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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from______to_____
Commission File No. 0-16880
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BNL FINANCIAL CORPORATION
(Exact name of Registrant as specified in its charter)
IOWA 42-1239454
(State of incorporation) (I.R.S. Employer Identification No.)
301 Camp Craft Road, Suite 200
Austin, Texas 78746
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (512) 327-3065
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Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No____ As of March 31, 1997, the
Registrant had 23,311,944 shares of Common Stock, no par value, outstanding.
Transitional Small Business Disclosure Format (check one) Yes___ No__X__
<PAGE>
Item 1. Financial Statements
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
June 30
ASSETS 1997 December 31,
(Unaudited) 1996
----------- ------------
<S> <C> <C>
Investments:
Investments available for sale, at
fair value ....................... $11,939,152 $11,885,909
Equity securities, common stock ....... 32,838 35,438
Cash and cash investments ............. 337,915 702,769
----------- -----------
Total Investments 12,309,906 12,624,116
Accrued investment income ................ 235,723 222,101
Furniture and equipment .................. 256,994 266,234
Deferred policy acquisition costs ........ 449,826 474,667
Receivable from reinsurer ................ 23,301 28,462
Other assets ............................. 497,782 485,995
----------- ----------
TOTAL ASSETS $13,773,532 $14,101,575
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Liability for future policy benefits . $1,392,921 $1,382,280
Policy claims payable................. 885,000 816,500
Premium deposit fund ................. 139,366 177,909
Annuity deposits ..................... 3,421,804 3,495,571
Deferred annuity profits ............. 615,737 610,536
Supplementary contracts without
life contingencies ............... 63,367 70,515
Other liabilities .................... 552,623 415,901
---------- ----------
Total liabilities 7,070,819 6,969,212
---------- ----------
SHAREHOLDERS' EQUITY:
Common stock ......................... 466,239 466,239
Additional paid-in capital ........... 14,308,230 14,308,230
Unrealized appreciation (depreciation)
of securities ................... (39,522) (41,679)
Treasury stock ....................... (64,105) (64,105)
Accumulated deficit .................. (7,968,129) (7,536,322)
---------- -----------
Total shareholders' equity 6,702,713 7,132,363
---------- ----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $13,773,532 $14,101,575
========== ==========
<FN>
(See Notes to Consolidated Financial Statements)
</FN>
</TABLE>
2
<PAGE>
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1997 1996 1997 1996
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES:
Premium income .................................. $ 2,555,179 $ 1,774,936 $ 4,822,269 $ 3,390,315
Investment income ............................... 229,940 218,219 439,507 433,509
Realized gains on investments ................... 23,147 12,546 41,911 16,459
----------- ----------- ---------- ----------
Total income ................................... 2,808,266 2,005,701 5,303,687 3,840,283
----------- ----------- ---------- ----------
EXPENSES:
Policy benefits and other insurance costs ....... 2,268,801 1,547,136 4,147,641 3,002,118
Increase in liability for future policy benefits (15,048) 8,232 4,141 (8,062)
Amortization of deferred policy acquisition costs 15,373 14,976 24,841 22,352
Operating expenses .............................. 695,132 628,825 1,359,231 1,211,444
Taxes, other than on income ..................... 90,860 66,244 199,640 127,737
----------- ----------- ---------- ----------
Total expenses ................................. 3,055,118 2,265,413 5,735,494 4,355,589
----------- ----------- ---------- ----------
OPERATING INCOME (LOSS) ........................ (246,852) (259,712) (431,807) (515,306)
Provision for income taxes ......................... 0 0 0 0
----------- ----------- ---------- ----------
NET INCOME (LOSS) .............................. ($ 246,852) ($ 259,712) ($ 431,807) ($ 515,306)
=========== =========== ========== ==========
Net loss per share .............................. ($ 0.01) ($ 0.01) ($ 0.02) ($ 0.02)
=========== =========== ========== ==========
Weighted average number
of shares ...................................... 23,311,944 23,311,944 23,311,944 23,311,944
=========== =========== ========== ==========
<FN>
(See Notes to Consolidated Financial Statements)
</FN>
</TABLE>
3
<PAGE>
<TABLE>
BNL FINANCIAL CORPORATION AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months
Ended Ended
06/30/97 06/30/96
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss ...................................................($ 431,807) ($ 515,306)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Realized (gain) loss on investments ....................... (45,990) (12,689)
Realized (gain) loss on sale of furniture and equipment.... 4,079 (3,770)
Depreciation .............................................. 46,923 46,669
Amortization of deferred acquisition
costs and state licenses acquired ...................... 24,841 23,906
Accretion of bond discount ................................ (1,782) (2,835)
Change in assets and liabilities:
Increase in accrued investment income ..................... (13,622) (39,695)
Decrease (increase) in receivable from reinsurer........... 5,161 0
Decrease in premium deposit fund .......................... (38,543) (9,483)
Increase (decrease)in annuity deposits and deferred profits (68,566) 86,320
Increase in liability for future policy
benefits ............................................... 10,641 (41,797)
Increase in policy claims payable.......................... 68,500 (33,735)
Other net ................................................. 124,934 (31,237)
---------- ---------
Total adjustments ..................................... 116,576 (18,346)
---------- ---------
Total cash provided by (used in)
operating activities .............................. (315,231) (533,652)
Cash flows from investing activities:
Sales of debt securities ................................. 1,496,496 1,561,854
Sales of equity securities ............................... 0 0
Sales of furniture and equipment ......................... 201 9,000
Purchase of equity securities ............................ 0 0
Purchase of furniture and equipment ...................... (41,963) (45,417)
Purchase of fixed maturity securities .................... (1,497,209) (2,547,183)
--------- ---------
Net cash provided by (used in) investing activities (42,475) (1,021,746)
--------- ---------
Cash flows from financing activities:
Payments on supplementary contracts ...................... (7,148) (6,755)
--------- ----------
Net cash provided by (used in) financing activities (7,148) (6,755)
--------- ----------
Net increase (decrease) in cash and cash equivalents ....... (364,854) (1,562,153)
Cash and cash equivalents, beginning of year ............ 702,769 1,910,596
--------- ---------
Cash and cash equivalents, end of period ................ $ 337,915 $ 348,443
========= =========
<FN>
(See notes to Consolidated Financial Statements)
</FN>
</TABLE>
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The financial statements included herein reflect all adjustments which are, in
the opinion of management, necessary to present a fair statement of the interim
results on a basis consistent with the prior period. The statements have been
prepared to conform to the requirements of Form 10-QSB and do not necessarily
include all disclosures required by generally accepted accounting principles
(GAAP). The reader should refer to the Company's Annual Report on Form 10-KSB
for the year ended December 31, 1995, previously filed with the Commission, for
financial statements for the year ended December 31, 1995, prepared in
accordance with GAAP. Net income (loss) per share of common stock is based on
the weighted average number of outstanding common shares.
5
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Liquidity and Capital Resources
At June 30, 1997, the Company had liquid assets of $337,915 in cash, money
market savings accounts and short-term certificates of deposit, all of which can
readily be converted to cash
The major components of operating cash flows are premium, annuity deposits and
investment income. In the first half of 1997, BNLAC collected $5,040,213 of
premiums and annuity deposits (gross before reinsurance) and the Company had
consolidated investment income of $439,507.
The Company's investments are primarily in U.S. Government and Government
Agencies and other investment grade bonds which have been marked to market and
classified as available for sale.
The Company's insurance operations are conducted through its wholly owned
subsidiary, Brokers National Life Assurance Company (BNLAC). At June 30, 1997,
BNLAC had statutory capital and surplus exceeding $5.158 million. In February
1997, the Company and BNL Equity Corporation contributed $500,000 to the gross
paid in and contributed surplus of BNLAC.
Results of Operations
Premium income for the first six months of 1997 was $4,822,269 compared to
$3,390,315 for the same period in 1996. The increase of $1,431,954, or 42%, was
due to increase in sales of group dental insurance in the last half of 1996 and
first half of 1997.
Net investment income was $439,507 for the period ended June 30, 1997 compared
to $433,509 for the same period in 1996. The increase was due to interest
received on GIC bonds.
Realized gains on investments were $41,911 in the first six months of 1997
compared to $16,456 for the same period in 1996. The increase in realized gains
was due to bonds sold in the normal course of the Company's investment activity.
In the first six months of 1997, policy benefits and other insurance costs were
$4,147,641 compared to $3,002,118 for the same period in 1996. The increase was
due to an increase in claims and commissions resulting from the increase in
dental business in force.
For the period ended June 30, 1997, the increase (decrease) in liability for
future policy benefits was $4,141 compared to $(8,062) in 1996. The increase in
1997 was due to an increase in group dental unearned premium reserves for the
year and an increase in GAAP life reserves.
Amortization of deferred policy acquisition costs were $24,841 and $22,352 for
the first half of 1997 and 1996 respectively. Amortization of deferred policy
acquisition costs should remain relatively constant as the asset is reduced over
the upcoming years.
Operating expenses increased from $1,211,444 in the first half of 1996 to
$1,359,231 in 1997. The increase in operating expenses was primarily due to an
increase in legal fees (see legal proceeding), printing expense and claims
administrative expense - which are attributable to the increase volume of dental
insurance in force.
Taxes, other than on income, fees and assessments were $199,640 for the first
six months of 1997 compared to $127,737 for the same period in 1996. The
increase was due to an increase in premium taxes on the increased premiums
collected and an increase in state filing fees for advertising and policy form
approval.
The net loss from operations for the first half of 1997 was $431,807 compared to
$515,306 for the same period in 1996. The decrease is primarily due to a
reduction in other insurance costs and operating expenses as a percentage of
premium income in 1997 versus 1996. Management anticipates this trend will
continue as increased dental business is put in force.
6
<PAGE>
PART II -- OTHER INFORMATION
Item 1. Legal Proceedings.
On April 30, 1996, Myra Jo Pearson and Paul Pearson filed a class action
complaint in the Circuit Court of Pulaski County, Arkansas (3rd Division) naming
the Company, BNL Equity Corporation and several officers of the Company, as
defendants. On July 19, 1996, the plaintiffs filed their first amended complaint
and on and after July 24, 1996, the defendants were first served and notified of
the complaint and first amended complaint. The plaintiffs have alleged that the
defendants violated the Arkansas Securities Act in several respects in
connection with the public offerings of securities made by United Arkansas
Corporation ("UAC") (now known as BNL Equity Corporation) during the period from
January 1989 until May, 1992. The plaintiffs have filed on behalf of themselves,
as well as all other similarly situated persons who acquired UAC stock in these
offerings. The crux of the plaintiffs' allegations is that the defendants made
alleged misrepresentations and omissions concerning the business plan and
insurance marketing strategy of UAC in connection with the public offerings.
Item 2. Changes in Securities.
None of the rights of the holders of any of the Company's securities were
materially modified during the period covered by this report. In addition, no
class of securities of the Company was issued or modified which materially
limited or qualified any class of its registered securities.
Item 3. Defaults Upon Senior Securities.
During the period covered by this report there was no material default in the
payment of any principal, interest, sinking or purchase fund installment, or any
other material default not cured within 30 days with respect to any indebtedness
of the Company and its consolidated subsidiary.
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's Annual Meeting of Shareholders was held on May 20, 1997 in Little
Rock, Arkansas. At the annual meeting, the following individuals were elected to
the Company's Board of Directors.
Wayne E. Ahart Richard Barclay Eugene A. Cernan
John Greig Tom Landry C. James McCormick
James A. Mullins Chris Schenkel Barry Shamas
Kenneth Tobey Cecil Alexander C. Donald Byrd
Hayden Fry Roy Keppy Roy Ledbetter
John E. Miller Robert R. Rigler L. Stanley Schoelerman
Orville E. Sweet
12,457,328 shares were voted in favor of Messrs. Barclay and Greig; 12,454,328
voted in favor of Mr. Miller; 12,453,326 shares voted in favor of Messrs.
Schoelerman and Sweet; 12,452,126 shares voted in favor of Messrs. Ahart and
Byrd; 12,451,226 shares voted in favor of Messrs. Alexander, Cernan and
Ledbetter; 12,449,726 shares voted in favor of Mr. Rigler; 12,448,226 shares
voted in favor of Mr. Mullins; 12,448,142 shares voted in favor of Mr.
McCormick; 12,447,026 shares voted in favor of Mr. Schenkel; 12,446,642 shares
voted in favor of Mr. Landry; 12,445,142 shares voted in favor of Mr. Keppy; and
12,440,060 shares voted in favor of Mr. Fry. 94,516 shares were withheld from
all directors.
The shareholders ratified the selection of Amend, Smith & Co., as the
Corporation's independent auditors for the fiscal year 1996. 12,147,860 shares
were voted in favor; 47,430 were voted against; and 96,052 shares abstained.
Item 5. Other Information.
None
7
<PAGE>
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 10-QSB
No. Description Page or Method of Filing
- --------- ---------------------------------------------------- ---------------------------------------------------
<S> <C> <C>
3.1 Articles of Incorporation of BNL Financial Incorporated by reference to Exhibit 3.1 of the
Corporation (formerly United Iowa Corporation), Company's Annual Report on Form 10-K for the dated
January 27, 1984 and Amendment to Articles period ending December 31, 1993.
of Incorporation of BNL Financial Corporation,
dated November 13, 1987.
3.2 Bylaws of BNL Financial Corporation Incorporated by reference to Exhibit 3.2 of the
Company's Registration Statement No. 33-70318
4.1 Instruments defining the rights of security Incorporated by reference to Exhibit 4 of the
holders, including indentures Company's Registration Statement No. 2-94538 and
Exhibits 3.5 and 4 of Post-Effective Amendment
No. 3 thereto.
4.2 Articles of Incorporation of BNL Financial Incorporated by reference to Exhibit 3.1 of the
Corporation (formerly United Iowa Corporation), Company's Annual Report on Form 10-K for the
dated January 27, 1984 and Amendment to Articles period ending December 31, 1993.
of Incorporation on BNL Financial Corporation,
dated November 13, 1987.
10.1 Form of Agreement between Commonwealth Industries Filed with 10-QSB for the period ended September
Corporation, American Investors Corporation and 30, 1994.
Wayne E. Ahart regarding rights to purchase shares
of the Company.
10.2 Agreement dated December 21, 1990 between Filed with 10-QSB for the period ended March 31,
Registrant and C. Donald Byrd granting Registrant 1996.
right of first refusal as to future transfers of
Mr. Byrd's shares of the Company's common stock.
10.3 Subscription Agreement dated March 2, 1994 Incorporated by reference to S-4 Registration
Statement No. 33-70318
10.4 Stock Escrow Agreement dated February 28, 1994 Incorporated by reference to S-4 Registration
Statement No. 33-70318
10.5 Merger Agreement between United Arkansas Incorporated by reference to S-4 Registration
Corporation and USSA Acquisition Inc. dated Statement No. 33-70318
February 11, 1994
10.6 Merger Agreement between Iowa Life Assurance Filed with 10-QSB for the period ended March 31,
Company and United Arkansas Life Assurance Company 1994
dated March 2, 1994
10.7 Office lease dated March 24, 1994, between Brokers Filed with 10-QSB for the period ended September
National Life Assurance Company (formerly Iowa 30, 1994
Life Assurance Company) and Enclave KOW, Ltd., for
premises in Austin, Texas.
10.8 Amendment Number Two to the Quota Share Filed with Form 8-K dated January 18, 1995
Reinsurance Agreement dated 8/10/91 between
Registrant and UniLife Insurance Co. of San
Antonio, Texas
10.9 Stock Bonus Agreement between BNL Financial Attached as Exhibit 10.9
Corporation and C. Donald Bryd and Kenneth Tobey
11 Statement re computation of per share earnings Not applicable
12 Statements re computation of ratios Not applicable
22 BNL Brokerage Corporation, Brokers National Life
Assurance Company and BNL Equity Corporation, all
wholly owned by Registrant
</TABLE>
(b) Reports on Form 8-K
The Company filed no reports on Form 8-K for the period covered by this report
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized.
BNL FINANCIAL CORPORATION
(Registrant)
Date: August 11, 1997 __________________________________
By: Wayne E. Ahart, Chairman of the Board
(Chief Executive Officer)
Date: August 11, 1997 __________________________________
By: Barry N. Shamas, Executive V.P.
(Chief Financial Officer)
8
<PAGE>
Exhibit 10.9
STOCK BONUS AGREEMENT
This Stock Bonus Agreement (the "Agreement") is made effective as of the 1st day
of January, 1997, between BNL Financial Corporation (the "Company") and Kenneth
Tobey ("Employee").
Whereas, the Employee serves as an executive officer of the Company; and
Whereas, the Company desires to encourage the Employee to remain as an employee
of the Company and for the Employee to have a growing personal interest in the
continued success and progress of the Company; and
Whereas, the Company desires to offer certain compensation to the Employee for
the performance of his duties through the purchase of stock as herein provided;
and
Whereas, the Company and Employee desire to enter into an agreement setting
forth the rights and obligations of the respective parties under said
compensation arrangement;
Now, therefore, in consideration of the foregoing and the covenants contained
herein, the Company and Employee agree as follows:
1. Establishment of Committee. A committee (the "Committee") of the board of
directors of the Company shall be established to implement the terms of this
Agreement. If the board shall not establish a separate committee for that
purpose, the Compensation Committee of the board shall act as the Committee.
2. Allocation of Profits. Subject to the terms and conditions set forth in this
Agreement, the Company agrees that it will allocate and set aside an amount
equal to two and one-half percent (2 1/2%) of the net profits, after taxes, of
the Company each year (the "Allocated Amount"). For purposes of the Agreement,
"net profits, after taxes" shall be calculated in accordance with generally
accepted accounting principles, with the amount to be determined from the
year-end financial statements of the Company.
3. Use of Allocated Amount. The Allocated Amount shall be used by the Company in
the following manner: (i) the Company shall withhold any amounts necessary to
pay all required taxes and similar charges required to be withheld on account of
the payment of compensation to the Employee; and (ii) after deduction for the
withholding of taxes and other charges as provided in the aforesaid subsection,
the funds remaining of the Allocated Amount shall be used to purchase shares of
the Company's common stock (the "Shares") for and on behalf of the Employee.
4. Timing of the Allocation. When the annual financial statements of the Company
have been received by the Company, a copy thereof shall be promptly given to the
Committee, together with a statement from the chief financial officer, or other
person designated by the Committee to make such calculation, of the
determination of the Allocated Amount hereunder. Upon receipt of the financial
information and the calculation as herein provided, the Committee shall direct
the appropriate officers or employees of the Company to set aside the Allocated
Amount for purposes of making the purchases herein contemplated and shall make
such arrangements as it deems appropriate to complete such purchases. It is the
intention of the parties hereto that all such purchases shall take place as soon
as reasonably practicable after the setting aside of the Allocated Amount.
5. Purchase of Shares. If possible, the Shares shall be purchased on the open
market at the then-current market price. In the event that an insufficient
number of shares shall be available for purchase on the open market so as to be
able to fully utilize the Allocated Amount for the purchase of Shares, the
Allocated Amount may be used to purchase shares directly from the Company. If
the Shares are purchased from the Company, the price shall be established at the
then-current market price or, if no such market exists, at a price to be
established by the board of directors of the Company. The Committee shall be
responsible for determining the timing and source of the purchases and shall use
reasonable efforts to comply with the intent of this agreement as herein
expressed.
6. Issuance of Shares. The Shares shall be purchased in the name of the Employee
and shall be issued in his name or, upon the request of the Employee, be issued
in joint tenancy with the Employee and any person designated by the Employee.
Neither the Company nor the Committee shall acquire any interest in or title to
any of the Shares.
7. Interpretation and Implementation of the Agreement. The Committee shall have
the full authority to interpret and implement this Agreement. The Company and
the Employee agree that any determination, if reasonable and made in good faith,
of the Committee shall be binding upon the parties.
8. Limitation on Annual Amount. The Allocated Amount for any one year shall not
exceed fifty thousand dollars ($50,000).
9. Limitation on Shares to be Purchased. This Agreement shall cease and the
Employee shall not be entitled to receive any additional Shares hereunder when
the total number of Shares purchased for the Employee shall be four hundred
thousand (400,000).
10. Termination of the Agreement by the Company. The Company may terminate the
Agreement at any time; provided, however, that the Employee shall be entitled to
receive any and all Shares to which he is entitled prior to the date of the
termination. If the Agreement is terminated after the end of the Company's
fiscal year but before the purchase of any Shares under the Agreement on account
of the results of the Company for the prior year, the Employee shall be entitled
to receive the entire amount which would be due for the prior fiscal year. If
the Agreement is terminated prior to the end of the Company's fiscal year, the
Committee shall make such adjustments to the Allocated Amount due, if any, to
Employee for that fiscal year as it deems appropriate. In making such
determination the Committee shall act in a reasonable manner and shall take into
account such factors as the length of time during the year the Agreement was in
effect and the Employee's contribution during the year to the success of the
Company.
11. Automatic Termination upon Termination of Employee. The termination of
Employee's employment with the Company shall act as a termination of the
Agreement at the date of Employee's termination, subject to the following: (a)
If Employee voluntarily terminates after the end of the Company's fiscal year
but before the Employee has received the Allocated Amount, Employee shall be
entitled to receive the entire Allocated Amount for that previous fiscal year.
(b) If Employee voluntarily terminates his employment with the Company before
the end of the fiscal year, Employee shall not be entitled to receive any of the
Allocated Amount for that fiscal year unless the Committee shall, in its sole
discretion, determine that such payment, or a portion thereof, would be
appropriate. (c) If Employee's employment with the Company is terminated by the
Company for any reason other than for cause, as hereinafter defined, during the
fiscal year, the Employee shall be entitled to receive that proportion of the
Allocated Amount which the amount of time during which he was employed bears to
the entire fiscal year. (d) If Employee's employment with the Company is
terminated by the Company for cause, Employee shall not be entitled to receive
any amount hereunder for that fiscal year.
For purposes of this section, "for cause" shall mean dishonesty, theft,
conviction of a serious misdemeanor or felony, drunkenness or drug use,
unethical business conduct, breach of trust or a material breach of this
Agreement. "For cause" shall also include the failure of the Employee for any
reason, within ten (10) days after receipt of Employee of written notice from
the Company, to correct, cease, or otherwise alter any insubordination, failure
to comply with instructions or other action or omission to act that in the
opinion of the Company does or may materially and adversely affect its business
or operations.
12. Possible Restriction on Shares. Employee recognizes and agrees that the
Shares may be "restricted securities" as that term is defined under the federal
securities laws if the Shares have been purchased directly from the Company or
in a manner that would require the Shares to be restricted securities." The
Company agrees that it will use reasonable efforts to purchase the Shares in
such a fashion that they will not be considered "restricted securities" but
makes no guaranty or other assurance that the Shares will be so acquired.
13. Assignability. The Employee may not assign his rights hereunder; provided,
however, that, in the event of the disability of the Employee, his interests may
be exercised by his representative, guardian or similar agent and that, in the
event of the death of the Employee, his estate and heirs may acquire and
exercise any and all of his rights hereunder which exist at the date of his
death.
14. Entire Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the matters contained herein.
15. Right to Employment. Nothing contained herein shall be construed as
providing Employee with any rights to continued employment with the Company.
The parties agree that this agreement shall become effective as of the date
first set forth above.
/S/ Kenneth Tobey_________________
Kenneth Tobey
"Employee"
BNL Financial Corporation
"Company"
BY: /S/ Wayne Ahart________________
A designated Officer
STOCK BONUS AGREEMENT
This Stock Bonus Agreement (the "Agreement") is made effective as of the 1st day
of January, 1997, between BNL Financial Corporation (the "Company") and C.
Donald Byrd ("Employee").
Whereas, the Employee serves as an executive officer of the Company; and
Whereas, the Company desires to encourage the Employee to remain as an employee
of the Company and for the Employee to have a growing personal interest in the
continued success and progress of the Company; and
Whereas, the Company desires to offer certain compensation to the Employee for
the performance of his duties through the purchase of stock as herein provided;
and
Whereas, the Company and Employee desire to enter into an agreement setting
forth the rights and obligations of the respective parties under said
compensation arrangement;
Now, therefore, in consideration of the foregoing and the covenants contained
herein, the Company and Employee agree as follows:
1. Establishment of Committee. A committee (the "Committee") of the board of
directors of the Company shall be established to implement the terms of this
Agreement. If the board shall not establish a separate committee for that
purpose, the Compensation Committee of the board shall act as the Committee.
2. Allocation of Profits. Subject to the terms and conditions set forth in this
Agreement, the Company agrees that it will allocate and set aside an amount
equal to two and one-half percent (2 1/2%) of the net profits, after taxes, of
the Company each year (the "Allocated Amount"). For purposes of the Agreement,
"net profits, after taxes" shall be calculated in accordance with generally
accepted accounting principles, with the amount to be determined from the
year-end financial statements of the Company.
3. Use of Allocated Amount. The Allocated Amount shall be used by the Company in
the following manner: (i) the Company shall withhold any amounts necessary to
pay all required taxes and similar charges required to be withheld on account of
the payment of compensation to the Employee; and (ii) after deduction for the
withholding of taxes and other charges as provided in the aforesaid subsection,
the funds remaining of the Allocated Amount shall be used to purchase shares of
the Company's common stock (the "Shares") for and on behalf of the Employee.
4. Timing of the Allocation. When the annual financial statements of the Company
have been received by the Company, a copy thereof shall be promptly given to the
Committee, together with a statement from the chief financial officer, or other
person designated by the Committee to make such calculation, of the
determination of the Allocated Amount hereunder. Upon receipt of the financial
information and the calculation as herein provided, the Committee shall direct
the appropriate officers or employees of the Company to set aside the Allocated
Amount for purposes of making the purchases herein contemplated and shall make
such arrangements as it deems appropriate to complete such purchases. It is the
intention of the parties hereto that all such purchases shall take place as soon
as reasonably practicable after the setting aside of the Allocated Amount.
5. Purchase of Shares. If possible, the Shares shall be purchased on the open
market at the then-current market price. In the event that an insufficient
number of shares shall be available for purchase on the open market so as to be
able to fully utilize the Allocated Amount for the purchase of Shares, the
Allocated Amount may be used to purchase shares directly from the Company. If
the Shares are purchased from the Company, the price shall be established at the
then-current market price or, if no such market exists, at a price to be
established by the board of directors of the Company. The Committee shall be
responsible for determining the timing and source of the purchases and shall use
reasonable efforts to comply with the intent of this agreement as herein
expressed.
6. Issuance of Shares. The Shares shall be purchased in the name of the Employee
and shall be issued in his name or, upon the request of the Employee, be issued
in joint tenancy with the Employee and any person designated by the Employee.
Neither the Company nor the Committee shall acquire any interest in or title to
any of the Shares.
7. Interpretation and Implementation of the Agreement. The Committee shall have
the full authority to interpret and implement this Agreement. The Company and
the Employee agree that any determination, if reasonable and made in good faith,
of the Committee shall be binding upon the parties.
8. Limitation on Annual Amount. The Allocated Amount for any one year shall not
exceed fifty thousand dollars ($50,000).
9. Limitation on Shares to be Purchased. This Agreement shall cease and the
Employee shall not be entitled to receive any additional Shares hereunder when
the total number of Shares purchased for the Employee shall be four hundred
thousand (400,000).
10. Termination of the Agreement by the Company. The Company may terminate the
Agreement at any time; provided, however, that the Employee shall be entitled to
receive any and all Shares to which he is entitled prior to the date of the
termination. If the Agreement is terminated after the end of the Company's
fiscal year but before the purchase of any Shares under the Agreement on account
of the results of the Company for the prior year, the Employee shall be entitled
to receive the entire amount which would be due for the prior fiscal year. If
the Agreement is terminated prior to the end of the Company's fiscal year, the
Committee shall make such adjustments to the Allocated Amount due, if any, to
Employee for that fiscal year as it deems appropriate. In making such
determination the Committee shall act in a reasonable manner and shall take into
account such factors as the length of time during the year the Agreement was in
effect and the Employee's contribution during the year to the success of the
Company.
11. Automatic Termination upon Termination of Employee. The termination of
Employee's employment with the Company shall act as a termination of the
Agreement at the date of Employee's termination, subject to the following: (a)
If Employee voluntarily terminates after the end of the Company's fiscal year
but before the Employee has received the Allocated Amount, Employee shall be
entitled to receive the entire Allocated Amount for that previous fiscal year.
(b) If Employee voluntarily terminates his employment with the Company before
the end of the fiscal year, Employee shall not be entitled to receive any of the
Allocated Amount for that fiscal year unless the Committee shall, in its sole
discretion, determine that such payment, or a portion thereof, would be
appropriate. (c) If Employee's employment with the Company is terminated by the
Company for any reason other than for cause, as hereinafter defined, during the
fiscal year, the Employee shall be entitled to receive that proportion of the
Allocated Amount which the amount of time during which he was employed bears to
the entire fiscal year. (d) If Employee's employment with the Company is
terminated by the Company for cause, Employee shall not be entitled to receive
any amount hereunder for that fiscal year.
For purposes of this section, "for cause" shall mean dishonesty, theft,
conviction of a serious misdemeanor or felony, drunkenness or drug use,
unethical business conduct, breach of trust or a material breach of this
Agreement. "For cause" shall also include the failure of the Employee for any
reason, within ten (10) days after receipt of Employee of written notice from
the Company, to correct, cease, or otherwise alter any insubordination, failure
to comply with instructions or other action or omission to act that in the
opinion of the Company does or may materially and adversely affect its business
or operations.
12. Possible Restriction on Shares. Employee recognizes and agrees that the
Shares may be "restricted securities" as that term is defined under the federal
securities laws if the Shares have been purchased directly from the Company or
in a manner that would require the Shares to be restricted securities." The
Company agrees that it will use reasonable efforts to purchase the Shares in
such a fashion that they will not be considered "restricted securities" but
makes no guaranty or other assurance that the Shares will be so acquired.
13. Assignability. The Employee may not assign his rights hereunder; provided,
however, that, in the event of the disability of the Employee, his interests may
be exercised by his representative, guardian or similar agent and that, in the
event of the death of the Employee, his estate and heirs may acquire and
exercise any and all of his rights hereunder which exist at the date of his
death.
14. Entire Agreement. This Agreement constitutes the entire agreement of the
parties with respect to the matters contained herein.
15. Right to Employment. Nothing contained herein shall be construed as
providing Employee with any rights to continued employment with the Company.
The parties agree that this agreement shall become effective as of the day first
written above.
_/S/ C. Donald Byrd______________
C. Donald Byrd
"Employee"
BNL Financial Corporation
"Company"
BY:_/S/ Wayne E. Ahart_________
A designated Officer
4
<PAGE>
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