FCCO

Business Context and Reporting Period

Company: First Community Corporation (Parent holding company for First Community Bank)
Filing Date: August 13, 2013
Event: Entry into a Material Definitive Agreement to acquire Savannah River Financial Corporation (Parent holding company for Savannah River Banking Company).
Structure: First Community will acquire Savannah River through a merger of a wholly-owned subsidiary (SRMS, Inc.) with Savannah River, followed by the merger of Savannah River Banking Company into First Community Bank. First Community will be the surviving corporation.

Key Financial Metrics and Transaction Terms

Consideration Structure: Savannah River shareholders may elect cash, First Community stock, or a combination thereof. The agreement mandates that 60% of outstanding shares be exchanged for cash and 40% for First Community stock (excluding dissenting shares).
Cash Component: $11.00 per share.
Stock Component (Exchange Ratio): Variable based on First Community's volume-weighted average stock price (Final Buyer Stock Price) over the ten trading days prior to the fifth business day before the merger date.

• Target Value: The ratio aims to provide stock worth $11.00 per share.
• Ratio Range: Between 1.0618 and 1.2972 shares of First Community stock per Savannah River share.
• Price Floor/Ceiling:
  • If Final Buyer Stock Price is between $8.48 and $10.36: Variable ratio applies.
  • If Final Buyer Stock Price is above $10.36: Ratio fixed at 1.0618.
  • If Final Buyer Stock Price is below $8.48: Ratio fixed at 1.2972.

Termination Fee: Savannah River is obligated to pay First Community $1,500,000 if the agreement is terminated under certain circumstances.
Management Compensation: Savannah River directors and officers will cancel warrants/options in exchange for cash equal to $11.00 minus the exercise price, or convert them to First Community stock.
Financial Performance: The filing text does not provide specific revenue, profit, cash flow, margin, debt, or liquidity metrics for either company.

Material Changes and Conditions

Board Approval: Boards of Directors for both First Community and Savannah River have approved the agreement.
Shareholder Support: Savannah River directors and executive officers beneficially own approximately 17.5% of outstanding shares and have entered into Support Agreements to vote in favor of the merger and against alternative transactions.
Board Composition: Upon closing, three specified members of the Savannah River board will join the boards of First Community and First Community Bank. First Community intends to establish an advisory board consisting of current Savannah River directors.
Adjustment Rights:

• First Community Termination Right: If Final Buyer Stock Price exceeds $11.78, First Community may terminate. Savannah River may prevent termination by adjusting the exchange ratio downward.
• Savannah River Termination Right: If Final Buyer Stock Price falls below $7.54, Savannah River may terminate. First Community may prevent termination by increasing the exchange ratio or paying additional cash consideration.

Regulatory and Closing Conditions: The transaction is subject to shareholder approval from both companies, regulatory approvals, and other customary closing conditions.

Guidance, Risks, and Contingencies

Forward-Looking Statements: The filing contains projections regarding cost savings, revenue synergies, and integration timelines, which are subject to significant risks.
Key Risks:

• Failure to successfully integrate businesses or delays in integration.
• Failure to realize expected cost savings or revenue synergies.
• Disruption to client, associate, or supplier relationships.
• Failure to obtain required governmental approvals.
• Failure of shareholders to approve the merger.
• Changes in economic conditions, interest rates, and competitive pressures.

Unusual Items: The filing explicitly states that the Agreement is not intended to provide financial information about the companies and that representations and warranties are for the benefit of the parties only, not investors.

Investor Verification Checklist

• Verify the final Exchange Ratio once the Final Buyer Stock Price is calculated prior to the merger date.
• Confirm the status of regulatory approvals required for the merger.
• Review the upcoming Proxy Statement/Prospectus (Form S-4) for detailed financial data and risk factors.
• Monitor the voting results of shareholders for both First Community and Savannah River.
• Assess the impact of the 60% cash / 40% stock split on the liquidity and capital structure of the combined entity.
• Review the specific terms of the Support Agreements held by Savannah River insiders (17.5% ownership).