Exhibit 10.1

 

THIS WARRANT AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES
LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED
FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THIS WARRANT OR THE COMMON STOCK
ISSUABLE UPON EXERCISE OF THIS WARRANT BE TRANSFERRED ON THE BOOKS OF THE
COMPANY, WITHOUT REGISTRATION OF SUCH WARRANT OR SHARES OF COMMON STOCK, AS
APPLICABLE, UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE SECURITIES LAWS
OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH COMPLIANCE, AT THE
OPTION OF THE COMPANY, TO BE EVIDENCED BY AN OPINION OF STOCKHOLDER’S COUNSEL,
IN A FORM ACCEPTABLE TO THE COMPANY, THAT NO VIOLATION OF SUCH REGISTRATION
PROVISIONS WOULD RESULT FROM ANY PROPOSED TRANSFER OR ASSIGNMENT.

 

No. W-1

Right to Purchase 2,000,000

 

Shares of Common Stock of

 

First Federal Bancshares of Arkansas, Inc.

 

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

COMMON STOCK PURCHASE WARRANT

 

May 3, 2011

 

THIS CERTIFIES THAT, for value received, Bear State Financial Holdings, LLC, an
Arkansas limited liability company, or its registered assigns (“Holder”), is
entitled to purchase, subject to the conditions set forth below, at any time or
from time to time during the Exercise Period (as defined in Section 11 below),
2,000,000 shares (“Shares”) of fully paid and non assessable Common Stock, par
value $0.01 per share (“Common Stock”), of First Federal Bancshares of Arkansas,
Inc., a Texas corporation (the “Company”), at an exercise price of $3.00 per
share (the “Warrant Price”), subject to the further provisions of this Warrant. 
This is the Warrant referred to in the Investment Agreement dated as of January
27, 2010 (the “Investment Agreement”), by and among the Company, First Federal
Bank, a federally chartered stock savings and loan association and wholly-owned
subsidiary of the Company, and the Holder.  For the avoidance of doubt, the
Warrant Price and the number of Shares represented by this Warrant reflect the
completion of the Reverse Stock Split (as defined in the Investment Agreement).

 

1.             Exercise of Warrant.  The terms and conditions upon which this
Warrant may be exercised, and upon which the Common Stock covered by this
Warrant may be purchased, are as follows:

 

(a)           Full Exercise.  This Warrant may be exercised at any time during
normal business hours during the Exercise Period in full by the Holder by
surrender of this Warrant, with the form of subscription attached to this
Warrant duly executed by such Holder, to the Company at its principal office,
accompanied by payment, by wire transfer of immediately available funds or by
check payable to the order of the Company, in the amount obtained by multiplying
the

 

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number of Shares for which this Warrant is then exercisable by the Warrant Price
then in effect; provided that notwithstanding the fact that for purposes of
Section 4 of this Warrant the Warrant Price may be adjusted to below $0.01 per
share, for purposes of paying the Warrant Price upon exercise of this Warrant,
the Warrant Price shall in no event be less than $0.01 per share.

 

(b)           Partial Exercise.  This Warrant may be exercised at any time
during normal business hours during the Exercise Period in part (in lots of 1000
shares or, if this Warrant is then exercisable for a lesser amount, in such
lesser amount) by surrender of this Warrant and payment of the Warrant Price
then in effect in the manner and at the place provided in Section 1(a), except
that the amount payable by the Holder on such partial exercise shall be the
amount obtained by multiplying (i) the number of Shares designated by the Holder
in the subscription by (ii) the Warrant Price then in effect; provided that
notwithstanding the fact that for purposes of Section 4 of this Warrant the
Warrant Price may be adjusted to below $0.01 per share, for purposes of paying
the Warrant Price upon exercise of this Warrant, the Warrant Price shall in no
event be less than $0.01 per share.  On any such partial exercise the Company at
its expense shall forthwith issue and deliver to or upon the order of the Holder
of this Warrant a new Warrant or Warrants of like tenor, in the name of the
Holder or as such Holder (upon payment by such Holder of any applicable transfer
taxes) may request, calling in the aggregate on the face or faces of such new
Warrant for the number of Shares for which such Warrant or Warrants may still be
exercised.

 

(c)           Satisfaction with Requirements of Securities Act of 1933. 
Notwithstanding the provisions of Section 7, each and every exercise of this
Warrant is contingent upon the Company’s satisfaction that the issuance of
Common Stock upon the exercise of this Warrant is exempt from the requirements
of the Securities Act of 1933, as amended (the “Securities Act”), and all
applicable state securities laws.  Holder agrees to execute any and all
documents deemed necessary by the Company to effect the exercise of this
Warrant.

 

(d)           Delivery of Stock Certificates, etc. on Exercise.  As soon as
practicable after the exercise of this Warrant in full or in part, and in any
event within 10 days after such exercise, the Company at its expense (including
the payment by it of any applicable issue taxes) shall cause to be issued in the
name of and delivered to the Holder, or as such holder (upon payment by such
holder of any applicable transfer taxes) may direct, a certificate or
certificates for the number of fully paid and nonassessable Shares to which such
Holder shall be entitled on such exercise.

 

2.             Transfers.

 

(a)           Transfers.  Subject to Section 7 of this Warrant, this Warrant and
all rights under this Warrant are transferable in whole or in part by the
Holder.  The transfer shall be recorded on the books of the Company upon the
surrender of this Warrant, properly endorsed, to the Secretary of the Company at
its principal office and the payment to the Company of all transfer taxes and
other governmental charges imposed on such transfer.  In the event of a partial
transfer, the Company shall issue to the several holders one or more appropriate
new Warrants, as appropriate.

 

(b)           Registered Holder.  Each Holder agrees that until such time as any
transfer pursuant to Section 2(a) is recorded on the books of the Company, the
Company may treat the

 

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registered Holder of this Warrant as the absolute owner; provided that nothing
in this Warrant affects any requirement that transfer of any Warrant or share of
Common Stock issued or issuable upon the exercise of such Warrant be subject to
compliance with the Securities Act and all applicable state securities laws.

 

(c)           Form Of New Warrants.  All Warrants issued in connection with
transfers of this Warrant shall bear the same date as this Warrant and shall be
substantially identical in form and provision to this Warrant except for the
number of Shares purchasable under such Warrant.

 

3.             Fractional Shares.  Notwithstanding that the number of Shares
purchasable upon the exercise of this Warrant may have been adjusted pursuant to
the terms of this Warrant, the Company shall nonetheless not be required to
issue fractions of Shares upon exercise of this Warrant or to distribute
certificates that evidence fractional shares nor shall the Company be required
to make any cash payments in lieu of issuing or distributing such fractional
shares upon exercise of this Warrant.  Holder hereby waives any right to receive
fractional Shares.

 

4.             Antidilution Provisions.

 

(a)           Stock Splits And Combinations.  If the Company shall at any time
subdivide or combine its outstanding shares of Common Stock, this Warrant shall,
after that subdivision or combination, evidence the right to purchase the number
of shares of Common Stock that would have been issuable as a result of that
subdivision or combination with respect to the Shares of Common Stock that were
purchasable under this Warrant immediately before that subdivision or
combination.  If the Company shall at any time subdivide the outstanding shares
of Common Stock, the Warrant Price then in effect immediately before that
subdivision shall be proportionately decreased, and, if the Company shall at any
time combine the outstanding shares of Common Stock, the Warrant Price then in
effect immediately before that combination shall be proportionately increased. 
Any adjustment under this Section 4 shall become effective at the close of
business on the date the subdivision or combination becomes effective.

 

(b)           Reclassification, Exchange and Substitution.  If the Common Stock
issuable upon exercise of this Warrant shall be changed into the same or a
different number of shares of any other class or classes of stock, whether by
capital reorganization, reclassification, or otherwise (other than a subdivision
or combination of shares provided for above), Holder shall, on its exercise, be
entitled to purchase for the same aggregate consideration, in lieu of the Common
Stock that Holder would have become entitled to purchase but for such change, a
number of shares of such other class or classes of stock equivalent to the
number of shares of Common Stock that would have been subject to purchase by
Holder on exercise of this Warrant immediately before that change.

 

(c)           Reorganizations, Mergers or Consolidations.  If at any time there
shall be a capital reorganization of the Company’s Common Stock (other than a
stock split, combination, reclassification, exchange, or subdivision of shares
provided for elsewhere herein) or merger or consolidation of the Company with or
into another corporation or other entity, then, as a part of such
reorganization, merger or consolidation, lawful provision shall be made so that
Holder shall after such reorganization, merger or consolidation be entitled to
receive upon exercise of this Warrant, during the period specified in this
Warrant and upon payment of the Warrant Price then

 

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in effect, the number of shares of Common Stock or other securities or property
of the Company, or of the successor Company resulting from such reorganization,
merger or consolidation, to which a holder of the Common Stock deliverable upon
exercise of this Warrant would have been entitled in such reorganization, merger
or consolidation if this Warrant had been exercised immediately before that
reorganization, merger or consolidation.  In any such case, appropriate
adjustment (as determined in good faith by the Company’s Board of Directors)
shall be made in the application of the provisions of this Warrant with respect
to the rights and interests of Holder after the reorganization, merger or
consolidation to the end that the provisions of this Warrant (including
adjustment of the Warrant Price then in effect and number of Shares purchasable
upon exercise of this Warrant) shall be applicable after that event, as near as
reasonably may be, in relation to any shares or other property deliverable after
that event upon exercise of this Warrant.  The Company shall, within thirty (30)
days after making such adjustment, give written notice (by first class mail,
postage prepaid) to the registered holder of this Warrant at the address of that
holder shown on the Company’s books.  That notice shall set forth, in reasonable
detail, the event requiring the adjustment and the method by which the
adjustment was calculated and specify the Warrant Price then in effect after the
adjustment and the increased or decreased number of Shares purchasable upon
exercise of this Warrant.  When appropriate, that notice may be given in advance
and be included as part of the notice required under other provisions of this
Warrant.

 

(d)           Common Stock Dividends; Distributions.  In the event the Company
should at any time prior to the expiration of this Warrant fix a record date for
the determination of the holders of Common Stock entitled to receive a dividend
or other distribution payable in additional shares of Common Stock or other
securities or rights convertible into or entitling the holder of such Common
Stock to receive, directly or indirectly, additional shares of Common Stock
(referred to in this Warrant as the “Common Stock Equivalents”) without payment
of any consideration by such holder for the additional shares of Common Stock or
Common Stock Equivalents (including the additional shares of Common Stock
issuable upon conversion or exercise of such Common Stock), then, as of such
record date (or the date of such event if no record date is fixed), the Warrant
Price shall be appropriately decreased and the number of shares of Common Stock
issuable upon exercise of the Warrant shall be appropriately increased in
proportion to such increase of outstanding shares.

 

(e)           Adjustments of Other Distributions.  In the event the Company
shall declare a distribution payable in securities of other persons, evidences
of indebtedness issued by the Company or other persons, assets (excluding cash
dividends) or options or rights not referred to in Section 4(d), then, in each
such case for the purpose of this Section 4(e), upon exercise of this Warrant,
Holder shall be entitled to a proportionate share of any such distribution as
though Holder was the holder of the number of shares of Common Stock of the
Company into which this Warrant may be exercised as of the record date fixed for
the determination of the holders of Common Stock of the Company entitled to
receive such distribution.

 

(f)            Certain Events; No Impairment.  If any event occurs of the type
contemplated by the provisions of this Section 4 but not expressly provided for
by such provisions, then the Board of Directors of the Company shall make an
appropriate adjustment in the Warrant Price so as to protect the rights of the
Holder of this Warrant; provided that no such adjustment shall increase the
Warrant Price as otherwise determined pursuant to this Section 4 or decrease the
number of

 

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shares of Common Stock issuable upon exercise of this Warrant.  The Company
shall not avoid or seek to avoid the observance or performance of any of the
terms to be observed or performed under this Warrant by the Company but shall at
all times in good faith assist in the carrying out of all the provisions of this
Section 4 and in the taking of all actions that may be necessary or appropriate
to protect the rights of the Holder of this Warrant against impairment.

 

(g)           Certificate as to Adjustments.  In the case of each adjustment or
readjustment of the Warrant Price pursuant to this Section 4, the Company shall
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and cause a certificate setting forth such adjustment or
readjustment and showing in detail the facts upon which such adjustment or
readjustment is based, to be delivered to Holder.  The Company shall, upon the
written request at any time of Holder, furnish or cause to be furnished to
Holder a certificate setting forth:

 

(i)            Such adjustments and readjustments;

 

(ii)           The Warrant Price at the time in effect; and

 

(iii)          The number of shares of Common Stock issuable upon exercise of
the Warrant and the amount, if any, of other property at the time receivable
upon the exercise of the Warrant.

 

(h)           Reservation of Stock Issuable Upon Exercise.  The Company shall at
all times reserve and keep available out of its authorized but unissued shares
of Common Stock solely for the purpose of effecting the exercise of this Warrant
such number of its shares of Common Stock as shall from time to time be
sufficient to effect the exercise of this Warrant and if at any time the number
of authorized but unissued shares of Common Stock shall not be sufficient to
effect the exercise of this Warrant, in addition to such other remedies as shall
be available to Holder, the Company shall use its best efforts to take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purposes.

 

5.             Rights Prior to Exercise of Warrant.  This Warrant does not
entitle Holder to any of the rights of a stockholder of the Company, including
without limitation, the right to receive dividends or other distributions, to
exercise any preemptive rights, to vote, or to consent or to receive notice as a
stockholder of the Company. If, however, at any time prior to the expiration of
this Warrant and prior to its exercise, any of the following events shall occur:

 

(a)           the Company shall declare any dividend payable in any securities
upon its shares of Common Stock or make any distribution (other than a regular
cash dividend) to the holders of its shares of Common Stock; or

 

(b)           the Company shall offer to the holders of its shares of Common
Stock any additional shares of Common Stock or securities convertible into or
exchangeable for shares of Common Stock or any right to subscribe for or
purchase any of such additional shares of Common Stock or securities;

 

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(c)           a capital reorganization, reclassification of the capital stock,
dissolution, liquidation or winding up of the Company, whether voluntary or
involuntary (other than in connection with a consolidation, merger, sale,
transfer or lease of all or substantially all of its property, assets, and
business as an entirety), shall be proposed and action by the Company with
respect to such reorganization, reclassification, dissolution, liquidation or
winding up has been approved by the Company’s Board of Directors; and

 

(d)           the Company proposes to effect a public offering of its shares of
common stock pursuant to a registration statement under the Securities Act,

 

then in any one or more of said events the Company shall give notice in writing
of such event to Holder at his last address as it shall appear on the Company’s
records at least twenty (20) days prior to the date fixed as a record date or
the date of closing the transfer books for the determination of the stockholders
entitled to such dividends, distribution, or subscription rights, or for the
determination of stockholders entitled to vote on such proposed dissolution,
liquidation or winding up. Such notice shall specify such record date or the
date of closing the transfer books, as the case may be. Failure to publish, mail
or receive such notice or any defect in such notice or in the publication or
mailing of such notice shall not affect the validity of any action taken in
connection with such dividend, distribution or subscription rights, or such
proposed dissolution, liquidation or winding up.  Each person in whose name any
certificate for shares of Common Stock is to be issued pursuant to this Warrant
shall for all purposes be deemed to have become the holder of record of such
shares on the date on which this instrument was surrendered and payment of the
Warrant Price was made, irrespective of the date of delivery of such stock
certificate, except that, if the date of such surrender and payment is a date
when the stock transfer books of the Company are closed, such person shall be
deemed to have become the holder of such shares of Common Stock at the close of
business on the next succeeding date on which the stock transfer books are open.

 

6.             Successors and Assigns.  The terms and provisions of this Warrant
shall inure to the benefit of, and be binding upon, the Company and Holder and
their respective successors and permitted assigns.

 

7.             Restricted Securities.  In order to enable the Company to comply
with the Securities Act and applicable state laws, the Company may require as a
condition of the transfer or exercise of this Warrant, Holder to give written
assurance satisfactory to the Company that the Warrant, or in the case of an
exercise of this Warrant the Shares subject to this Warrant, are being acquired
for his own account, for investment only, with no view to the distribution of
the same, and that any disposition of all or any portion of this Warrant or the
Shares issuable upon the due exercise of this Warrant shall not be made, unless
and until:

 

(a)           There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement; or

 

(b)           Holder has notified the Company of the proposed disposition and
shall have furnished the Company with a detailed statement of the circumstances
surrounding the proposed disposition, and Holder has furnished the Company with
an opinion of counsel, reasonably

 

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satisfactory to the Company, that such disposition shall not require
registration of such securities under the Securities Act and applicable state
law.

 

Holder acknowledges that this Warrant is, and each of the shares of Common Stock
issuable upon the due exercise of this Warrant shall be, a restricted security,
that he understands the provisions of Rule 144 of the Securities and Exchange
Commission, and that the certificate or certificates evidencing such shares of
Common Stock shall bear a legend substantially similar to the following:

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE SECURITIES LAWS OF ANY STATE.
THEY MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT COVERING THESE SECURITIES UNDER THE SAID ACT OR
LAWS, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT
REGISTRATION IS NOT REQUIRED THEREUNDER.”

 

8.             Loss or Mutilation.  Upon receipt by the Company of satisfactory
evidence of the ownership of and the loss, theft, destruction, or mutilation of
any Warrant, and (i) in the case of loss, theft, or destruction, upon receipt by
the Company of indemnity satisfactory to it, or (ii) in the case of mutilation,
upon receipt of such Warrant and upon surrender and cancellation of such
Warrant, the Company shall execute and deliver in lieu of such Warrant a new
Warrant representing the right to purchase an equal number of shares of Common
Stock on identical terms.

 

9.             Notices.  All notices, requests, demands and other communications
under this Warrant shall be in writing and shall be deemed to have been duly
given on the date of service if served personally on the party to whom notice is
to be given, or on the date of mailing if mailed to the party to whom notice is
to be given, by first class mail, registered or certified, postage prepaid, and
properly addressed as follows: if to Holder, at his address as shown in the
Company records; and if to the Company, at its principal office. Any party may
change its address for purposes of this Section 9 by giving the other party
written notice of the new address in the manner set forth above.

 

10.           Governing Law.  This Warrant and any dispute, disagreement or
issue of construction or interpretation arising under this Warrant whether
relating to its execution, its validity, the obligations provided in this
Warrant or performance shall be governed or interpreted according to the laws of
the State of New York without regard to conflicts of law.

 

11.           Expiration.  The right to exercise this Warrant shall begin on the
date hereof and expire at 5:00 p.m., Little Rock, Arkansas time, on the three
(3) year anniversary of the Second Closing (as defined in the Investment
Agreement) (the “Exercise Period”).

 

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12.           Registration Rights. The Holder is entitled to certain
registration rights as set forth Section 3.12 of the Investment Agreement.

 

[Signature Page Follows]

 

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IN WITNESS WHEREOF, the Company has executed this Warrant under seal as of the
date first written above.

 

 

FIRST FEDERAL BANCSHARES OF ARKANSAS, INC.

 

 

 

 

 

By:

/s/ Larry J. Brandt

 

 

Larry J. Brandt

 

 

President and Chief Executive Officer

 

 

SIGNATURE PAGE TO COMMON STOCK PURCHASE WARRANT

 

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FORM OF SUBSCRIPTION

(To be signed only on exercise of Warrant)

 

First Federal Bancshares of Arkansas, Inc.

 

The undersigned, the holder of the within Warrant, hereby irrevocably elects to
exercise this Warrant for, and to purchase under this Warrant,            shares
of Common Stock of First Federal Bancshares of Arkansas, Inc. and herewith makes
payment of $                   for such shares, and requests that the
certificates for such shares be issued in the name of, and delivered to
                        , federal taxpayer identification number
                          , whose address is
                                                    .

 

Dated:

 

 

 

 

 

 

(Signature must conform to name of holder as specified on the face of the
Warrant)

 

 

 

 

 

 

 

(Address)

 

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FORM OF ASSIGNMENT

(To be signed only on transfer of Warrant)

 

For value received, the undersigned hereby sells, assigns, and transfers unto
                , federal taxpayer identification number
                                    , whose address is
                                  , the right represented by the within Warrant
to purchase                      shares of Common Stock of First Federal
Bancshares of Arkansas, Inc. to which the within Warrant relates, and appoints
                                                   Attorney to transfer such
right on the books of First Federal Bancshares of Arkansas, Inc. with full power
of substitution in the premises.

 

Dated:

 

 

 

 

 

 

(Signature must conform to name of holder as specified on the face of the
Warrant)

 

 

 

 

 

 

 

(Address)

 

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