UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 8-K

 

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

 

April 21, 2011

Date of Report

(Date of earliest event reported)

 

First Federal Bancshares of Arkansas, Inc.

(Exact name of registrant as specified in its charter)

 

Texas

 

0-28312

 

71-0785261

(State or other jurisdiction

 

(Commission File Number)

 

(IRS Employer

of incorporation)

 

 

 

Identification No.)

 

1401 Highway 62-65 North, Harrison, Arkansas

 

72601

(Address of principal executive offices)

 

(Zip Code)

 

(870) 741-7641

(Registrant’s telephone number, including area code)

 

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o             Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

o             Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

o             Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

o             Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 


 

Item 1.01.               Entry into a Material Definitive Agreement.

 

On April 20, 2011, First Federal Bancshares of Arkansas, Inc. (the “ Company ”), with its wholly-owned subsidiary, First Federal Bank (the “ Bank ”), and Bear State Financial Holdings, LLC (“ Bear State ”) entered into an amendment  (the “ First Amendment ”) to the Investment Agreement dated January 27, 2011, among the Company, the Bank, and Bear State (the “ Investment Agreement ”), which sets forth the terms and conditions of the Company’s recapitalization plan (the “ Recapitalization Plan ”).  Further information concerning the Recapitalization Plan and the Investment Agreement can be found in the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission (the “ SEC ”) on January 28, 2011, the Company’s Annual Report on Form 10-K for the year ended December 31, 2010 filed with the SEC on March 16, 2011, and the Company’s definitive proxy statement filed with the SEC on March 30, 2011 (the “ Definitive Proxy Statement ”).

 

The obligation of Bear State to purchase shares of the Company’s common stock, par value $0.01 per share (“ Common Stock ”), pursuant to the terms of the Investment Agreement is conditioned upon, among other things, the Company receiving the approval of its stockholders to (i) amend its Articles of Incorporation, as amended, to effect a 1-for-5 reverse stock split (the “ Reverse Split ”) of all outstanding shares of the Company’s Common Stock and  (ii) issue more than 20% of the Company’s post-Reverse Split outstanding Common Stock in accordance with the terms of the Investment Agreement.  The stockholders of the Company will vote on the foregoing matters at a special meeting of the Company’s stockholders to be held on April 29, 2011 (the “ Special Meeting ”).

 

Under the terms of the Investment Agreement, the Company and the Bank are obligated to increase the size of the Company’s and the Bank’s respective Boards of Directors so that each consists of seven (7) members and to appoint four (4) individuals designated by Bear State to serve on the Boards of Directors of the Company and the Bank (the “ Designated Investor Directors ”) effective immediately following the closing (the “ First Closing ”) of Bear State’s purchase of (i) 15,425,262 post-Reverse Split shares of the Common Stock and (ii) a warrant to purchase 2 million shares of Common Stock (the “ Investor Warrant ”).  As promptly as practical following the First Closing, the Company intends to commence a rights offering (the “Rights Offering”).  On the closing date of the Rights Offering, the Company will sell to Bear State any unsold shares of the Company’s Common Stock offered in the Rights Offering.  Prior to the adoption of the First Amendment, Bear State’s right to designate the Designated Investor Directors continued following the First Closing (i) for as long as Bear State owned at least thirty-three percent (33%) of the Company’s outstanding Common Stock, and (ii) under certain circumstances in connection with the distribution of shares of the Company’s Common Stock by Bear State to its members.  The Investment Agreement, as modified by the First Amendment, continues to give Bear State the right to designate the Designated Investor Directors effective immediately following the First Closing.  However, after giving effect to the First Amendment and consistent with the NASDAQ Voting Rights Rule and Policy, Bear State’s right to designate the Designated Investor Directors will cease following their initial appointment.

 

After giving effect to the Recapitalization Plan, Bear State will own at least 81.80% of the Company’s Common Stock (after taking into account the exercise of the Investor Warrant), and could own as much as 94.90% of the Company’s common stock (after taking into account the overall limitation on Bear State’s ownership set forth in the Investment Agreement and the exercise of the Investor Warrant and assuming no stockholders of record as of the record date for the Rights Offering subscribe to the Rights Offering).  As a result, Bear State will be able to determine our corporate and management policies and determine the outcome of any corporate transaction or other matter, including the election of directors, submitted to our stockholders for approval.

 

The foregoing description of the terms of the First Amendment is qualified in its entirety by reference to the full text of the First Amendment, which is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated herein by reference.

 

Item 3.02.               Unregistered Sales of Equity Securities.

 

To the extent required by Item 3.02 of Form 8-K, the information set forth under Item 1.01 of this Form 8-K is incorporated by reference in this Item 3.02.

 

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Additional Information

 

The Company filed the Definitive Proxy Statement with the SEC on March 30, 2011 in connection with the Special Meeting and mailed the Definitive Proxy Statement to its stockholders. The Company and its respective directors and executive officers may be deemed to be participants in the solicitation of proxies in connection with the Special Meeting. The Definitive Proxy Statement contains important information about the Company, the Recapitalization Plan and related matters. Security holders are urged to read the Definitive Proxy Statement carefully.

 

Stockholders may obtain an additional copy of the Definitive Proxy Statement and any other documents filed by the Company with the SEC free of charge from the SEC’s website at www.sec.gov. In addition, free copies of these documents may also be obtained by directing a written request to: Tommy Richardson, Corporate Secretary, First Federal Bancshares of Arkansas, Inc., P.O. Box 550, Harrison, Arkansas 72602.

 

Caution about Forward-Looking Statements

 

Certain information contained in the above discussion may include “forward-looking statements.”  These forward-looking statements relate to the Company’s plans for raising capital, the Recapitalization Plan and the transactions contemplated by the Investment Agreement, as amended by the First Amendment.  There can be no assurance that the Company will be able to consummate the Recapitalization Plan and the related transactions and obtain the capital contemplated by the Recapitalization Plan, or that other actual results, performance or achievements of the Company will not differ materially from those expressed or implied by forward-looking statements.  Factors that could cause actual events or results to differ significantly from those described in the forward-looking statements include, but are not limited to, the failure of the Company to timely obtain the necessary regulatory and stockholder approvals that are conditions to the Company’s ability to complete the Recapitalization Plan and the transactions contemplated by the Investment Agreement, as amended by the First Amendment; inability to continue as a going concern; management’s ability to effectively execute the Company’s business plan; inability to raise additional capital on acceptable terms, or at all; inability to achieve the higher minimum capital ratios that the Bank has agreed to maintain with the Office of Thrift Supervision; inability to receive dividends from the Bank and to satisfy obligations as they become due; regulatory enforcement actions to which the Company and the Bank are currently, and may in the future be, subject; costs and effects of legal and regulatory developments, and the results of regulatory examinations or reviews; changes in capital classification; the impact of current economic conditions and the Company’s results of operations on its ability to borrow additional funds to meet its liquidity needs; local, regional, national and international economic conditions and events and the impact they may have on the Company and its customers; changes in the economy affecting real estate values; inability to attract and retain deposits; changes in the level of non-performing assets and charge-offs; changes in estimates of future reserve requirements based upon the periodic review thereof under relevant regulatory and accounting requirements; changes in the financial performance and/or condition of the Bank’s borrowers; effect of additional provision for loan losses; long-term negative trends in the Company’s market capitalization; continued listing of the Company’s Common Stock on the NASDAQ Global Market; effects of any changes in trade and monetary and fiscal policies and laws, including the interest rate policies of the Federal Reserve Board; inflation, interest rate, cost of funds, securities market and monetary fluctuations; continued volatility in the credit and equity markets and its effect on the general economy; effect of changes in laws and regulations (including laws concerning banking, taxes and securities) with which the Company and its subsidiaries must comply; and effect of changes in accounting policies and practices.  In addition to the risks and factors identified above, reference is also made to other risks and factors detailed in reports filed by the Company with the SEC, including the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.  The Company cautions that the foregoing factors are not exclusive.

 

Item 9.01                Financial Statements and Exhibits

 

(d) Exhibits

 

10.1          First Amendment to Investment Agreement, dated April 20, 2011, among First Federal Bancshares of Arkansas, Inc., First Federal Bank, and Bear State Financial Holdings, LLC.

 

3


 

S IGNATURES

 

Pursuant to the requirements 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.

 

 

FIRST FEDERAL BANCSHARES OF
ARKANSAS, INC.

 

 

 

 

 

 

 

 

By:

/s/ Larry J. Brandt

 

Name:

Larry J. Brandt

 

Title:

President and Chief Executive Officer

 

 

 

 

 

 

Date:  April 21, 2011

 

 

 

4

Exhibit 10.1

 

AMENDMENT NO. 1

TO

INVESTMENT AGREEMENT

 

THIS AMENDMENT NO. 1 TO INVESTMENT AGREEMENT , dated as of April 20, 2011 (this “ Amendment ”), is made by and among First Federal Bancshares of Arkansas, Inc., a Texas corporation (the “ Company ”), First Federal Bank, a federally chartered stock savings and loan association and wholly-owned subsidiary of the Company (the “ Bank ”), and Bear State Financial Holdings, LLC, an Arkansas limited liability company (the “ Investor ”).

 

RECITALS

 

A.             The Company, the Bank and the Investor are parties to that certain Investment Agreement dated as of January 27, 2011 (the “ Investment Agreement ”).

 

B.             The Investment Agreement creates an ongoing obligation on the part of the Company to take certain actions with respect to the Designated Investor Directors following the First Closing for so long as the Investor or its Permitted Transferees maintain a minimum percentage ownership in the Common Stock of the Company.

 

C.             The Company, the Bank and the Investor desire to amend the Investment Agreement, pursuant to Section 6.4 thereof, in order to eliminate such obligation.

 

AGREEMENT

 

Now, therefore, in consideration of the foregoing contained in this Amendment, and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the Company, the Bank and the Investor hereby agree as follows:

 

1.              Definitions .  Capitalized terms used herein and not otherwise defined shall have the meanings ascribed to them in the Investment Agreement.

 

2.              Amendments .  The Investment Agreement is hereby amended as follows:

 

(a)            The Defined Terms Index is hereby amended to delete the terms “Permitted Transferee”, “Permitted Transferee Voting Agreement” and “Qualifying Ownership Interest” and the corresponding section references for such terms.

 

(b)            Section 3.5 (Governance Matters) of the Investment Agreement is hereby amended to delete subsection (a) in its entirety and to replace such subsection with the following:

 

“(a)          Immediately prior to the First Closing, the Company shall take all requisite corporate action (including, without limitation, amending as necessary the Bank’s bylaws) such that (i) immediately prior to the First Closing, the size of the Board of Directors as well as the Bank Board shall consist of seven (7) seats, and (ii) immediately following the First Closing, (A) the Board of Directors and the Bank Board shall include four (4) individuals designated by the Investor to serve on the Board of Directors and the Bank Board (the “ Designated Investor Directors ”) (if

 


 

such individuals have received prior written approval by OTS to serve in such positions as part of the Investor’s application to the OTS for status as a savings and loan holding company) and (B) the positions of Chairman and Vice Chairman of the Board of Directors and Bank Board shall be filled by the Designated Investor Directors designated by the Investor to serve in those positions (if such individuals have received prior written approval by OTS to serve in such positions).  Of the four (4) Designated Investor Directors, only one (1) such Designated Investor Director may serve in such capacity while also serving as an employee of the Company and/or the Bank.  Of the three (3) non-Designated Investor Directors, only one (1) such director may serve in such capacity while also serving as an employee of the Company and/or Bank.  Any existing member of the Board of Directors and the Bank Board who will not be among the seven (7) members of the Board of Directors and the Bank Board immediately following the First Closing shall have tendered his or her conditional resignation from the Board of Directors and the Bank Board to be effective only upon the First Closing (provided that OTS has granted prior written approval to his/her proposed replacement).  Not less than ten (10) Business Days prior to the First Closing, the Investor shall provide to the Company in writing the names of the Designated Investor Directors to the Board of the Directors and the Bank Board (including the name of the Designated Investor Directors designated by the Investor to serve as Chairman of the Board of Directors and the Bank Board and Vice Chairman of the Board of Directors and the Bank Board) and the committees to which such designees are to be appointed immediately following the First Closing.  In accordance with this Section 3.5 , the Company (if OTS has granted prior written approval for such Designated Investor Directors to serve in such positions) shall cause (A) the Designated Investor Directors to be elected or appointed as members of the Board of Directors and the Bank Board and (B) the Designated Investor Directors designated by the Investor to serve as Chairman of the Board of Directors and the Bank Board and Vice Chairman of the Board of Directors and the Bank Board to be elected or appointed as Chairman of the Board of Directors and Bank Board and Vice Chairman of the Board of Directors and the Bank Board, all subject to satisfaction of all legal and governance requirements regarding service as a member of the Board of Directors and the Bank Board on the First Closing Date.”

 

(c)            Section 3.8 (Preemptive Rights) of the Investment Agreement is hereby amended to delete subsection (a) in its entirety and to replace such subsection with the following:

 

“(a)          Sale of New Securities .  After the First Closing, for so long as the Investor owns, in the aggregate, thirty-three percent (33%) or more of the then outstanding shares of Common Stock (as adjusted from time to time for any reorganization, recapitalization, stock dividend, stock split, reverse stock split, or other like changes in the Company’s capitalization and including Common Shares issued upon exercise of the Investor Warrant) (before giving effect to any issuances triggering provisions of this Section 3.8 ), at any time that the Company proposes to make any public or nonpublic offering or sale of any equity (including Common Stock, preferred stock or restricted stock), or any securities, options or debt that is convertible or exchangeable into equity or that includes an equity component (such as, an “equity kicker”) (including any hybrid security) (any such security, a “ New Security ”) (other than the issuance and sale of securities (i) in connection with the Rights

 


 

Offering and the Second Closing; (ii) to employees, officers, directors or consultants of the Company pursuant to employee benefit plans or compensatory arrangements approved by the Board of Directors (including upon the exercise of employee stock options granted pursuant to any such plans or arrangements) or (iii) as consideration in connection with any bona fide, arm’s-length direct or indirect merger, acquisition or similar transaction) the Investor shall first be afforded the opportunity to acquire from the Company for the same price (net of any underwriting discounts or sales commissions) and on the same terms (except that, to the extent permitted by Law and the Articles of Incorporation and bylaws of the Company, the Investor may elect to receive such securities in nonvoting form, convertible into voting securities in a widely dispersed offering) as such securities are proposed to be offered to others, up to the amount of such New Securities to be offered in the aggregate required to enable it to maintain its proportionate Common Stock-equivalent interest in the Company immediately prior to any such issuance of New Securities. The New Securities that the Investor shall be entitled to purchase in the aggregate shall be determined by multiplying (x) the total number or principal amount of such offered New Securities by (y) a fraction, the numerator of which is the number of shares of Common Stock held by the Investor (assuming full conversion or exercise of any securities convertible into or exercisable for Common Stock) and the denominator of which is the number of shares of Common Stock then outstanding.”

 

(d)            Section 3.8 (Preemptive Rights) of the Investment Agreement is hereby further amended to delete subsection (g) in its entirety and to replace such subsection with the following:

 

“(g)          No Assignment . The rights set forth under this Section 3.8 are exclusive to the Investor and its members and are not otherwise assignable or transferable to any third party.”

 

3.              No Other Amendments .  Except for the amendments expressly set forth and referred to in Section 2 hereof, the Investment Agreement shall remain unchanged and in full force and effect.

 

4.              Effect of Amendment .  Whenever the Investment Agreement is referred to in the Investment Agreement or in any other agreements, documents and instruments, such reference shall be deemed to be to the Investment Agreement as amended by this Amendment.

 

5.              Entire Agreement .  The Investment Agreement (including the documents referred to therein and those certain written agreements and undertakings between the parties executed and delivered on the date thereof that relate to the transactions contemplated by the Investment Agreement), as amended by this Amendment, constitutes the entire agreement among the parties and supersedes any prior understandings, agreements, or representations by or among the parties, written or oral, to the extent they relate in any way to the subject matter hereof.

 

6.              Governing Law .  This Amendment shall be governed by and construed in accordance with the Laws of the State of New York applicable to contracts made and to be performed entirely within such State.

 


 

7.              Severability .  Any term or provision of this Amendment that is invalid or unenforceable in any situation in any jurisdiction shall not affect the validity or enforceability of the remaining terms and provisions hereof or the validity or enforceability of the offending term or provision in any other situation or in any other jurisdiction.

 

8.              Counterparts .  This Amendment may be executed in one or more counterparts (including by means of facsimile or scanned copy), each of which shall be deemed an original but all of which together will constitute one and the same instrument.

 

9.              Headings .  The section headings contained in this Amendment are inserted for convenience only and shall not affect in any way the meaning or interpretation of this Amendment.

 

[SIGNATURE PAGE FOLLOWS]

 


 

IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first above written.

 

 

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

 

 

 

 

 

By:

/s/ Larry J. Brandt

 

Larry J. Brandt

 

President and Chief Executive Officer

 

 

 

 

 

FIRST FEDERAL BANK

 

 

 

 

 

By:

/s/ Larry J. Brandt

 

Larry J. Brandt

 

President and Chief Executive Officer

 

 

 

 

 

BEAR STATE FINANCIAL HOLDINGS, LLC

 

 

 

 

 

By:

/s/ Richard N. Massey

 

Richard N. Massey

 

Managing Member

 

SIGNATURE PAGE TO AMENDMENT NO. 1 TO INVESTMENT AGREEMENT