================================================================================



                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                    FORM 10-Q

        [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
                              EXCHANGE ACT OF 1934

                       For the Quarter Ended June 30, 2001

     [ ] 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.)

 2100 W. William Cannon, Suite L
           Austin, Texas                                             78745
(Address of principal executive offices)                           (Zip Code)



Registrant's telephone number, including area code:  (512) 383-0220

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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 June 30, 2001, the Registrant had 23,311,944 shares of Common Stock, no
par value, outstanding.




<PAGE>




PART I - FINANCIAL INFORMATION
Item 1. Financial Statements



                         INDEPENDENT ACCOUNTANTS' REPORT




To The Board of Directors
BNL Financial Corporation


We have reviewed the accompanying Consolidated Balance Sheet of BNL Financial
Corporation and Subsidiaries as of June 30, 2001 and the related Consolidated
Statements of Income and Comprehensive Income, Changes in Shareholders' Equity
and Cash Flows for the six-month periods ended June 30, 2001 and 2000. These
financial statements are the responsibility of the Corporation's management.

We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data and of making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit conducted in accordance
with generally accepted auditing standards, the objective of which is the
expression of an opinion regarding the financial statements taken as a whole.
Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to such consolidated financial statements for them to be in conformity
with generally accepted accounting principles.

We have previously audited, in accordance with generally accepted auditing
standards, the Consolidated Balance Sheet of BNL Financial Corporation and
Subsidiaries as of December 31, 2000 and the related Consolidated Statements of
Income and Comprehensive Income, Shareholders' Equity, and Cash Flows for the
year then ended (not presented herein); and in our report dated February 10,
2001, we expressed an unqualified opinion on those consolidated financial
statements. In our opinion, the information set forth in the accompanying
Consolidated Balance Sheet as of December 31, 2000 is fairly stated, in all
material respects, in relation to the Consolidated Balance Sheet from which it
has been derived.





Oklahoma City, Oklahoma                                SMITH, CARNEY & CO., p.c.
August 8, 2001


                                      2

<PAGE>


<TABLE>
<CAPTION>

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BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
-------------------------------------------------------------------------------
  ASSETS
                                                                           June 30,             December 31,
                                                                             2001                   2000
                                                                          (Unaudited)             (Audited)
                                                                       ------------------     ------------------
<S>                                                                    <C>                     <C>

Cash and cash equivalents                                                     $2,765,215             $  932,816
Investments available for sale, at fair value (amortized cost
  $12,537,523;  $13,737,999; respectively)                                    12,577,431             13,561,719
Investment in equity securities at market
   (cost $41,809; $37,147 respectively)                                           77,850                 66,532
                                                                       ------------------     ------------------
               Total Investments, Including Cash and                          15,420,496
                     Cash Equivalents                                                                14,561,067

Accrued investment income                                                        226,759                248,297
Furniture and equipment, net                                                     395,893                374,876
Deferred policy acquisition costs                                                283,395                308,102
Policy loans                                                                     104,187                 98,863
Receivable from reinsurer                                                         29,630                 29,630
Premiums due and unpaid                                                          738,571                946,775
Income tax assets                                                                553,000                767,000
Other assets                                                                     561,227                245,661
                                                                       ------------------     ------------------

               Total Assets                                                  $18,313,158            $17,580,271
                                                                       ==================     ==================

                    LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities:
   Liabilities for future policy benefits                                     $1,404,484            $ 1,392,584
   Policy claims payable                                                       2,302,350              2,446,350
   Annuity deposits                                                            2,843,912              2,805,220
   Deferred annuity profits                                                      478,474                469,623
   Premium deposit funds                                                          74,793                101,491
   Supplementary contracts without life contingencies                             70,257                 80,295
   Advanced and unallocated premium                                              368,827                656,615
   Commissions payable                                                           536,086                440,640
   Other liabilities                                                             571,139                680,528
                                                                       ------------------     ------------------

               Total Liabilities                                               8,650,322              9,073,346
                                                                       ------------------     ------------------

Commitments and contingencies (Note 4)
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                                                 14,313,000             14,308,230
   Accumulated other comprehensive income (loss)
                                                                                  79,185              (140,215)
   Accumulated deficit                                                       (5,189,263)            (6,063,224)
   Treasury stock, at cost; 13,695; 138,795 shares respectively                  (6,325)               (64,105)
                                                                       ------------------     ------------------

               Total Shareholders' Equity                                      9,662,836              8,506,925
                                                                       ------------------     ------------------

               Total Liabilities and Shareholders' Equity                    $18,313,158            $17,580,271
                                                                       ==================     ==================
--------------------------------------------------------------------------------
            (See accompanying notes and Independent Accountants' Report)
--------------------------------------------------------------------------------
</TABLE>

                                       3
<PAGE>
<TABLE>
<CAPTION>

BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
--------------------------------------------------------------------------------

                                                                    Three Months Ended                     Six Months Ended
                                                                         June 30                               June 30
                                                            ----------------------------------    --------------------------------

                                                                2001               2000              2001               2000
                                                             (Unaudited)        (Unaudited)        (Unaudited)        (Unaudited)
                                                           ---------------    ---------------    --------------    ----------------
<S>                                                         <C>                <C>                <C>               <C>
Income:
Premium income                                                 $ 9,333,402        $ 8,770,015       $18,830,495         $17,471,595
Net investment income                                              248,820            202,685           496,478             404,741
Realized gains                                                      10,964                800            11,643               2,020
                                                           ---------------    ---------------    --------------    ----------------


Total Income                                                     9,593,186          8,973,500        19,338,616          17,878,356
                                                           ---------------    ---------------    --------------    ----------------


Expenses:
Increase (decrease) in liability for future policy benefits        (14,722)           (58,324)            11,900            (96,452)
Policy benefits and other insurance costs                        7,537,993          6,579,710        14,478,281          13,454,594
Amortization of deferred policy acquisition costs                   18,379              4,265            24,707              23,509
Operating expenses                                               1,628,444          1,383,121         3,108,644           2,782,427
Taxes, other than on income                                        250,317            270,018           589,124             548,918
                                                           ---------------    ---------------    --------------    ----------------


Total Expenses                                                   9,420,411          8,178,790        18,212,656          16,712,996
                                                           ---------------    ---------------    --------------    ----------------


Income from Operations before
       Income Taxes                                                172,775            794,710         1,125,960           1,165,360

Provision for income taxes                                           4,000                 -            252,000               -
                                                           ---------------    ---------------    --------------    ----------------


Net Income                                                        $168,775           $794,710          $873,960          $1,165,360
                                                           ===============    ===============    ==============    ================


Net income per common share (basic and diluted)                      $0.01              $0.03             $0.04               $0.05
                                                           ===============    ===============    ==============    ================


Weighted average number of fully
  paid common shares                                            23,311,944         23,311,944        23,311,944          23,311,944
                                                           ===============    ===============    ==============    ================


Other comprehensive income, net of tax:
Unrealized gains on securities:
Unrealized holding gain (loss) arising during
     period                                                       $ 70,433          ($35,464)          $231,043            $161,922
Reclassification adjustment for gain (loss) included
     in net income                                                (10,964)              (800)          (11,643)             (2,020)
                                                           ---------------    ---------------    --------------    ----------------


Other Comprehensive Income (Loss)                                   59,469           (36,264)           219,400             159,902
                                                           ---------------    ---------------    --------------    ----------------


Comprehensive Income                                              $228,244           $758,446       $ 1,093,360         $ 1,325,262
                                                           ===============    ===============    ==============    ================



--------------------------------------------------------------------------------
            (See accompanying notes and Independent Accountants' Report)
--------------------------------------------------------------------------------
</TABLE>



                                       4
<PAGE>
<TABLE>
<CAPTION>

BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

--------------------------------------------------------------------------------




                                                                                                       Accumulated
                                     Common Stock                 Additional                             Other
                            --------------------------------      Paid-In          Accumulated        Comprehensive       Treasury
                               Shares            Amount           Capital             Deficit             Income            Stock
                            -------------    -------------     --------------    -----------------    --------------   -------------
<S>                         <C>              <C>               <C>               <C>                  <C>              <C>

Balance, December 31, 1999     23,311,944         $466,239        $14,308,230         ($9,507,706)        ($897,523)       ($64,105)
                           ==============    =============     ==============    =================    ==============   =============
Accumulated other
  Comprehensive gain               -                -                  -                 -                   159,902           -
Net income                         -                -                  -                 1,165,360                -            -
                           --------------    -------------     --------------    -----------------    --------------   -------------
Balance, June 30, 2000
(Unaudited)                    23,311,944         $466,239        $14,308,230         ($8,342,346)        ($737,621)       ($64,105)
                           ==============    =============     ==============    =================    ==============   =============



                           --------------    -------------     --------------    -----------------    --------------   -------------

Balance, December 31, 2000     23,311,944         $466,239        $14,308,230         ($6,063,223)        $(140,215)       ($64,105)
                           ==============    =============     ==============    =================    ==============   =============

Accumulated other
     Comprehensive income          -                -                  -                    -                219,400           -
Sale of treasury stock             -                -                   4,770               -                     -          57,780
Net income                         -                -                  -                 873,960                  -            -
                           --------------    -------------     --------------    -----------------    --------------   -------------
Balance, June 30, 2001
(Unaudited)                    23,311,944         $466,239        $14,313,000         ($5,189,263)           $79,185        ($6,325)
                           ==============    =============     ==============    =================    ==============   =============







--------------------------------------------------------------------------------
        (See accompanying notes and Independent Accountants' Report)
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</TABLE>

                                       5
<PAGE>

<TABLE>
<CAPTION>

BNL FINANCIAL CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

------------------------------------------------------------------------------------------------------------------------------------

                                                                                                  Six Months Ended
                                                                                                       June 30,
                                                                                        -------------------------------------
                                                                                              2001                2000
                                                                                          (Unaudited)          (Unaudited)
                                                                                        -----------------    ----------------
<S>                                                                                     <C>                  <C>

Cash flows from operating activities:
     Net income                                                                                 $873,960         $ 1,165,360
     Adjustments to reconcile net income to net cash
        Provided by operating activities:
            Realized gain on investments                                                        (11,643)             (2,020)
            Decrease in deferred tax asset                                                       214,000            -
            Depreciation                                                                          54,262              60,937
            Amortization of deferred acquisition costs,
            Organization costs and state licenses acquired                                        26,261              25,063
            Accretion of bond discount                                                               750                 887
        Change in assets and liabilities:
             (Increase) decrease in accrued investment income                                     21,538            (22,646)
             Decrease in premiums due and unpaid                                                 208,204              74,634
             Increase (decrease) in liability for future policy benefits                          11,900            (96,452)
             Decrease in policy claims payable                                                 (144,000)           (426,000)
             Increase (decrease) in annuity deposits and deferred profits                         47,543           (150,299)
             Decrease in premium deposit funds                                                  (26,698)             (8,685)
             Increase (decrease) in advanced and unallocated premium                           (287,788)              87,592
             Increase in commissions payable                                                      95,446              93,201
             Other, decrease                                                                   (410,639)           (135,823)
                                                                                        -----------------    ----------------

                    Net Cash Provided by Operating Activities                                    673,096             665,749
                                                                                        -----------------    ----------------

Cash flows from investing activities:
     Proceeds from sales of furniture and equipment                                            -                         800
     Proceeds from sales of fixed maturity securities                                          2,100,593             152,058
     Proceeds from sales of equity securities                                                     92,932            -
     Purchase of furniture and equipment                                                        (75,279)            (33,015)
     Purchase of fixed maturity securities                                                     (899,607)         (1,050,000)
     Purchase of equity securities                                                              (90,652)            -
                                                                                        -----------------    ----------------

                     Net Cash Provided by (Used In) Investing Activities                       1,127,987           (930,157)
                                                                                        -----------------    ----------------

Cash flows from financing activities:
     Sale of Treasury Stock                                                                       62,550            -
     Net payments on supplementary contracts                                                    (31,234)            (12,245)
                                                                                        -----------------    ----------------

                      Net Cash Provided By (Used In) Financing Activities                         31,316            (12,245)
                                                                                        -----------------    ----------------

Net increase (decrease) in cash and cash equivalents                                           1,832,399           (276,653)

Cash and cash equivalents, beginning of period                                                   932 816           1,419,618
                                                                                        -----------------    ----------------

Cash and cash equivalents, end of period                                                      $2,765,215          $1,142,965
                                                                                        =================    ================


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         (See accompanying notes and Independent Accountant's Report)

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</TABLE>

                                       6
<PAGE>


 BNL FINANCIAL CORPORATION AND SUBSIDIARIES
 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

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Note 1.

The accompanying Consolidated Financial Statements (unaudited) as of June 30,
2001 and June 30, 2000 have been reviewed by independent certified public
accountants. In the opinion of management, the aforementioned financial
statements contain all adjustments necessary to present fairly the financial
position as of June 30, 2001, and the results of operations for the periods
ended June 30, 2001 and June 30, 2000, and the cash flows for the periods ended
June 30, 2001 and June 30, 2000.

The statements have been prepared to conform to the requirements of Form 10-Q
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, 2000, previously filed
with the Commission, for financial statements for the year ended December 31,
2000, prepared in accordance with GAAP. Net income per share of common stock is
based on the weighted average number of outstanding common shares.

Note 2.

The dental claims loss ratio was 65.9% during the first six months of 2001
compared to 68.3% for the same period in 2000. The decrease is in large part due
to management's continuing efforts to control the claims loss ratio through rate
strategies, modification of benefits, use of dental PPO networks and changes in
marketing strategies. However, part of the decline in the loss ratio is due to
an approximate $162,000 over-estimation of the claims liability at December 31,
2000, which had the effect of reducing claims expense in 2001. Due to the
monthly fluctuation in claims received and the lag time in receiving the claims,
this accrual is difficult to estimate.

Note 3.

The Company, BNL Equity Corporation and several officers in the Company are
defendants in a pending class action lawsuit alleging violation of the Arkansas
Securities Act. 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 Company retained the firm of Friday, Eldredge & Clark, Little Rock,
Arkansas, to handle the defense of the action on behalf of all defendants. On
March 3, 1998, the plaintiffs filed a Second Amended Class Action Complaint, in
which they dropped certain claims, including allegations of common law fraud,
fraudulent concealment, tolling of the statute of limitations, and the request
for punitive damages. On May 19, 1998 the plaintiffs filed a Third Amended Class
Action Complaint in which they assert only a claim under the Arkansas Securities
Act.

Discovery is underway and the matter is set for trial October 15, 2001. The
Company continues to believe strongly that the case is without merit. However,
the ultimate outcome of this litigation is unknown at the present time.
Accordingly, no provisions for any liability that might result have been made in
the financial statements. The Company has expended a substantial amount to date
in legal expenses. Future costs are not estimable at this time.



                                       7
<PAGE>


--------------------------------------------------------------------------------
BNL FINANCIAL CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

--------------------------------------------------------------------------------

Note 4.

On July 25, 2001, one of the Company's subsidiaries, BNL Equity Corporation
("BNLE") entered into an agreement to expand the Company's business relationship
with EPSI Benefits Inc. ("EBI") a Texas Corporation. EBI is the parent company
of Employer Plan Services Inc. ("EPSI") which provides dental claims processing
and adjudication for the Company's insurance subsidiary, Brokers National Life
Assurance Company ("BNLAC"). BNLAC loaned BNLE a sum of $1,457,407, with
interest accruing on the outstanding balance of such at 7.5% per year. BNLE
loaned EBI $1,357,407 to purchase 51% of the common stock of EBI, which was
owned by EBI's majority stockholder. The common stock was retired as treasury
stock. BNLE will use the additional $100,000 of the loan to pay expenses
incurred in connection with the negotiation and execution of the agreement.
BNLAC pledged $335,000 of bonds to secure the operating line of credit of EPSI
in conjunction with this transaction.

The loan from BNLE to EBI will be repaid through the issuance by EBI of a
convertible debenture, which BNLE can convert into 51% of EBI common stock at
any time. Until and unless the debenture is converted, the loan will be repaid
in accordance with the Convertible Debenture Agreement. BNLE will also receive a
marketing fee from EBI.

Note 5.

Investment in equity securities includes an $8,104 investment in call options on
common stock held for trading purposes. These are stated at cost, which
approximates market value.









                                       8
<PAGE>


Item 2. Management's  Discussion and Analysis of Financial Condition and Results
of Operations.
In this section, we review the consolidated results of operations for the six
months ended June 30, 2001 and 2000 and significant changes in the consolidated
financial condition of the Company. This discussion should be read in
conjunction with the accompanying consolidated financial statements, notes and
selected financial data.

Forward-Looking Statements

All statements, trend analyses and other information contained in this report
and elsewhere (such as in filings by us with the Securities and Exchange
Commission, press releases, presentations by us or our management or oral
statements) relative to markets for our products and trends in our operations or
financial results, as well as other statements including words such as
"anticipate," "believe," "plan," "estimate," "expect," "intend," and other
similar expressions, constitute forward-looking statements under the Private
Securities Litigation Reform Act of 1995. These forward-looking statements are
subject to known and unknown risks, uncertainties and other factors which may
cause actual results to be materially different from those contemplated by the
forward-looking statements. Such factors include, among other things: (i)
general economic conditions and other factors, including prevailing interest
rate levels and stock and credit market performance which may affect (among
other things) our ability to sell our products, our ability to access capital
resources and the costs associated therewith, the market value of our
investments and the lapse rate and profitability of policies; (ii) customer
response to new products and marketing initiatives: (iii) mortality, morbidity
and other factors which may affect the profitability of our products; (iv)
changes in the federal income tax laws and regulations which may affect the
relative income tax advantages of our products; (v) regulatory changes or
actions, including those relating to regulation of financial services affecting
(among other things) bank sales and underwriting of insurance products and
regulation of the sale, underwriting and pricing of products; and (vi) the risk
factors or uncertainties listed from time to time in our filings with the
Securities and Exchange Commission.

Liquidity and Capital Resources

At June 30, 2001, we had liquid assets of $2,765,215 in cash, money market
savings accounts, government agency discount notes and short-term certificates
of deposit.

The major components of operating cash flows are premium income, annuity
deposits and investment income. In the first six months of 2001, BNLAC collected
$18,906,354 of premiums and annuity deposits (gross before reinsurance) and we
had consolidated investment income of $496,478.

Our investments are primarily in U.S. Government, Government Agency and other
investment grade bonds which have been marked to market and classified as
available for sale. We do not hedge our investment income through the use of
derivatives.

Management believes that liquid assets along with investment and premium income
are sufficient to meet our long and short-term liquidity needs. We do not have
any current plans to borrow money for operations.

Our insurance operations are conducted through BNLAC. At June 30, 2001, BNLAC
had statutory capital and surplus of $8,409,381. BNLAC is required to maintain
minimum levels of statutory capital and surplus, which differ from state to
state, as a condition to conducting business in those states in which it is
licensed. The State of Arkansas, which is the legal domicile of BNLAC, requires
a minimum of $2,300,000 in capital and surplus. The highest requirement in any
state in which BNLAC is licensed is $3,000,000. Management monitors the minimum
capital and surplus requirements to maintain compliance in each state in which
it is licensed.
                                       9
<PAGE>

Consolidated Results of Operations

Premium income for the second quarter of 2001 was $9,333,402 compared to
$8,770,015 for the second quarter of 2000. For the first six months of 2001
premium income was $18,830,495 compared to $17,471,595 for the same period in
2000. The increase of 6% for the second quarter and 8% for the first six months
was due to an increase in group dental insurance premiums written.

Net investment income was $248,820 for the second quarter of 2001 compared to
$202,685 for the second quarter of 2000. Net investment income was $496,478 for
the period ended June 30, 2001 compared to $404,741 for the same period in 2000.
The 23% increase for the second quarter and first six months was primarily due
to an increase in the amount of investments purchased from the cash generated
from operations.

Realized gains on investments were $10,964 for the second quarter of 2001 and
$11,643 for the first six months of 2001 compared to a realized gain of $800 for
the second quarter of 2000 and $2,020 for the first six months of 2000. The
increase for both periods in 2001 was primarily due to gains on the sale of
common stock during the second quarter.

For the second quarter of 2001, liability for future policy benefits was
($14,722) compared to ($58,324) for the same period in 2000. For the six-month
period ended June 30, 2001, liability for future policy benefits expense was
$11,900 compared to ($96,452) for the same period in 2000. The change of $43,602
and $108,352 for the second quarter and first six months, respectively, were
primarily due to a decline in lapsed life insurance policies over both periods
in 2001.

Policy  benefits and other  insurance  costs for the second quarter of 2001 were
$7,537,993  compared to $6,579,710  for the second  quarter of 2000.  The claims
ratio on dental  insurance,  which  represents  the ratio of claims  incurred to
premium  earned,  was 70.0% for the second quarter of 2001 compared to 68.5% for
the second quarter in 2000. In the first six months of 2001, policy benefits and
other  insurance  costs were  $14,478,281  compared to $13,454,594  for the same
period in 2000.  The increase  for the second  quarter and first six months were
due in part to an increase in commissions resulting from the increase in premium
income.  In the  first  half of 2001,  policy  benefits  increased  by  $873,401
compared  to the same  period in 2000.  The  claims  ratio  during the first six
months of 2001 was 65.9% compared to 68.3% for the same period in 2000. Based on
claim  experience  during 2001 and 2000,  the  estimate of claims  liability  at
December 31, 2000 and December 31, 1999 was overstated by approximately $162,000
and $513,000,  respectively. The over estimates for this liability contributed a
corresponding decrease in expense during the first six months of 2000 and 2001.

Amortization of deferred policy acquisition costs was $18,379 and $4,265 for the
second quarter and $24,707 and $23,509 for the first six months of 2001 and
2000, respectively. Amortization of deferred policy acquisition costs vary in
relation to new life insurance sales and lapses or surrenders of existing
policies.

For the second quarter of 2001 operating expenses were $1,628,444 compared to
$1,383,121 for the same period in 2000. Operating expenses were $3,108,644 in
the first six months of 2001 compared to $2,782,427 for the same period in 2000.
The increase for both periods in operating expenses was primarily due to an
increase in personnel and legal fees expense.

Taxes, other than on income, fees and assessments, were $250,317 for the second
quarter of 2001 compared to $270,018 for the second quarter of 2000. The
decrease was primarily due to a refund of premium taxes received in the second
quarter of 2001. Taxes, other than on income, fees and assessments were $589,069
for the first six months of 2001 compared to $548,917 for the same period in
2000. The increase for the year was primarily due to an increase in premium
taxes on the increased premiums collected.
                                       10
<PAGE>

The provision for federal income taxes in the second quarter of 2001 includes
$20,000 current expense and ($16,000) deferred tax expense compared to a $0 tax
provision in the second quarter of 2000. The provision for federal income taxes
in the first half of 2001 includes $38,000 current expense and $214,000 deferred
tax expense compared to $0 for the same period in 2000. The increase is due to
the recognition of a deferred tax asset, subsequent to June 30, 2000.

Income from operations for the second quarter of 2001 was $168,775 compared to
$794,710 for the same period in 2000. The decrease of $625,935 was primarily due
to the increase in policy benefits expense for the quarter. The income from
operations for the first six months of 2001 was $1,125,960 compared to
$1,165,360 for the same period in 2000. Based on claim experience during 2001
and 2000, the estimate of claims liability at December 31, 2000 and December 31,
1999 was overstated by approximately $162,000 and $513,000, respectively. The
over estimates for this liability contributed a corresponding increase in income
during both periods.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the potential loss resulting from adverse changes in the
value of financial instruments, either derivative or non-derivative, caused by
fluctuations in interest rates, foreign exchange rates, commodity prices, and
equity security prices. We handle market risks in accordance with our
established policies. We did not have financial instruments to manage and reduce
the impact of changes in interest rates at June 30, 2001 and December 31, 2000.
We held various financial instruments at June 30, 2001 and 2000, consisting of
financial assets reported in our Consolidated Balance Sheets. (For additional
information regarding these financial instruments, refer to Note 4 to our annual
consolidated financial statements.) In the second quarter of 2001 we invested
$8,104 in call options for common stock for trading purposes. Our risk on this
investment is limited to our cost.

Interest Rate Risk - We are subject to interest rate risk through the investment
in fixed maturity securities, such as U.S. Government and Government Agency
securities and other investment grade bonds. The fair market value of long-term,
fixed-interest rate debt is subject to interest rate risk. Generally, the fair
value of fixed-interest rate debt will increase as interest rates fall and will
decrease as interest rates rise. The estimated fair value of our fixed maturity
securities at June 30, 2001 and December 31, 2000 was $12,577,431 and
$13,561,719, respectively.

A one percentage point increase in prevailing interest rates would result in a
decrease in the estimated fair value of fixed maturity securities held at June
30, 2001 of $310,000. Initial fair values were determined using the current
rates at which we could enter into comparable financial instruments with similar
remaining maturities. The estimated earnings and cash flows impact for the first
half of 2001 resulting from a one percentage point increase in interest rates
would be immaterial, holding other variables constant.

Foreign-Exchange Rate Risk - We currently have no exposure to foreign-exchange
rate risk because all of our financial instruments are denominated in U.S.
dollars.

Commodity Price Risk - We have no financial instruments subject to commodity
price risk.

Equity Security Price Risk - Equity securities at June 30, 2001 totaled $77,850,
or .5% of total investments and cash on a consolidated basis. The equity
securities portfolio consists primarily of one stock with a beta of 1.26. If the
overall stock market value changed by 10%, the value of our equity securities
would be expected to change by approximately 12.6% or $10,143.

The preceding discussion of estimated fair value of our financial instruments
and the sensitivity analyses resulting from hypothetical changes in interest
rates are "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such statements reflect our current
expectations and involve uncertainties. These forward-looking market risk
disclosures are selective in nature and only address the potential impact from
financial instruments. They do not include other potential effects which could
impact our business as a result of changes in interest rates, foreign-exchange
rates, commodity prices, or equity security prices.

                                       11

<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. 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  Company  retained  the  firm of  Friday,  Eldredge  & Clark,  Little  Rock,
Arkansas,  to handle the defense of the action on behalf of all  defendants.  On
March 3, 1998, the plaintiffs  filed a Second Amended Class Action  Complaint in
which they dropped  certain claims,  including  allegations of common law fraud,
fraudulent concealment,  tolling of the statute of limitations,  and the request
for punitive damages. On May 19, 1998 the plaintiffs filed a Third Amended Class
Action Complaint in which they assert only a claim under the Arkansas Securities
Act.

Discovery is underway and the matter is set for trial October 15, 2001. The
Company continues to believe strongly that the case is without merit.

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.

Item 4.  Submission of Matters to a Vote of Security Holders.

The Company's Annual Meeting of Shareholders was held on June 13, 2001, in
Little Rock, Arkansas. At the annual meeting, the following individuals were
elected to the Company's Board of Directors. The number of shares voted for each
director is set forth next to his name.
<TABLE>
<S>                      <C>              <C>                    <C>               <C>                         <C>
Wayne E. Ahart           (13,132,946)     Eugene A. Cernan       (13,131,770)      James A. Mullins            (13,135,850)
C. Donald Byrd           (13,132,946)     Hayden Fry             (13,116,068)      C. James McCormick          (13,128,470)
Kenneth Tobey            (13,135,550)     John Greig             (13,135,349)      Robert R. Rigler            (13,131,350)
Barry N. Shamas          (13,134,248)     Roy Keppy              (13,127,270)      Chris Schenkel              (13,128,470)
Cecil Alexander          (13,131,770)     Roy Ledbetter          (13,135,850)      L.Stanley Schoelerman       (13,135,550)
Richard Barclay          (13,135,850)     John E. Miller         (13,135,850)      Orville Sweet               (13,134,350)
</TABLE>

A total of 83,268 shares were withheld from all directors. The shareholders also
ratified the selection of Smith, Carney & Co. p.c. as the Company's independent
auditor for the fiscal year 2001. 13,104,029 shares were voted in favor of
ratifying such selection of independent auditor, 25,815 were voted against, and
95,274 shares abstained from voting on the matter.

                                       12
<PAGE>


Item 5.  Other Information.

On July 25, 2001, one of the Company's subsidiaries, BNL Equity Corporation
("BNLE") entered into an agreement to expand the Company's business relationship
with EPSI Benefits Inc. ("EBI") a Texas Corporation. EBI is the parent company
of Employer Plan Services Inc. ("EPSI") which provides dental claims processing
and adjudication for the Company's insurance subsidiary, Brokers National Life
Assurance Company ("BNLAC"). BNLAC loaned BNLE a sum of $1,457,407, with
interest accruing on the outstanding balance of such at 7.5% per year. BNLE
loaned EBI $1,357,407 to purchase 51% of the common stock of EBI, which was
owned by EBI's majority stockholder. The common stock was retired as treasury
stock. BNLE will use the additional $100,000 of the loan to pay expenses
incurred in connection with the negotiation and execution of the agreement.
BNLAC pledged $335,000 of bonds to secure the operating line of credit of EPSI
in conjunction with this transaction.

The loan from BNLE to EBI will be repaid through the issuance by EBI of a
convertible debenture, which BNLE can convert into 51% of EBI common stock at
any time. Until and unless the debenture is converted, the loan will be repaid
in accordance with the Convertible Debenture Agreement. BNLE will also receive a
marketing fee from EBI.
<TABLE>
<CAPTION>
Item 6. Exhibits and Reports on Form 10-Q.
<S>          <C>                                                                        <C>
------------ -------------------------------------------------------------------------- -----------------------------------------
             Loan and stock retirement agreement dated July 25, 2001 between BNL
10.1         Equity Corporation and EPSI Benefits Inc. in order to acquire              Filed herewith as Exhibit 10.1
             controlling interest in EPSI Benefits Inc.
------------ -------------------------------------------------------------------------- -----------------------------------------
</TABLE>


(b) Reports on Form 8-K.

No reports were filed for the period covered by this report.


                                       13

<PAGE>




                                   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 08, 2001                      /s/ Wayne E. Ahart
                                           ------------------
                                      By: Wayne E. Ahart, Chairman of the Board
                                          (Chief Executive Officer)


Date: August 08, 2001                      /s/ Barry N. Shamas
                                           --------------------
                                      By: Barry N. Shamas, Executive V.P.
                                          (Chief Financial Officer)




                                       14
<PAGE>

Exhibit 10.1

                           STOCK RETIREMENT AGREEMENT

         This Stock Retirement Agreement ("Agreement") is made and entered into
this 25th day of July, 2001, among A. Hardy Roper ("Seller"), EPSI Benefits,
Inc. ("EBI"), Lyndon Smith ("Smith") and Sally Dwyer ("Dwyer") (collectively the
"Shareholders") and BNL Equity Corporation ("BNLE").

                                    RECITALS

         Seller is the owner of 510 shares of the capital stock of EBI which
constitutes 51% of the issued and outstanding capital stock of EBI (the
"Shares") and desires to sell the Shares to EBI so that they can be retired. The
Shares constitute control of EBI. Upon the purchase and retirement of the
Shares, the Shareholders will be the owners of all of the outstanding shares of
the capital stock of EBI ("Shareholders Shares"). BNLE has agreed to loan EBI
the sum of $1,357,407 to be used for the purchase and retirement of the Shares
by EBI. In addition, BNLE has agreed to guarantee a loan to EBI and/or its
wholly-owned subsidiary, Employers Plan Services, Inc. ("EPSI"), in the amount
of $250,000 for the upgrading of EPSI's internet capabilities to comply with the
federal Health Insurance Portability Accountability Act of 1996.

         NOW THEREFORE, in consideration of the sum hereinafter stated, mutual
promises, covenants and agreements contained herein, and for other good and
valuable consideration, the sufficiency of which is hereby acknowledged, Seller,
EBI, the Shareholders and BNLE agree as follows:

                                    SECTION 1

                                 PURCHASE PRICE

         1.1. Sale and Purchase of Shares. Subject to and upon the terms and
conditions of this Agreement, at the Closing (as hereinafter defined) the Seller
shall sell, transfer, assign and deliver the Shares to EBI and EBI shall
purchase and acquire the Shares from Seller for the total sum of $1,357,407
("Purchase Price"). Such Shares shall be free and clear of all liens, charges,
encumbrances, security interests and claims of whatever kind or nature.

        1.2. Payment of the Purchase Price. The Purchase Price
shall be paid in cash at the Closing, by wire transfer or such
other method as shall be acceptable to Seller as designated by him
prior to the Closing.



                                 1

<PAGE>



         1.3 Closing Date Balance Sheet. The Shareholders shall cause to be
delivered an unaudited balance sheet and income statement of EBI and Employers
Plan Services, Inc., EBI's wholly- owned subsidiary, ("EPSI"), as of the close
of business on the day preceding the closing date (the "Closing Date Balance
Sheet"). The Closing Date Balance Sheet of EBI shall be prepared on the same
basis as the February 28, 2001 EBI consolidated Financial Statement attached as
Schedule 3.1.10.

                                    SECTION 2

                              EMPLOYMENT AGREEMENT

         2.1. Employment Agreement. At the Closing, the Seller and EBI shall
enter into an Employment Agreement in substantially the form of Exhibit A
attached hereto. The term of the Employment Agreement shall be forty-eight (48)
months. EBI shall pay Seller the sum of $36,000 per year during the term of the
Employment Agreement payable in the manner provided therein. The Seller and his
dependent spouse shall be included in the health insurance program of EBI which
EBI provides for its employees throughout the term of the Employment Agreement
at the sole cost of EBI.

                                    SECTION 3

                         REPRESENTATIONS AND WARRANTIES

         3.1.              Representations and Warranties of Seller. Seller
(based upon Seller's  knowledge,  except  Section  3.1.14) and the  Shareholders
represent and warrant to EBI and BNLE, as applicable, that:

         3.1.1.            Due Incorporation.  Each of EBI and EPSI is a
business  corporation duly  incorporated,  validly existing and in good standing
under the laws of the State of Texas.

         3.1.2. Due Qualification. EBI and EPSI are each duly qualified and
licensed to do business,  EBI as an insurance  agent,  and EPSI as a third party
administrator,  and in good  standing  in all  states  in which  either is doing
business. Neither EBI nor EPSI is doing business in any state except as shown on
Schedule  3.1.2 or except where the failure to be so qualified  would not have a
material adverse effect on either EBI or EPSI. Neither EPSI nor EBI has ever had
its insurance or other required license to do business  revoked,  suspended,  or
not renewed, and there is no fact or condition known to Seller that could result
in the revocation, suspension, or non-renewal of its license.

                                       2
<PAGE>

         3.1.3.            Subsidiaries.  EPSI is the only subsidiary
owned by EBI.  EPSI has no  subsidiaries  and  does not own  beneficially  or of
record any capital stock or equity  interest or  investment in any  corporation,
association,  partnership,  joint venture or other  business  entity (other than
securities  acquired  in the  ordinary  course of  business  for its  investment
portfolio).

         3.1.4. Capitalization. EBI's authorized capital stock consists solely
of One Hundred Thousand  (100,000)  shares of Common Stock,  $1.00 par value per
share (the "Authorized Shares"), of which One Thousand (1,000) shares are issued
and outstanding  (the  "Outstanding  Shares").  Seller owns  beneficially and of
record 510 shares or 51% of the  Outstanding  Shares.  The  Shareholders  own in
equal  portions the remaining 490 shares (49%) of the  outstanding  Shares.  The
Shares (a) have been duly authorized and validly issued,  (b) are fully paid and
non-assessable, and (c) to the knowledge of the Shareholders, have been offered,
issued, sold and delivered by EBI in compliance with, or pursuant to, exemptions
from applicable Federal and state securities laws. EBI has no intention to issue
any additional shares of its Authorized Shares.

         3.1.5. Binding Obligations. This Agreement and each other
document hereby contemplated to be executed by Seller will, upon such execution,
constitute a legal, valid and binding  obligation of Seller enforceable  against
Seller  in  accordance  with its  terms,  except as the same may be  limited  by
bankruptcy,   insolvency,   moratorium  or  other  similar  laws  affecting  the
enforcement of creditors' rights generally or by general equitable principles.

         3.1.6. No Violation; Required Consents and Approvals. Except as would
not  result in a material  adverse  change to either  EBI or EPSI,  neither  the
execution of this Agreement nor any other  document  hereby  contemplated  to be
executed by the Seller,  nor the consummation of the  transactions  contemplated
hereby, nor compliance by the Seller with any of the provisions hereof, will (a)
violate,  conflict  with  or  result  in  a  breach  of  any  provision  of  any
stockholders'   agreement,   buy-sell  agreement,   stock  transfer  restriction
agreement,  or any other agreement,  license, the Articles of Incorporation,  or
the  By-Laws  of EBI,  (b)  result  in a  default,  or give rise to any right of
termination,  cancellation, or acceleration,  under any of the terms, conditions
or provisions of any agreement,  or other  instrument or obligation to which EBI
or EPSI is a party, or by which EBI or EPSI may be bound,

                                       3

<PAGE>



(c)to the knowledge of the Shareholders,  violate any statute, rule, regulation,
judgment,  order,  writ,  injunction,  or decree  of any  court or  governmental
authority  having  jurisdiction  over  EBI or EPSI or their  properties,  or (d)
cause,  or give any  creditor  grounds  to cause  (with or without  notice,  the
passage of time,  or both) the maturity of any liability or obligation of EBI to
be accelerated or increased.

         3.1.7. Litigation. There are no actions, suits, claims, investigations
or  proceedings  pending or, to the  knowledge of the  Shareholders,  threatened
against or involving EBI or EPSI (or in respect to the Shares) before any court,
administrative agency or other body, and no order, writ,  injunction,  judgment,
decree or similar command of any court,  governmental  agency or instrumentality
is presently in effect or has been entered  against and served upon EBI or EPSI.
To the knowledge of the Shareholders  there are no grounds or bases for any such
action,  suit, claim,  investigations or proceeding  against or involving EBI or
EPSI (or in respect to the Shares).

         3.1.8.            Compliance with Law.  EBI and EPSI are each in
in all  material  respects  with all  applicable  laws,  regulations  and  other
requirements of governmental authorities having jurisdiction over EBI and EPSI.

         3.1.9. Title to Assets. Except as disclosed on Schedule 3.1.9, EBI and
EPSI each have good and marketable  title to all of their assets and properties,
tangible  and  intangible,  free and  clear  of all  liens,  mortgages,  leases,
pledges,  security  interests,  conditional  sale agreements,  charges,  claims,
options and other encumbrances of any kind or nature whatsoever other than liens
for property taxes not yet due and payable.  A listing of all customer contracts
of EBI and EPSI  containing  the name of each  customer,  expiration  dates  and
estimated annual proceeds is attached hereto as Schedule 3.1.9.  Seller knows of
no  circumstances  that would  indicate an intention of any of such customers to
cancel its  contract.  Excepting  assets  disposed of in the ordinary  course of
business,  all  assets  reflected  in the  February  28,  2001 EBI  Consolidated
Financial  Statement  are in the direct or indirect  possession of EBI. No other
person has a right to possession to all or any part of such assets.

                  3.1.10.           Financial Condition. EBI has prepared cash
basis  management-use  unaudited financial statements for its fiscal years ended
March 31, 1999,  2000 and 2001 and the interim  period  through  April 30, 2001.
EPSI has prepared cash
                                        4

<PAGE>



basis  management-use  unaudited financial statements for its fiscal years ended
August 31, 1999 and 2000,  and interim  periods  through April 30, 2001. EBI and
EPSI have delivered  these  financial  statements  (all of which include balance
sheets and income statements) (the "EBI and EPSI Financial Statements") to BNLE.
The Financial Statements are complete and correct in all material respects, have
been  prepared on a basis  consistent  with that of prior  periods,  and present
fairly the  financial  condition  and results of operations of EBI and EPSI on a
cash basis for the periods indicated.

         In addition, EBI has prepared a consolidated balance sheet at February
28, 2001, and related consolidated  statements of loss and retained earnings and
cash flows for the eleven  months then ended,  attached as Schedule  3.1.10 (the
"February 28, 2001 EBI  Consolidated  Financial  Statements").  The February 28,
2001 Consolidated  Financial Statements are correct and complete in all material
respects,  and  present  fairly  the  financial  position  of EBI and EPSI as of
February  28,  2001 and the results of their  operations  and cash flows for the
eleven  months then ended,  in conformity  with  generally  accepted  accounting
principles.  Except  as set  forth in the  February  28,  2001 EBI  Consolidated
Financial   Statements  and  since  the  date  of  the  February  28,  2001  EBI
Consolidated Financial Statement:

                           (1) EBI and EPSI do not have any debts, liabilities
                  or obligations of any nature, whether accrued, absolute,
                  contingent, or otherwise, due or to become due except for
                  debts, liabilities and obligations which have arisen in the
                  ordinary course of business and which do not exceed $10,000 in
                  the aggregate;

                           (2) EBI and EPSI have not, except in the ordinary and
                  usual course of business, allowed or caused to be sold,
                  conveyed, encumbered, discounted with or without recourse or
                  otherwise transferred any of their assets or waived, released,
                  cancelled or agreed to waive, release or cancel any debts or
                  claims owing to or in favor of EBI or EPSI;

                           (3) EBI and EPSI have not (i) caused any dividend to
                  be paid or declared or caused any distribution to be made on
                  the Shares, (ii) redeemed or agreed to redeem any of their
                  capital stock (other than this agreement); or (iii) entered
                  into any transaction except in the ordinary and usual course
                  of business;



                                       5

<PAGE>



                           (4) The assets and businesses of EBI and EPSI have
                  been maintained and operated in substantially the same manners
                  during the periods covered by any EBI and EPSI Financial
                  Statements, and EBI and EPSI have maintained their books and
                  records in a manner that fairly, accurately, consistently, and
                  correctly presents their income, expenses, assets and
                  liabilities, absolute and contingent;

                           (5) There has been no material adverse change in the
                  business, operations, assets, properties or rights, prospects
                  or condition (financial or otherwise) of EBI or EPSI or any
                  occurrence, circumstance, or condition thereof which could
                  reasonably be expected to result in any such material adverse
                  change;

                           (6) There has not been any increase in amounts
                  payable by EBI or EPSI to, or for the benefit of, or committed
                  to, or paid by EBI or EPSI to or for the benefit of the Seller
                  or any director, officer, consultant, agent or employee, in
                  any capacity, of EBI or EPSI, or in any benefits granted under
                  any bonus, stock option, profit sharing, pension, retirement,
                  deferred compensation, insurance, or other direct or indirect
                  benefit plan, payment or arrangement made to, for the benefit
                  of, or with the Seller, or any director, officer, agent,
                  consultant or employee in any capacity;

                           (7) EBI and EPSI have not borrowed or entered into
                  any agreement to borrow funds (except in connection with this
                  transaction), incurred any other obligation or liability,
                  contingent or otherwise (except current liabilities incurred
                  in the ordinary course of business) and which do not exceed
                  the sum of $10,000 in the aggregate, or made any endorsement,
                  assumption or guarantee of payment or performance of any loan
                  or obligation of any other individual, firm, corporation or
                  other entity;

                           (8) EBI and EPSI have not purchased or entered into
                  any agreement to purchase assets, nor has EBI or EPSI leased
                  or entered into any agreement to lease, as lessee, any assets;

                           (9)   EBI and EPSI have not made any loan or advance
                  to any individual, firm, corporation or other entity;

                           (10)     EBI and EPSI have not made any modification,


                                6

<PAGE>



                  waiver, change, amendment, release, rescission or termination
                  of, or accord and satisfaction with respect to any term,
                  condition, or provision of any contract, agreement, license or
                  other instrument to which EBI or EPSI is a party (including,
                  without limitation, any contracts), other than any
                  satisfaction by performance in accordance with the terms
                  thereof in the ordinary and usual course of business; and

                           (11) EBI and EPSI have paid all taxes, charges and
                  assessments as and when due, have made all debt service
                  payments (if any) when contractually due and payable and have
                  paid all accounts payable and other liabilities on a current
                  basis.

                  3.1.11. Employees; Welfare and Benefit Plans. Each of EBI and
EPSI has paid or has  reflected  on its books or on the  February  28,  2001 EBI
Consolidated  Financial  Statement a liability  for the payment of all salaries,
wages and  benefits  accrued to or for the benefit of its  employees  and former
employees,  and has complied in all material  respects with all applicable laws,
rules and regulations relating to employment or labor,  including those relating
to wages,  hours,  benefits,  terms and  conditions  of  employment,  collective
bargaining and the payment and  withholding of taxes.  Except as attached hereto
as Schedule  3.1.11,  neither EBI nor EPSI is a party to or bound by any oral or
written (a) employee  collective  bargaining  agreement,  consulting  agreement,
deferred compensation agreement,  confidentiality agreement, or non- competition
agreement,  or (b) employees'  pension,  profit  sharing,  stock option,  bonus,
incentive, stock purchase, welfare, life insurance,  hospital or medical benefit
plan.  All  obligations  of EBI and EPSI  applicable to their former  employees,
whether arising by operation of law, by contract, past custom or otherwise,  for
payments  by EBI or  EPSI  to  trusts  or  other  funds  or to any  governmental
authority with respect to unemployment,  compensation benefits,  social security
benefits or any other  benefits for its  employees  (other than  benefits  under
qualified  pension or  profit-sharing  plans as described below) with respect to
employment of such  employees  have been paid or fully provided for on the books
of EBI and EPSI. All qualified pension or  profit-sharing  plans to which EBI or
EPSI contributed or in which any of the employees of EBI or EPSI participated or
were eligible to participate, were established,  qualified,  administered and/or
terminated in accordance with the Employee Retirement Income Tax Security Act of
1974, as amended ("ERISA"),  and the regulations  promulgated  thereunder as was
any other plan of
                                  7
<PAGE>



EBI or EPSI  subject to ERISA.  With respect to each such  qualified  pension or
profit-sharing  plans:  (c)  neither EBI nor EPSI,  nor any of their  respective
directors or employees nor any "parties in interest" nor "disqualified  person,"
as such terms are defined in Section 3 of ERISA and Section 4975 of the Internal
Revenue Code of 1986, as amended (the "IRC"), respectively, has, with respect to
any of said plans engaged in a "prohibited  transaction" as such term is defined
in Section 4975 of the IRS or Section 407 of ERISA,  which could  subject EBI or
EPSI, or Seller and/or their  affiliates,  any of their respective  directors or
employees or any of such qualified pension or profit-sharing  plans to any taxes
or penalties on prohibited transactions under Section 4975 of the IRC or Section
502(i) of ERISA;  (d) none of the plans that were defined  benefit  plans within
the  meaning  of  Section  3(35) of ERISA or  related  trusts  thereunder,  were
terminated  subsequent to September 2, 1974, nor have there been any "reportable
events"  within the  meaning of Section  4043(b) of ERISA since such date except
for such events which might be caused by general  extensions of reporting  dates
or similar  extensions granted by the United States Department of Labor; (e) EBI
and EPSI has each made all  contributions  to each such plan required to be made
under the terms of such  plan(s),  as well as all  contributions  required to be
made in order to satisfy the minimum  funding  standards of Section 302 of ERISA
and Section  412 of the IRC to the extent such  standards  are  applicable;  (f)
where  applicable,  each  such  plan  sponsored  by EBI or EPSI has  received  a
determination letter as to its continued qualification under the IRC, as amended
by ERISA, and a copy of each such determination letter has been delivered to EBI
and BNLE and there is no event  which has  occurred  with  respect to such plans
which  would  result in or serve as the basis for a loss of such  qualification;
(g)  neither EBI nor EPSI has or expects to incur any  liability  to the Pension
Benefit Guaranty Corporation; (h) EBI and EPSI have each administered such plans
in compliance with the reporting and disclosure  requirements applicable thereto
under ERISA, the IRC and any other federal, state or local law; (i) all required
contributions  to such employee  benefit plans have been made,  and EBI and EPSI
each have no liability with respect to any such employee  benefit plans; and (j)
there are no actions, suits or claims pending, or, threatened,  against any such
plan or against the assets of such plan.  None of such employee  benefit  plans,
nor  any  related  trusts  thereunder,  were  or  are  subject  to  any  pending
investigation, examination or other proceeding initiated by the Internal Revenue
Service,  the United States  Department of Labor,  the Pension Benefit  Guaranty
Corporation, or any other federal or  state agency or instrumentality.
                    8

<PAGE>





               3.1.12.           Contracts.  Neither EBI nor EPSI is a party to,
         and neither EBI nor EPSI nor any of their properties are
subject to any contract, agreement, lease, commitment, undertaking, agreement or
obligation, written or oral except as set forth in Schedule 3.1.12.


                  3.1.13.           Environmental Matters. EBI and EPSI,
respectively,  are and have been in compliance in all material respects with any
and all  federal,  state,  and other  governmental  environmental  laws.  To the
knowledge of the Shareholders,  there is no liability or obligation with respect
to any environmental law to any person or entity.

                  3.1.14. Taxes. All federal, state, local and foreign returns,
reports  and  filings  of EBI and EPSI for all  taxes (as  hereinafter  defined)
required  to be filed on or before  the date  hereof  have been duly filed on or
before the relevant due date, as such date may have been extended, and all taxes
shown as due thereon have been  determined  in  accordance  with all  applicable
laws,  rules and  regulations  and have been paid except as detailed on Schedule
3.1.14.  The Seller  and/or EBI and EPSI have  delivered to BNLE copies of EBI's
and EPSI's federal income tax returns,  including any amended returns,  together
with all accompanying  schedules and forms,  filed for three (3) taxable periods
ending on or before the date hereof. All taxes, assessments,  fees, deficiencies
and other  governmental  charges relating to EBI and EPSI and their  properties,
assets and income on which they are  required  to pay or  withhold  on behalf of
their employees or any third party, such taxes, assessments,  fees, deficiencies
and  other  governmental  charges  have  been  paid or have  been  set  forth as
liabilities on Schedule 3.1.14.  No action has been taken, or not taken, by EBI,
EPSI,  the Seller,  or any affiliate  thereof that may result in any increase in
the tax  liability  of EBI or EPSI with  respect to any  taxable  period  ending
before, on or after the Closing (with respect to periods commencing prior to the
Closing). The permanent books and records of EBI or EPSI have been maintained so
as to reflect the  operations  of EBI or EPSI through the Closing.  There are no
amounts of taxes, assessments,  fees, deficiencies or other governmental charges
for which EBI or EPSI may be assessed or otherwise liable for any periods ending
on, with or before Closing except for amounts detailed on Schedule 3.1.14. There
are no (i) actions, suits, proceedings, investigations or claims now pending or,
to the knowledge of the Seller and Shareholders,  threatened against EBI or EPSI
in respect of taxes asserted by
                                9

<PAGE>



any governmental  authority,  or (ii) agreements,  waivers or other arrangements
providing  for an extension of time with respect to the filing of any tax return
by, or the assessment or payment of taxes,  governmental charges or deficiencies
against, EBI or EPSI. Any liability due to a breach of this Section 3.1.14 shall
be borne equally among Seller, Dwyer and Smith.

                  3.1.15. Conflicting Interests. Except as described in Schedule
3.1.15,  neither EBI nor EPSI have any  indebtedness to any of their  respective
officers, directors,  employees,  consultants or shareholders or to any of their
respective  relatives  or  affiliates,  and  none  of the  officers,  directors,
employees, shareholders or consultants of EBI or EPSI, or their affiliates, owns
directly or indirectly, individually or collectively, a material interest in any
entity  which is a  competitor,  customer or  supplier  of (or has any  existing
contractual  relationship  with) EBI or EPSI.  Except as  described  in Schedule
3.1.15, no shareholder, director, officer, consultant or employee of EBI or EPSI
(a) owns  properties  or assets now being  used,  or  necessary  for use, in the
conduct  of  EBI's  or  EPSI's  business  or (b)  has any  existing  contractual
relationship with EBI or EPSI.

                  3.1.16. Insurance Coverages. EBI and EPSI each have maintained
adequate insurance to protect them against all hazards,  claims and losses which
they may  reasonably  be  expected  to be  exposed  to in the  conduct  of their
business,  and each of EBI and  EPSI  has  maintained  such  adequate  insurance
throughout its corporate existence.  EBI and EPSI have each made regular premium
payments on such insurance policies from their last previous  respective renewal
or effective dates through the date hereof, and each, respectively, is the owner
and/or beneficiary of all such insurance policies.

                  3.1.17. Insolvency. Neither EBI nor EPSI is currently involved
in any  proceedings  by or  against  them in any  court  under  any  bankruptcy,
insolvency  or  debtor's  relief  act,  whether  Federal  or  state,  or for the
appointment of a trustee, receiver, liquidator,  assignee, sequestrator or other
similar  official  of  them  or it or of a  substantial  part  of its  or  their
property.

                  3.1.18.           Minute Books.  EBI's and EPSI's Minute Books
(the "Minute Books") contain a summary of all meetings of the Board of Directors
and shareholders of EBI and EPSI, respectively,  since the date of incorporation
of each and
                                 10

<PAGE>



reflect all transactions  referred to in such minutes accurately in all material
respects. All actions taken by EBI and EPSI requiring action by their respective
Boards of Directors or shareholders have been duly and appropriately  authorized
or ratified as necessary and are evidenced in the Minute Books.

                  3.1.19.          Articles of Incorporation.  EBI and EPSI have
each  provided  BNLE with a true,  accurate and complete copy of the Articles of
Incorporation of EBI and EPSI, together with all amendments thereto.

                  3.1.20. By-Laws. EBI and EPSI have each provided BNLE with a
true,  accurate  and complete  copy of the By-Laws of EBI and EPSI,  as amended.
Each amendment to the By-Laws of EBI and EPSI was adopted in accordance with the
provisions of the By-Laws of EBI and EPSI, respectively.

                  3.1.21. Officers and Directors. The persons named in Schedule
3.1.21 have been duly elected and/or appointed and qualified and are the legally
acting  officers and directors of EBI and EPSI holding the respective  office(s)
or position(s) set forth opposite their names.

                  3.1.22. Bank Accounts and Deposit Boxes. Schedule 3.1.22 sets
forth a true,  accurate and complete  list of each bank in which each of EBI and
EPSI has an account or safe deposit box,  together  with a  description  of such
account or safe  deposit  box and the names of all  persons  authorized  to draw
thereon, or who have access thereto.

                  3.1.23. Investments. Schedule 3.1.23 lists all investments in
bonds, stocks and other securities,  mortgages and other properties owned by EBI
and EPSI,  respectively,  at the close of business on February  28, 2001 and the
original  cost and fair market  value  thereof set forth on Schedule  3.1.23 are
accurate.

                  3.1.24. Insurance Agents/Brokers. EBI has no commission, bonus
or other payment  obligation or  arrangement to or with agents or brokers of any
nature, whether accrued, absolute,  contingent or otherwise or whether due or to
become due, except as set forth on Schedule 3.1.24 attached hereto.

                  3.1.25.         Powers of Attorney and Suretyship. Neither EBI
nor EPSI has any general or special powers of attorney  outstanding  (whether as
grantor or grantee  thereof),  nor any obligation or liability  (whether actual,
accrued, accruing,

                                11

<PAGE>



contingent or otherwise) as guarantor,  surety,  co-signer,  endorser,  comaker,
indemnitor or otherwise in respect to the obligation of any person, corporation,
partnership, joint venture, association, organization or other entity, except as
endorser or maker of checks in the ordinary course of business.

                  3.1.26.  Brokers, Finders, Etc.  There are no claims for
brokerage  commissions,  finder's fees or similar compensation arising out of or
due to any act of EBI,  EPSI or  Seller  in  connection  with  the  transactions
contemplated by this Agreement.

               3.1.27. Full Disclosure. This Agreement and the schedules
attached hereto,  as well as any other document,  certificate,  schedule or
statement  furnished  to BNLE or any third  party by or on behalf of the Seller,
EBI or EPSI in connection  with the  transactions  contemplated  hereby,  do not
contain any untrue  statement  of fact and do not omit to state a material  fact
necessary  in order to make the  statements  contained  therein  or  herein  not
misleading in light of the circumstances under which they were made.


                  3.1.28. Shares. All of the Shares owned of record by Seller
are free and clear of all liens, encumbrances, claims,
charges and restrictions. There are no outstanding options,
warrants, pre-emptive rights, first rights of refusal,
conversion rights, agreements, authorizations, commitments
or rights of any type relating to the sale, transfer,
purchase, redemption, pledge or other disposition of any of
the Shares owned of record by him. There are no voting
agreements, voting trusts or any other agreements or
understandings with respect to the voting of the Shares
owned by him.

                  3.1.29. No Violation. Neither the execution of this Agreement
nor any other document hereby contemplated to be executed by Seller,
nor the consummation of the transactions contemplated hereby, nor
compliance by the Seller with any of the provisions hereof, will (a)
result in a default, or give rise to any right of termination,
cancellation or acceleration under any of the terms, conditions or
provisions of any agreement or other instrument or obligation to which
the Seller may be bound, (b) violate any statute, rule or regulation,
judgment, order, writ, injunction, or decree of any court or
governmental authority having jurisdiction over the Seller or his
properties, or (c) cause, or give any creditor grounds to cause (with
or without notice, the passage of time, or both) the maturity of any
liability or obligation
                                       12

<PAGE>



of the Seller to be accelerated or increased. No consent or approval,
no filing with, and no permit or other authorization of any agency,
person or entity is required in connection with the execution and
delivery by the Seller of this Agreement or the consummation of the
transactions contemplated hereby or is necessary to permit EBI and EPSI
to conduct their business and operations after the Closing.

                  3.1.30. Plan Documents. Plan documents provided by EBI or EPSI
in connection with the administration of any employee benefit plans are
consistent in all material respects with applicable federal and state
law, and neither EBI nor EPSI has any material liability for any
defective plan provided or advice given regarding the administration of
such plans.

                  3.1.31.     Governmental Claim Processing.  Neither EBI nor
 EPSI have, pursuant to any contract or agreement, processed
any claims for any federal or state insurance program such as
Medicare, Medicaid, Veterans Administration or similar
programs.

                                    SECTION 4

                                    CLOSING
         4.1. Closing Date, Etc. The transactions contemplated hereby shall be
consummated at a closing (the "Closing") to be held at the offices of Fizer,
Beck, Webster, Bentley and Scroggins, 1360 Post Oak Blvd., Suite 1600, Houston,
Texas 77056 at _____ a.m./p.m., on a mutually agreeable date as soon as possible
(but in no event later than 30 days) after all of the conditions precedent
contained in this Agreement have been fulfilled or waived (the "Closing Date").

         4.2.              Deliveries at Closing.

         4.2.1.            Deliveries by EBI.  At Closing, EBI shall

         deliver or cause to be delivered to Seller the following:

                           (a) Secretary's Certificate. A certificate dated the
                  Closing Date and executed by the Secretary or an Assistant
                  Secretary of EBI on behalf of EBI: (i) attesting to the
                  incumbency and signatures of the officers and directors of
                  EBI; and (ii) certifying that the resolutions of the Board of
                  Directors and shareholders of EBI authorizing the execution of
                  the Agreement and the consummation of the transactions
                  contemplated herein (true, accurate and complete copies of
                  which resolutions shall be attached to such

                                       13
<PAGE>



                  certificate) are duly adopted and are in full force and
                  effect as of the Closing Date;

                       (b)      Other.  Such other documents and instruments as

                  Seller may reasonably request.

                       (c)      Employment Agreement.  Duly executed copy of

                  the Employment Agreement in the form attached hereto.

                  4.2.2.         Deliveries by Seller.  At Closing, Shareholders
shall make available to BNLE for examination and provide
certified copies thereof to BNLE as BNLE may request, the
following:

                           (a)      Certified Articles of Incorporation.  The
                  Articles of Incorporation and all amendments thereto of
                  EBI and EPSI, duly certified as of a recent date, by the
                  Secretary of State of the State of Texas.

                           (b) Certificates of Existence/Good Standing. A
                  certificate, executed as of recent date by the Secretary of
                  State and the Commissioner of Insurance of the State of Texas
                  as to the good standing, licensing and qualification of EBI
                  and EPSI to do business in that state.

                           (c)    Secretary's Certificates.  Certificates dated

                  the Closing Date and executed by the Secretary or
                  Assistant Secretary of EBI and EPSI, respectively: (i)
                  attesting to the incumbency and the signatures of the
                  officers and directors of EBI and EPSI; and (ii)
                  certifying the By-Laws of EBI and EPSI are true, correct
                  and complete.

                           (d)      Minute Books; Stock Transfer Records.  The
                  original Minute Books and stock transfer records of EBI
                  and EPSI.

                           (e)  Officers and Directors. The written resignation
                  of the Seller as an officer and member of the Boards of
                  Directors of EBI and BNLE, respectively, effective as of
                  the Closing Date.

                           (f) Investments. A true, accurate and complete list
                  of investments owned by EBI and EPSI on the Closing Date, duly
                  certified as of the Closing Date by the appropriate officers
                  of EBI and EPSI.


                                       14

<PAGE>



                           (g)     Closing Date Balance Sheet.  The Closing Date
                                   Balance Sheets.

                           (h)   Other.  Such other documents and instruments as
                                 EBI may reasonably request.

                                    SECTION 5

                  OBLIGATIONS OF THE PARTIES AFTER THE CLOSING

         5.1.              Indemnification.


                           (a)      Indemnification of EBI or BNLE by Seller.
                                    ----------------------------------------
Notwithstanding any investigation of the assets, properties, books, records and
business of EBI and EPSI by or on behalf of BNLE prior to the Closing, Seller
shall, after the Closing, indemnify and hold EBI or BNLE, as the case may be,
harmless from, and assume liability for the payment of and pay, any and all
liabilities, losses, damages, costs, charges, reasonable attorneys fees and
other expenses of every nature and character incurred by EBI or BNLE ("Losses")
arising by reason of or resulting from any breach of any representation,
warranty, covenant or agreement made by Seller in this Agreement, the Disclosure
Schedules or any other document executed in connection herewith by the Seller.

                           (b)      Indemnification of Seller.  EBI shall, after
                                    -------------------------
the Closing, indemnify and hold the Seller harmless from, and assume liability
for the payment of and pay, any and all Losses arising by reason of or resulting
from (1) any untrue representation, breach of warranty, or non-fulfillment of
any covenant or agreement by EBI contained herein or in any certificate,
document, or instrument delivered to Seller pursuant hereto or in connection
herewith; and (2) any and all actions, suits, proceedings, claims, demands,
assessments, judgments, costs, and expenses incident to any of the foregoing or
incurred in investigating or attempting to avoid the same or to oppose the
imposition thereof, or in enforcing this indemnity.

                           (c)   Seller's and Shareholders' Indemnity Cap.  The
                                    ----------------------------------------
parties hereto agree that, except for such liability of the Seller and the
Shareholders with respect to losses resulting from or attributable to
intentional fraud or any willful misconduct by the Seller and the Shareholders
(for which the potential liability under this Section 5 is not subject to the
Indemnity Cap (as hereinafter defined)), the Seller and the Shareholders shall
not have any obligations to indemnify EBI and/or BNLE pursuant to this Section
5:


                                       15

<PAGE>



                           (i)     in excess of $1,400,000 (such amount, the
"Indemnity Cap") (after which point the Seller and the Shareholders shall have
no obligation to indemnify EBI or BNLE from and against any further such
Losses).

                           (d)      Claims Net of Insurance Proceeds and Tax
Benefits. All Losses for which an indemnity claim is made by an Indemnitee (as
hereinafter defined)pursuant to this Section 5 shall be net of any insurance
proceeds received by such Indemnitee with respect to the event that resulted in
such indemnity claim (less the present value of any premium increases occurring
as a result of such claim) and any net tax benefit resulting from the event that
resulted in such indemnity claim.

         5.2.              Claims.
                           ------

                           (a)    In the event that any party hereto shall incur
any Losses in respect of which indemnification may be sought by such party
pursuant to this Section 5, the party to be indemnified hereunder (the
"Indemnitee") shall assert a claim for indemnification by written notice (a
"Notice") to the party providing indemnification (the "Indemnitor") stating in
reasonable detail the nature and basis of such claim. In the case of any Losses
arising out of any representation or warranty of a party being incorrect or
inaccurate when made, the Notice shall be given prior to the expiration of the
survival period relating to such representation or warranty as set forth in
Section 6.10 hereof. In the case of Losses arising by reason of any third party
claim, the Notice shall be given within ten (10) business days of the filing or
assertion of such claim against the Indemnitee, but the failure of the
Indemnitee to so notify the Indemnitor shall not relieve the Indemnitor of any
liability the Indemnitor may have to the Indemnitee except to the extent that
the Indemnitor demonstrates that its defense of such claim is materially
prejudiced thereby; provided, however, that any indemnity payment due hereunder
shall be reduced by any additional costs incurred by the Indemnitor (including
reasonable attorneys' fees and interest) as a result of the Indemnitee's failure
to meet the ten (10) business day notice requirement set forth above. The
Indemnitee shall provide to the Indemnitor all information and documentation
reasonably necessary to support and verify any Losses which the Indemnitee
believes give rise to a claim for indemnification hereunder and shall give the
Indemnitor reasonable access to all books, records and personnel in the
possession or under the control of the Indemnitee which would have bearing on
such claim.

                           (b)      In the case of third party claims, the
Indemnitor shall have the option (i) to conduct any proceedings or

                                       16

<PAGE>



negotiations in connection therewith, (ii) to take all other steps to settle any
such claims (but not without first obtaining the consent of the Indemnitee
(which consent shall not be unreasonably withheld)), and (iii) to employ counsel
reasonably acceptable to the Indemnitee to contest any such claim or liability
in the name of the Indemnitee or otherwise. The Indemnitor shall, within thirty
(30) days of receipt of Notice of such claim, notify the Indemnitee of its
intention to assume the defense of such claim (provided that any assumption by
the Indemnitor of the defense of such claim shall be without prejudice to the
Indemnitor's right to dispute its responsibility to indemnify the Indemnitee
therefor). If the Indemnitor shall decline to assume the defense of any such
claim, the Indemnitee shall defend against any such claim in such manner as it
may deem appropriate (provided that the Indemnitee shall not settle any such
claim without the consent of the Indemnitor, which consent shall not be
unreasonably withheld). The reasonable expenses of all proceedings, contests or
lawsuits with respect to such claims shall be borne by the Indemnitor but only
if the Indemnitor is responsible pursuant hereto to indemnify the Indemnitee in
respect of the third party claim (and provided that, if the Indemnitor shall
have assumed the defense of any such claim, the fees and expenses of any counsel
retained by the Indemnitee shall be paid by the Indemnitee). Regardless of which
party shall assume the defense of the claim, the parties agree to cooperate
fully with one another in connection therewith. If (and to the extent) the
Indemnitor is responsible pursuant hereto to indemnify the Indemnitee in respect
of the third party claim, then within ten (10) days after the occurrence of a
final non-appealable determination with respect to such third party claim, the
Indemnitor shall pay the Indemnitee, in immediately available funds, the amount
of any Losses (or such portion thereof as the Indemnitor shall be responsible
for pursuant to the provisions hereof) representing payment by the Indemnitee of
such third party claim. In the event that any Losses incurred by the Indemnitee
do not involve payment by the Indemnitee of a third party claim, then, if (and
to the extent) the Indemnitor is responsible pursuant hereto to indemnify the
Indemnitee against such Losses, the Indemnitor shall within ten (10) days after
agreement on the amount of Losses or the occurrence of a final non-appealable
determination of such amount pay to the Indemnitee, in immediately available
funds, the amount of such Losses (or such portion thereof as the Indemnitor
shall be responsible for pursuant to the provisions hereof).

         5.3.              Taxes.


                           (a)      For the purposes of this Agreement, the term
"Taxes" shall include all federal, state, local and foreign income,

                                       17

<PAGE>



profits, franchise, sales, use, occupation, property, premium, excise and other
taxes or governmental fees or charges of any nature whatsoever (including taxes
withheld from employees' salaries and other withholding, employment or payroll
taxes and obligations and all deposits with respect thereto, and taxes and other
amounts arising in connection with obligations relating to information reporting
or backup withholding), including interest and penalties thereon, imposed upon
any party or upon the property, assets, income or franchises of any party.

                           (b)  Seller and EBI will furnish each other with all
information necessary for, and will be available for consultation at reasonable
times with respect to (i) the preparation and filing of any return of Taxes of
EBI or EPSI, and (ii) any audit examination by any government taxing authority
of any return referred to in the preceding clause (i). Such information shall
include, without limitation, the furnishing or making available of records,
books of account or other materials of EBI and EPSI necessary or helpful for the
defense against assertions of any taxing authority as to the tax returns for
periods ending on, with or before the Closing.

                           (c)      Any formal or informal tax allocation
agreements between the Seller or any affiliate with respect to EBI or EPSI have
been delivered by Seller to EBI on or before the date hereof and shall be
terminated as of the Closing, and EBI or EPSI (and BNLE) shall have no further
obligation with respect thereto and shall be released from the performance of
any obligation in existence and unsatisfied in whole or in part on the Closing.

         5.4. Further Assurances. Seller, EBI and BNLE shall, from time to time,
at the other party's request, and without further consideration, perform such
acts and execute and deliver to the other party such other and further
instruments, documents and other considerations as the other party may
reasonably request for the more effective consummation of the transactions
contemplated hereby and the satisfaction by the first party of its other
obligations under this Agreement.

         5.5.              Publicity.  Prior to the Closing, all press releases
                           ---------
and announcements to be made by any party hereto with respect to
the transactions contemplated hereby shall be subject to mutual
agreement which agreement shall not be unreasonably withheld or
delayed.





                                       18

<PAGE>



                                    SECTION 6

                               GENERAL PROVISIONS

         6.1. Notices. All notices, requests, demands and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on or by facsimile
transmission to the party to whom notice is to be given, or on the third day
after mailing if mailed to the party to whom notice is to be given, by certified
mail, return receipt requested, first class postage prepaid, and properly
addressed as follows:

         If to Seller:                      A. Hardy Roper
         ------------
                                            2016 Bentwater Dr.
                                            Montgomery, Texas 77356

         With a copy to:                    Jeffrey E. Sher
         --------------
                                            Fizer, Beck, Webster, Bentley
                                              and Scroggins
                                            1360 Post Oak Blvd., Suite 1600
                                            Houston, Texas 77056
                                            Fax No.: (713) 963-8469

         If to EBI                          Lyndon Smith
         or Lyndon Smith:                   EPSI Benefits, Inc.
         ---------------
                                            2180 North Loop West, Suite 400
                                            Houston, Texas 77018
                                            Fax No.: (713) 932-1162

         If to Sally Dwyer:                 Sally Dwyer
         -----------------
                                            EPSI Benefits, Inc.
                                            2180 North Loop West, Suite 400
                                            Houston, Texas 77018
                                            Fax No.: (713) 932-1162


         If to BNLE:                        Barry N. Shamas
         ----------
                                        Executive Vice President
                                        Brokers National Life Assurance Company
                                        2100 W. William Cannon, Suite L
                                        Austin, Texas 78715-0129
                                        Fax No.: (512) 692-5047



                               19

<PAGE>



         With a copy to:                    Allan W. Horne, Esq.
         --------------
                                            Horne, Hollingsworth & Parker
                                            Post Office Box 3363
                                            Little Rock, Arkansas 72203-3363
                                            Fax No. (501) 372-7142

or such substituted address or facsimile number as any of them have given to the
other in writing.

         6.2. Benefit of Agreement. The terms and provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns and may not be assigned by either
party hereto without the prior written consent of the other parties hereto.

         6.3.              Governing Law.  This Agreement is executed in and
                           -------------
shall be construed in accordance with the laws of the State of
Texas.  The parties hereto consent to the jurisdiction of the state
federal courts sitting in Austin, Texas in any action arising out
of or connected in any way with this Agreement.

         6.4.              Headings.  Section headings in this Agreement are
                           --------
for convenience only and shall not govern the interpretation or
construction of any of the provisions of this Agreement.

         6.5. Waiver; Amendment. The parties may, by an instrument in writing
executed in the same manner as this Agreement: (i) extend the time for the
performance of any of the covenants or agreements of the other party under this
Agreement; (ii) waive any inaccuracies in the representations or warranties of
the other party contained in this Agreement or in any document delivered
pursuant hereto or thereto; (iii) waive the performance by the other party of
any of the covenants or agreements to be performed by it or them under this
Agreement; or (iv) waive the satisfaction or fulfillment of any condition the
nonsatisfaction or nonfulfillment of which is a condition to the right of the
party so waiving to terminate this Agreement. The waiver by any party hereto of
a breach of any provision of this Agreement shall not operate or be construed as
a waiver of any other or subsequent breach hereunder.

         6.6.              Expenses. EBI shall pay all costs and expenses,
                           --------
including attorneys' fees, incurred by, received and paid prior to
Closing by EBI, Seller, and the Shareholders in connection with the
transactions contemplated by this Agreement.  BNLE shall pay all

                                       20

<PAGE>



its costs and expenses, including attorneys' fees, incurred, in connection with
the transactions contemplated by this Agreement. In any action at law or in
equity to enforce any of the provisions or rights under this Agreement, the
unsuccessful party or parties to such litigation, as determined by the court in
a final judgment or decree, shall pay the successful party or parties all costs,
expenses and reasonable attorneys' fees incurred by the successful party or
parties (including, without limitation, costs, expenses and fees on any
appeals), and if the successful party or parties recovers judgment in any such
action or proceeding, such costs, expenses or attorneys' fees shall be included
as part of the judgment.

         6.7. Severability. In case any one or more of the provisions contained
herein shall, for any reason, be held to be invalid, illegal, or unenforceable
in any respect, such invalidity, illegality, or unenforceability shall not
affect any other provision of this Agreement, but this Agreement shall be
construed as if such invalid, illegal, or unenforceable provision or provisions
had never been contained herein.

         6.8.              Counterparts.  This Agreement may be executed in any
                           ------------
number of counterparts, all of which taken together shall
constitute one agreement, and any of the parties hereto may execute
this Agreement by signing any such counterpart, but such
counterparts shall together constitute one and the same instrument.

         6.9. Incorporation by Reference. All Exhibits and Schedules attached
hereto are incorporated herein by this reference. Each of the other documents
delivered pursuant hereto shall be made subject to all of the terms, covenants,
conditions, obligations, stipulations and agreements contained in this Agreement
to the same extent and effect as if fully set forth therein, and this Agreement
is made subject to all of the terms, covenants, conditions, obligations,
stipulations and agreements contained in the other documents to the same extent
and effect as if fully set forth herein.

         6.10. Survival of Representations and Warranties. All representations,
warranties, covenants and agreements of the parties contained in this Agreement
and in any deeds, certificates, including closing certificates, instruments,
Schedules or other documents delivered pursuant hereto or otherwise in
connection herewith, shall survive the Closing and continue in full force and
effect for a period of two years after the Closing or, with respect


                               21

<PAGE>



to taxes,if longer, the period of limitations for assessment of any tax
attributable to any period ending on, with, or before Closing.

         6.11.             Loan Guaranty.  BNLE shall aid EBI in the
                           -------------
procurement of a line of credit loan, and guarantee such loan up to
$250,000 to be used for the upgrading of EPSI's internet
capabilities to comply with the federal Health Insurance
Portability Accountability Act of 1996.

         6.12. Pledge of Stock. As an inducement to BNLE to make the loan to EBI
to purchase the Shares and to guarantee the line of credit loan described in
Section 6.11, and for other good and valuable considerations, each Shareholder
agrees to pledge to BNLE 125 Shares of Company stock as security for the loan
and loan guaranty.

         6.13. Continuation of Insurance Coverage. During the time period
starting on the Closing Date and ending on the two (2) year anniversary of the
Closing Date, EBI and EPSI shall maintain insurance coverage on EBI and its
subsidiaries (including, without limitation, general liability insurance,
professional liability insurance, "errors and omissions" insurance and
"umbrella" insurance) on terms equal to or better than the coverage afforded by
the policies maintained by EBI for itself and its subsidiaries as of the Closing
Date. EBI and EPSI may obtain such insurance coverage from any one or more
insurance companies selected by EBI and EPSI at their sole discretion.

         6.14.             Release of Guarantee.  At the Closing, EBI and EPSI
                           --------------------
shall obtain the unconditional release of Seller from a $90,000
loan and corresponding $150,000 line of credit from Wells Fargo.

         6.15.             Entire Agreement.  This Agreement supersedes any
                           ----------------
other agreement, whether oral or written, between EBI and Seller
relating to the matters contemplated hereby and constitutes the
entire agreement between the parties hereto.

         IN WITNESS WHEREOF, Seller, EBI, the Shareholders and BNLE have caused
this Agreement to be executed as of the date first above written.






                                       22

<PAGE>





                                                         SELLER:

                                                  /s/ A. Hardy Roper
                                                  ------------------------------
                                                  A. Hardy Roper

                                 ACKNOWLEDGMENT

STATE OF TEXAS
COUNTY OF __________


         Now on this day personally appeared before me, the undersigned Notary
Public, within and for the County and State aforesaid, Hardy M. Roper,
personally known by me, who stated and verified that he had executed the
foregoing Stock Retirement Agreement.

         WITNESS my hand and seal in testimony thereof this 25th day of July,
2001.

                                                 ------------------------------
                                                                   Notary Public


My Commission Expires:                      _____________________
















                                       23

<PAGE>

                                    EBI:

                                             EPSI BENEFITS, INC.
                                             By:s/s Lyndon Smith
                                              _____________________
                                              Lyndon Smith, Vice President


ATTEST:


-----------------------------
Secretary

                                 ACKNOWLEDGMENT

STATE OF TEXAS

COUNTY OF __________


         Now on this day personally appeared before me, the undersigned Notary
Public, within and for the County and State aforesaid, Lyndon Smith and
____________________, personally known by me, as Vice President and Secretary,
respectively, of EPSI Benefits, Inc., a Texas corporation, who stated and
verified that they had executed the foregoing Stock Retirement Agreement for and
in behalf of said company.

         WITNESS my hand and seal in testimony thereof this 25th day of July,
2001.

                                                -------------------------------
                                                                   Notary Public

My Commission Expires:

----------------------



                                24

<PAGE>




                                                  ------------------------------
                                                            Lyndon Smith




                                                                  ACKNOWLEDGMENT

STATE OF TEXAS
COUNTY OF __________


         Now on this day personally appeared before me, the undersigned Notary
Public, within and for the County and State aforesaid, Lyndon Smith, personally
known by me, who stated and verified that he had executed the foregoing Stock
Retirement Agreement.

         WITNESS my hand and seal in testimony thereof this 25th day of July,
2001.


                                                  ------------------------------
                                                                   Notary Public


My Commission Expires:

----------------------




                                       25

<PAGE>




                                                  ------------------------------
                                                                     Sally Dwyer





                                 ACKNOWLEDGMENT

STATE OF TEXAS
COUNTY OF __________


         Now on this day personally appeared before me, the undersigned Notary
Public, within and for the County and State aforesaid, Sally Dwyer, personally
known by me, who stated and verified that she had executed the foregoing Stock
Retirement Agreement.

         WITNESS my hand and seal in testimony thereof this ______ day of July,
2001.


                                                  ------------------------------
                                                                   Notary Public


My Commission Expires:

----------------------





                                       26

<PAGE>





                                             BNL EQUITY CORPORATION

                                             By:s/s Barry N. Shamas
                                                ______________________
                                                Barry N. Shamas
                                                Executive Vice President


ATTEST:

-----------------------------
Secretary



                    ACKNOWLEDGMENT

STATE OF TEXAS

COUNTY OF __________


         Now on this day personally appeared before me, the undersigned Notary
Public, within and for the County and State aforesaid, Barry N. Shamas and
____________________, personally known by me, as Executive Vice President and
Secretary, respectively, of BNL Equity Corporation, a Texas corporation, who
stated and verified that they had executed the foregoing Stock Retirement
Agreement for and in behalf of said company.

         WITNESS my hand and seal in testimony thereof this 25th day of July,
2001.

                                                --------------------------------
                                                                   Notary Public

My Commission Expires:

----------------------



                                 27

<PAGE>