SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[_] Confidential, for Use of the Commission only (as permitted by Rule
14a-6(e)(2))
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Soliciting material pursuant to ss.240.14a-12
Union Financial Bancshares, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- --------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
N/A
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
N/A
- --------------------------------------------------------------------------------
(3) Filing Party:
N/A
- --------------------------------------------------------------------------------
(4) Date Filed:
N/A
- --------------------------------------------------------------------------------
December 27, 2002
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders
of Union Financial Bancshares, Inc. The meeting will be held in the University
of South Carolina Auditorium, Union Campus, 401 East Main Street, Union, South
Carolina on Wednesday, January 29, 2003 at 2:00 p.m., local time.
The notice of annual meeting and proxy statement appearing on the
following pages describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the Company.
Directors and officers of the Company, as well as a representative of Elliott
Davis, LLC, the Company's independent auditors, will be present to respond to
appropriate questions of stockholders.
It is important that your shares are represented at this meeting,
whether or not you attend the meeting in person and regardless of the number of
shares you own. To make sure your shares are represented, we urge you to
complete and mail the enclosed proxy card. If you attend the meeting, you may
vote in person even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Carl L. Mason
Carl L. Mason
Chairman of the Board
Union Financial Bancshares, Inc.
203 West Main Street
Union, South Carolina 29379
(864) 427-9000
- --------------------------------------------------------------------------------
Notice of Annual Meeting of Stockholders
- --------------------------------------------------------------------------------
The annual meeting of stockholders of Union Financial Bancshares, Inc.
(the "Company") will be held in the University of South Carolina Auditorium,
Union Campus, 401 East Main Street, Union, South Carolina on Wednesday, January
29, 2003 at 2:00 p.m., local time, for the following purposes:
1. To elect three directors of the Company;
2. To ratify the appointment of Elliott Davis, LLC as independent
auditors for the Company for the fiscal year ending September 30,
2003; and
3. To transact any other business that may properly come before the
meeting.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Stockholders of record at the close of business on December 9, 2002 are
entitled to receive notice of and to vote at the meeting and any adjournment or
postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited
by the Board of Directors, and mail it promptly in the enclosed envelope. The
proxy will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Wanda J. Wells
Wanda J. Wells
Corporate Secretary
Union, South Carolina
December 27, 2002
IMPORTANT: The prompt return of proxies will save the Company the expense of
further requests for proxies to ensure a quorum. A self-addressed envelope is
enclosed for your convenience. No postage is required if mailed in the United
States.
Union Financial Bancshares, Inc.
----------------------------------
Proxy Statement
----------------------------------
This proxy statement is furnished in connection with the solicitation
of proxies by the Board of Directors of Union Financial Bancshares, Inc. ("Union
Financial" or the "Company") to be used at the annual meeting of stockholders of
the Company. The Company is the holding company for Provident Community Bank
("Provident"). The annual meeting will be held in the University of South
Carolina Auditorium, Union Campus, 401 East Main Street, Union, South Carolina
on Wednesday, January 29, 2003 at 2:00 p.m., local time. This proxy statement
and the enclosed proxy card are being first mailed to stockholders on or about
December 27, 2002.
Voting And Proxy Procedure
Who Can Vote at the Meeting
You are entitled to vote your Union Financial common stock if the
records of the Company showed that you held your shares as of the close of
business on December 9, 2002. If your shares are held in a stock brokerage
account or by a bank or other nominee, you are considered the beneficial owner
of shares held in "street name" and these proxy materials are being forwarded to
you by your broker or nominee. As the beneficial owner, you have the right to
direct your broker or nominee on how to vote your shares. Your broker or nominee
has enclosed a voting instruction card for you to use in directing the broker or
nominee on how to vote your shares.
As of the close of business on December 9, 2002, a total of 1,963,252
shares of Union Financial common stock were outstanding. Each share of common
stock has one vote. As provided in the Company's Certificate of Incorporation,
record holders of the Company's common stock who acquire beneficial ownership in
excess of 10% of the Company's outstanding shares without the approval of
two-thirds of the Board of Directors are entitled to cast only one-hundredth of
a vote of any shares held in excess of the 10% limit.
Attending the Meeting
If you are a stockholder of record as of the close of business on
December 9, 2002, you may attend the meeting. However, if you hold your shares
in street name, you will need proof of ownership to be admitted to the meeting.
A recent brokerage statement or a letter from a bank or broker are examples of
proof of ownership. If you want to vote your shares of Union Financial common
stock held in street name in person at the meeting, you will have to get a
written proxy in your name from the broker, bank or other nominee who holds your
shares.
Vote Required
The annual meeting will be held if a majority of the outstanding shares
of common stock entitled to vote is represented at the meeting. If you return
valid proxy instructions or attend the meeting in person, your shares will be
counted for purposes of determining whether there is a quorum, even if you
abstain from voting. Broker non-votes also will be counted for purposes for
determining the existence of a quorum. A
broker non-vote occurs when a broker, bank or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have discretionary voting power with respect to that item and has not
received voting instructions from the beneficial owner.
In voting on the election of directors, you may vote in favor of all
nominees, withhold votes as to all nominees, or withhold votes as to specific
nominees. There is no cumulative voting for the election of directors. Directors
will be elected by a plurality of the votes cast at the annual meeting. This
means that the nominees receiving the greatest number of votes will be elected.
Votes that are withheld and broker non-votes will have no effect on the outcome
of the election. In voting on the ratification of the appointment of Elliott
Davis, LLC as independent auditors, you may vote in favor of the proposal,
against the proposal or abstain from voting. To be approved, this matter
requires the affirmative vote of a majority of votes cast by stockholders.
Abstentions and broker non-votes will have no effect on the outcome of the vote.
Voting by Proxy
This proxy statement is being sent to you by the Board of Directors of
Union Financial for the purpose of requesting that you allow your shares of
Union Financial common stock to be represented at the annual meeting by the
persons named in the enclosed proxy card. All shares of Union Financial common
stock represented at the meeting by properly executed proxies will be voted in
accordance with the instructions indicated on the proxy card. If you sign and
return a proxy card without giving voting instructions, your shares will be
voted as recommended by the Company's Board of Directors. The Board of Directors
recommends a vote "FOR" each of the nominees for director and "FOR" ratification
of the appointment of Elliott Davis, LLC as independent auditors.
If you are a participant in the Company's Dividend Reinvestment Plan,
the proxy card covers the shares in your account under the Plan, as well as
shares registered in your name.
If any matters not described in this proxy statement are properly
presented at the annual meeting, the persons named in the proxy card will use
their judgment to determine how to vote your shares. This includes a motion to
adjourn or postpone the meeting to solicit additional proxies. If the annual
meeting is postponed or adjourned, your Union Financial common stock may be
voted by the persons named in the proxy card on the new meeting date as well,
unless you have revoked your proxy. The Company does not know of any other
matters to be presented at the meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Secretary of the
Company in writing before your shares have been voted at the annual meeting,
deliver a later dated proxy, or attend the meeting and vote your shares in
person. Attendance at the annual meeting will not in itself constitute
revocation of your proxy.
If your Union Financial common stock is held in street name, you will
receive instructions from your broker, bank or other nominee that you must
follow to have your shares voted. Your broker or bank may allow you to deliver
your voting instructions via the telephone or the Internet. Please see the
instruction form that accompanies this proxy statement. If you wish to change
your voting instructions after you have returned your voting instruction form to
your broker or bank, you must contact your broker or bank.
2
Stock Ownership
The following table provides information as of December 9, 2002 with
respect to persons known to Union Financial to be the beneficial owners of more
than 5% of Union Financial's outstanding common stock. A person may be
considered to beneficially own any shares of common stock over which he or she
has, directly or indirectly, sole or shared voting or investing power.
Percent of
Number of Common Stock
Name and Address Shares Owned Outstanding
- ----------------- -------------------- -----------------
Jeffrey L. Gendell
Tontine Financial Partners, L.P. 100,700/(1)/ 5.13%
Tontine Management, L.L.C.
237 Park Avenue, 9/th/ Floor
New York, New York 10017
__________________
(1) Based on information filed in a Schedule 13D with the U.S. Securities and
Exchange Commission on February 25, 2002.
The following table provides information about the shares of Union
Financial common stock that may be considered to be owned by each director or
nominee for director of the Company, by the executive officers of the Company
named in the Summary Compensation Table and by all directors and executive
officers of the Company as a group as of December 9, 2002. Unless otherwise
indicated, each of the named individuals has sole voting power and sole
investment power with respect to the shares shown.
Number of Shares That
Number of May Be Acquired Within Percent of Common
Shares Owned 60 Days By Exercising Stock
Name (Excluding Options) Options Outstanding(1)
- ------------------------- ------------------------ ------------------------- ---------------------
Mason G. Alexander 12,833/(2)/ 5,450 *
James W. Edwards 3,757 11,000 *
Richard H. Flake 10,829/(3)/ 43,142 2.69%
William M. Graham 15,968 11,000 1.37
Louis M. Jordan 55,991/(4)/ 11,000 3.39
Carl L. Mason 5,548 11,000 *
John S. McMeekin 5,000 4,175 *
Dwight V. Neese 13,994 73,811 4.31
Philip C. Wilkins 5,943/(5)/ 4,175 *
All directors and executive
officers as a group (16 persons) 159,457 196,073 16.46%
___________________________________
* Less than 1% of the shares outstanding.
(footnotes continued on following page)
3
(1) Based on 1,963,252 shares of Union Financial common stock outstanding and
entitled to vote as of December 9, 2002, plus the number of shares that may
be acquired within 60 days by each individual (or group of individuals) by
exercising stock options.
(2) Includes 200 shares owned by the Frances & Mason Alexander Family
Foundation over which Mr. Alexander shares voting power.
(3) Includes 994 shares owned by Mr. Flake's spouse.
(4) Includes 16,953 shares owned by Mr. Jordan's spouse, 3,298 shares owned by
Mr. Jordan's spouse's individual retirement account and 14,789 shares held
in a trust for which Mr. Jordan serves as trustee and shares voting power.
(5) Includes 100 shares held by Mr. Wilkins' spouse.
Proposal 1 -- Election of Directors
The Company's Board of Directors currently consists of eight members.
Seven of them are independent directors and one is a member of management. The
Board is divided into three classes with three-year staggered terms, with
approximately one-third of the directors elected each year. Three directors will
be elected at the annual meeting to serve for a three-year term, or until their
respective successors have been elected and qualified. The nominees are Louis M.
Jordan, Dwight V. Neese and Philip C. Wilkins, all of whom are currently
directors of the Company and Provident.
It is intended that the proxies solicited by the Board of Directors
will be voted for the election of the nominees named above. If any nominee is
unable to serve, the persons named in the proxy card would vote your shares to
approve the election of any substitute proposed by the Board of Directors.
Alternatively, the Board of Directors may adopt a resolution to reduce the size
of the Board. At this time, the Board of Directors knows of no reason why any
nominee would be unable to serve.
The Board of Directors recommends a vote "FOR" the election of all of
the nominees.
Information regarding the nominees for election at the annual meeting,
as well as information regarding the continuing directors whose terms expire in
2004 and 2005, is provided below. Unless otherwise stated, each individual has
held his current occupation for the last five years. The age indicated in each
individual's biography is as of September 30, 2002. The indicated period for
service as a director includes service as a director of Provident.
Nominees for Election of Directors
The directors standing for election are:
Louis M. Jordan. Mr. Jordan is a major stockholder of Jordan's Ace
Hardware, Inc. located in Union South Carolina. Age 67. Director since 1971.
Dwight V. Neese. Mr. Neese is the President and Chief Executive Officer
of the Company and Provident. Age 52. Director since 1995.
Philip C. Wilkins, DMD. Dr. Wilkins is a dentist in Winnsboro, South
Carolina. Age 46. Director since 1999.
4
Directors Continuing in Office
The following directors have terms ending in 2004:
Mason G. Alexander. Mr. Alexander is a retired banker and currently
serves as a director of Mid-South Management Company, a newspaper holding
company, and Kanuga Episcopal Conferences, Inc. Age 70. Director since 1996.
James W. Edwards. Mr. Edwards is the Dean of Academics at the
University of South Carolina, Union Campus located in Union, South Carolina. Age
65. Director since 1996.
The following directors have terms ending in 2005:
Carl L. Mason. Mr. Mason is the Chairman of the Board of the Company
and Provident. He is the retired President of Cone Mills Corporation, a textile
finishing company. Age 58. Director since 1989.
William M. Graham. Mr. Graham is the sole owner and operator of
Graham's Flowers in Union, South Carolina. Age 58. Director since 1990.
John S. McMeekin. Mr. McMeekin is the President of Winnsboro Furniture
Company located in Winnsboro, South Carolina. Age 48. Director since 1999.
Meetings and Committees of the Board of Directors
The business of the Company and Provident is conducted through meetings
and activities of their Boards of Directors and their committees. During the
fiscal year ended September 30, 2002, the Board of Directors of the Company held
12 meetings and the Board of Directors of Provident held 12 meetings. No
director attended fewer than 75% of the total meetings of the Boards of
Directors and committees on which such director served.
The Audit Committee, consisting of Directors McMeekin (Chairman),
Edwards and Graham, meets as needed to select and review the work performed by
the independent auditors and to monitor the Company's internal audit function
and internal control system. This committee met four times during the year ended
September 30, 2002.
The Human Resources Committee, composed of Directors Alexander
(Chairman), Mason and Wilkins meets as needed to review the employee wage and
benefit packages, hear employee grievances and prepare employee job
descriptions. This committee met once during the year ended September 30, 2002.
The Company's Governance Committee, composed of Directors Mason
(Chairman), Jordan, Alexander and Neese (ex-officio) selects nominees for
election as directors. The Governance Committee will accept and consider
stockholder nominations that are made pursuant to timely written notice to the
secretary. All recommendations must include all information necessary for the
Governance Committee to fully review the qualifications and credentials of the
candidate. This committee met once during the year ended September 30, 2002.
The Company and Provident also maintain Loan, Asset/Liability,
Investment and Strategic Planning Committees.
5
Directors' Compensation
Non-employee members of the Board of Directors of Provident receive a
monthly fee of $900. The Chairman of the Board of Directors receives an
additional monthly fee of $300. Committee members do not receive additional fees
for committee meetings attended. Non-employee members of the Board of Directors
of Union Financial receive an annual retainer of $2,000.
During the year ended September 30, 2002, each non-employee director
received options to acquire 1,500 shares of Union Financial common stock.
One-third of the options became exercisable upon the date of grant. The
remainder of the options become exercisable in two equal annual installments
beginning on the first anniversary of the date of grant.
Executive Compensation
Summary Compensation Table
The following information is furnished for Messrs. Neese and Flake. No
other executive officer of Union Financial received salary and bonus of $100,000
or more during the year ended September 30, 2002.
Long-Term
Compensation
--------------------------
Annual Compensation Awards
-------------------------------- --------------------------
Other Restricted Securities
Annual Stock Underlying All Other
Name and Principal Fiscal Compensation Awards Options Compensation
Positions Year Salary($) Bonus($) ($)(1) ($) (#) ($)
- ------------------------------ ------ --------- -------- ------------ --------- ---------- ------------
Dwight V. Neese 2002 $142,480 $67,322 $ -- $ -- 4,087 $17,271/(2)/
President and Chief 2001 137,000 -- -- -- 5,000 18,390
Executive Officer 2000 131,040 50,778 -- -- -- 21,442
Richard H. Flake 2002 $ 94,000 $35,532 $ -- $ -- 4,052 $12,549/(3)/
Executive Vice President 2001 87,100 -- -- -- 3,200 11,294
and Chief Financial Officer 2000 83,760 23,506 -- -- -- 14,756
_____________________
(1) Does not include the aggregate amount of perquisites and other personal
benefits, which was less than 10% of the total annual salary and bonus
reported.
(2) Consists of employer contribution to Provident's 401(k) plan of $7,184 and
contribution to money purchase pension plan of $10,087.
(3) Consists of employer contribution to Provident's 401(k) plan of $5,523 and
contribution to money purchase pension plan of $7,026.
6
Option Grants in Last Fiscal Year
The following table lists all grants of options to Messrs. Neese and
Flake in fiscal year 2002.
Number of % of Total
Securities Options Exercise
Underlying Granted to or Base
Options Employees in Price Expiration
Name Granted (#)(1) Fiscal Year Per Share Date
- ------------------------ ---------------- ---------------- ----------- -----------------
Dwight V. Neese .......... 4,087 12.4% $10.36 January 18, 2012
Richard H. Flake ......... 4,052 12.3 10.36 January 18, 2012
__________________
(1) One-third of the options became exercisable upon the date of grant. The
remainder of the options become exercisable in two equal annual
installments beginning on the first anniversary of the date of grant,
provided, however, options will be immediately exercisable if the optionee
terminates employment following a change in control of the Company of
Provident or due to death or disability.
Option Value at Fiscal Year End
No stock options were exercised by Messrs. Neese or Flake during the
fiscal year ended September 30, 2002. The following table provides information
regarding unexercised stock options for Messrs. Neese and Flake as of September
30, 2002.
Number of Securities
Underlying Unexercised Value of Unexercised
Options in-the-money Options
at Fiscal Year-End (#) at Fiscal Year-End ($)(1)
------------------------------- --------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- --------------------------- -------------- --------------- ------------- -----------------
Dwight V. Neese .......... 71,424 6,076 $485,475 $23,917
Richard H. Flake ......... 41,138 3,862 271,445 14,092
________________________
(1) Value of unexercised in-the-money stock options equals the market value of
shares covered by in-the-money options on September 30, 2002, less the
option exercise price. Options are in-the-money if the market value of
shares covered by the options is greater than the exercise price.
Employment Agreements
The Company and Provident maintain three-year employment agreements
with Messrs. Neese and Flake. The terms of the agreements are extended daily,
unless written notice of non-renewal is given by the Board of Directors. Mr.
Neese's base salary for the 2003 calendar year is $142,480. Mr. Flake's base
salary for the 2003 calendar year is $94,000. The agreements may be terminated
at any time by the Board of Directors for "cause," as defined in the agreements.
If the executive's employment is terminated for cause, the agreements provide
that the executive will not receive any salary or benefits for any period after
the termination for cause. The agreements provide for severance payments if
employment is terminated following a change in control (as defined in the
agreements), equal to 2.99 times the average annual compensation paid to the
executive during the five years immediately preceding the change in control and
continuation of other employee benefits for three years. The sum would be paid
promptly within ten days after termination following any change in control.
Section 280G of the Internal Revenue Code states that severance payments that
equal or exceed three times the base amount compensation of the individual are
deemed to be "excess parachute payments" if they are contingent upon a change in
control. Individuals
7
receiving excess parachute payments are subject to a 20% excise tax on the
amount of the payments in excess of their base amount compensation, and the
Company is not entitled to deduct such amounts.
Compliance with Section 16(a) of the Exchange Act
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
any registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than 10% stockholders are required by
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on its review of the copies of the reports it has received
and written representations provided to the Company from the individuals
required to file the reports, the Company believes that each of the Company's
executive officers and directors has complied with applicable reporting
requirements for transactions in Union Financial common stock during the fiscal
year ended September 30, 2002.
Transactions with Management
Federal regulations require that all loans or extensions of credit to
executive officers and directors of insured financial institutions must be made
on substantially the same terms, including interest rates and collateral, as
those prevailing at the time for comparable transactions with other persons,
except for loans made pursuant to programs generally available to all employees,
and must not involve more than the normal risk of repayment or present other
unfavorable features. Provident is therefore prohibited from making any new
loans or extensions of credit to executive officers and directors at different
rates or terms than those offered to the general public, except for loans made
pursuant to programs generally available to all employees, and has adopted a
policy to this effect. In addition, loans made to a director or executive
officer in an amount that, when aggregated with the amount of all other loans to
such person and his or her related interests, are in excess of the greater of
$25,000 or 5% of the institution's capital and surplus (up to a maximum of
$500,000) must be approved in advance by a majority of the disinterested members
of the Board of Directors. Provident's policy is to not make any new loans or
extensions of credit to executive officers and directors at different rates or
terms than those offered to the general public and to have the Board of
Directors approve all loans to executive officers and directors.
Proposal 2 -- Ratification of Appointment of Auditors
The Board of Directors has appointed Elliott Davis, LLC to be its
auditors for the 2003 fiscal year, subject to ratification by stockholders. A
representative of Elliott Davis, LLC is expected to be present at the annual
meeting to respond to appropriate questions from stockholders and will have the
opportunity to make a statement should he or she desire to do so.
If the ratification of the appointment of the auditors is not approved
by a majority of the votes cast by stockholders at the annual meeting, other
independent public auditors will be considered by the Board of Directors. The
Board of Directors recommends that stockholders vote "FOR" the ratification of
the appointment of auditors.
8
The following table sets forth the fees billed to the Company for the
fiscal year ending September 30, 2002 by Elliott Davis, LLC:
Audit Fees .............................. $55,894
Financial information and systems
design and implementation fees ........ --
All other fees* ......................... 19,110
______________
*Includes fees for reviews of internal controls and procedures.
The Audit Committee believes that the provision of non-audit services
by Elliott Davis, LLC are compatible with maintaining Elliott Davis, LLC's
independence.
Audit Committee Report
The Audit Committee of the Board of Directors is responsible for
providing independent, objective oversight of Union Financial's independent
auditors, accounting functions and internal controls. The Audit Committee is
comprised of three directors, each of whom is independent under the National
Association of Securities Dealers' listing standards. The Audit Committee acts
under a written charter adopted by the Board of Directors.
The Audit Committee reviewed and discussed the annual financial
statements with management and the independent auditors. As part of this
process, management represented to the Audit Committee that the financial
statements were prepared in accordance with generally accepted accounting
principles. The Audit Committee also received and reviewed written disclosures
and a letter from the auditors concerning their independence as required under
applicable standards for auditors of public companies. The Audit Committee
discussed with the auditors the contents of such materials, the auditors'
independence and the additional matters required under Statement on Auditing
Standards No. 61. Based on such review and discussions, the Audit Committee
recommended that the Board of Directors include the audited consolidated
financial statements in Union Financial's Annual Report on Form 10-KSB for the
year ended September 30, 2002 for filing with the Securities and Exchange
Commission.
The Audit Committee's responsibility is to monitor and review the
Company's financial reporting process, including its system of internal controls
and the preparation of consolidated financial statements. It is not the duty or
the responsibility of the Audit Committee to conduct auditing or accounting
reviews. The Audit Committee's oversight does not provide it with an independent
basis to determine that management has maintained appropriate accounting and
financial reporting principles or policies, or appropriate internal controls and
procedures designed to assure compliance with accounting standards and
applicable laws and regulations. Furthermore, the Audit Committee's
considerations and discussions with management and the independent auditors do
not assure that the Company's financial statements are presented in accordance
with accounting principles generally accepted in the United States of America,
that the audit of the Company's financial
9
statements has been carried out in accordance with generally accepted auditing
standards or that the Company's independent auditors are in fact "independent."
John S. McMeekin (Chairman)
James W. Edwards
William M. Graham
Miscellaneous
The Company will pay the cost of this proxy solicitation. The Company
will reimburse brokerage firms and other custodians, nominees and fiduciaries
for reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Union Financial common stock. In addition to soliciting
proxies by mail, directors, officers and regular employees of the Company may
solicit proxies personally or by telephone. None of these persons will receive
additional compensation for these activities.
The Company's Annual Report to Stockholders has been mailed to all
persons who were stockholders as of the close of business on December 9, 2002.
Any stockholder who has not received a copy of the Annual Report may obtain a
copy by writing to the Secretary of the Company. The Annual Report is not to be
treated as part of the proxy solicitation material or as having been
incorporated herein by reference.
A copy of the Company's Form 10-KSB for the fiscal year ended September
30, 2002, as filed with the Securities and Exchange Commission, will be
furnished without charge to all persons who were stockholders as of the close of
business on December 9, 2002 upon written request to Corporate Secretary, Union
Financial Bancshares, Inc., 203 West Main Street, Union, South Carolina 29379.
Stockholder Proposals and Nominations
Proposals that stockholders seek to have included in the proxy
statement for the Company's next annual meeting must be received by the Company
no later than August 29, 2003. However, if the annual meeting is held more than
30 calendar days from January 29, 2004, a stockholder proposal must be received
by a reasonable time before the Company begins to print and mail its proxy
solicitation materials. Any such proposals will be subject to the requirements
of the proxy rules adopted by the Securities and Exchange Commission.
10
The Company's Certificate of Incorporation provides that in order for a
stockholder to make nominations for the election of directors or proposals for
business to be brought before the annual meeting, a stockholder must deliver
notice of such nominations and/or proposals to the Secretary not less than 30
nor more than 60 days prior to the date of the annual meeting; provided that if
less than 31 days' notice of the annual meeting is given to stockholders, such
notice must be delivered not later than the close of the tenth day following the
day on which notice of the annual meeting was mailed to stockholders. A copy of
the Certificate of Incorporation may be obtained from the Company.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Wanda J. Wells
Wanda J. Wells
Corporate Secretary
Union, South Carolina
December 27, 2002
11
UNION FINANCIAL BANCSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
January 29, 2003
2:00 p.m. Local Time
------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the Board of Directors, with full power
of substitution, to act as proxy for the undersigned, and to vote all shares of
common stock of Union Financial Bancshares, Inc. (the "Company") owned of record
by the undersigned at the Annual Meeting of Stockholders, to be held on January
29, 2003 at 2:00 p.m., local time, in the University of South Carolina
Auditorium, Union Campus, 401 East Main Street, Union, South Carolina, and at
any and all adjournments thereof, as designated below with respect to the
matters set forth below and described in the accompanying Proxy Statement and,
in their discretion, for the election of a person to the Board of Directors if
any nominee named herein becomes unable to serve or for good cause will not
serve and with respect to any other business that may properly come before the
meeting. Any prior proxy or voting instructions are hereby revoked.
1. The election as directors of all nominees listed (except as marked
to the contrary below).
Louis M. Jordan, Dwight V. Neese and Philip C. Wilkins
FOR ALL
FOR VOTE WITHHELD EXCEPT
--- ------------- ------
[_] [_] [_]
INSTRUCTION: To withhold your vote for any individual nominee, mark "FOR ALL
EXCEPT" and write that nominee's name in the space provided below.
- --------------------------------------------------------------------------------
2. The ratification of the appointment of Elliott Davis, LLC as
independent auditors for the Company for the fiscal year ending
September 30, 2003.
FOR AGAINST ABSTAIN
--- ------- -------
[_] [_] [_]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
EACH OF THE LISTED PROPOSALS.
This proxy will be voted as directed, but if no instructions are
specified, this proxy will be voted "FOR" each of the proposals listed. If any
other business is presented at the meeting, including whether or not to adjourn
the meeting, this proxy will be voted by the proxies in their best judgment. At
the present time, the Board of Directors knows of no other business to be
presented at the Annual Meeting.
The above-signed acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders, a Proxy
Statement dated December 27, 2002 and the Annual Report to Stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
Dated:__________________________
________________________________
STOCKHOLDER SIGN ABOVE
________________________________
CO-HOLDER (IF ANY) SIGN ABOVE
________________________
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
A-2