was changed from United Iowa Corporation to BNL Financial Corporation as one of
the first steps in the merger. The merger involved an exchange of newly-issued
common stock of the Company for all of the issued and outstanding shares of
common stock of BNLE. The merger was approved by the shareholders of BNLE. The
shareholders of the Company authorized additional shares of its common stock,
some of which was used in connection with the merger. The merger was approved
August 1, 1994 by the Arkansas Insurance Department. The merger is more fully
described in the Registration Statement on Form S-4 (including a preliminary
Prospectus/Proxy Statement), No. 33-70318, filed with the Securities and
Exchange Commission on October 13, 1993. The Registration Statement includes as
an exhibit thereto the Plan of Merger containing the terms and conditions of the
transaction.
In connection with the merger of USSA and BNLE, the Company
redomesticated Brokers National (formerly known as Iowa Life Assurance
Corporation ), from Iowa into Arkansas, making it an Arkansas-domiciled insurer.
The redomestication was a step preliminary to merging Brokers National with
United Arkansas Life Assurance Corporation, an Arkansas-domiciled life insurer,
and the wholly owned subsidiary of BNLE. Brokers National was the survivor of
the merger. The merger enhanced the capital and surplus of both companies and
increased the survivor's capacity for premium growth. The merger of the
subsidiaries was approved by the Iowa Insurance Division and the Arkansas
Insurance Department.
The executive offices of the Corporation are located at 301 Camp Craft
Road, Suite 200, Austin, Texas 78746, telephone number (512) 327-3065.
For additional information concerning the business and operations of
the Company, see "Business of the Company."
The Stock Options
This Prospectus relates to the issuance and exercise of certain stock
options (the "Stock Options") under the Company's 1994 Brokers' and Agents'
Nonqualified Stock Option Plan (the "Plan"). The Plan is intended to advance the
interests of the Company by attracting and retaining insurance brokers and
agents for Brokers National and to furnish additional incentive to such persons
upon whose initiative and efforts the successful conduct and development of the
business of the Company largely depends, by encouraging such persons to become
owners of the common stock of the Company.
2
<PAGE>
The Plan will be administered by a Committee of the following four
members of the Board of Directors: Wayne E. Ahart, C. Don Byrd, Kenneth Tobey
and Barry N. Shamas. The Committee shall have final authority to determine the
individuals to whom options shall be granted and to determine the number of
shares, purchase price and other terms related to the options granted and to
administer the Plan in accordance with its terms. Participants in the Plan will
be selected by the Committee from the sales persons of insurance policies of
Brokers National. Such persons may include individuals with the following
titles: Area General Agent, General Agent and Personal Producing General Agent.
The aggregate number of shares of common stock which may be issued
upon exercise of options granted under the Plan shall not exceed 250,000 shares.
All shares for which options are granted which for any reason are cancelled or
which expire unexercised shall be available for granting of further options
under the Plan. The exercise price of common stock offered to eligible
participants may be less than the full market value of the common stock at the
date of grant. The term of each option shall be established by the Committee but
in no event shall be longer than five years from the date of grant. The exercise
of options may be subject to a vesting schedule determined by the Committee on
the date of grant. No option shall be exercisable after the expiration of five
years from the date of grant.
Any option granted under the Plan shall be exercisable only during the
lifetime of the optionee and may not be assigned, pledged or hypothecated in any
way, shall not be subject to execution, and shall not be transferrable by the
optionee otherwise than by will or laws of descent and distribution. No option
may be granted under the Plan after the expiration of ten years from the date on
which the Plan is approved by the shareholders of the Company.
For additional information regarding the Stock Options, see "The Stock Options"
Common Stock Outstanding
The following table describes the number of shares of Common Stock
outstanding (net of treasury shares) prior to the issuance of the Stock Options
and after the issuance and exercise of all of the Stock Options. There can be no
assurance that any of the Stock Options will be exercised.
Common Stock outstanding prior to
exercise of Stock Options ....................... 23,173,149 shares
Common Stock to be outstanding after
after exercise of the Stock Options ............. 23,423,149 shares
Use of Proceeds
The Company intends to apply the net proceeds, if any, realized upon
the exercise of the Stock Options for working capital and general corporate
purposes. See "Use of Proceeds."
Risk Factors
The securities offered hereby involve a high degree of risk. See "Risk
Factors."
Comparative Market Price Data
There is currently no trading market for the Company's common stock
and no basis upon which to establish a market value. See, "Market Price of and
Dividends on Common Equity and Related Stockholder Matters."
3
<PAGE>
RISK FACTORS
Developing Businesses
The Company has a limited business history and continues to develop its
business. On the basis of generally accepted accounting principles, the Company
has not been profitable.
The Company has paid no dividends in the past and there can be no
assurance that the Company could pay dividends in the near future. Further, the
Company's cash flow is derived in part from dividends on the stock of BNLE. The
ability of BNLE to pay dividends is dependent primarily upon its cash flow from
dividends on the capital stock of Brokers National. The payment of dividends to
BNLE by Brokers National is subject to regulation by the Arkansas Insurance
Department.
Absence of Public Market; Restrictions on Transfer
There is no established public trading market for the Company's common
stock and there can be no assurance that a market will develop in the near
future. The Stock Options are not transferable.
Competition
The insurance industry is highly competitive and Brokers National
competes in many instances with individual companies and with groups of
affiliated companies that have substantially greater financial resources, larger
sales forces and more widespread agency and brokerage relationships than Brokers
National. In 1995, Brokers National was assigned a performance rating of "B-"
(adequate) from A. M. Best Corporation, Inc. ("Best").
Regulation
The insurance industry is subject to extensive regulation and
supervision by state insurance departments. Brokers National is regulated by
the Insurance Department of the State of Arkansas and the other states in which
it is licensed to write and sell insurance products. Such regulation and
supervision is primarily for the benefit and protection of policyholders and not
investors.
USE OF PROCEEDS
The Company intends to apply the net proceeds, if any, of the Stock
Option exercise contemplated by this offering for working capital and general
corporate purposes.
THE COMPANY
General
The Company is an insurance holding corporation incorporated in Iowa in
January 1984. The Company has two wholly-owned subsidiaries, BNLE and Brokers
National. BNLE is an intermediate holding company which became a subsidiary of
the Company as a result of a merger with USSA Acquisition, Inc. ("USSA"), as
more fully described below. USSA was organized in Arkansas in 1993 as a
subsidiary of BNL solely for the purpose of facilitating the merger with BNLE.
Brokers National is a life and health insurance company.
On December 3, 1991, the Company acquired Statesman Life Insurance
Corporation ("Statesman") from Vulcan Life Insurance Corporation ("Vulcan"), the
parent and sole owner of Statesman. The acquisition was structured as a merger
between Brokers National and Statesman. In exchange for Statesman, Brokers
National paid cash of approximately $1,000,000 which was equal to the carrying
value of securities on deposit by Statesman with various state insurance
departments and, in addition, the Company issued to Vulcan 301,205 shares of its
common stock on a restricted basis. Brokers National was then merged with and
into Statesman. The name of the merged
4
<PAGE>
insurance companies was simultaneously changed to Brokers National's former
name, Iowa Life Assurance Company. Brokers National remained domiciled in Des
Moines, Iowa following the merger with Statesman and continued to engage in the
sale of life and health insurance.
Effective August 1, 1994, the Company merged its wholly-owned
subsidiary, USSA Acquisition, Inc. ("USSA"), an Arkansas corporation, with and
into BNL Equity Corporation ("BNLE"), formerly known as United Arkansas
Corporation, an Arkansas insurance holding Corporation and BNLE became a
wholly-owned subsidiary of the Company. In March, 1994, the name of the Company
was changed from United Iowa Corporation to BNL Financial Corporation, and the
name of UAC was changed to BNL Equity Corporation ("BNLE") as one of the first
steps in the merger. The merger involved an exchange of newly-issued common
stock of the Company for all of the issued and outstanding shares of common
stock of BNLE. The merger was approved by the shareholders of BNLE. The
shareholders of the Company authorized additional shares of its common stock,
some of which was used in connection with the merger. The merger was approved
August 1, 1994 by the Arkansas Insurance Department. The merger is more fully
described in the Registration Statement on Form S-4 (including a preliminary
Prospectus/Proxy Statement), No. 33-70318, filed with the Securities and
Exchange Commission on October 13, 1993. The Registration Statement includes as
an exhibit thereto the Plan of Merger containing the terms and conditions of the
transaction.
In connection with the merger of USSA and BNLE, the Company
redomesticated Brokers National from Iowa, its initial state of domicile, into
Arkansas, making it an Arkansas-domiciled insurer. The redomestication was a
step preliminary to merging Brokers National with United Arkansas Life Assurance
Corporation, an Arkansas-domiciled life insurer, and the wholly owned subsidiary
of BNLE. Brokers National was the survivor of the merger. The merger enhanced
the capital and surplus of both companies and increased the survivor's capacity
for premium growth. The merger of the subsidiaries was approved by the Iowa
Insurance Division and the Arkansas Insurance Department.
The executive offices of the Company are located at 301 Camp Craft
Road, Suite 200, Austin, Texas 78746, telephone number (512) 327-3065
Industry Segments
The operations of the Company are conducted through Brokers National,
which sells life and accident and health insurance. Brokers National began
marketing its insurance products in Iowa in October 1987. Prior to 1992, Brokers
National's insurance products were sold only in Iowa. In 1995, Brokers National
sold insurance policies in 20 states. The Company has no foreign operations.
Brokers National has Certificates of Authority in 27 states to issue
life and accident and health insurance on an individual and group basis. Brokers
National currently concentrates its marketing on group dental insurance, sold
primarily on a payroll deduction basis. The Company conducts business in only
one industry segment.
Sales and Marketing
In 1992, the Company determined that, due to the high costs of
recruiting, training and managing a captive sales force, its long-term growth
potential would be substantially enhanced by marketing specialized products
through professional independent agents and brokers.
As a result, the primary marketing emphasis of Brokers National is the
development of specialized or "niche" life and health insurance products that
can be sold on a group or payroll deduction basis through independent insurance
agents. The life company currently offers four such products: an accidental
death life insurance policy, a family level term insurance policy, a deferred
annuity and a line of dental insurance policies. In addition, it has available a
variety of whole life, limited payment whole life, annuity and annually
renewable term life insurance policies as well as waiver of premium disability,
premium payor disability, double indemnity and child life insurance rider
benefits.
5
<PAGE>
Statistics by line of business for Brokers National are as follows
(gross before reinsurance):
<TABLE>
<CAPTION>
For the Years Ended December 31,
<S> <C> <C>
1995 1994
I. Annual Premiums and Annuity Deposits In Force:
Ordinary Life Insurance $ 407,000 $ 452,000
Individual Annuities(1) 337,000 384,000
Group Dental Insurance 5,264,000 3,250,000
Accidental Death Insurance 94,000 110,000
----------- ------------
Total $6,102,000 $ 4,196,000
========== ===========
II. Collected Premiums and Annuity Deposits:
Ordinary Life Insurance $ 406,000 $ 447,000
Individual Annuities(1) 371,000 377,000
Group Dental Insurance 4,159,000 2,640,000
Accidental Death Insurance 86,000 101,000
----------- ------------
Total $5,022,000 $ 3,565,000
========== ===========
III. Amount of Insurance:
Ordinary Life Insurance $ 35,000,000 $ 36,000,000
Accidental Death Insurance 180,000,000 208,000,000
------------ ------------
Total $215,000,000 $244,000,000
============ ============
<FN>
(1)Classified as a deposit liability on the financial statements.
</FN>
</TABLE>
At February 28, 1996, Brokers National had appointed 784 agents in 21
states to market its policies. On all of its products, except the dental
policies, Brokers National follows the industry practice of paying a large
portion of the first year's premiums and a relatively small portion of
subsequent premiums as commissions to agents. For the dental policies,
commissions are level in all years which is typical for this type of business.
There is considerable competition for insurance agents. Brokers National
competes with larger, well-established life insurance companies for the services
of agents. Brokers National believes it can attract competent agents by offering
competitive compensation and efficient service and by developing products to
fill special needs within the marketplace.
6
<PAGE>
Financial Information by Geographical Regions
Premiums collected by state during 1995 are reflected in the following
table:
<TABLE>
<CAPTION>
Group Dental
and
State Life Premiums Annuity Accidental Death Total
<S> <C> <C> <C> <C>
Alabama - - $ 268,586 $ 268,586
Arkansas $ 13,925 - 1,507,852 1,521,777
Colorado - - 136,619 136,619
Delaware - - 1,068 1,068
Florida 781 - 98,444 99,225
Georgia - - 421,078 421,078
Illinois 589 - 169,853 170,442
Indiana 8,148 - 74,819 82,967
Iowa 367,650 370,633 629,233 1,367,516
Louisiana - - 6,589 6,589
Michigan 954 - 453,968 454,922
Minnesota 9,364 - 82,059 91,423
Mississippi 540 - 58,976 59,516
Missouri 165 - 195,403 195,568
Nebraska 96 - 6,249 6,345
Ohio - - 26,309 26,309
Oklahoma 3,881 - 99,863 103,744
South Dakota - - 6,976 6,976
Miscellaneous - - 1,603 1,603
----------- ----------- ------------ ------------
Total $406,093 $370,633 $4,245,547 $5,022,273
=========== =========== ============= ============
</TABLE>
Reinsurance
As is customary among insurance companies, Brokers National reinsures
with other insurance companies portions of the life and accident and health
insurance risks it underwrites. The primary purpose of reinsurance agreements is
to enable an insurance corporation to reduce the amount of its risk on any
particular policy and, by reinsuring the amount exceeding the maximum amount
which it is willing to retain, to write policies in amounts larger than it could
without such agreements. An effect of reinsurance is to transfer a portion of
the profit, if any, on the insurance ceded to the reinsurer in exchange for the
reinsurer's assumption of risk. Even though a portion of the risk may be
reinsured, the ceding insurer remains liable to perform all obligations imposed
by the policies issued by it and is liable if its reinsurer should be unable to
meet its obligation under the reinsurance agreements. Brokers National
determines the insurability of the applicant prior to submitting the application
to the reinsurer. However, if reinsurers reject any such application as an
unsatisfactory risk, Brokers National also rejects the application.
The two principal types of life insurance reinsurance treaties commonly
in use in the industry are "automatic" and "facultative" agreements. Under an
"automatic" treaty, the reinsurer agrees that it will assume liability
automatically for the excess over the ceding company's retention limits on any
application acceptable to the ceding company. Under a "facultative" treaty, the
reinsurer retains the right to accept or reject any reinsurance submitted after
a survey of each individual application.
Life and Accident Insurance: Brokers National reinsures all accidental
death life insurance policies with Business Mens Assurance Corporation ("BMA"),
Kansas City, Missouri, under automatic treaties whereby BMA assumes liability
for all risks over $25,000. All other insurance products of Brokers National in
excess of $35,000 are reinsured with BMA under an automatic treaty up to
$175,000 and under a facultative treaty for amounts over $175,000. BMA received
a rating of "A+" (superior) from Best for 1994.
7
<PAGE>
<TABLE>
<CAPTION>
Gross
Insurance Reinsurance Reinsurance Net Insurance
In Force Ceded Assumed In Force
<S> <C> <C> <C> <C>
Life Insurance
1995 $35,310,000 $11,486,000 $6,131,000 $30,455,000
1994 36,280,000 11,188,000 5,624,000 30,716,000
1993 38,485,000 14,142,000 5,524,000 29,867,000
1992 44,472,000 16,321,000 5,308,000 33,459,000
1991 42,872,000 14,615,000 5,112,000 33,369,000
Accidental Death Insurance
1995 $180,000,000 $164,426,000 $0 $15,574,000
1994 208,000,000 190,350,000 0 17,650,000
1993 239,345,000 219,583,000 0 19,762,000
1992 320,048,000 293,295,000 0 26,225,000
1991 32,195,000 29,295,000 0 2,900,000
</TABLE>
Group Dental Insurance. The group dental insurance of Brokers National
has been reinsured with UniLife Insurance Corporation ("UniLife") of San
Antonio, Texas under a quota share reinsurance agreement. Prior to 1995, UniLife
assumed 90% of the risk on each of these policies and Brokers National received
a fee for the portion of the risks reinsured. Effective January 1, 1995, Brokers
National renegotiated its agreement with UniLife and under the terms of the new
agreement, Brokers National reinsured 50% of the dental business with UniLife
and no longer received a fee for the portion of the risks reinsured. In
addition, Brokers National paid UniLife claim administration fees equal to 4% of
the net collected premiums on the 50% portion of the risk Brokers National
retains.
In March, 1995, Brokers National was notified that UniLife was
discontinuing active marketing and underwriting of insured dental policies and,
consequently, was terminating the quota share reinsurance agreement and
administrative agreement, effective January 1, 1996 and March 31, 1996,
respectively. Effective June 1, 1995, Brokers National amended its reinsurance
agreement so that all new dental business written was 100% insured by Brokers
National. On November 1, 1995, Brokers National terminated its reinsurance
agreements with UniLife and began administering and retaining 100% of the group
dental business.
The following chart shows group dental insurance premiums collected net
of reinsurance for the years ended December 31, 1991, 1992, 1993, 1994 and 1995.
<TABLE>
<CAPTION>
Gross Net
Premiums Premiums Premiums Ceding
Group Dental Insurance Collected Ceded Collected Fees
---------------------- --------- ------- --------- -----
<S> <C> <C> <C> <C>
1995 $4,159,000 $1,655,000 $2,504,000 $ 0
1994 2,640,000 2,376,000 264,000 180,000
1993 1,241,000 1,117,000 124,000 109,000
1992 321,000 289,000 32,000 27,000
1991 1,000 900 100 0
</TABLE>
The following chart shows group dental insurance claims paid net of reinsurance
and incurred loss ratios for the years ended December 31, 1991, 1992, 1993, 1994
and 1995. The incurred loss ratio represents the ratio of incurred claims to
premiums earned.
8
<PAGE>
<TABLE>
<CAPTION>
Gross
Premiums Ceded Net Incurred
Group Dental Insurance Paid Claims Claims Paid Loss %
---------------------- ------ ------ ----------- -------
<S> <C> <C> <C> <C> <C> <C>
1995 $2,719,000 $1,211,000 $1,508,000 72.5%
1994 1,822,000 1,639,000 183,000 74.8%
1993 858,000 772,000 86,000 73.2%
1992 197,000 177,000 20,000 76.7%
1991 0 0 0 0
</TABLE>
Investments
Consistent with state insurance company regulatory laws, Brokers
National has invested available funds in certificates of deposit, US Government
and Agency bonds, corporate bonds and other investment securities. The earnings
from such investments represent a substantial part of the income of Brokers
National.
For the years ended December 31, 1991, 1992, 1993, 1994 and 1995,
Brokers National's net investment income and ratio of net return on mean
invested assets were as follows:
<TABLE>
<CAPTION>
Net Return
Net on Mean
Investment Invested
Year Income Assets
<S> <C> <C>
1995 $734,000 6.6%
1994 674,000 6.5%
1993 599,000 6.1%
1992 637,000 6.9%
1991 467,000 7.7%
</TABLE>
As of December 31, 1995, Brokers National and the Company owned taxable
municipal bonds (the "bonds") representing investment in three issuers by whom
the proceeds of the securities were invested in guaranteed investment contracts
with Executive Life Insurance Corporation ("Executive Life"). Executive Life was
placed under rehabilitation by the California regulators in 1991. At that time
all interest payments on the bonds were discontinued. On March 31, 1991, the
Company elected to reduce the book value of the bonds to 25% of their $700,000
face value (approximate market value at that time) and recorded a loss of
$522,282 as a result. In 1993, a rehabilitation plan was approved for Executive
Life. In 1994, the Company and Brokers National received partial payments on the
bonds that included $175,000 return of principal remaining on the books,
$133,318 realized gain from recovery of previous write-down and $106,015
interest. In 1995, the Company and Brokers National received $188,456 realized
gain from recovery of previous write-down and $43,174 interest on the bonds. As
of December 31, 1995, the Company and Brokers National had received $645,963 of
principal and interest on the bonds since 1991 when they went into default. The
bonds have a total market value of $580, which indicates the rehabilitation
program has paid out substantially all of the principal available now and in the
future on the bonds.
For further information regarding the investments of the Company, see
the Consolidated Financial Statements set forth in pages F-1 through F-14 of
this Prospectus.
Special Factors Relating to Life Insurance Companies
State insurance laws and regulations generally govern the accounting
practices and prescribe the procedures and form for financial reports of
insurance companies filed with state insurance regulatory agencies. Although
there are some differences among the various states, there is a substantial
degree of uniformity by reason of the policies adopted by the National
Association of Insurance Commissioners ("NAIC"). Reports prepared in accordance
with the prescribed accounting practices are primarily intended to reflect the
ability of an insurance Corporation to meet its obligations to policyholders and
do not necessarily reflect going-concern value. Balance sheets prepared under
9
<PAGE>
this approach are designed primarily to reflect the financial position of
insurance companies from the standpoint of solvency. Certain of the prescribed
or permitted accounting practices for statutory purposes differ in some respects
from generally accepted accounting principles followed by other business
enterprises in determining financial position and results of operations.
Life insurance corporation gross income is generated from two sources,
premiums and investment income. The cost of placing new policies in force may
exceed the premiums received from those policies for the first year. In
subsequent policy years, some of these costs, such as commissions, medical
examinations and investigative expenses, may be reduced substantially. Also,
policy lapses and surrenders are generally greater in the first years that
policies are in force. Although the costs of acquiring new insurance business
are large and generally not duplicated thereafter, statutory accounting
procedures for insurance companies and state laws and regulations designed to
protect policyholders provide that the entire amount of acquisition costs must
be charged to operations currently instead of being spread over the life of the
policies. As a result of this and other factors, new insurance companies
normally show losses on a statutory basis in their early years of operations.
The interests of policyholders and of the public in the financial
integrity of the life insurance industry make it important that the solvency of
life insurance companies be demonstrated to regulatory authorities.
Consideration of these interests and the uncertainties inherent in the future
have resulted in the accounting practices prescribed or permitted by insurance
regulatory authorities. Solvency must be continuously demonstrated for a life
insurance Corporation to be permitted to issue policies to the public.
A large portion of the first year and renewal premiums are required to
be placed in reserve for the protection of policyholders. The amount of such
reserves is based upon actuarial calculations and its annual increase is treated
as an expense for insurance accounting purposes. Therefore premiums create
income only to the extent that they exceed reserve requirements, commissions and
administrative expenses. Regulatory authorities require that actuarial
calculations of reserves use conservative assumptions as to mortality and risk
and future interest earnings on the reserves. Accordingly, the amounts of
premiums available to create income will be decreased.
Brokers National calculates statutory reserves on the Commissioner's
Reserve Valuation Method. This method provides a lower reserve in the early
years of a policy to partially offset the higher first-year costs of the policy.
Although such reserves are treated as liabilities and are not available for the
general use of insurance companies, the companies are free to invest such
reserves in accordance with applicable state laws. Interest earned on invested
reserves becomes operating income to each of the life insurance companies to the
extent that such interest exceeds the amount required to be added to the
reserves.
The consolidated financial statements of the Company and Brokers
National to be presented to shareholders and the public are required to be
prepared in conformity with generally accepted accounting principles. The
objective of these financial statements is to provide reliable financial
information about economic resources and obligations of a business enterprise
and changes in net resources resulting from its business activities, measured as
a going concern. To the extent that the accounting practices prescribed or
permitted by state regulatory authorities differ from generally accepted
accounting principles, appropriate adjustments will be made, including (but not
limited to) the following:
(a) Premiums are reported as earned over the premium paying period.
Benefits and expenses are associated with earned premiums so as to
result in the matching of expenses with the related premiums over
the life of the contracts. This is accomplished through the
provision for liabilities for future policy benefits and the
deferral and amortization of acquisition costs.
(b) Certain assets designated as "non-admitted assets" for statutory
purposes are reinstated to the accounts.
(c) The asset valuation reserve is reclassified as retained earnings
rather than as a liability. The interest maintenance reserve is
reclassified from a liability to investment income.
(d) Deferred federal income taxes are provided for income and
deductions which are recognized in the financial statements
at a different time than for federal income tax purposes. These
items (temporary
10
<PAGE>
differences) relate primarily to different methods of calculating
policy reserves, treatment of acquisition costs, and recognition
of deferred and uncollected premiums.
(e) Premium payments received on annuities are not reported as revenue
but are recorded as increases to a deposit liability account. The
profits are then deferred over the life of the policy instead of
being realized when the payments are received.
(f) Realized gains and losses from the sale of investments are
reclassified to a separate component of summary of operations.
Taxes thereon are included in the tax provision.
(g) Investments in fixed maturity securities that are available for
sale are carried at fair value with the unrealized appreciation
(depreciation) recorded to shareholders' equity.
There is not assurance that Brokers National will be profitable when
reporting in conformity with generally accepted accounting principles and, in
any event, no dividends may be paid to the Company by Brokers National unless
such dividend would be permissible under the statutory accounting requirements.
Competition
The life insurance business is highly competitive, and Brokers National
competes in many instances with individual companies and groups of affiliated
companies that have substantially greater financial resources, larger sales
forces and more widespread agency and brokerage relationships than Brokers
National. Certain of these companies operate on a mutual basis which may give
them an advantage over Brokers National on certain types of policies due to the
fact that the profits thereon accrue to the policyholders rather than the
shareholders. In 1995, Brokers National was assigned an A.M. Best financial
performance rating of "B-" (adequate).
Brokers National focuses its marketing efforts on sales of life, health
and dental insurance products to small and medium size groups of insureds such
as members of employee associations. The groups to whom it has sold insurance
range in size from two to approximately 1,200 persons. Brokers National also
sells life, health and dental insurance products to individuals. Brokers
National is a relatively small insurance company which has no identifiable
market share. Brokers National is not ranked according to its size or volume of
sales.
Brokers National competes for the services of agents and brokers in
several ways. First, the line of dental insurance products offered by Brokers
National are attractive to brokers and general agents because such products can
be sold as an "add-on" to existing group insurance products. Second, Brokers
National strives to provide high service to agents by offering insurance
products that meet their clients' needs and individualized service in the
administration of such products. Finally, Brokers National attempts to structure
the levels of premiums, benefits and commissions on dental insurance products to
compare favorably with competitors.
Insurance Regulations
Brokers National is subject to regulation and supervision by the states
in which it is admitted to transact business. The laws of these jurisdictions
generally establish supervisory agencies with broad administrative and
supervisory powers relative to granting and revoking licenses to transact
business, regulating trade practices, establishing guaranty associations,
licensing agents, approving policy forms, regulating premium rates for some
lines of business, establishing reserve requirements, regulating competitive
matters, prescribing the form and content of required financial statements and
reports, determining the reasonableness and adequacy of statutory capital and
surplus and regulating the type and amount of investments permitted.
Most states have also enacted legislation which regulates insurance
holding company systems, including acquisitions, extraordinary dividends, the
terms of surplus notes, the terms of affiliate transactions and other related
matters. Brokers National is registered as a holding company system pursuant to
such legislation in Arkansas, and Brokers National routinely reports to other
jurisdictions.
Recently, increased scrutiny has been placed upon the insurance
regulatory framework. A number of state legislatures have considered or enacted
legislative proposals that alter, and in many cases increase, the authority of
11
<PAGE>
state agencies to regulate insurance companies and holding company systems. In
addition, legislation has been introduced in Congress which, if enacted, could
result in the federal government assuming some role in the regulation of the
insurance industry. The Subcommittee on Oversight and Investigations of the
Committee on Energy and Commerce of the U. S. House of Representatives has made
inquiries and conducted hearings as part of a broad study of the regulation of
U. S. insurance companies.
The NAIC, an association of state regulators and their staffs, attempts
to coordinate the state regulatory process and continually re-examines existing
laws and regulations and their application to insurance companies. Recently,
this re-examination has focused on insurance company investment and solvency
issues and, in some instances, has resulted in new interpretations of existing
law, the development of new laws and the implementation of non-statutory
guidelines. The NAIC has formed committees and appointed advisory groups to
study and formulate regulatory proposals on such diverse issues as the use of
surplus debentures, accounting for reinsurance transactions and the adoption of
risk-based capital ("RBC") rules. In addition, in connection with its
accreditation of states to conduct periodic company examinations, the NAIC has
encouraged states to adopt model NAIC laws on specific topics, such as holding
company regulations and the definition of extraordinary dividends. It is not
possible to predict the future impact of changing state and federal regulation
on operations of Brokers National.
The NAIC has adopted model RBC requirements, effective December 31,
1993, to evaluate the adequacy of statutory capital and surplus in relation to
investment and insurance risks associated with: (i) asset quality; (ii)
mortality and morbidity; (iii) asset and liability matching; and (iv) other
business factors. The RBC formula is designed to be used by the states as an
early warning tool to identify possible weakly capitalized companies for the
purpose of initiating regulatory action. In addition, the formula defines a new
minimum capital standard which will supplement the prevailing system of low,
fixed minimum capital and surplus requirements on a state-by-state basis.
The new RBC requirements provide for four different levels of
regulatory attention depending on the ratio of a company's total adjusted
capital (defined as the total of its statutory capital, surplus, asset valuation
reserve and 50% of apportioned dividends) to its RBC. The "Company Action Level"
is triggered if a company's total adjusted capital is less than 100% but greater
than or equal to 75% of its RBC, or if total adjusted capital is less than 125%
of RBC and a negative trend has occurred. The trend test calculates the greater
of any decrease in the margin (i.e., the amount in dollars by which a company's
total adjusted capital exceeds its RBC) between the current year and the prior
year and between the current year and the average of the past three years, and
assumes that the decrease could occur again in the coming year. If a similar
decrease in the margin in the coming year would result in an RBC of less than
95%, then Company Action Level would be triggered. At the Company Action Level,
a company must submit a comprehensive plan to the regulatory authority which
discusses proposed corrective actions to improve its capital position. The
"Regulatory Action Level" is triggered if a company's total adjusted capital is
less than 75% but greater than or equal to 50% of its RBC. At the Regulatory
Action Level, the regulatory authority will perform a special examination of the
company and issue an order specifying corrective actions that must be followed.
The "Authorized Control Level" is triggered if a company's total adjusted
capital is less than 50% but greater than or equal to 35% of its RBC, and the
regulatory authority may take any action it deems necessary, including placing
the company under regulatory control. The "Mandatory Control Level" is triggered
if a company's total adjusted capital is less than 35% of its RBC, and the
regulatory authority is mandated to place the company under its control.
Calculations using the NAIC formula at December 31, 1994, indicate that the
ratios of total adjusted capital to RBC for Brokers National would have been
significantly above the Company Action Level.
As part of their routine regulatory process, approximately once every
three years insurance departments conduct detailed examinations ("Triennial
examinations") of the books, records and accounts of insurance companies
domiciled in their states. Such Triennial examinations are generally conducted
in cooperation with the departments of other states under guidelines promulgated
by the NAIC.
The Iowa Insurance Division completed Brokers National's Triennial
Examination as of December 31, 1990 and an interim examination was completed as
of September 30, 1992, following the Company's acquisition of Statesman Life
Insurance Company. At the conclusion of the December 31 examination, the Iowa
Insurance Division proposed various changes in the recorded amounts of certain
assets and liabilities. Brokers National accepted these adjustments which
reduced its surplus by $31,733. The interim examination resulted in a decrease
in Brokers National's surplus of $8,099. In addition, a question concerning a
loan was raised by the Iowa Insurance
12
<PAGE>
Division and has been resolved.
Management of Brokers National is not aware of any failure to comply
with any significant insurance regulatory requirement.
Personnel
As of December 31, 1995, Brokers National had four executive officers,
29 full-time administrative personnel and one part-time employee. Brokers
National's administrative staff supervises services for the agency force, policy
underwriting, policy issuance and service, billing and collections, claims,
accounting and bookkeeping, preparation of reports to regulatory authorities and
other matters. The Company utilizes the same four executive officers under a
cost-sharing arrangement. Neither the Company nor Brokers National have
experienced any work stoppages or strikes and consider their relations with
employees and agents to be excellent. None of these employees are presently
represented by a union.
Administrative Agreement - Dental Insurance
In August, 1991, in conjunction with its reinsurance treaty with
UniLife, Brokers National entered into an administrative agreement whereby
UniLife agreed to perform, at no cost to Broker National, all administrative and
claim services with respect to the dental insurance policies written by Brokers
National. The agreement was amended effective January 1, 1995, whereby Brokers
National increased the amount it retains on this business from 10% to 50% and
Brokers National will pay UniLife a claims administrative fee equal to 4% of net
collected premiums on the portion of the risk (50%) not ceded to UniLife. In
March, 1995, Brokers National received notice that UniLife was discontinuing
active marketing and underwriting of insured dental policies and, consequently,
was terminating the quota share reinsurance agreement and administrative
agreement, effective January 1, 1996 and March 31, 1996, respectively. Effective
June 1, 1995, Brokers National amended its reinsurance agreement so that all new
dental business written was 100% insured by Brokers National. On November 1,
1995, Brokers National terminated its reinsurance agreements with UniLife and
began administering and retaining 100% of the group dental business.
PROPERTIES
Neither the Company nor Brokers National own any real estate. Brokers
National leases 288 square feet of office space in Des Moines, Iowa at a monthly
rental of $567 ($6,804 per year). The rent includes the services of a secretary
that is shared with other tenants of the building.
On June 1, 1994, Brokers National entered into a five-year lease for
5,588 square feet of office space in Austin, Texas, at a monthly rent of $5,588
($67,056 per year) during 1994 and 1995 plus pro rata operating expenses in
1995. The rent increases to $6,053 per month, plus pro rata operating expenses,
beginning in the third year of the lease. The Company has its administrative and
marketing offices at this location.
BNLE leases office space in North Little Rock, Arkansas, at a monthly
rate of $1,800 ($21,600 per year). The lease expires June 1, 1996. Brokers
National shares 50% of the rental cost.
The Company owns the furniture and equipment used in the operation of
its business.
LEGAL PROCEEDINGS
There are no material pending proceedings to which the Company or
Brokers National is a party or to which any of their property is the subject.
13
<PAGE>
DESCRIPTION OF THE COMPANY'S
CAPITAL STOCK
The following statement is a brief summary of certain provisions with
respect to the Company's capital stock. The summary does not purport to be
complete, and such statements are qualified in their entirety by reference to
the Company's Articles of Incorporation and Bylaws. The aggregate number of
shares which the Company currently has the authority to issue is forty-six
million (46,000,000) shares consisting of forty-five million (45,000,000) shares
of common stock with no par value, of which 23,173,149 shares (excluding
treasury shares) were outstanding on December 31, 1995, and one million
(1,000,000) shares of preferred stock, $2.00 par value, none of which were
issued or outstanding on December 31, 1995.
Holders of the Company's common stock, with respect to shares which are
authorized or proposed to be authorized, are entitled to or will be entitled to
one vote per share on all matters submitted to a vote of shareholders, including
the election of directors. Shareholders may not cumulate their votes in the
election of directors. Holders of the Company's common stock are entitled to
dividends, when and if declared by the Board of Directors, out of legally
available funds. Upon liquidation, the holders of the Company's common stock are
entitled to share ratably in the net assets of the Company remaining after
provision for payment of liabilities and satisfaction of the liquidation
preferences of any shares of preferred stock that may be outstanding. Holders of
the Company's common stock have no preemptive, subscription, redemption or
conversion rights. The rights, preferences and privileges of holders of the
Company's common stock may become subject to those of holders of any preferred
stock that the Company may issue in the future.
The preferred stock may be issued from time to time in one or more
series of any number of shares, provided that the aggregate number of shares
outstanding of all series shall not exceed one million (1,000,000). Authority is
vested in the Board of Directors from time to time to authorize the issuance of
the preferred stock of any series and to state and express, in the resolution or
resolutions creating and providing for the issue of shares of any series, the
designations, voting powers, if any, preferences and qualifications,
limitations, and restrictions thereof of such series to the full extent now or
hereafter permitted by the laws of the State of Iowa, including the designation
of a series and the number of shares which shall constitute a series; the annual
dividend rate on the shares of a series; the conditions upon which and the time
when any dividends are payable; any redemption price and the terms of which such
series are redeemable; the right of shares upon liquidation, dissolution,
winding up or distribution of assets of the Company and any preferences related
thereto; voting rights of any series, conversion or exclusive rights; the
requirement of any sinking or purchase fund; and any other preferences and
relative participating, optional or other special rights of shares of such
series and qualification, limitations or restrictions thereof.
MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Market for Stock
There is no established public trading market for the Company's Common
Stock. The stock of the Company was traded by Starmont Capital, Ltd., Des
Moines, Iowa, on a workout basis. There has been a limited trading market for
the Company's securities during 1995. Stock sales during the year ranged from
$.40 to $.35 a share. The final stock sold during 1995 was at $.35 a share.
From 1989 until 1992, BNLE offered Arkansas residents 1,000,000 shares
of Common Stock and 500,000 shares of preferred stock in units of two common
shares and one preferred share at $10 per unit. As a condition of the public
offering, the 13,500,000 shares issued to organizers in February 1989 were
placed in escrow. On May 1, 1992, the organizers' shares were reduced to
5,563,212 in accordance with an agreement whereby the organizers could not
collectively own more than 60% of the number of shares of Common Stock
outstanding.
In 1994, in order to consummate a merger of United Arkansas Corporation
and USSA Acquisition, Inc., the stock subject to the February 1, 1989 escrow
agreement was released from the terms and conditions of the February 1, 1989
escrow agreement so that the stock could be exchanged for common stock of United
Iowa Corporation pursuant to the terms of the merger. A new escrow agreement
with an effective date of February 28,
14
<PAGE>
1994, prohibits sale or transfer of the organizer's shares until any one of the
following conditions is satisfied:
a. The Company has net earnings per share per year, after tax and
before extraordinary items, of $1.86 for any three years following the
public offering.
b. A tender offer or an offer to merge or otherwise acquire the Company's
Common Stock at a per share price of at least $3.34 per share of Common
Stock and having a market value at the effective date of the tender
offer, merger, or other acquisition of at least $3.71 per share of
Common Stock.
c. At any time after February 28, 1995, the public market price exceeds
$3.25 for a term of 90 trading days and for 30 consecutive trading days
prior to a request for termination of the escrow.
d. If insurance business in force reaches the following levels:
$100,000,000 - 50% of escrowed shares will be released.
$125,000,000 - 25% of escrowed shares will be released.
$150,000,000 - remaining 25% of escrowed shares will be released.
e. All escrowed shares will be released August 1, 1999, if they have not
been released prior to that time.
Holders
As of December 31, 1995, there were 4,926 shareholders of record of the
Company's Common Stock.
Dividends
The Company has not declared any dividends on its Common Stock to date
and has no present plans to pay any dividends in the foreseeable future. The
Company's ability to declare and pay dividends in the future will be dependent
upon its earnings and the cash needs for expansion. In addition, payment of
dividends by Brokers National is regulated under Arkansas insurance laws.
Transfer Agent and Registrar
First Commercial Trust, Little Rock, Arkansas, is the Registrar and
Transfer Agent for the Company's Common Stock.
THE STOCK OPTIONS
The Board of Directors and the stockholders of the Company approved the
1994 Brokers' and Agents' Nonqualified Stock Option Plan ("Plan") effective
December 14, 1994. The Plan is designed to give certain high-producing agents
and brokers of the Company and Brokers National an opportunity to acquire an
interest in the operation and growth of the Company by granting nonqualified
stock options to agents and brokers designed from time to time by the Board. The
full text of the Plan is set forth in Exhibit A to this Proxy Statement, and the
following description is qualified by reference to the text thereof.
Purpose
The Plan is intended to advance the interests of the Company by
attracting and retaining insurance brokers and agents for Brokers National and
to furnish additional incentive to such persons upon whose initiative and
efforts the successful conduct and development of the business of the Company
largely depends by encouraging such persons to become owners of the common stock
of the Company.
Administration
The Plan will be administered by a Committee of the following four
members of the Board of Directors: Wayne E. Ahart, C. Don Byrd, Kenneth Tobey
and Barry N. Shamas. The Committee shall have final authority
15
<PAGE>
to determine the individuals to whom options shall be granted and to determine
the number of shares, purchase price and other terms related to the options
granted and to administer the Plan in accordance with its terms.
Participants
Participants in the Plan will be selected by the Committee from the
sales persons of insurance policies of Brokers National. Such persons may
include individuals with the following titles: Area General Agent, General Agent
and Personal Producing General Agent.
Number of Shares Subject to Options
The aggregate number of shares of common stock which may be issued upon
exercise of options granted under the Plan shall not exceed 250,000 shares. All
shares for which options are granted which for any reason are cancelled or which
expire unexercised shall be available for granting of further options under the
Plan.
Exercise Price and Term
The exercise price of common stock offered to eligible participants may
be less than the full market value of the common stock at the date of grant. The
term of each option shall be established by the Committee but in no event shall
be longer than five years from the date of grant.
Exercise of Options
The exercise of options may be subject to a vesting schedule determined
by the Committee on the date of grant. No option shall be exercisable after the
expiration of five years from the date of grant. Unless the options are
registered pursuant to the requirements of the Securities Act of 1933, as
amended, restrictions on exercise under the federal securities laws may exist
and certificates representing shares issued upon exercise will bear a legend
describing such restrictions.
Agreements
All options granted under the Plan shall be evidenced by an agreement
between the Company and a participant and shall contain such terms as may from
time to time be approved by the Committee, subject to the limitations and
conditions contained in the Plan.
Manner of Exercise
An option may be exercised by delivery of a written notice of such
election to the Company specifying the number of shares with respect to which
the option is being exercised and specifying a date on which the shares are to
be delivered and payment made therefor. The date of delivery of the shares shall
be at least twenty-one days after such notice is given. In the event payment for
the shares is not made on the specified date, the option shall become
inoperative as to shares which are not paid for and accepted, but shall continue
with respect to any remaining shares subject to the option as to which exercise
has not yet been made.
Restrictions on Transferability
Any option granted under the Plan shall be exercisable only during the
lifetime of the optionee and may not be assigned, pledged or hypothecated in any
way, shall not be subject to execution, and shall not be transferrable by the
optionee otherwise than by will or laws of descent and distribution.
Termination of Agency
If the agency or employment of an optionee terminates for any reason
other than death or total or permanent disability, options granted under the
Plan to such optionee which shall not have been exercised shall be cancelled;
provided, however, that such optionee may exercise any of such options within
three months after the date of termination to the extent such options were
exercisable as of that date.
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<PAGE>
Termination by Death or Disability
In the event of the death of an optionee any option held by him at the
time of his death shall be transferred as provided in his will or is determined
by the laws of descent and distribution, and may be exercised by the optionee's
estate or any person who acquired the options from the estate at any time or
from time to time within three months after the date of death or total
disability, to the extent such option was exercisable on such date. In the event
an optionee becomes totally and permanently disabled, any option held by him on
the date of the onset of such disability may be exercised by the optionee or his
legally appointed agent or conservator within three months after the date of the
onset of such disability.
Adjustments
In the event the outstanding shares of Common Stock of the Company are
subsequently increased or decreased or changed into or exchanged for a different
number or kind of shares or securities of the Company or another corporation by
reason of a recapitalization, reclassification, stock split up, combination of
shares, reorganization, tender offer or dividend or other distribution paid in
common stock, appropriate adjustments shall be made by the Committee in the
number and kind of shares on which options may be granted. Additionally, the
Committee shall make appropriate adjustments in unexercised options so that the
proportionate interest of the holder of the options to the extent practicable
may be maintained as before the occurrence of such event.
Amendment
The Board of Directors may amend or discontinue the Plan at any time
provided that no unexercised option granted under the Plan may be altered or
cancelled, except in accordance with its terms, without the consent of the
optionee to whom the option has been granted; provided, however, that any such
amendment may be subject to approval by the shareholders of the Company under
applicable law.
Term
No option may be granted under the Plan after the expiration of ten
years from the date on which the Plan is approved by the shareholders of the
Company.
FEDERAL TAX CONSIDERATIONS
The following discussion is a brief summary of the federal income tax
treatment of the Stock Options and should not be considered to be legal advice.
Individual tax consequences to Optionholders can very widely depending upon
facts peculiar to each Optionholder's circumstances and are too numerous to
address herein. Each Optionholder should seek independent advice from a
qualified attorney or tax advisor regarding the federal and state tax
consequences applicable to the receipt and exercise of the Stock Options
discussed herein.
The Stock Options are considered compensatory non-qualified stock
options for federal income tax purposes, and the federal income tax treatment of
such options is governed by Section 83 of the Internal Revenue Code of 1986, as
amended (the "Code"). However, unless such options have a readily ascertainable
fair market value as addressed in Section 83 and the regulations promulgated
thereunder, the grant of such options will not constitute a taxable event.
Applicable regulations create an irrebuttable presumption that an option that is
not actively traded on an established market does not have a readily
ascertainable fair market value unless all four of the following conditions are
met: (i) the option is transferable by the optionee; (ii) the option is
exercisable immediately in full by the optionee; (iii) neither the option, nor
the property underlying the option, is subject to any restrictions that have a
significant effect upon the option's value; and (iv) the fair market value of
the option privilege is readily ascertainable. The "option privilege" is the
opportunity to benefit from an increase in the value of the underlying stock
without risking any capital, and the valuation of this option privilege requires
a prediction of the future value of the underlying stock. Generally, this
prediction cannot be made with reasonable accuracy as the regulations require.
Since the Stock Options are not actively traded, and the conditions set forth in
(i), (iii) and (iv) recited above are arguably not satisfied, management
believes that the grant of the Stock Options will not constitute a taxable
event.
17
<PAGE>
The exercise of a Stock Option will constitute a taxable event unless
the underlying stock is nontransferable and is subject to a substantial risk of
forfeiture. If either condition is not satisfied, exercise of the option will
constitute a taxable event. Insofar as the Common Stock to be received from the
Company by an Optionholder upon exercise of the Stock Option is not subject to a
risk of forfeiture, exercise of the Stock Option will constitute a taxable
event.
The excess, if any, of the fair market value of the Common Stock on the
date of exercise of the Stock Options over the amount, if any, paid for such
stock (the exercise price) must be included in the exercising Optionholder's
gross income during the year of exercise. The grant or exercise of a
non-qualified option will not result in an adjustment in computing alternative
minimum taxable income or an item of tax preference for alternative minimum tax
proposes.
The amount included in gross income at the time of exercise plus any
amounts paid for the Common Stock would be the Optionholder's basis in the
common Stock for purposes of determining taxable gain or loss upon subsequent
disposition of the Common Stock.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
At December 31, 1995, the Company had liquid assets of $1,910,596 in
cash and money market savings accounts, treasury bills and short-term
certificates of deposit; all of which can readily be converted to cash.
The major components of operating cash flow are premiums, annuity
deposits and investment income. In 1995, Brokers National collected $5.0 million
of premiums and annuity deposits (gross before reinsurance) and $880,000 of
investment income. Another source of cash flow is from the sale of investments
which, in 1995, produced gains totaling $308,000.
The Company's investments are primarily in U. S. Government and
Government Agencies ($10,280,599) and other investment grade bonds ($1,224,243)
which have been marked to market and classified as available for sale. The
Company does not hedge its investment income through the use of derivatives.
Management believes that liquid assets along with investment and
premium income exceed the necessary long and short-term liquidity requirements
and the Company will not require an external source of funds for its liquidity
requirements.
The Company's insurance operations are conducted through its
wholly-owned subsidiary, Brokers National. At December 31, 1995, Brokers
National had statutory capital and surplus of approximately $5,800,000 which is
sufficient to meet Brokers National's capital requirements in the states in
which it is licensed and which management believes is sufficient to support
anticipated future growth.
Results of Operations
Premium income for 1995 was $3,073,819 compared to $971,600 in 1994, an
increase of $2,102,219. The increase was due to the increased sales of group
dental insurance and the termination of the group dental reinsurance agreement
effective November 1, 1995, whereby Brokers National changed its retention of
dental premiums to 100%, as more fully described in Note 9 to the Consolidated
Financial Statements.
Net investment income was $880,368 in 1995 and $897,757 in 1994. The
decrease was due to the receipt of interest of $106,000 in 1994, compared to
$43,174 in 1995, on certain taxable municipal bonds that had been in default
since 1991 (See Note 5).
Realized gains were $308,490 in 1995 compared to $154,646 in 1994.
Realized gains included $188,456 and $133,318 for 1995 and 1994, respectively,
of partial payments of principal on certain taxable municipal bonds
18
<PAGE>
that had been marked down to 25% of par value in 1991. The balance of the
increase in realized gains in 1995 was primarily due to an increase in bonds
called or matured in 1995 compared to 1994.
Increases in liability for future policy benefits were $47,670 in 1995
compared to $133,336 for the same period in 1994. The decrease of $85,666 is
directly related to lapses in life and annuity policies and reflects the
marketing shift to group dental insurance.
Policy benefits and other insurance costs were $2,618,023 in 1995
compared to $553,016 in 1994. The increase was due to claims and commissions on
the increased dental insurance premiums written and the termination of the group
dental reinsurance contract. The incurred loss ratio on the group dental
insurance was $72.5% in 1995 compared to 74.8% in 1994.
Amortization of deferred policy acquisition costs was $48,191 in 1995
and $44,339 in 1994. The increase was due to a decline in life and accidental
death business in force which accelerated the amortization of the deferred
policy acquisition costs on these blocks of business.
Operating expenses were $1,767,550 in 1995 and $1,805,306 in 1994. The
decrease was primarily due to a decrease in accounting fees and recapture of
agents' balances previously written off.
Taxes, other than on income, were $137,170 for 1995 and $102,757 for
1994. The 1995 increase was primarily due to an increase in premium taxes on the
increased dental insurance premiums collected.
The consolidated net loss for 1995 was $355,927 compared to $619,285 in
1994. The decrease in the loss was due to the increase in premiums and realized
gains and the decrease in liability for future policy and operating expenses.
FINANCIAL STATEMENTS AND SCHEDULES
The Company's Financial Statement and Schedule are set forth in pages
F-1 through F-14 of this Prospectus.
19
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
Principal Stockholders:
The following table reflects the persons known to the Company to be the
beneficial owners of 5% or more of the Company's voting securities as of
December 31, 1995:
<TABLE>
<CAPTION>
Amount and Nature
Name and Address of of Beneficial
Title of Class Beneficial Owner Ownership (1) Percent of Class
<S> <C> <C> <C>
Common Stock Wayne E. Ahart 4,845,505(2)(3) 20.91%
#14 Club Estates Parkway
Austin, Texas 78738
Common Stock Barry N. Shamas 2,801,816(4) 12.09%
1095 Hidden Hills Drive
Dripping Springs, Texas
78620
Common Stock Universal Guaranty Life 2,216,776(2) 9.57%
Insurance Company
5250 S. Sixth Street Road
Springfield, Illinois 62705
Common Stock C. Don Byrd 1,452,719(5) 6.27%
631 47th Street
West Des Moines, Iowa 50265
<FN>
(1) To the Company's knowledge, all shares are beneficially owned by, and
the sole voting and investment power is held by the persons named,
except as otherwise indicated.
(2) Mr. Ahart and Commonwealth Industries, Inc., a parent of Universal
Guaranty Life Insurance Company ("UGL"), have agreed: (a) that if Mr.
Ahart sells his shares of the Company to a third party, Mr. Ahart or
the third party must also purchase UGL's shares of the Company at the
same price and on the same terms; and (b) in the event UGL receives a
bona fide offer to purchase its shares of the Company, Mr. Ahart has a
first right of refusal to purchase such shares on the same terms and
conditions.
(3) Includes 2,400,000 shares held in the name of National Iowa Corporation
and 2,178,926 shares held in the name of Arkansas National Corporation,
both of which are controlled by Mr. Ahart.
(4) Includes 1,400,000 shares held in the name of Life Industries of Iowa,
Inc. and 1,335,171 shares held in the name of Arkansas Industries
Corporation, both of which are controlled by Mr. Shamas.
(5) All of Mr. Byrd's shares are subject to a right-of-first refusal of the
Company to acquire said shares on the same terms and conditions as any
proposed sale or other transfer by Mr. Byrd.
</FN>
</TABLE>
20
<PAGE>
Security Ownership of Management:
The following table sets forth, as of December 31, 1995, certain
information concerning the beneficial ownership of the Company's Common Stock by
each director of the Company and by all directors and officers as a group:
<TABLE>
<CAPTION>
Amount and Nature
Name of of Beneficial
Title of Class Beneficial Owner Ownership (1) Percent of Class
-------------- ---------------- --------------- ----------------
<S> <C> <C> <C>
Common Wayne E. Ahart 4,845,505(2) 20.91%
Common Barry N. Shamas 2,801,816(3) 12.09%
Common C. Don Byrd 1,452,719(4) 6.27%
Common Kenneth Tobey 761,762 3.29%
Common Cecil Alexander 37,088 .16%
Common Richard Barclay 37,088 .16%
Common Eugene A. Cernan 37,088 .16%
Common Hayden Fry 69,047 .30%
Common John Greig 50,102 .22%
Common Roy Keppy 51,001 .22%
Common Thomas Landry 87,088 .38%
Common Roy Ledbetter 37,088 .16%
Common John E. Miller 37,088 .16%
Common James A. Mullins 50,000 .22%
Common C. James McCormick 137,084(5) .59%
Common Knox Nelson 37,088 .16%
Common Robert R. Rigler 3,295 .01%
Common Chris Schenkel 37,088 .16%
Common L. Stanley Schoelerman 50,000 .22%
Common Orville Sweet 50,000 .22%
Common Charles Thone 50,000 .22%
Common All Officers and Directors 10,737,578(6) 46.33%
as a group (22 persons)
<FN>
(1) To the Company's knowledge, all shares are beneficially owned by, and
the sole voting and investment power is held by the persons named,
except as otherwise indicated.
(2) Includes 2,400,000 shares held in the name of National Iowa Corporation
and 2,178,926 shares held in the name of Arkansas National Corporation,
both of which are controlled by Mr. Ahart.
(3) Includes 1,400,000 shares held in the name of Life Industries of Iowa,
Inc. and 1,335,171 shares held in the name of Arkansas Industries
Corporation, both of which are controlled by Mr. Shamas.
(4) All of Mr. Byrd's shares are subject to a right-of-first refusal of the
Company to acquire said shares on the same terms and conditions as any
proposed sale or other transfer by Mr. Byrd.
(5) Includes 13,708 shares held in the name of Mr. McCormick and 123,376
shares divided equally among and held in the names of Mr. McCormick's
four children.
(6) Includes the shares of Jeffrey J. Drees, Vice President-Controller of
the Company.
</FN>
</TABLE>
21
<PAGE>
<TABLE>
<CAPTION>
MANAGEMENT
First Became Director
Name(2) Age or Executive Officer(1)
<S> <C> <C>
Wayne E. Ahart 55 1984
C. Don Byrd 54 1984
Kenneth Tobey 37 1988
Barry N. Shamas 48 1984
Cecil Alexander 59 1989
Richard Barclay 58 1989
Eugene A. Cernan 61 1989
Hayden Fry 66 1984
John Greig 60 1984
Roy Keppy 72 1984
Thomas Landry 70 1984
Roy Ledbetter 65 1989
John E. Miller 66 1988
James A. Mullins 61 1984
C. James McCormick 70 1984
Knox Nelson 69 1988
Robert R. Rigler 72 1989
Chris Schenkel 71 1989
L. Stanley Schoelerman 70 1984
Orville Sweet 71 1984
Charles Thone 71 1984
<FN>
(1) On August 1, 1994, in connection with the merger of a wholly-owned
subsidiary of the Company (formerly United Iowa Corporation) with
United Arkansas Corporation, the Board of Directors of the Company was
increased by nine and the former members of the United Arkansas Board
of Directors who did not serve on the Company's Board of Directors
prior to the merger were elected to fill the nine newly-created
positions. The nine persons who became directors upon completion of the
merger were: Cecil Alexander, Richard Barclay, Eugene A. Cernan, Roy
Ledbetter, Mahlon A. Martin, John E. Miller, Knox Nelson, Chris
Schenkel and Kenneth Tobey.
(2) Mahlon A. Martin died in 1995. Additionally, Knox Nelson will retire
from the Board of Directors effective at the end of the current term.
The vacancies will not be filled.
</FN>
</TABLE>
22
<PAGE>
BACKGROUND OF MANAGEMENT
Wayne E. Ahart has served as Chairman of the Board of the Company since 1984 and
Brokers National since 1986. He has served as Chairman of the Board of United
Arkansas since 1988 and served as Chairman of the Board of United Arkansas Life
from 1990 to 1994. Prior to that time, Mr. Ahart served as Board Chairman of:
Investors Trust, Inc. ("ITI") and its subsidiary, Investors Trust Assurance
Company ("ITAC"), both of Indianapolis, Indiana (1973-1987); Liberty American
Corporation ("LAC")(President since 1981) and its subsidiary Liberty American
Assurance Company ("LAAC"), both of Lincoln, Nebraska (1975-1987); (President)
American Investors Corporation ("AIC") and its subsidiary, Future Security Life
Insurance Company ("FSL"), both of Austin, Texas (1980-1987). Mr. Ahart has been
owner and Chairman of the Board of Lone Star Pizza Garden Inc. from 1986 to the
present.
C. Don Byrd has been President and a Director of the Company and Brokers
National since 1984 and 1986, respectively. Mr. Byrd was Agency Director of FSL
from 1983 to 1984 and Regional Director of AIC 1981 to 1983. He was an agent and
Regional Director of ITI and ITA from 1974 to 1981.
Kenneth Tobey has been President and a director of Brokers National and the
Company since August 1, 1994. Mr. Tobey has served as President of BNLE since
1988 and serviced as President of United Arkansas Life from 1990 to 1994. He
served as Assistant to the President and Training Director of Brokers National
from 1986 to 1988. From 1981 to 1986, Mr. Tobey served in various capacities for
AIC and FSL, including Agent, Regional Manager, Executive Sales Director and
Assistant to the President.
Barry N. Shamas has served as Executive Vice-President, Secretary and Treasurer
of BNLE since 1988 and United Arkansas Life from 1990 to 1994. From 1984 and
1986, respectively, he has served as Executive Vice President and Director of
the Company and Brokers National, which positions he presently holds. He served
in various capacities for ITI and ITAC, including Executive Vice President,
Senior Vice President, Treasurer and Financial Vice President beginning in 1976
through 1987. Mr. Shamas served as Executive Vice President, Secretary/Treasurer
and as Director of AIC and FSL from 1980 and 1983, respectively, until 1987.
From 1978 through 1987, Mr. Shamas served as a Director and a member of the
Executive Committee of LAC and LAAC.
Jeffrey J. Drees has served as Controller of BNLE since 1988 and United Arkansas
Life from 1990 to 1994. He has served as the Controller of the Company since
1988 and Brokers National since April 1987. He previously served as: Vice
President and Controller of FSL (1983-1986); Chief Accountant and Vice President
of Providence Washington Insurance Company, Austin, Texas (April 1982 - May
1983); Controller of Montgomery Ward Corporation, Cedar Rapids, Iowa (October
1979 - March 1982); and Assistant Controller of State Automobile & Casualty
Underwriters, Des Moines, Iowa (June 1978 - October 1979).
Cecil L. Alexander is currently Vice President of Public Affairs for Arkansas
Power & Light Company, where he has been employed since 1980. Prior to joining
the AP&L Executive Staff, Mr. Alexander served for 16 years in the Arkansas
General Assembly, and during 1975-76, was Speaker of the House of
Representatives. Since 1971 Mr. Alexander has been involved in the real estate
business as a partner in Heber Springs Realty. He is a past president of the
Cleburne County Board of Realtors and has served on the governmental affairs
committee of the Arkansas Association of Realtors. Mr. Alexander is currently on
the Board of Directors of Mercantile Bank of Heber Springs, the Board of
Directors of the Arkansas Tourism Development Foundation and the Board of
Directors of Baptist Foundation.
Richard L. Barclay, a Certified Public Accountant, has been engaged in public
accounting since 1961. He is a Partner in the firm of Barclay, Yarborough &
Evans, Certified Public Accountants in Rogers, Arkansas. He is a member of the
Arkansas Society of Certified Public Accountants and of the American Institute
of Certified Public Accountants. He was a member of the Arkansas House of
Representatives from 1977 until 1991. He presently serves as a Director of
Federal Savings Bank, Rogers, Arkansas; and Vice President, Arkansas State
Chamber of Commerce.
23
<PAGE>
Eugene A. Cernan has been President and Chairman of the Board of The Cernan
Corporation, since 1981. In addition, he recently became Chairman of the Board
of Johnson Engineering Corporation which provides the National Aeronautics and
Space Administration (NASA) with Flight Crew Systems Development. Captain Cernan
retired from the U. S. Navy in 1976 after serving 20 years as a naval aviator,
13 of which were dedicated to direct involvement with the U. S. Space Program as
a NASA astronaut. Captain Cernan was the pilot on the Gemini 9 mission and the
second American to walk in space; lunar module pilot of Apollo 10; and
Spacecraft Commander of Apollo 17, which resulted in the distinction of being
the last man to have left his footprints on the surface of the moon. In 1973, he
served as a Senior United States Negotiator in discussions with the USSR on the
Apollo-Soyuz Mission. Captain Cernan served as Executive Consultant, Aerospace
and Government of Digital Equipment Corporation, from 1986 to 1992, and he was a
Director and Vice President-International of Coral Petroleum, Inc., Houston,
Texas from 1976 to 1981. Captain Cernan is presently a Director of Up With
People, an international educational foundation for young men and women; United
States Space Foundation; the Young Astronaut Council; Alaska Aerospace
Development Corporation, International MicroSpace; and Johnson Engineering
Corporation. Captain Cernan is also on the President's Engineering Committee,
Purdue University and is a member of the Board of Trustees of the U. S. Naval
Aviation Museum, NFL Alumni and the Major League Baseball Players Alumni. In
addition, Captain Cernan has served as a consultant commentator to ABC News. He
served on the Board of AIC and FSL from 1980 and 1983, respectively, to 1987.
Hayden Fry has been Head Football Coach at the University of Iowa since 1979. He
was Head Football Coach at North Texas State University from 1973 to 1978 and at
Southern Methodist University from 1962 to 1972. He was named Football Coach of
the Year in the Big Ten (1981, 1990, 1991), the Missouri Valley Conference
(1973), and the Southwest Conference (1962, 1966 and 1968). He is on the Board
of Advisors of Wilson Sporting Goods (1962 to date); the Board of Trustees of
Pop Warner Football (1962 to date); and the American Football Coaches
Association (1983 to date) and is the 1993 President. He was President of
Hawkeye Marketing Group from 1979 - 1984. He is a member of the Board of
Directors of the PPI Group.
John Greig has been President of Greig and Co. since 1967. He is a Director of
Boatmen's Bank of Iowa, NW., Estherville, Iowa. He has been President of the
Iowa Cattlemen's Association (1975-1976) and a member of the Executive Committee
of the National Cattlemen's Association (1975-1976). He was a member of the Iowa
Board of Regents from 1985 to 1991. He was elected as an Iowa State
Representative in 1993.
Roy Keppy has operated his grain and livestock farming operation in Davenport,
Iowa since 1946. In 1982, he and his son founded Town and Country Meats in
Davenport and he currently serves as its Vice President. He was a Director of
Eldridge Cooperative Elevator Company for 33 years, retiring in 1982, serving as
President for 6 years. He is now a Director of First State Bank N.A., Davenport,
Iowa. He is a past Chairman of the National Livestock and Meat Board, and was on
its Board of Directors from 1970 to 1986. He was on the Board of Directors of
the National Pork Producers from 1965 to 1972, serving as its President in
1970-1971.
Thomas W. Landry was Head Coach of the Dallas Cowboys, 1960 to 1989. He is a
member of the National Board of Trustees of the Fellowship of Christian
Athletes. He serves as a Director of Dallas Theological Seminary. He was on the
Board of Directors of Continental Life Insurance Company for four years. He has
served as Texas State Chairman of the American Cancer Society. Mr. Landry is an
Advisory Member of the Board of Directors of Southwest Baptist Theological
Seminary, Chairman of the Dallas International Sports Commission, and a member
of the Board of Advisors of Alexander Proudfoot Company.
Roy E. Ledbetter presently serves as President and Chief Executive Officer of
Highland Industrial Park, a division of Highland Resources, Inc. in East Camden,
Arkansas. He holds a Bachelor of Science Degree in Education from Southern
Arkansas University at Magnolia, a Masters Degree in Education from Henderson
State University at Arkadelphia and an AMP from Harvard Business School at
Boston. In 1966, Mr. Ledbetter joined Highland Resources, Inc. and coordinated
organization of Southern Arkansas University Technical Branch; was promoted to
division Manager (1972), Vice President and Division Manager (1975), Senior Vice
President (1980), and President in 1984. He is past President of the Camden
Chamber of Commerce; was 1977 Camden Jaycee's Man of the Year; was awarded first
annual Camden Area Chamber of Commerce Community Service Award in 1983; served
on Education Standards Committee of the State of Arkansas; and presently serves
on the Boards of East Camden and Highland Railroad, Shumaker Public Service
Corporation, Merchants and Planters Bank of Camden, and First United Bancshares
of El Dorado.
24
<PAGE>
C. James McCormick is Chairman of the Board of McCormick, Inc., Best Way
Express, Inc., and President of JAMAC Corporation, all of Vincennes, Indiana. He
is also Vice Chairman of Golf Hosts, Inc. He is the owner of CJ Leasing. Mr.
McCormick is Chairman of the Board of Directors and CEO of First Bancorp,
Vincennes, Indiana; First Vice Chairman of Vincennes University and a Life
Director of the Indiana Chamber of Commerce; and a member of the Indiana
President's Organization and the Indiana Automobile Dealers Association. He is a
former Chairman of the Board of the American Trucking Associations. Mr.
McCormick is a Past Chairman of the National Board of Trustees of The Fellowship
of Christian Athletes.
John E. Miller has been a member of the State of Arkansas House of
Representatives since 1959. He has been self-employed in the insurance,
abstract, real estate, heavy construction and farming business for more than 20
years. He presently serves on the Board of Directors of Calico Rock Medical
Center, Easy K Foundation, National Conference of Christians and Jews, Council
of State Governments, Southern Legislative Conference, State Advocacy Services,
Lions World Services for the Blind, State Board of Easter Seals, Williams
Baptist College Board of Trustees, Chairman of the Governor's Developmental
Disabilities Planning Council and Izard County Chapter of the American Red
Cross.
James A. Mullins has owned and operated Prairie Flat Farms, Corwith, Iowa since
1969. He was a Director of the Omaha Farm Credit Bank from 1988 to 1994, a
director of the Federal Farm Credit Banks Funding Corporation from 1986 to 1994,
and a director of the U.S. Meat Export Federation from 1988 to 1995. He served
as Chairman of the Foreign Trade Committee, National Cattlemen's Association
(1988 - 1993). He was Chairman of the U.S. Meat Export Federation until 1984. He
was Chairman of the National Livestock & Meat Board in 1983; Chairman of the
Beef Industry Council in 1979 and 1980; and Chairman of the Omaha Farm Credit
Bank in 1988 and 1989.
Knox Nelson served in the Arkansas House of Representatives from 1957 to 1959.
In 1961, he was elected a member of the Arkansas State Senate and served in that
capacity until December 19, 1991. For 40 years Mr. Nelson has been associated
with and currently owns Knox Nelson Oil Company.
Robert R. Rigler has been Chairman of the Board of Security State Bank, New
Hampton, Iowa since 1989; he served as its President and CEO from 1968 to 1989.
Mr. Rigler was Iowa Superintendent of Banking from 1989 to 1991. He was a member
of the Iowa Transportation Commission from 1971 to 1986 and served as its
Chairman from 1973 to 1986. He was a member of the Iowa State Senate from 1955
to 1971 and served as a Majority and Minority Floor Leader.
Chris Schenkel has been a full-time television sportscaster of ABC Sports, New
York, New York, from 1965 to present. He also served as Spokesperson for
Owens-Illinois, Toledo, Ohio, from 1976 to present, for whom he speaks as voice
on commercials, personal appearances, conventions and shows. Mr. Schenkel served
as Chairman of the Board of Directors of Counting House Bank, North Webster,
Indiana from 1974-1982. He also served as a director of ITI and ITAC from 1978
to 1986 and on the Board of Haskell Indian Junior College, Lawrence, Kansas.
L. Stanley Schoelerman has been President and a partner of Petersen Sheep &
Cattle Co., Spencer, Iowa since 1964. He was a Director of Home Federal Savings
& Loan, Spencer, Iowa, from 1969 to 1988; and Honeybee Manufacturing, Everly,
Iowa, from 1974 to 1986. He was President of Topsoil-Schoenewe, Everly, Iowa,
from 1974 to 1986. Mr. Schoelerman was Commissioner of the Iowa Department of
Transportation from 1974 to 1978 and was a member of the National Motor Carrier
Advisory Board of the Federal Highway Administration from 1981 to 1985.
Orville Sweet served as a Visiting Industry Professor at Iowa State University
from 1989 to 1990 and is President of Sweet and Associates, a consulting firm
for agricultural organizations. He was Executive Vice President of the 100,000
member National Pork Producers Council, Des Moines, Iowa, from 1979 to 1989. He
was President of the American Polled Hereford Association, Kansas City, Missouri
in 1963-79. He is past President of the U.S. Beef Breeds Council and the
National Society of Livestock Records Association and was a Director of the
Agricultural Hall of Fame and the U.S. Meat Export Federation. He is a member of
the American Society of Animal Science. He has served as a member of the USDA
Advisory Council Trade Policy, the State Department Citizens Network and the
Executive Committee of the Agricultural Council of America.
25
<PAGE>
Charles Thone has been a Senior Principal of the law firm of Erickson &
Sederstrom, P.C., Lincoln, Nebraska, since 1983. He was Governor of the State of
Nebraska from 1979 to 1983 and a Representative in the U.S. Congress (First
District of Nebraska) from 1971 to 1979. He was Managing Partner of the law firm
of Davis, Thone, Bailey, Polsky & Hansen, Lincoln, Nebraska from 1959 to 1971.
He has been an Assistant U.S. Attorney in Nebraska and Nebraska Assistant
Attorney General and Nebraska Deputy Secretary of State. He has been a member of
the Board of Trustees of the University of Nebraska Foundation since 1979; and a
member of the Board of Directors of the Nebraska State Bar Foundation since
1985. He was a Director of LAC and LAAC from 1983 to 1987. Mr. Thone is active
in many civic organizations.
Board Meetings; Committees:
The Board of Directors of the Company held three meetings during the
year ended December 31, 1995. Messrs. McCormick, Nelson, Fry, Schenkel, Barclay,
Keppy, Alexander, Thone, Cernan, Mullins, Schoelerman, Miller, Rigler and Martin
(deceased) attended fewer than 75% of such meetings.
The Company has an Investment Committee, consisting of Messrs. Ahart
and Shamas. This Committee manages the Company's investments, and met
periodically during 1995 on both a formal and informal basis; Messrs. Ahart and
Shamas did not miss any meetings. The Company has no standing audit, nominating
or compensation committees.
Executive Officers:
<TABLE>
The executive officers of the Company are as follows:
<CAPTION>
Officer
Name Age Since Position(s)
<S> <C> <C> <C>
Wayne E. Ahart 55 1984 Chairman of the Board and Director
C. Don Byrd 54 1984 Vice Chairman of the Board and Director
Kenneth Tobey 37 1988 President and Director
Barry N. Shamas 48 1984 Executive Vice President, Treasurer
and Director
</TABLE>
The Company's executive officers serve at the pleasure of the Board of
Directors. Each of the above officers also hold the same office in Brokers
National.
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding remuneration
of the CEO of the Company during the years ended December 31, 1993, 1994 and
1995.
<TABLE>
<CAPTION>
Summary Compensation Table
Name and Other Annual
Principal Position Year Salary($) Bonus($) Compensation($)
<S> <C> <C> <C> <C>
Wayne E. Ahart, CEO 1995 $125,000 $0 $8,744
" 1994 $125,000 $0 $8,013
" 1993 $125,000 $0 $3,486
</TABLE>
26
<PAGE>
Compensation Determination:
The Company has no compensation committee. Compensation decisions are made
by the Board of Directors. The factors and criteria upon which the compensation
of the executive officers of the Company are based include the financial
performance of the Company, the nature of the officers' respective job duties
and their seniority and experience with the Company.
Compensation of Directors:
Each director receives a fee of $100, plus reasonable travel expenses, for
each meeting of the Board of Directors attended. No director receives any other
remuneration in the capacity of director.
Other Compensation; Indebtedness:
The Company does not have any contingent forms of remuneration to executive
officers, such as options, warrants or other rights to purchase the Company's
securities, or any pension, retirement, stock appreciation or other similar
plans. No officer, director or nominee for director of the Company or associate
of any such person was indebted to the Company at any time during the year ended
December 31, 1995, other than for ordinary travel and expense advances and for
other transactions in the ordinary course of business, if any.
Purchase of the Company's Shares:
In December 1990, the Company purchased from C. Don Byrd, Vice Chairman and
Director of the Company, a total of 390,000 shares of the Company's common
stock. As a part of this same transaction, Mr. Byrd and the Company entered into
an agreement, dated December 21, 1990, whereby the Company acquired a right of
first refusal to purchase the remaining 1,360,000 shares of the Company's common
stock owned by Mr. Byrd on the same terms and conditions that would apply in any
proposed sale, pledge or other transfer of the shares by Mr. Byrd. The Company
must exercise its right of first refusal within thirty days after receiving
notification from Mr. Byrd of any such proposed transaction in the shares, and
make payment for the shares within forty-five days after acceptance. The right
of first refusal may be exercised only as to all of such shares and not as to
any lesser amount. Mr. Byrd has retained the right to transfer his shares to a
trust controlled by him or to members of his family or heirs in the event of
death, but all of the shares so transferred remain subject to the Company's
right of first refusal as to any subsequent transfer.
Stock Performance Graph:
There has been a limited trading market for the Company's securities during
1995. The stock of the Company was traded by Starmont Capital Ltd., Des Moines,
Iowa, on a workout basis. Stock sales during the year ranged from $.40 to $.35 a
share. The final stock sold during 1995 was at $.35 a share. Due to the limited
trading market, no comparison on a stock performance graph of the change in
shareholder return with an index representing shares of comparable companies can
be made.
Involvement of Management in Certain Legal Proceedings:
None.
Family Relationships:
No family relationship exists between any director or executive officer of
the Company.
27
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
During the year ended December 31, 1995, as part of the Company's routine
investment program, the Company and Brokers National effected certain of its
purchases and sales of various U. S. Treasury and corporate securities through
the brokerage firm of Ahart & Bryan, Inc. ("A & B, Inc.") of North Little Rock,
Arkansas. A & B, Inc. is registered with the National Association of Securities
Dealers, Inc. Mr. Tom Ahart (a brother of the Company's Chairman, Wayne E.
Ahart) is President and a Director of A & B, Inc. The above-described
transactions were executed pursuant to a clearing agreement between A & B, Inc.
and Rauscher, Pierce, Refsnes, Inc. ("RPR"), an unaffiliated brokerage firm and
a member of the New York Stock Exchange. Under the clearing agreement, RPR acted
as "clearing agent" for A & B, Inc. (the introducing broker). In that capacity,
RPR executed purchases and sales with a market value totaling approximately
$9,800,000 during 1995 as directed by the Company through A & B, Inc. RPR
received, held and disbursed all of the proceeds and securities relating to
these transactions until such transactions were consummated (at which time such
proceeds and/or securities were disbursed at the direction of the Company and
Brokers National). A & B, Inc. received fees totaling $7,197 for completing
these transactions. Management believes that the amounts charged by A & B, Inc.
in these transactions were less than those which would have been charged by
other brokerage firms. The Company and Brokers National used A & B, Inc. as one
of its broker dealers during 1995 and anticipates continuing this arrangement.
LEGAL MATTERS
Whitfield & Eddy, P.L.C., 317 Sixth Avenue, Suite 1200, Des Moines, Iowa
50309-4110, has acted as counsel to the Company and has provided an opinion that
the shares of Common Stock to be issued upon exercise of the Options as
described herein will be validly issued, duly paid and nonassessable.
EXPERTS
The consolidated financial statements included in this Prospectus have been
audited by Amend Smith & Co., P.C., independent auditors, as stated in their
report appearing herein, and are included in reliance upon such report given
upon the authority of such firm as experts in accounting and auditing.
INDEMNIFICATION OF DIRECTORS AND OFFICERS OF THE COMPANY
The Company's Articles of Incorporation provide that a director of the
Company shall not be personally liable to the Company or its shareholders for
monetary damages for breach of fiduciary duty as a director, except for
liability (i) for any breach of the director's duty of loyalty to the Company or
its shareholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) for any transaction
from which the director derived an improper personal benefit, or (iv) under
Section 490.857 of the Code of Iowa.
As permitted by Section 490.850 et seq. of the IBCA, the Company's Bylaws
provide that the Company shall indemnify and hold harmless any person who is or
was a director, officer, agent or employee of the Company against liability
incurred in connection with his service or status for the Company. Such
indemnification would also extend to liability arising from actions taken by any
person who serves or has served at the request of the Company as a director,
officer, agent, employee, partner or trustee of another corporation, or of a
partnership, joint venture or other enterprise.
The Company's Bylaws provide that a director or officer of the Company (i)
shall be indemnified by the corporation for all amounts actually and reasonably
incurred by him in connection with the defense or settlement of non-derivative
suits as expenses (including attorney's fees), amounts paid in settlement,
judgments and fines when he or she is successful on the merits or otherwise,
(ii) may be indemnified by the corporation for the expenses (including
attorneys' fees), judgments, fines and amounts paid in termination of a
nonderivative suit if he or she
28
<PAGE>
is not successful on the merits if he or she acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation (and, in the case of a criminal proceeding, had no reason to believe
his or her conduct was unlawful), (iii) shall be indemnified by the Company for
expenses of a derivative suit, including attorney's fees, but excluding amounts
paid in settlement, if he is successful on the merits or otherwise (iv) may be
indemnified by the Company even if he or she is not successful on the merits, if
he or she acted in good faith and in a manner he or she reasonably believed to
be in or not opposed to the best interests of the corporation, provided that no
such indemnification may be made in accordance with this clause (iv) if the
director or officer is adjudged liable for fraud, gross negligence or
intentional misconduct in the performance of his duty to the Company, unless
(and only to the extent that) the court in which the suit was brought determines
that, despite such adjudication but in view of all of the circumstances, he or
she is fairly and reasonably entitled to indemnification of such expenses as the
court shall deem proper. The indemnification described in clauses (ii) and (iv)
above shall be made only upon a determination by (i) a court, (ii) a majority of
disinterested directors of the Company (whether or not a quorum), (iii)
independent legal counsel (appointed by a majority of the directors of the
Company, whether or not a quorum, or elected by the shareholders of the Company)
in a written opinion, or (iv) the shareholders of the Company, that
indemnification is proper because the applicable standard of conduct is met.
Anyone making a determination of entitlement to indemnification may determine
that a person has met the standard as to some matters but not as to others, and
may reasonably prorate amounts to be indemnified.
The effect of the indemnification provisions contained in the Company's
Bylaws is to require the Company to indemnify its directors and officers under
circumstances where such indemnification would otherwise be discretionary and to
extend to the Company's directors and officers the benefits of Iowa law dealing
with director and officer indemnification, as well as any future changes which
might occur under Iowa law in this area.
The Company's Bylaws specify that the indemnification rights granted
thereunder are not exclusive of any other indemnification rights that the
director or officer may have under an agreement, provision of law, vote of
shareholders or disinterested directors or otherwise. As permitted by Section
490.850 et seq. of the IBCA, the Company's Bylaws also authorize the Company to
purchase directors' and officers' insurance for the benefit of its past and
present directors and officers, irrespective of whether the Company has the
power to indemnify such persons under Iowa law. The Company currently maintains
such insurance as allowed by these provisions.
The Company's Bylaws also provide that expenses (including attorneys' fees)
incurred by a director or officer in a lawsuit or proceeding which may become
subject to indemnification by the Company may be paid by the Company in advance
of the final disposition of the matter if the Company's Board of Directors
authorizes the specific payment and the person receiving the payment undertakes
in writing to repay such amount unless it is ultimately determined that he is
entitled to indemnification by the Company.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
29
<PAGE>
FOR THE YEAR ENDED DECEMBER 31, 1995
BNL FINANCIAL CORPORATION and SUBSIDIARIES
DES MOINES, IOWA
Financial Statements Required by Item 8
<TABLE>
<CAPTION>
Page Number of 1995
Form 10-KSB
-------------------------
<S> <C>
Consolidated Balance Sheet, December 31, 1995 and 1994 F-2
Consolidated Statement of Operations for the years ended December 31, 1995 and 1994 F-3
Consolidated Statement of Changes in Shareholders' Equity for the years ended December 31, 1995 F-4
and 1994
Consolidated Statement of Cash Flows for the years ended December 31, 1995 and 1994 F-5
Notes to Consolidated Financial Statements F-6
Report of Independent Accountants on Consolidated Financial Statements F-14
</TABLE>
F-1
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, 1995 and 1994
===========================================================================================================
<CAPTION>
December 31, December 31,
1995 1994
------------------- -------------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $1,910,596 $2,207,537
Investments available for sale, at fair value (amortized
cost $10,959,766; 10,716,387; respectively ) 11,504,802 10,448,215
Investment in equity securities, common stock
at market (cost $108,123; $131,208; respectively) 41,870 110,792
------------------- -------------------
Total investments, including cash and
cash equivalents 13,457,268 12,766,544
Accrued investment income 252,617 201,120
Furniture and equipment, net 303,262 151,935
Deferred policy acquisition costs 514,561 562,750
Receivable from reinsurer 142,677 315,527
Other assets 433,827 227,958
------------------- -------------------
Total assets $15,104,212 $14,225,834
=================== ===================
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liabilities for future policy benefits $1,325,514 $1,275,699
Policy claims payable 552,235 296,200
Annuity deposits 3,435,834 3,319,236
Deferred annuity profits 602,719 591,637
Premium deposit funds 195,542 220,885
Supplementary contracts without life contingencies 84,213 173,593
Other liabilities 315,358 167,191
------------------- -------------------
Total liabilities 6,511,415 6,044,441
------------------- -------------------
Commitments and contingencies (Note 7)
Shareholders' equity:
Common stock, $.02 stated value, 45,000,000 shares
authorized, 23,311,944 shares issued and outstanding 466,239 466,239
Additional paid-in capital 14,308,230 14,308,272
Unrealized appreciation (depreciation) of securities 478,783 (288,590)
Accumulated deficit (6,596,350) (6,240,423)
Treasury stock, at cost, 138,795 shares (64,105) (64,105)
------------------- -------------------
Total shareholders' equity 8,592,797 8,181,393
------------------- -------------------
Total liabilities and shareholders' equity $15,104,212 $14,225,834
=================== ===================
<FN>
The accompanying notes are an integral part of the consolidated financial statements.
</FN>
</TABLE>
F-2
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
BNL FINANCIAL CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENT OF OPERATIONS
for the years ended December 31, 1995 and 1994
===============================================================================================================
<CAPTION>
Year Ended December 31,
-----------------------------------------
1995 1994
------------------- ------------------
<S> <C> <C>
Income:
Premium income $3,073,819 $971,066
Net investment income 880,368 893,757
Realized gains 308,490 154,646
------------------- ------------------
Total income 4,262,677 2,019,469
------------------- ------------------
Expenses:
Increase in liability for future policy benefits 47,670 133,336
Policy benefits and other insurance costs 2,618,023 553,016
Amortization of deferred policy acquisition costs 48,191 44,339
Operating expenses 1,767,550 1,805,306
Taxes, other than on income 137,170 102,757
------------------- ------------------
Total expenses 4,618,604 2,638,754
------------------- ------------------
Loss from operations before
income taxes (355,927) (619,285)
Provision for income taxes - -
------------------- ------------------
Net loss $(355,927) $(619,285)
=================== ==================
Net loss per common share $(0.02) $(0.03)
=================== ==================
Weighted average number of fully
paid common shares 23,311,944 23,311,944
=================== ==================
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
F-3
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------------------
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
for the years ended December 31, 1995, and 1994
====================================================================================================================================
<CAPTION>
Unrealized
Additional (Depreciation)
Common Stock Paid-In Accumulated Appreciation of Treasury
Shares Amount Capital Deficit Securities Stock
-------------- ------------- --------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 24,243,186 $484,864 $14,299,646 $(5,621,138) $1,049,154 $(74,105)
Common stock reduction
during merger (931,242) (18,625) 8,626 - - -
Treasury shares canceled - - - - - 10,000
Unrealized depreciation
of securities - - - - (1,337,744) -
Net loss - - - (619,285) - -
-------------- ------------- --------------- --------------- -------------- -------------
Balance, December 31, 1994 23,311,944 466,239 14,308,272 (6,240,423) (288,590) (64,105)
Fractional shares
repurchased - - (42) - - -
Unrealized appreciation
of securities - - - - 767,373 -
Net loss - - - (355,927) - -
============== ============= =============== =============== ============== ============
Balance, December 31, 1995 23,311,944 $466,239 $14,308,230 $(6,596,350) $478,783 $(64,105)
============== ============= =============== =============== ============== ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
F-4
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------------------------------
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
for the years ended December 31, 1995, and 1994
=========================================================================================================================
<CAPTION>
Year Ended December 31,
----------------------------------
1995 1994
--------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $(355,927) $(619,285)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Realized gains on investments (306,851) (154,624)
Realized gains on sale of furniture and equipment (1,639) (22)
Depreciation 65,294 53,662
Amortization of deferred acquisition costs,
organization costs and state licenses acquired 51,299 58,639
Accretion of bond discount (7,460) (6,190)
Deferred policy acquisition costs (48,189) (7,939)
Change in assets and liabilities:
Decrease (increase) in receivable from reinsurer 172,850 (140,338)
Increase in accrued investment income (51,497) (26,680)
Increase in liability for future policy benefits 49,815 132,944
Increase in policy claims payable 256,035 156,700
Increase in annuity deposits and deferred profits 127,680 287,944
Increase (decrease) in premium deposit funds (25,343) 10,905
Other, (increase) (13,977) (33,664)
--------------- ---------------
Net cash used in operating activities (87,910) (287,948)
--------------- ---------------
Cash flows from investing activities
Proceeds from sales of investments 1,599,954 1,583,813
Proceeds from maturity or redemption of investments 1,666,657 450,661
Sales of equity securities 22,562 1,024
Proceeds from sale of furniture and equipment 7,340 250
Purchase of furniture and equipment (221,009) (42,413)
Purchase of fixed maturity securities (3,195,155) (3,784,772)
Purchase of equity securities - (105,705)
--------------- ---------------
Net cash used in investing activities (119,651) (1,897,142)
--------------- ---------------
Cash flows from financing activities:
Net payments on supplementary contracts (89,380) (19,857)
--------------- ---------------
Net cash used in financing activities (89,380) (19,857)
--------------- ---------------
Net decrease in cash and cash equivalents (296,941) (2,204,947)
Cash and cash equivalents, beginning of period 2,207,537 4,412,484
--------------- ---------------
Cash and cash equivalents, end of period $1,910,596 $2,207,537
=============== ===============
Supplemental Information:
Noncash activities:
Cancellation of treasury stock - $(10,000)
=============== ===============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
F-5
<PAGE>
- --------------------------------------------------------------------------------
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies:
The consolidated financial statements include the accounts of BNL Financial
Corporation and its wholly owned subsidiaries, BNL Equity Corporation and
Brokers National Life Assurance Company (BNLAC). As part of the Company's
continuing efforts of expansion and diversification, on November 30, 1995, BNL
Brokerage Corporation was formed as an Arkansas domiciled entity. There was no
activity in this corporation in 1995. It will be a wholly owned subsidiary of
BNLAC. All significant intercompany balances have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates
The Company's principal activity is the sale of individual and group life and
accident and health insurance within the United States. The Company is licensed
to sell in 27 states. Substantially all of the Company's life insurance in force
is nonparticipating business.
Premiums are reported as earned when due.
Benefits and expenses are associated with earned premiums so as to result in
recognition over the life of the policy. Such recognition is accomplished by
means of the provision for future policy benefits and amortization of deferred
policy acquisition costs.
Costs of acquiring new business and certain expenses of policy issuance and
underwriting have been deferred; these deferred policy acquisition costs are
being amortized over the premium-paying period of the policies (maximum of 30
years) in proportion to the ratio of annual premium revenue to total premium
revenue anticipated.
Liability for future policy benefits for traditional and limited-payment
contracts has been determined primarily by the net level premium method using
the 1975 through 1980 Select and Ultimate Mortality Table, interest assumptions
starting at 7% graded to 5% at the end of the sixteenth year and estimated
future withdrawals based upon Linton tables B or C.
For annuity contracts without mortality risk, net premium deposits and benefit
payments are recorded as increases or decreases in a liability account rather
than as revenue and expense. Expenses incurred and fees charged upon issuance
are deferred and recognized in relationship to the amount of funds held.
Increases in the liability account for interest credited to contracts are
charged to expense. The interest rate assumptions ranged from 6.50% to 5.25%
during 1995 and 1994.
The Company classifies its fixed maturity investments as investments available
for sale. Such securities may be sold prior to maturity due to changes that
might occur in market interest rates, changes in the security's prepayment risk,
the Company's liquidity needs, and similar factors, including the Company's
asset/liability management strategy. Investments available for sale are carried
at fair value. Unrealized gains and losses resulting from changes in the
valuation of fixed maturity securities are recorded directly to shareholders'
equity. Realized gains or losses on sale of investments are determined on a
specific identification basis. Investments in equity securities are carried at
fair value.
Cash equivalents are carried at amortized cost, which approximates fair value.
Cash equivalents represent US Treasury Bills and other short-term securities.
For purposes of the statement of cash flows, the Company considers all highly
liquid short-term investments to be cash equivalents. For purpose of cash flows
disclosures, there have been no federal income taxes or interest paid for 1995
and 1994.
Furniture and equipment are recorded at cost. Maintenance and repairs are
charged to expense as incurred. Provision for depreciation is made on the basis
of estimated useful lives of 3 to 10 years utilizing the straight-line method.
Accumulated depreciation totaled $309,498 and $271,515 at December 31, 1995 and
1994, respectively. Depreciation expense was $65,294 and $53,662 for the years
ended December 31, 1995, and 1994, respectively.
Other assets include agents' balances reduced by allowance for doubtful accounts
of $155,665 and $232,377 at December 31, 1995 and 1994, respectively. Reductions
in the allowance account were a credit to bad debt expense recorded in
operations of $(48,000) and $(32,535) for the years ended December 31, 1995, and
1994, respectively.
Other assets also include the cost of 26 state licenses acquired in 1991 as part
of the Statesmen Life Insurance Company acquisition. Such licenses are amortized
over the related estimated life of the license (40 years) using the
straight-line method. Amortization expense of approximately $3,109, was recorded
for each of the years ended December 31, 1995, and 1994.
F-6
<PAGE>
1. Summary of Significant Accounting Policies (continued):
Certain items in 1994 financial statements have been reclassified to conform to
the 1995 financial statements.
Net loss per share is based on net loss divided by the weighted average number
of fully paid shares.
2. Business Combination:
Effective August 1, 1994, United Arkansas Corporation (UAC) was merged with USSA
Acquisition Inc., a wholly owned subsidiary of the Company. As a part of the
merger, all of the outstanding shares of common stock of UAC were converted into
newly issued shares of common stock of the Company at a rate of ten shares of
UAC for nine shares of the Company. In connection with the merger, the Company
redomesticated its subsidiary Iowa Life Assurance Company (ILAC), an
Iowa-domiciled life insurance company, into Arkansas, making it an
Arkansas-domiciled company. Immediately following the redomestication, the
insurance subsidiary of UAC, United Arkansas Life Assurance Company, was merged
into ILAC and the name of the surviving company was changed to Brokers National
Life Assurance Company. At that same time, United Iowa Corporation was renamed
BNL Financial Corporation and United Arkansas Corporation became BNL Equity
Corporation. Upon completion of the merger, USSA Acquisition Inc., was
dissolved. This transaction was accounted for as a pooling of interests in 1994.
3. Shareholders' Equity:
At December 31, 1995 and 1994 shareholders' equity includes approximately
$6,372,000 and $5,915,000 respectively, of BNLAC net assets, substantially all
of which are restricted from distribution to the parent company without the
prior approval of the Arkansas Insurance Department. During 1994, the Company
contributed $1,000,000 of additional capital to BNLAC.
BNLAC reports to state regulatory authorities on a statutory accounting basis
that differs from the basis used herein. Under Arkansas insurance regulations,
BNLAC must maintain a minimum of $1,000,000 in capital and surplus. Capital and
surplus and net loss of BNLAC as reported on a statutory basis are as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------------------
1995 1994
---- ----
<S> <C> <C>
Capital and surplus $5,792,668 $6,243,076
========== ==========
Net loss $(436,054) $(453,689)
========== ==========
</TABLE>
The following is a reconciliation of consolidated net loss and shareholders'
equity per the financial statements included herein to BNLAC unconsolidated net
loss and capital and surplus on a statutory basis: <TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
----------------------------------------- ------------------------------------------
Income/Loss Capital and Surplus Income/Loss Capital and Surplus
----------------- ---------------------- ---------------- ----------------------
<S> <C> <C> <C> <C>
Consolidated Reporting Under
Generally Accepted Accounting Principles $(355,927) $8,592,797 $(619,285) $8,181,393
Less Parent Company and BNL Equity 20,224 2,220,523 75,010 2,266,547
----------------- ---------------------- ----------------- ----------------------
Brokers National Life Assurance Company (335,703) 6,372,274 (544,275) 5,914,846
Deferred Acquisition Costs 48,188 (514,561) 44,337 (562,750)
Reserve and Premium Adjustments (15,317) 4,227 (14,015) 7,912
Interest Maintenance Reserve/AVR (77,919) (342,604) 22,433 (269,335)
Unrealized appreciation (depreciation)
of securities - (480,385) - 386,347
Annuity Deposits and Related Adjustments (73,389) 828,571 21,174 829,118
Other 18,086 (74,854) 16,657 (63,062)
----------------- ---------------------- ----------------- ----------------------
BNLAC Statutory Basis $(436,054) $5,792,668 $(453,689) $6,243,076
================= ====================== ================= ======================
</TABLE>
F-7
<PAGE>
4. Income Taxes:
During 1993, the Company adopted Statement of Financial Accounting Standards
(SFAS) No. 109, Accounting for Income Taxes. The Statement adopts the liability
method of accounting for deferred income taxes. Under the liability method,
companies establish a deferred tax liability or asset for the future tax effects
of temporary differences between book and tax basis of assets and liabilities.
Changes in future tax rates will result in immediate adjustments to deferred
taxes. The effect of adopting (SFAS) No. 109 was immaterial.
The total net operating loss carry forwards at December 31, 1995 were
approximately $5,884,000 for income tax reporting. The net operating loss carry
forwards expire in years 2000 - 2010. The Company and its subsidiaries will file
separate income tax returns for 1995.
A deferred tax asset of $2,600,000 resulted from net operating loss carryovers
and temporary differences primarily related to the life insurance subsidiary.
The Company has recognized a corresponding valuation allowance of $2,600,000
against the deferred tax asset. This represents a net increase of $200,000 in
the deferred tax asset for 1995 and corresponding valuation allowance over the
previous year. The Company recognized no current or deferred tax expense or
benefit.
5. Investments:
The amortized cost and estimated market value of investments in fixed maturity
securities are as follows:
<TABLE>
<CAPTION>
December 31, 1995 Gross Gross Estimated
----------------- Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C>
US Treasury securities and obligations of
US government corporations and agencies $4,927,660 $496,718 $ - $5,424,378
Obligations of states and political subdivisions 5,390,856 45,616 (16,067) 5,420,405
Corporate Securities 410,365 7,701 (4,672) 413,394
Mortgage-backed securities
GNMA 30,769 5,796 - 36,565
Public utility bonds 200,116 9,944 - 210,060
--------------- ------------- ------------- ---------------
Totals $10,959,766 $565,775 $(20,739) $11,504,802
=============== ============= ============= ===============
December 31, 1994 Gross Gross Estimated
- ----------------- Amortized Unrealized Unrealized Market
Cost Gains Losses Value
--------------- ------------- ------------- ---------------
US Treasury securities and obligations of
US government corporations and agencies $5,766,379 $22,435 $(206,548) $5,582,266
Obligations of states and political subdivisions 3,841,349 183,000 (216,876) 3,807,473
Corporate securities 727,668 1,500 (39,582) 689,586
Mortgage-backed securities
GNMA 36,944 - (1,444) 35,500
Public utility bonds 344,047 - (10,657) 333,390
--------------- ------------- ------------- ---------------
Totals $10,716,387 $206,935 $(475,107) $10,448,215
=============== ============= ============= ===============
</TABLE>
The amortized cost and estimated fair value of investments in fixed maturity
securities at December 31, 1995 by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because borrowers may
have the right to call or prepay obligations with or without call or prepayment
penalties and because most mortgage-backed securities provide for periodic
payments throughout their life.
F-8
<PAGE>
5. Investments (continued):
<TABLE>
<CAPTION>
December 31, 1995
---------------------------------
Estimated
Amortized Cost Market Value
--------------- --------------
<S> <C> <C>
Due in one year or less $ 551,368 $ 552,724
Due after one year through five years 3,781,842 3,855,470
Due after five years through ten years 3,168,581 3,219,918
Due after ten years 3,427,206 3,840,125
--------------- --------------
10,928,997 11,468,237
Mortgage-backed securities 30,769 36,565
--------------- --------------
$10,959,766 $11,504,802
=============== ==============
</TABLE>
Proceeds from sales and maturities of investments in fixed maturity securities
for the years ended December 31, 1995 and 1994 were $1,599,954 and $1,583,813,
respectively. Gross gains of $307,416 and $156,497 and gross losses of $565 and
$1,851 were realized on those December 31, 1995, and 1994 sales, respectively.
Investment in equity securities at December 31, 1995 and 1994 represents common
stock investments as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
Market Market Value
Cost Value Cost
------------- ------------ ------------- -------------
<S> <C> <C> <C> <C>
Banks, trusts and
insurance companies $ 2,423 $ 625 $ 2,423 $ 1,250
Industrial, savings
and loans and other 105,700 41,245 128,785 109,542
------------- ------------ ------------- -------------
$108,123 $41,870 $131,208 $110,792
============= ============ ============= =============
</TABLE>
Net investment income for the years ended December 31, 1995 and 1994 is as
follows:
December 31,
------------------------------
1995 1994
------------- -------------
Interest on debt securities and
cash investments $897,175 $907,292
Dividends on equity securities 169 177
------------- -------------
897,344 907,469
Investment expenses (16,976) (13,712)
------------- -------------
Net investment income $880,368 $893,757
============= =============
F-9
<PAGE>
5. Investments (continued):
Net realized gains and losses are summarized below:
December 31,
------------------------------
1995 1994
------------- -------------
Debt securities $307,374 $153,622
Equity securities (523) 1,024
------------- -------------
$306,851 $154,646
============= =============
Included in 1995 and 1994 realized gains on debt securities is $188,456 and
$133,318, respectively of gains on taxable municipal bonds that were written
down in 1991 to 25% of par value for a total realized loss of $522,282. The
taxable municipal bonds were of three issuers whereby the proceeds of the
securities were invested in guaranteed investment contracts (GICs) of Executive
Life Insurance Company (Executive Life). Executive Life was placed under
rehabilitation by the California regulators in 1991. In 1993, a rehabilitation
plan was approved and in 1995 and 1994 the Company received a portion of the
principal in excess of the book value and back interest on the bonds.
6. Fair Value of Financial Instruments
<TABLE>
<CAPTION>
1995 1994
--------------------------------- ---------------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Assets
Cash and Cash Equivalents
(Note 1) $ 1,910,596 $ 1,910,596 (a) $ 2,207,537 $ 2,207,537 (a)
Investments-fixed maturity, available for sale
(Note 5 & 1) 11,504,802 11,504,802 (b) 10,448,215 10,448,215 (b)
Investments -equity securities
(Note 5 & 1) 41,870 41,870 (b) 110,792 110,792 (b)
Other financial instruments-Assets 316,428 316,428 (a) 226,797 226,797 (a)
---------------- ---------------- ---------------- ----------------
Total financial instruments-Assets $13,773,696 $13,773,696 $12,993,341 $12,993,341
================ ================ ================ ================
Liabilities
Premium deposit funds $195,542 $195,542 (a) $220,885 $220,885 (a)
Supplementary contracts without life contingencies
(Note 1) 84,213 84,213 (a) 173,593 173,593 (a)
Annuity deposits
(Note 1) 3,435,834 3,435,834 (a) 3,319,236 3,319,236 (a)
---------------- ---------------- ---------------- ----------------
Total financial instruments-Liabilities $3,715,589 $3,715,589 $3,713,714 $3,713,714
================ ================ ================ ================
<FN>
(a) The indicated assets and liabilities are carried at book value which
approximates fair value. (b) Fair value of investments are based on quoted
market price or dealer quotes, when available. If quotes are not available, fair
values are based on quoted prices of comparable instruments.
</FN>
</TABLE>
F-10
<PAGE>
7. Commitments and Contingencies:
The Company has entered into noncancelable operating leases for office space and
equipment. Future minimum payments under the leases are as follows:
1996 $94,997
1997 $77,868
1998 $77,868
1999 $41,544
Thereafter $0
----------------------
Total $292,277
======================
Related lease cost incurred for the years ended December 31, 1995 and 1994 was
$101,480 and $103,089, respectively.
The Company's wholly owned insurance subsidiary may be subject to losses related
to guarantee fund assessments. Such assessments result from liquidation of
troubled insurers by state regulators. The assessment to BNLAC, if any, is not
reasonably estimable, nor expected to have a material effect on the financial
statements.
Cash deposits in excess of federally insured limits are approximately $274,000
at December 31, 1995.
8. Liability for Unpaid Claims
Activity in the liability for unpaid claims is summarized as follows.
<TABLE>
<CAPTION>
1995 1994
------------------ -------------------
<S> <C> <C>
Balance at January 1 $296,200 $139,500
Less Reinsurance Recoverable 260,730 117,800
------------------ -------------------
Net Balance at January 1 35,470 21,700
------------------ -------------------
Incurred related to:
Current year 1,902,000 149,627
Prior years 1,688 (1,143)
------------------ -------------------
Total Incurred 1,903,688 148,484
------------------ -------------------
Paid related to:
Current year 1,475,000 118,657
Prior years 32,658 16,057
------------------ -------------------
Total paid 1,507,658 134,714
------------------ -------------------
Net Balance at December 31 431,500 35,470
Plus reinsurance recoverable 120,735 260,730
================== ===================
Balance at December 31 $552,235 $296,200
================== ===================
</TABLE>
9. Reinsurance:
Liability for future policy benefits is reported before the effects of
reinsurance. Reinsurance receivable (including amounts related to insurance
liabilities) are reported as assets. Estimated reinsurance receivable are
recognized in a manner consistent with the liabilities related to the underlying
reinsurance contracts. Such amounts have been presented in accordance with
Statement of Financial Standards No. 113 "Accounting and Reporting for
Reinsurance of Short Duration and Long Duration Contracts." The Company is
liable if the reinsuring companies are unable to meet their obligations under
the reinsurance agreements.
In 1994 the Company wrote dental business of which 90% was ceded, under a quota
share reinsurance agreement, to UniLife Insurance Company (UniLife). Effective
January 1, 1995, the agreement was modified to a 50% quota share reinsurance
agreement. In March 1995, BNLAC received notice from UniLife of termination of
the quota share reinsurance agreement. Effective November 1, 1995, BNLAC started
administrating and retaining 100% of the group dental business. Dental Premiums
collected for the years ended December 31, 1995 and 1994 were approximately
$4,159,000 and $2,588,000 respectively, of which approximately $2,504,000 and
$259,000 were included in premium income.
F-11
<PAGE>
9. Reinsurance (continued):
The Company retains a maximum of $35,000 on any one risk and reinsures the
remainder with Business Mens Assurance Company. The rating by A.M. Best Company
of Business Mens Assurance Company, the primary life reinsurer, was "A+"
(Superior) for 1994. Following is a summary of life reinsurance for December 31,
1995 and 1994:
<TABLE>
<CAPTION>
Percentage
Ceded to Assumed of Amount
Gross other from other Net Assumed to
Amount Companies Companies Amounts Net
------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C> <C>
December 31, 1995
Life Insurance in force
(in thousands) $35,310 $11,486 $6,631 $30,455 21.7%
============= ============= ============= ============= =============
Premiums-life insurance $406,093 $40,915 $16,758 $381,936 4.3%
============= ============= ============= ============= =============
Percentage
Ceded to Assumed of Amount
Gross other from other Net Assumed to
Amount Companies Companies Amounts Net
------------- ------------- ------------- ------------- -------------
December 31, 1994
Life Insurance in force
(in thousands) $36,280 $11,188 $5,624 $30,716 18.3%
============= ============= ============= ============= =============
Premiums-life insurance $448,231 $31,043 $16,583 $433,771 3.8%
============= ============= ============= ============= =============
</TABLE>
10. Related Party Transactions
During the years ended December 31, 1995 and 1994, as part of the Company's
routine investment program, certain purchases and sales of securities were
effected through a broker firm owned by the brother of the Chairman of the Board
of the Company. The above described transactions were executed pursuant to a
clearing agreement with an unaffiliated brokerage firm and member of the New
York Stock Exchange. Total purchases and sales executed under the agreement were
approximately $9,800,000 and $6,600,000 for 1995 and 1994, respectively. Fees
paid to the related broker were $7,197 and $7,327 for 1995 and 1994,
respectively.
11. Stock Option Plan
In 1994, the Board of Directors and stockholders approved the 1994 Brokers and
Agents' Nonqualified Stock Option Plan. This plan, subject to approval of the
registration, was established as incentive to sales persons of BNLAC. A maximum
of 250,000 shares will be available under the plan and the option period may not
exceed a term of 5 years. The duration of the plan is ten years and it will be
administrated by a four member committee of Directors. During 1995 the Company
granted 26,400 stock options with an exercise price of $.50 per share. No
options were granted through this plan in 1994. No options were exercised in
1995.
F-12
<PAGE>
12. The Offering
From 1989 until 1992, United Arkansas Corporation offered Arkansas residents
1,000,000 shares of common stock and 500,000 shares of preferred stock in units
of two common shares and one preferred share at $10 per unit. As a condition of
the public offering, the 13,500,000 shares issued to organizers in February 1989
were placed in escrow. On May 1, 1992 the organizers' shares were reduced to
5,563,212 in accordance with an agreement whereby the organizers could not
collectively own more than 60 percent of the number of shares of common stock
outstanding.
In 1994, in order to consummate a merger of United Arkansas Corporation and USSA
Acquisition Inc., the stock subject to the February 1, 1989 escrow agreement was
released from the terms and conditions of the February 1, 1989 escrow agreement
so that the stock could be exchanged for common stock of United Iowa Corporation
pursuant to the terms of the merger (see Note 2). A new escrow agreement with an
effective date of February 28, 1994, prohibits sale or transfer of the
organizers' shares until any one of the following conditions is satisfied:
a. The Company has net earnings per share per year, after tax and before
extraordinary items, of $1.86 for any three years following the public
offering.
b. A tender offer or an offer to merge or otherwise acquire the Company's
common stock at a per share price of at least $3.34 per share of common
stock and having a market value at the effective date of the tender offer,
merger, or other acquisition of at least $3.71 per share of common stock.
c. At any time after February 28, 1995, the public market price exceeds $3.25
for a term of 90 trading days and for 30 consecutive trading days prior to a
request for termination of the escrow.
d. If insurance business in force reaches the following levels:
$100,000,000 - 50% of escrowed shares will be released.
$125,000,000 - 25% of escrowed shares will be released.
$150,000,000 - remaining 25% of escrowed shares will be released.
e. All escrowed shares will be released August 1, 1999, if they have not been
released prior to that time.
F-13
<PAGE>
- --------------------------------------------------------------------------------
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS
================================================================================
To the Board of Directors and Shareholders
BNL Financial Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of BNL Financial
Corporation and Subsidiaries as of December 31, 1995 and 1994, and the related
consolidated statements of operations, change in shareholders' equity and cash
flows for the years then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of BNL
Financial Corporation and Subsidiaries as of December 31, 1995 and 1994 and the
consolidated results of their operations and their consolidated cash flows for
the years then ended in conformity with generally accepted accounting
principles.
/S/ Amend, Smith & Co.
-----------------------
Oklahoma City, Oklahoma AMEND, SMITH & CO., p.c
February 15, 1996
F-14
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Other Expenses of Issuance and Distribution.
Registration fee ..................................... $ 100.00
Accountants' fees ................................... 5,000.00
Attorneys' fees ...................................... 5,000.00
Printing ............................................ 500.00
Exhibits.
Exhibits Description
3.1* Articles of Incorporation of BNL
Financial Corporation
3.2* Bylaws of BNL Financial Corporation
4.1* Articles of Incorporation of BNL
Financial Corporation (included herewith
as Exhibit 3.1)
5.1 Opinion of Whitfield & Eddy, P.L.C., counsel
to the Registrant, as to the legality of the
securities being registered
8.1 Opinion of Whitfield & Eddy, P.L.C. as to
tax matters (included in Exhibit 5.1)
10.1 1994 Brokers' and Agents' Non-Qualified
Stock Option Plan
10.2* Stock Bonus Incentive Agreement for
C. Don Byrd, dated August 28, 1991
10.3* Stock Escrow Agreement, dated
February 1, 1989, between United
Arkansas Corporation (now known as
BNL Equity Corporation), Organizer
Shareholders of United Arkansas Corpora-
tion, First Commercial Bank, N.A.,
Little Rock, Arkansas, the Escrow Agent,
and the Arkansas Securities Commissioner
II-1
<PAGE>
Exhibits Description
21.1 Subsidiaries of BNL Financial
Corporation
23.1 Consent of Amend, Smith & Co., P.C.
Independent Certified Public Accountants
23.2 Consent of Whitfield & Eddy, P.L.C.
(included in their opinion filed as
Exhibit 5.1)
24.1 Powers of Attorney
* Filed as an Exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 33-70318, filed with the Securities and Exchange Commission on
October 13, 1993, which Exhibit is incorporated herein by this reference. The
Form S-4 was filed under the former name of the Registrant, which was United
Iowa Corporation.
Undertakings
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events
arising after the effective date of the registration statement
(or the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement;
(iii) To include any material information with
respect to the plan of distribution not previously disclosed
in the registration statement or any material change to such
information in the registration statement.
(2) That, for the purpose of determining any liability under
the Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall
be deemed to be the initial bona fide offering thereof.
II-2
<PAGE>
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at
the termination of the offering.
(b) The undersigned registrant hereby undertakes
that, for purposes of determining any liability under the
Securities Act of 1933, each filing of the registrant's annual
report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each
filing of any employee benefit plan's annual report pursuant
to section 15(d) of the Securities Exchange Act of 1934) that
is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona
fide offering thereof.
(c) Insofar as indemnification for liabilities
arising under the Securities Act of 1933 may be permitted to
directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in
the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
(d) The undersigned registrant hereby undertakes to
deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest
annual report to security holders that is incorporated by
reference in the prospectus and furnished pursuant to and
meeting the requirements of Rule 14a-3 or Rule 14c-3 under the
Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of
Regulation S-X are not set forth in the prospectus, to
deliver, or cause to be delivered to each person to whom the
prospectus is sent or given, the latest quarterly report that
is specifically incorporated by reference in the prospectus to
provide such interim financial information.
(e) The undersigned registrant hereby undertakes as
follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a
part of this registration statement, by any person or party
who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus
will contain the information called for
II-3
<PAGE>
by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of
the applicable form.
(f) The Registrant undertakes that every prospectus
(i) that is filed pursuant to paragraph (d) immediately
preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a
part of an amendment to the registration statement and will
not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to
be a new registration statement relating to the securities
offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering
thereof.
(g) The undersigned registrant hereby undertakes to
respond to requests for information that is incorporated by
reference into the prospectus within one business day of
receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means.
This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of the registration statement through the
date of responding to the request.
(h) The undersigned registrant hereby undertakes to
supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in
the registration statement when it became effective.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Austin,
Texas, on April , 1996.
BNL FINANCIAL CORPORATION
By: /s/ Kenneth Tobey
Kenneth Tobey, President
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
<S> <C> <C>
/s/ Wayne E. Ahart Chief Executive Officer April 19, 1996
- ------------------------------- and Chairman of the Board
Wayne E. Ahart
/s/ C. Donald Byrd Vice Chairman of the April 19, 1996
- ------------------------------- Board
C. Donald Byrd
/s/ Kenneth Tobey President April 19, 1996
Kenneth Tobey
/s/ Barry N. Shamas Executive Vice President April 19, 1996
- ------------------------------- and Treasurer
Barry N. Shamas,
Individually, and as
Attorney-in-Fact for
those individuals marked
with an asterisk
/s/ Cecil Alexander Director April 19, 1996
- ---------------------------------
Cecil Alexander*
/s/ Richard Barclay Director April 19, 1996
Richard Barclay*
/s/ Eugene Cernan Director April 19, 1996
- --------------------------------
Eugene Cernan*
/s/ Hayden Fry Director April 19, 1996
- ---------------------------------
Hayden Fry*
II-5
<PAGE>
/s/ John Greig Director April 19, 1996
- ---------------------------------
John Greig*
/s/ Roy Keppy Director April 19, 1996
- --------------------------------
Roy Keppy*
/s/ Thomas Landry Director April 19, 1996
- ------------------------------
Thomas Landry*
/s/ Roy Ledbetter Director April 19, 1996
- --------------------------------
Roy Ledbetter*
/s/ John E. Miller Director April 19, 1996
- ---------------------------------
John E. Miller*
/s/ James A. Mullins Director April 19, 1996
- ---------------------------------
James A. Mullins*
/s/ C. James McCormick Director April 19, 1996
- ------------------------------
C. James McCormick*
/s/ Knox Nelson Director April 19, 1996
- ----------------------------------
Knox Nelson*
/s/ Robert R. Rigler Director April 19, 1996
- -----------------------------------
Robert R. Rigler*
/s/ Chris Schenkel Director April 19, 1996
- -----------------------------------
Chris Schenkel*
/s/ L. Stanley Schoelerman Director April 19, 1996
- ---------------------------------
Stanley Schoelerman*
/s/ Orville Sweet Director April 19, 1996
- -----------------------------------
Orville Sweet*
/s/ Charles Thone Director April 19, 1996
- ----------------------------------
Charles Thone*
</TABLE>
II-6
<PAGE>
As filed with the Securities and Exchange Commission on _______________
Registration No. _____________
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
EXHIBITS TO
FORM SB-2
REGISTRATION STATEMENT
Under
The Securities Act of 1933
BNL FINANCIAL CORPORATION
(Exact name of registrant as specified in charter)
-------------
IOWA 6311 42-1239454
(State or other jurisdiction of (Primary Standard Industrial (IRS Employer
incorporation or organization) Classification Code) Identification No.)
301 Camp Craft Road, Suite 200
Austin, Texas 78746
(512) 327-3065
(Address, including zip code and telephone number, including area code, of
registrant's principal offices)
HARLEY A. WHITFIELD, ESQ. COPY TO:
WHITFIELD & EDDY, P.L.C.
317 SIXTH AVENUE, SUITE 1200 Wendy L. Carlson, Esq.
DES MOINES, IOWA 50309-4110 WHITFIELD & EDDY, P.L.C.
(515) 288-6041 317 Sixth Avenue, Suite 1200
Des Moines, Iowa 50309-4110
(Address, including zip code and telephone number, (515) 288-6041
including area code, of agent for service)
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered on a delayed
or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check
the following box. [ ]
-------------------
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to Section 8(a), may
determine.
- -------------------------------------------------------------------------------
<PAGE>
<PAGE>
EXHIBIT LIST
Exhibit Description
3.1* Articles of Incorporation of BNL
Financial Corporation
3.2* Bylaws of BNL Financial Corporation
4.1* Articles of Incorporation of BNL
Financial Corporation (included herewith
as Exhibit 3.1)
5.1 Opinion of Whitfield & Eddy, P.L.C., counsel
to the Registrant, as to the legality of the
securities being registered
8.1 Opinion of Whitfield & Eddy, P.L.C., as to
tax matters (included in Exhibit 5.1)
10.1 1994 Brokers' and Agents' Non-Qualified
Stock Option Plan
10.2* Stock Bonus Incentive Agreement for
C. Don Byrd, dated August 28, 1991
10.3* Stock Escrow Agreement, dated
February 1, 1989, between United
Arkansas Corporation (now known as
BNL Equity Corporation), Organizer
Shareholders of United Arkansas Corpora-
tion, First Commercial Bank, N.A.,
Little Rock, Arkansas, the Escrow Agent,
and the Arkansas Securities Commissioner
21.1 Subsidiaries of BNL Financial
Corporation
23.1 Consent of Amend, Smith & Co., P.C.
Independent Certified Public Accountants
23.2 Consent of Whitfield & Eddy, P.L.C.
(included in their opinion filed as
Exhibit 5.1)
24.1 Powers of Attorney
* Filed as an Exhibit to the Registrant's Registration Statement on Form S-4
(Registration No. 33-70318, filed with the Securities and Exchange Commission on
October 13, 1993, which Exhibit is incorporated herein by this reference. The
Form S-4 was filed under the former name of the Registrant, which was United
Iowa Corporation.
<PAGE>
Page 1
April 16, 1996
Exibit 5.1
April 16, 1996 246-5579
Board of Directors
BNL Financial Corporation
301 Camp Craft Road, Suite 200
Austin, Texas 78746
Re: BNL Financial Corporation
Registration Statement on Form SB-2
Gentlemen:
You have requested our opinion, as general counsel for BNL Financial Corporation
(the "Company"), in connection with the Registration Statement on Form SB-2 to
be filed by the Company with the Securities and Exchange Commission in
connection with the registration under the Securities Act of 1933, as amended,
by the Company of an aggregate of 250,000 shares of common stock, no par value
(the "Common Stock"), which are issuable upon the exercise of stock options
granted, or to be granted, to agents and brokers under the 1994 Brokers' and
Agents' Non-Qualified Stock Option Plan (the "Plan"). We have examined and
relied upon originals or copies, certified or otherwise indemnified to our
satisfaction, of such documents, corporate records, certificates and instruments
relating to the Company as we have deemed relevant and necessary to the
formation of the opinion hereinafter set forth. In such examination, we have
assumed the genuineness and authenticity of all documents examined by us and all
signatures thereon, the legal capacity of all persons executing such documents,
the conformity to originals of all copies of documents submitted to us for the
truth and correctness of any representations and warranties contained therein.
Based upon and subject to the foregoing, we are of the opinion that:
<PAGE>
Page 2
April 16, 1996
A. Legality of Issuance of Common Stock:
The Common Stock when issued in accordance with the terms of the Plan will be
legally issued, fully paid and nonassessable.
B. Federal Income Tax Consequences:
The summary of federal income tax considerations to recipients of options under
the Plan as set forth under the heading "Federal Income Tax Consequences" in the
Registration Statement discusses all material federal income tax aspects of the
grant and exercise of the options and is correct under the Internal Revenue Code
of 1986, as amended, the Income Tax Regulations and rulings of the Internal
Revenue Service promulgated thereunder, and the relevant judicial
interpretations thereof, all of which are subject to change which may affect our
opinion. The discussion under "Federal Income Tax Consequences," covers issues
upon which we expressly render an opinion, and such opinions represent, subject
to the qualifications and conditions contained under "Federal Income Tax
Consequences," subject to this letter, and subject to the accuracy of the facts
set forth in the Registration Statement, our best judgment of the outcome of
such issues if challenged and litigated.
C. Consent
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/ Wendy L. Carlson
Wendy L. Carlson
WLC/dc
<PAGE>
EXHIBIT 10.1
1994 BROKER'S AND AGENT'S NON-
QUALIFIED STOCK OPTION PLAN
OF
BNL FINANCIAL CORPORATION
ARTICLE 1: PURPOSE
This 1994 Broker's and Agent's Non-Qualified Stock Option Plan (the "Plan") is
adopted by the Board of Directors of BNL FINANCIAL CORPORATION (the
"Corporation") this 13th day of September, 1994, subject to stockholder approval
within twelve months of the date of adoption, in order that the interests of the
Corporation may be advanced by enabling the Corporation to attract insurance
brokers and agents for the Corporation's subsidiary, Brokers National Life
Assurance Company ("BNLAC"), and to furnish additional incentive to such
persons, upon whose initiative and efforts the successful conduct and
development of the business of BNLAC largely depends, by encouraging such
persons to become owners of the common stock of the Corporation.
ARTICLE 2: ADMINISTRATION
2.1 BOARD OF DIRECTORS: The Plan shall be administered by the Board of Directors
of the Corporation or by a committee consisting of at least three members of the
Board (the Board of Directors of the Corporation or committee thereof as
provided herein shall be referred to herein as the "Board"). Acts of a majority
of the Board, at which a quorum is present, or acts approved in writing by all
of the members of the Board, shall be valid acts of the Board. The Board shall
from time to time, in its discretion, determine by resolution the eligible
persons, as defined in Article 3, who shall be granted options, the amount of
stock to be optioned to each, the time (within the limitations prescribed in
Article 6) when such options shall become exercisable and the conditions, if
any, which must be met prior to exercise.
2.2 CONSTRUCTION: The interpretation and construction by the Board of any
provisions of the Plan, or of any option granted under it, shall be final. No
member of the Board shall be liable for any action or determination made in good
faith with respect to the Plan or any option granted under it.
2.3 INDEMNIFICATION: In addition to such other legal rights of indemnification
as they may have as members of the Board, the members of the Board shall be
indemnified by the Corporation to the full extent set forth in the corporation's
articles of incorporation and bylaws in respect of the administration and
construction of the Plan.
ARTICLE 3: ELIGIBILITY FOR PARTICIPATION
Options under the Plan shall be granted only to salespersons of insurance
policies of BNLAC. Such persons currently include individuals with the titles
Area General Agent, General Agent and Personal Producing General Agent. The
Board may grant options to persons of like title with like duties as the
foregoing persons. Notwithstanding the foregoing, for purposes of the Plan, and
the Plan only, no person shall be granted an option under the Plan unless such
person:
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1. shall have first been presented with the most recent annual
report on Form 10-K of the Corporation, all quarterly reports
on Form 10-Q of the Corporation since the most recent 10-K,
the most recent Annual report to Shareholders of the
Corporation, and the most recent proxy material of the
Corporation;
2. shall be, at the time of grant, licensed to sell insurance in
the states in which the person solicits BNLAC policies.
Options may be issued to the same person on more than one occasion.
ARTICLE 4: STOCK SUBJECT TO THE PLAN
The stock for which options may be granted and which may be sold pursuant to the
Plan shall not, subject to Article 12, exceed in the aggregate 250,000 shares of
the Corporation's common stock. Such shares may be authorized and unissued
shares or may be issued shares reacquired by the Corporation and referred to in
the Corporation's Balance Sheet as "Treasury Stock." All shares for which an
option is granted under the Plan, which for any reason are not issued as a
result of exercise of such option, shall be available for the granting of
further options under the Plan.
ARTICLE 5: EXERCISE PRICE
The exercise price of the common stock offered to eligible participants under
the Plan by grant of an option to purchase common stock may be less than the
fair market value of the common stock at the date of grant.
ARTICLE 6: TERM OF OPTIONS
The terms of each option shall be no more than five years from the date of grant
as determined by the Board but shall be subject to earlier termination as
subsequently provided.
ARTICLE 7: EXERCISE OF OPTIONS
7.1 SCHEDULE FOR EXERCISE: Immediately after grant of an option, it may be
exercised (subject to Article 9) as the Board shall so determine on the date of
grant. In no event, however, shall an option be exercisable after the expiration
of five years from the date it was granted.
7.2 REGISTRATION OF SHARES: Since an exemption from the registration
requirements of the Securities Act of 1933, as amended, may not be available for
either the issuance of the options, the issuance of shares upon , exercise of an
option, or the transfer of shares acquired, the administration of the Plan, the
issuance of options pursuant thereto, and the issuance of shares upon the
exercise of such options shall be accomplished in such a manner that such
registration provisions will not be violated. In addition, all shares acquired
as a result of exercise of options granted pursuant hereto, which are not part
of an offering made pursuant to a Registration Statement or a Notification under
Regulation A filed with the Securities and Exchange Commission, shall be subject
to restrictions upon their transfer in that the shares shall not be transferred
in any manner which would constitute a violation of the registration
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requirements of the aforesaid Act. In exercising an option to acquire or shares
subject to the foregoing restrictions upon transfer, the optionee shall make to
the Corporation the following representations in writing:
Gentlemen:
I hereby represent and warrant to the Corporation that I am acquiring
the shares subject to this option for my own account for investment;
that I am not acquiring such shares with a view to dividing my
participation with others or with a view to or in connection with an
offering or distribution; and that I have no present intention of
selling or otherwise disposing of such shares.
I further agree that any and all stock certificates issued to me
pursuant to the exercise of this option shall contain the following
legend or one substantially similar thereto:
The shares represented by this Certificate have not been registered
under the securities Act of 1933 (the "Act") and are "restricted
securities" as that term is defined in Rule 144 under the Act. The
shares may not be offered for sale, sold, or otherwise transferred
except pursuant to an effective registration statement under the Act or
pursuant to an exemption from registration under the Act, the
availability of which is to be established to the satisfaction of the
Corporation.
ARTICLE 8: DATE OF GRANT AND FORM OF AGREEMENT
Each option granted under the Plan, unless otherwise specifically indicated,
shall be granted as of the date of the Board's resolution conferring the option
("date of grant"), and the Board shall notify the optionee of the grant in
writing delivered in duplicate by mail. The notification shall serve as the
option agreement and shall contain a summary of the essential terms and
conditions of the Plan. Receipt of the notification shall be acknowledged by the
optionee on the duplicate copy, and by such acknowledgment, the optionee shall
agree that in consideration of such option he will abide by all the terms and
conditions of the Plan. The optionee shall return the duplicate copy to the
Corporation either by delivery in person or by mail. Any inconsistencies between
the terms of the Plan and the terms of the option agreement shall be governed by
the terms of the Plan.
ARTICLE 9: MANNER OF EXERCISE
9.1 NOTICE TO THE CORPORATION: Each exercise of an option granted shall be made
by the delivery by the optionee (or his legal representative, as the case may
be) of written notice of such election to the corporation, either in person or
by certified mail to the corporation's mailing address, stating the number of
shares with respect to which the option is being exercised and specifying a date
on which the shares will be taken and payment made therefor. Such date shall be
at least 21 days after such notice is given.
9.2 ISSUANCE OF STOCK: On the date specified in the notice of election, the
Corporation shall deliver, or cause to be delivered, to the optionee (or his
legal representative, as the case may be), stock certificates for the number of
shares with respect to which the option is being
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exercised, against payment therefor. Delivery of the certificate(s) may be made
at the office of the Corporation or at the office of a transfer agent appointed
for the transfer of shares of the Corporation, as the Corporation shall
determine. Shares shall be issued in the name of the optionee (or his legal
representative, as the case may be). No shares shall be issued until full
payment therefor shall have been made by cash or by certified check equal to the
option price. In the event of a failure on the date stated to pay for and accept
delivery of the certificate(s) representing the full number of shares specified
in the notice of election, the option shall become inoperative only as to those
shares which are not paid for and accepted, but shall continue with respect to
any remaining shares subject to the option as to which exercise has not yet been
made. If an option becomes inoperative under the preceding sentence, it still
will be considered to be outstanding for purposes of paragraph 7.2.
9. 3 SECURITIES AND EXCHANGE COMMISSION ACTION: If any law or regulation of the
Securities and Exchange Commission or of any other body having jurisdiction
shall require any action to be taken in connection with the shares specified in
a notice of election of an option before the shares can be delivered to the
optionee, then the date stated for issuance of the shares shall be postponed
until such action can be taken.
ARTICLE 10: ASSIGNMENT PROHIBITED
Any option granted under the Plan shall, by its terms, be exercisable during the
lifetime of the optionee only by the optionee. It shall not be assigned, pledged
or hypothecated in any way, shall not be subject to execution, and shall not be
transferable by the optionee otherwise than by will or the laws of descent and
distribution. With respect to any option granted hereunder, any attempt of
assignment, transfer, pledge, hypothecation, or other disposition thereof which
is contrary to the provisions of the Plan, and the levy of any attachment or
similar proceedings thereon, shall be null and void.
ARTICLE 11: TERMINATION OF AGENCY
11.1 TERMINATION OTHER THAN BY DEATH OR DISABILITY: If the agency or employment
of an optionee terminates for any reason other than death or total and permanent
disability, any options granted to the optionee under the Plan which have not
been exercised shall be canceled, except that such optionee may exercise within
three months after such termination of agency or employment, an option granted
to him to the extent the option is exercisable on the date of termination of
agency or employment. The Plan will not confer upon any optionee any right with
respect to continuance of agency or employment with the Corporation; nor will it
interfere in any way with the Corporation's right to terminate his agency or
employment at any time.
11.2 TERMINATION BY DEATH OR DISABILITY: In the event of the death of an
optionee, any option held by him at the time of his death shall be transferred
as provided in his will or as determined by the laws of descent and
distribution, and may be exercised by the estate of the optionee, or by any
person who acquired such option by bequest or inheritance from the optionee, at
any time or from time to time within three months after the date of disability
(such date to be determined by the Board), to the extent the option was
exercisable on such date, and provided that the option is exercised within five
years from the date of grant.
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ARTICLE 12: CHANGES IN CAPITAL STRUCTURE
12.1 STOCK DIVIDENDS AND SPLIT-UPS: If the corporation shall, at any time prior
to the termination date of the Plan, change its issued common stock into a
greater number of shares of stock through a stock dividend or split-up of
shares, the number of shares reserved for issuance under the Plan and the number
of shares of stock deliverable with respect to each payment of the specified
option price per share in connection with each exercise of an option after the
record or effective date of such stock dividend or split-up of shares shall be
proportionately increased and the price to be paid per share shall be decreased
proportionately. Conversely, if the issued common stock of the Corporation
shall, at any time within such period, be combined into a smaller number of
shares of stock, the number of shares reserved for issuance under the Plan and
the number of shares of stock deliverable with respect to each payment of the
specified option price per share in connection with the exercise of an option
after the record or effective date of such combination of shares shall be
proportionately reduced and the price to be paid per share shall be increased
proportionately. Notwithstanding any such proportionate increase or decrease, no
fraction of a share of stock shall be issued on the exercise of an option.
12.2 REORGANIZATION: If within the duration of an option there shall be a
corporate merger consolidation, acquisition of assets, or other reorganization,
and if such transaction shall affect the optioned stock, the optionee shall
thereafter be entitled to receive upon exercise of his option those shares or
securities that he would have received had the option been exercised prior to
such transaction and the optionee had been a stockholder of the Corporation with
respect to such shares.
12.3 LIQUIDATION: Upon the complete liquidation of the Corporation, other than
pursuant to a plan of reorganization or similar transaction of the nature
specified in paragraph 12.2, any unexercised options granted under the Plan
shall be canceled.
ARTICLE 13: RIGHTS AS A STOCKHOLDER
An optionee shall not by reason of any option granted pursuant to the Plan have
any rights of a stockholder of the Corporation until the date of issuance of the
stock certificate(s) to him in respect of exercise of an option granted
hereunder.
ARTICLE 14: GOVERNING LAW
Options granted under the Plan shall be construed and shall take effect in
accordance with the laws of the State of Iowa.
ARTICLE 15: AMENDMENT The Board of Directors may amend or discontinue the Plan
at any time provided that no unexercised option g granted under the Plan may be
altered or canceled, except in accordance with its terms, without the written
consent of the optionee to whom the option has been granted.
ARTICLE 16: TERM OF THE PLAN
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No option shall be granted hereunder after the expiration of ten years from the
earlier of the date on which the Plan was adopted by the Board of directors or
the date it was approved by the stockholders of the Corporation.
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Exhibit 21.1
SUBSIDIARIES OF BNL FINANCIAL CORPORATION
BNL Equity Corporation, an Arkansas corporation
Brokers National Life Assurance Company, an Arkansas-domiciled insurance company
BNL Brokerage Corporation, an Arkansas corporation
<PAGE>
EXHIBIT 23.1
Independent Auditors' Consent
We consent to the inclusion in this registration statement of BNL Financial
Corporation on form SB-2 of our report dated February 15, 1996, appearing in the
Prospectus, which is part of this Registration Statement and to the reference to
us under the heading of "Experts" in such Prospectus.
/s/ Amend, Smith & Co., p.c.
AMEND, SMITH & Co., p.c.
Oklahoma City, Oklahoma
April 19, 1996
<PAGE>
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Cecil Alexander
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Richard Barclay
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Eugene Cernan
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Hayden Fry
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ John Greig
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Roy Keppy
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Thomas Landry
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Roy Ledbetter
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ John E. Miller
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ James A. Mullins
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ C. James McCormick
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Knox Nelson
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Robert R. Rigler
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Chris Schenkel
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Stanley Schoelerman
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Orville Sweet
Director
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
The undersigned director of BNL Financial Corporation ("BNL"), an Iowa
corporation, hereby constitutes and appoints Wayne E. Ahart and/or Barry N.
Shamas, each as his true and lawful attorney and agent, with full power of
substitution and resubstitution, in the name and on behalf of the undersigned,
to do any and all acts and things and execute any and all instruments which the
said attorney and agent may deem necessary or advisable to enable BNL to comply
with the Securities Act of 1933, as amended, and any rules and regulations and
requirements of the Securities and Exchange Commission in respect thereof, in
connection with the Registration on Form SB-2 under the Securities Act of 1933
of Stock Options which may be granted by BNL under the 1994 Brokers' and Agents'
Non-Qualified Stock Option Plan, and the Common Stock which may be issued upon
exercise of such Stock Options, including specifically, but without limiting the
generality of the foregoing, the power and authority to sign the name of the
undersigned in his capacity as a director of BNL to one or more Registration
Statements to be filed with the Securities and Exchange Commission in respect
thereto, to any and all amendments, including post-effective amendments, to the
Registration Statements and to any and all instruments and documents filed as a
part of or in connection with the Registration Statements or amendments thereto;
hereby ratifying and confirming all that said attorneys and agents, or any of
them, has done, shall do or cause to be done by virtue hereof.
Dated this 16th day of April, 1996.
/s/ Charles Thone
Director
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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