<PAGE>
<PAGE>
SCHEDULE 14A INFORMATION
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or
Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
UNITED TENNESSEE BANKSHARES, INC.
- ----------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- ----------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
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:
________________________________________________________________
2. Aggregate number of securities to which transaction
applies:
________________________________________________________________
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):
________________________________________________________________
4. Proposed maximum aggregate value of transaction:
________________________________________________________________
5. Total fee paid:
________________________________________________________________
[ ] 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:
____________________________________________
2. Form, Schedule or Registration Statement No.:
____________________________________________
3. Filing Party:
____________________________________________
4. Date Filed:
____________________________________________
<PAGE>
<PAGE>
[LETTERHEAD]
April 15, 1998
Dear Stockholder:
We invite you to attend the annual meeting of stockholders
of our holding company, United Tennessee Bankshares, Inc., to be
held at the Holiday Inn of Newport, Interstate 40 & Highway 32,
Newport, Tennessee on Tuesday, May 19, 1998 at 5:00 p.m.
The accompanying notice and proxy statement describe the
formal business to be transacted at the meeting. During the
meeting, we will also report on our operations during the fiscal
year ended December 31, 1997 and our conversion from mutual to
stock form effective January 1, 1998. Our directors and
officers will be present to respond to any questions the
stockholders may have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE ACCOMPANYING FORM OF PROXY AS SOON AS
POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL
MEETING. Your vote is important, regardless of the number of
shares you own. This will not prevent you from voting in person
but will assure that your vote is counted if you are unable to
attend the meeting.
Sincerely,
/s/ Richard G. Harwood
Richard G. Harwood
President<PAGE>
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
344 W. BROADWAY
NEWPORT, TENNESSEE 37821-0249
(423) 623-6088
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 1998
NOTICE IS HEREBY GIVEN that the annual meeting of
stockholders (the "Annual Meeting") of United Tennessee
Bankshares, Inc. (the "Company") will be held at the Holiday Inn
of Newport, Interstate 40 & Highway 32, Newport, Tennessee on
Tuesday, May 19, 1998 at 5:00 p.m.
A proxy statement and form of proxy for the Annual Meeting
accompany this notice.
The Annual Meeting is for the purpose of considering and
acting upon:
1. The election of four directors of the Company;
and
2. The transaction of such other matters as may
properly come before the Annual Meeting or any
adjournments thereof.
The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on any one of the foregoing pro-
posals at the Annual Meeting on the date specified above or on
any date or dates to which, by original or later adjournment,
the Annual Meeting may be adjourned. Stockholders of record at
the close of business on April 6, 1998 are the stockholders
entitled to vote at the Annual Meeting and any adjournments
thereof.
You are requested to fill in and sign the accompanying
form of proxy which is solicited by the Board of Directors and
to mail it promptly in the accompanying envelope. The proxy
will not be used if you attend and vote at the Annual Meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peggy Holston
PEGGY HOLSTON
SECRETARY
Newport, Tennessee
April 15, 1998
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE
COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO
ENSURE A QUORUM. THE ACCOMPANYING FORM OF PROXY IS ACCOMPANIED
BY A SELF-ADDRESSED ENVELOPE FOR YOUR CONVENIENCE. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
<PAGE>
PROXY STATEMENT
OF
UNITED TENNESSEE BANKSHARES, INC.
344 W. BROADWAY
NEWPORT, TENNESSEE 37821-0249
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
GENERAL
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of United
Tennessee Bankshares, Inc. ("our holding company" or the
"Company") to be used at its annual meeting of stockholders (the
"Annual Meeting") which will be held at the Holiday Inn of
Newport, Interstate 40 & Highway 32, Newport, Tennessee, on
Tuesday, May 19, 1998 at 5:00 p.m. This proxy statement and the
accompanying notice and proxy card are being first provided to
stockholders on or about April 15, 1998.
On January 1, 1998, we converted from mutual to stock form
(the "Conversion") and simultaneously changed our name to
Newport Federal Bank ("we," "us", etc. or the "Bank").
Concurrently with the consummation of the Conversion, our
holding company acquired all of our stock and consummated an
initial public offering of its common stock, issuing 1,454,750
shares for gross proceeds of $14,547,500 in a subscription
offering to our customers.
VOTING AND REVOCABILITY OF PROXIES
Stockholders who execute proxies retain the right to
revoke them at any time. Unless so revoked, the shares
represented by such proxies will be voted at the Annual Meeting
and all adjournments thereof. Proxies may be revoked by written
notice to Peggy Holston, our Corporate Secretary, at the address
shown above, by filing a later dated proxy prior to a vote being
taken on a particular proposal at the Annual Meeting or by
attending the Annual Meeting and voting in person.
Proxies solicited by our Board of Directors will be voted
in accordance with the directions given therein. WHERE NO
INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED FOR THE
NOMINEES FOR DIRECTOR SET FORTH BELOW. The proxy confers
discretionary authority on the persons named therein to vote
with respect to the election of any person as a director where
the nominee is unable to serve or for good cause will not serve,
and matters incident to the conduct of the Annual Meeting. If
any other business is presented at the Annual Meeting, proxies
will be voted by those named therein in accordance with the
determination of a majority of the Board of Directors. Proxies
marked as abstentions, and shares held in street name which have
been designated by brokers on proxies as not voted, will not be
counted as votes cast. Proxies marked as abstentions or as
broker non-votes will, however, be treated as shares present for
purposes of determining whether a quorum is present.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP
Stockholders of record as of the close of business on
April 6, 1998 (the "Record Date") are entitled to one vote for
each share then held. At the Record Date, our holding company
had 1,454,750 shares of common stock, no par value (the "Common
Stock"), issued and outstanding. The presence, in person or by
proxy, of at least a majority of the total number of shares of
the Common Stock outstanding and entitled to vote will be
necessary to constitute a quorum at the Annual Meeting.<PAGE>
<PAGE>
Persons and groups owning in excess of 5% of the Common
Stock are required to file certain reports regarding such
ownership pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). The following table sets forth,
as of the Record Date, certain information as to shares of the
Common Stock believed by management to be beneficially owned by
persons owning in excess of 5% of the Common Stock and by all of
our directors and executive officers as a group.
<TABLE>
<CAPTION>
Amount and Percent of
Nature of Shares of
Name and Address Beneficial Common Stock
of Beneficial Owner Ownership Outstanding
- ------------------- ---------- ------------
<S> <C> <C>
United Tennessee Bankshares, Inc.
Employee Stock Ownership Plan ("ESOP")
344 W. Broadway
Newport, Tennessee 37821-0249 116,400 (1) 8.0%
Jerome H. Davis
200 Park Avenue, Suite 515
New York, New York 10166 91,540 6.3%
All directors and executive officers
as a group (10 persons) 161,475 (2) 11.1%
<FN>
__________
(1) Reflects unallocated shares held in a suspense account for future
allocation among participating employees as the loan used to purchase the
shares is repaid. The ESOP trustees, currently Directors Henry, Overholt
and Self, vote all allocated shares in accordance with instructions of
the participants; unallocated shares and shares for which no instructions
have been received generally are voted by the ESOP trustees in the same
ratio as participants direct the voting of allocated shares or, in the
absence of such direction, as directed by our Board of Directors.
(2) Reflects shares over which one or more directors and executive officers
have sole or shared voting and/or dispositive power; excludes 12,516
shares held in trust in connection with the Bank's directors' retirement
plan. The trustees, currently Directors Myers, Henry and Overholt, vote
all shares in the same proportion on all matters as the ESOP trustees
vote the ESOP shares.
</FN>
</TABLE>
ELECTION OF DIRECTORS
GENERAL
Our holding company's Board of Directors currently
consists of eight members. Our holding company's Charter
requires that directors be divided into three classes, as nearly
equal in number as possible, with approximately one-third of the
directors elected each year. The Board has nominated long-time
directors Clyde E. Driskill, Jr. and Robert L. Overholt for
reelection to serve as directors for full three-year terms. In
addition, the Board is pleased to nominate two recently
appointed directors, Tommy C. Bible and Ben W. Hooper, III, for
election to serve as directors for two- and three-year terms,
respectively. Under Tennessee law, directors are elected by a
plurality of all votes cast at a meeting at which a quorum is
present. If the nominees are unable to serve, the shares
represented by all valid proxies will be voted for the election
of such substitute as the Board may recommend or the size of the
Board may be reduced to eliminate the vacancy. At this time,
the Board knows of no reason why the nominees might be
unavailable to serve.
-2-<PAGE>
<PAGE>
The following table sets forth the names of the nominees
for election as directors and the directors whose terms expire
in future years. Also set forth is certain other information
with respect to each person's age, the year he first became a
director, the expiration of his term as a director and the
number and percentage of shares of the Common Stock beneficially
owned (each of our directors is also a director of our holding
company).
<TABLE>
<CAPTION>
Shares of
Year First Common Stock
Age at Elected as Current Beneficially
December 31, Director of Term Owned at the Percent
Name 1997 The Bank To Expire Record Date(1) of Class
- -------------------------------------------------------------------------------------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2001
<S> <C> <C> <C> <C> <C>
Clyde E. Driskill, Jr 66 1980 1998 19,807 1.36%
Robert L. Overholt 54 1983 1998 20,193 1.39
BOARD NOMINEE FOR TERM TO EXPIRE IN 2000
Tommy C. Bible 44 1998 1998 22,000 1.51
BOARD NOMINEE FOR TERM TO EXPIRE IN 2001
Ben W. Hooper, III 33 1998 1998 1,000 .07
DIRECTORS CONTINUING IN OFFICE
Richard G. Harwood 51 1989 1999 20,968 1.44
Robert D. Self 67 1978 1999 7,740 .05
William B. Henry 67 1978 2000 25,548 1.76
J. William Myers 56 1975 2000 22,719 1.56
<FN>
__________
(1) Reflects shares over which the named individuals have sole or shared
voting and/or dispositive power; excludes unallocated shares held by the
ESOP and certain shares held by our defined contribution thrift plan and
our directors' retirement plan (see "Voting Securities and Beneficial
Ownership") above.
</FN>
</TABLE>
Set forth below is information concerning our nominees for
election as director and continuing directors. Unless otherwise
stated, all directors have held the positions indicated for at
least the past five years.
CLYDE E. DRISKILL, JR. has been the owner and president of
Driskill's Furniture, Inc., a furniture and appliance retail
establishment located in Newport, Tennessee, since 1960. Mr.
Driskill has served as the Chairman of the Newport Regional
Planning Commission and of the Newport/Cocke County Industrial
Development Commission.
ROBERT L. OVERHOLT has been the owner/manager of Home
Supply of Newport, Tennessee, Inc., a building supply
establishment, since 1966. Mr. Overholt is active with the
Shriners and Habitat for Humanity.
TOMMY C. BIBLE is the General Manager of the Jefferson-
Cocke County Gas Utility District that serves natural and
propane gas to the Jefferson County and Cocke County areas.
Prior to joining Jefferson-Cocke, he worked 15 years for Newport
Utilities Board as the Administrative Manager. Mr. Bible is
Chairman of the Cocke County Election Commission and is a
director for the Newport/Cocke County Economic Development
Commission.
-3-<PAGE>
<PAGE>
BEN W. HOOPER, III is a partner in general practice with
Campbell & Hooper Attorneys in Newport, Tennessee. Mr. Hooper
also serves as legal counsel to the Cocke County Amvets and Del
Rio Culture & Preservation Society. He is a director and the
current chairman of the Cocke County Recreation Advisory Board
and is a member of the Cocke County Bar Association, Tennessee
Bar Association and Tennessee Trial Lawyers Association.
RICHARD G. HARWOOD serves as our President and Chief
Executive Officer. Mr. Harwood joined us as Senior Vice
President in 1984. He has acted as the Vice Chairman of the
Economic Development Commission, a director for the United Way
of Cocke County and Treasurer for the Newport Lions Club.
ROBERT D. SELF has been the owner of Bob Self Auto Parts,
an auto parts supplier located in Newport, Tennessee, since
1969. Mr. Self is active with the Newport Lions Club and serves
on the board of directors of the Stokley Memorial Library.
WILLIAM B. HENRY has been an optometrist in Newport,
Tennessee since 1961. He is presently serving as the secretary
of the Newport Utilities Board and is a member of the
Newport/Cocke County Economic Development Commission.
J. WILLIAM MYERS is a lawyer. He has practiced law in
Newport, Tennessee since 1966. Mr. Myers serves as our Chairman
of the Board. He is active with Habitat for Humanity.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Our Board of Directors holds regular meetings and special
meetings as needed. During the year ended December 31, 1997,
the Board met 15 times and once, respectively, on behalf of us
and our holding company. No nominee for election as a director
or continuing director attended fewer than 75% in the aggregate
of the total number of Board meetings held while he was a member
during the year ended December 31, 1997 and the total number of
meetings held by committees on which he served during such
fiscal year.
Our full Board of Directors acts as an audit committee and
met once in this capacity in connection with the independent
audit for fiscal 1997.
Our Board of Directors has an Executive Committee, which
consists of Chairman Myers and Directors Harwood and Henry and
acts as a compensation committee. This committee reviews the
performance of our officers and met twice for fiscal 1997.
Our Board of Directors does not have a standing nominating
committee. Under our holding company's current Bylaws, the full
Board of Directors acts as a nominating committee and met once
in this capacity to select the nominees for election at the
Annual Meeting.
DIRECTOR COMPENSATION
Fees. Our directors currently receive fees of $6,000 per
year, plus $300 per regular board meeting attended and $100 per
committee meeting attended, plus the amount of any credit to
their account under a long-term incentive plan implemented in
fiscal 1997 and described below. In addition, the Chairman
receives a salary of $5,569 per year. For fiscal 1997,
directors' fees totaled $10,745. Directors do not receive
additional compensation for service as directors of our holding
company. For additional information, see "Transactions with
Management" below.
Directors' Retirement Plan. We adopted a directors'
retirement plan effective June 19, 1997. On the effective date,
a bookkeeping account was established in the name of each
director, and each account was credited with an amount equal to
the product of (i) $1,291 and (ii) the director's full years of
service as a director, up to 20 years. At that time, in
recognition of their accrued years of service, the accounts of
Messrs. Butcher, Driskill, Harwood, Henry, Myers, Overholt and
Self were credited with $25,810, $21,939, $10,324, $24,520,
$25,810, $18,067 and $24,520, respectively.
-4-<PAGE>
<PAGE>
On each December 31 (excluding December 31, 1997), each
participant who is then a director and has 20 or fewer years of
service shall have his account credited with an amount equal to
the product of $1,291 and the safe performance factor, which is
determined based on our actual performance as compared to
budgeted goals for return on average equity, non-performing
assets and composite regulatory rating. The safe performance
factor may not exceed 1.2. All amounts credited to
participants' accounts are fully vested at all times. Until
distributed in accordance with the terms of the plan, each
participant's account will be credited with a rate of return
equal to our highest rate of interest paid on certificates of
deposit having a term of one year. Each participant may
prospectively elect to have the dividend-adjusted rate of return
on the Common Stock measure future appreciation. Beginning with
the fiscal year following a participant's termination of
service, the participant's account will receive an investment
return measured by the participant's election between up to two
different mutual funds (or other investments) selected by the
Board of Directors.
Each participant may elect to receive plan benefits in a
lump sum or over a period shorter than ten years, and in the
absence of an election will receive payments in five
substantially equal installments. In the event of a
participant's death, the balance of his plan account will be
paid in a lump sum (unless the participant elects a distribution
period up to ten years) to his designated beneficiary or, if
none, his estate.
Any compensation accrued under the plan will be paid from
our general assets. We have established a trust in order to
hold assets with which to pay compensation. Trust assets would
be subject to claims of our general creditors. If a participant
were to prevail over us in a legal dispute as to the terms or
interpretation of the plan, he would be reimbursed for his legal
and other expenses. Upon the implementation of the plan, we
recognized compensation expense totaling $151,000 to provide for
participants' initial account balances.
Deferred Compensation Plan. We have established a
deferred compensation plan for directors and select executive
officers. Before each calendar year begins, each non-employee
director may elect to defer receipt of all or part of his fees
for the year, and any other participant may elect to defer
receipt of up to 25% of his or her compensation for the year.
Deferred amounts are credited at the end of the calendar year to
a bookkeeping account in the participant's name along with the
investment return which would have resulted if such deferred
amounts had been invested, based upon the participant's choice,
between the dividend-adjusted rate of return on the Common Stock
and our highest annual rate of interest on certificates of
deposit having a one-year term. Each participant may make an
election to receive distributions either in a lump sum or in
annual installments over a period up to ten years.
We expect (but are under no legal obligation) to make
quarterly contributions to a grantor trust in an amount equal to
the accrued expense associated with the deferred compensation
plan. In the event of a change in control (as defined in the
employment agreements described below), we will contribute to
the trust an amount sufficient to provide the trust with assets
having an overall value equal to the aggregate account balances
under the plan. The trust's assets would remain subject to the
claims of our general creditors and be available for eventual
payments to participants.
EXECUTIVE COMPENSATION
Summary. The following table sets forth compensation for
the fiscal years ended December 31, 1997 and 1996 awarded to or
earned by our Chief Executive Officer for services rendered in
all capacities. No other executive officer received salary and
bonus in excess of $100,000 during the fiscal year 1997 or 1996.
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation
Fiscal ---------------------------
Year Salary Bonus Other(1)
------ ------ ----- --------
<S> <C> <C> <C> <C>
Richard G. Harwood 1997 $70,118 $4,945 $11,220
1996 67,723 1,303 12,403
<FN>
__________
(1) Consists of director fees ($7,100) and matching contribution
to defined contribution retirement plan ($4,120) for fiscal
1997; excludes appraisal fees for services to borrowers;
excludes indirect compensation in the form of certain
perquisites and other personal benefits which did not
exceed 10% of salary and bonus.
</FN>
</TABLE>
-5-
<PAGE>
<PAGE>
EMPLOYMENT AGREEMENTS
We and our holding company have entered into employment
agreements pursuant to which Richard Harwood serves as our
President and Chief Executive Officer. In such capacities, Mr.
Harwood is responsible for overseeing all of our operations and
for implementing the policies adopted by the Board of Directors.
The Board believes that the employment agreements assure fair
treatment of Mr. Harwood in his career with us by assuring him
of some financial security.
The employment agreements became effective on January 1,
1998 and provide for a term of three years with an annual base
salary equal to Mr. Harwood's existing base salary rate in
effect on the effective date. On each anniversary date of the
commencement of the employment agreements, the term of Mr.
Harwood's employment may be extended for an additional one-year
period beyond the then effective expiration date, upon a
determination by the Board of Directors that the performance of
Mr. Harwood has met the required performance standards and that
such employment agreements should be extended. The employment
agreements provide Mr. Harwood with a salary review by the Board
of Directors not less often than annually, as well as with
inclusion in any discretionary bonus plans, retirement and
medical plans, customary fringe benefits, vacation and sick
leave. The employment agreements shall terminate upon Mr.
Harwood's death, may terminate upon Mr. Harwood's disability and
are terminable by us for "just cause" (as defined in the
employment agreements). In the event of termination for just
cause, no severance payment is available. If we terminate Mr.
Harwood without just cause, Mr. Harwood will be entitled to a
continuation of his compensation from the date of termination
through the remaining term of the employment agreements. In
addition, Mr. Harwood is entitled, at his election, to either
continued participation in compensation plans which he would
have been eligible to participate in through his employment
agreements' expiration date or the cash equivalent thereof. If
Mr. Harwood's employment is terminated for any reason other than
just cause, he shall be entitled to purchase from us, at his own
expense which shall not exceed applicable statutory rates,
family medical insurance under any group health plan that we
maintain for our employees. This right shall be in addition to,
and not in lieu of, any other rights that Mr. Harwood has under
the employment agreements and shall continue until he first
becomes eligible for participation in Medicare. If the
employment agreements are terminated due to Mr. Harwood's
"disability" (as defined in the agreements), Mr. Harwood will be
entitled to a continuation of his compensation through the date
of such termination, including any period prior to the
establishment of Mr. Harwood's disability. In the event of Mr.
Harwood's death during the term of the employment agreements,
Mr. Harwood's estate will be entitled to receive his salary
through the last day of the calendar month in which Mr.
Harwood's death occurred. Mr. Harwood is able to voluntarily
terminate the employment agreements by providing 90 days'
written notice to us, in which case Mr. Harwood would be
entitled to receive only his compensation, vested rights and
benefits up to the date of termination.
In the event of (i) Mr. Harwood's involuntary termination
of employment other than for "just cause" during the 12-month
period following a change in control or (ii) Mr. Harwood's
voluntary termination within 90 days of the occurrence of
certain specified events occurring during that period, Mr.
Harwood will be paid within 10 days of such termination (or the
date of the change in control, whichever is later) an amount
equal to the difference between (a) 2.99 times his base amount,
as defined in Section 280G(b)(3) of the Internal Revenue Code,
and (b) the sum of any other parachute payments, as defined
under Section 280G(b)(2) of the Internal Revenue Code, that he
receives on account of the change in control. "Change in
control" means any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25%
of our voting stock, (ii) the acquisition of the ability to
control the election of a majority of our directors, (iii) the
acquisition of a controlling influence over our management or
policies by any person or by persons acting as a "group" (within
the meaning of Section 13(d) of the Exchange Act) or, (iv)
during any period of two consecutive years, individuals
("continuing directors") who at the beginning of such period
constituted our Board of Directors (the "existing board") cease
for any reason to constitute at least two-thirds thereof,
provided that any individual whose election or nomination for
election as a member of the existing board was approved by a
vote of at least two-thirds of the continuing directors then in
office shall be considered a continuing director. For purposes
of this paragraph only, the term "person" refers to an
individual or a corporation, partnership, trust, association,
joint venture, pool, syndicate, sole proprietorship,
unincorporated organization or any other form of entity not
specifically listed herein. The payments that would be made to
Mr. Harwood assuming his termination of employment under the
-6-<PAGE>
<PAGE>
foregoing circumstances at December 31, 1997, would have been
approximately $197,818. These provisions may have an anti-
takeover effect by making it more expensive for a potential
acquirer to obtain control of us. If Mr. Harwood were to
prevail over us, or obtain a written settlement, in a legal
dispute as to the employment agreements, he would be entitled to
be reimbursed for his legal and other expenses.
TRANSACTIONS WITH MANAGEMENT
We offer loans to directors, officers and employees.
These loans are made in the ordinary course of business with the
same collateral, interest rates and underwriting criteria as
those of comparable transactions prevailing at the time and do
not involve more than the normal risk of collectibility or
present other unfavorable features, except each director,
officer and employee may obtain one mortgage loan and one
consumer loan with waived origination fees and a 1% discount on
the interest rate (on adjustable rate loans, the discounted rate
applies only until the rate adjusts). At December 31, 1997, no
director or executive officer had more than $60,000 of
preferential loans from us at any time since December 31, 1996,
except J. William Myers, Chairman of the Board of Directors, who
had an adjustable rate mortgage loan with an initial interest
rate of 7.75% whose largest balance during that period and whose
balance at the end of that period was $315,903. At December 31,
1997, our loans to directors and executive officers totaled
approximately $147,611, or 6.5% of our equity and .5% of our
total assets at that date.
J. William Myers, our Chairman of the Board, is a lawyer
in Newport, Tennessee. He performs routine legal services on
behalf of us and our borrowers, principally in connection with
the closing of mortgage loans. In fiscal 1997, Mr. Myers' fees
for such services totaled $51,985.
Richard G. Harwood, our President and Chief Executive
Officer, and Nancy L. Bryant and Peggy Holston, our Vice
President and Treasurer and Assistant Secretary and Branch
Manager, respectively, are licensed real estate appraisers.
They perform routine appraisal services on behalf of our
borrowers principally in connection with the closing of mortgage
loans. In fiscal 1997, Mr. Harwood's and Mses. Bryant's and
Holston's fees for such services totaled $18,385, $10,960 and
$10,144, respectively.
OTHER MATTERS
The Board of Directors is not aware of any business to
come before the Annual Meeting other than those matters
described above in this proxy statement. However, if any other
matters should properly come before the Annual Meeting, it is
intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the determination of a
majority of the Board of Directors.
MISCELLANEOUS
The cost of soliciting proxies will be borne by our
holding company. Our holding company will reimburse brokerage
firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials
to beneficial owners of shares of the Common Stock. In addition
to solicitations by mail, our directors, officers and regular
employees may solicit proxies personally or by telegraph or
telephone without additional compensation.
Our annual report to stockholders, including financial
statements, is being mailed to all stockholders of record as of
the close of business on the Record Date. Any stockholder who
has not received a copy of such annual report may obtain a copy
by writing to our Corporate Secretary. Such annual report is
not to be treated as a part of the proxy solicitation material
or as having been incorporated herein by reference.
-7-<PAGE>
<PAGE>
Pugh & Company, P.C. was our independent auditor for the
1997 fiscal year and has been retained by the Board of Directors
to be our auditor for the 1998 fiscal year. A representative of
Pugh & Company, P.C. is expected to be present at the Annual
Meeting to respond to stockholders' questions and will have the
opportunity to make a statement if he or she so desires.
STOCKHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's
proxy materials for next year's Annual Meeting of Stockholders,
any stockholder proposal to take action at such meeting must be
received at the Company's main office at 344 W. Broadway,
Newport, Tennessee 37821-0249, no later than December 16, 1998.
Any such proposal shall be subject to the requirements of the
proxy rules adopted under the Exchange Act.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peggy Holston
PEGGY HOLSTON
SECRETARY
Newport, Tennessee
April 15, 1998
ANNUAL REPORT ON FORM 10-KSB
A COPY OF OUR HOLDING COMPANY'S ANNUAL REPORT ON FORM
10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 AS FILED WITH
THE SEC WILL BE FURNISHED WITHOUT CHARGE TO EACH STOCKHOLDER AS
OF THE RECORD DATE UPON WRITTEN REQUEST TO OUR CORPORATE
SECRETARY, UNITED TENNESSEE BANKSHARES, INC., 344 W. BROADWAY,
NEWPORT, TENNESSEE 37821-0249.
-8-<PAGE>
<PAGE>
[X]PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE UNITED TENNESSEE BANKSHARES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 19, 1998
The undersigned hereby appoints William B. Henry, Robert D. Self
and J. William Myers, with full powers of substitution, to act
as proxies for the undersigned, to vote all shares of common
stock of United Tennessee Bankshares, Inc. (the "Company")
which the undersigned is entitled to vote at the annual meeting
of stockholders (the "Annual Meeting"), to be held at the
Holiday Inn of Newport, Interstate 40 & Highway 32, Newport,
Tennessee, on Tuesday, May 19, 1998 at 5:00 p.m., and at any and
all adjournments thereof, as follows:
<TABLE>
<CAPTION>
WITH-
FOR HOLD EXCEPT
<S> <C> <C> <C>
1. The election as directors of all
nominees listed (except as marked
to the contrary below): [ ] [ ] [ ]
For Terms to Expire in 2001:
CLYDE E. DRISKILL, JR.
ROBERT L. OVERHOLT
For Term to Expire in 2000:
TOMMY C. BIBLE
For Term to Expire in 2001:
BEN W. HOOPER, III
INSTRUCTION: To withhold authority to vote for
any listed nominee, mark "EXCEPT" and write that
nominee's name in the space provided below.
________________________________________________
</TABLE>
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED
NOMINEES.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE LISTED NOMINEES. IF
ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS
PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE
WITH THE DETERMINATION OF THE BOARD OF DIRECTORS. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS
TO BE PRESENTED AT THE ANNUAL MEETING. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH
RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND
MATTERS INCIDENT TO THE CONDUCT OF THE ANNUAL MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Please be sure to sign and date this proxy in the box below
Date_________________________
_____________________________ _____________________________
Stockholders sign above. Co-holder (if any) sign above.
Should the undersigned be present and elect to vote at the
Annual Meeting or at any adjournment thereof and after
notification to the Secretary of the Company at the Annual
Meeting of the stockholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to
the execution of this proxy of notice of the annual meeting, a
proxy statement dated April 15, 1998 and an annual report to
stockholders.
Please sign exactly as your name appears on this proxy card.
When signing as attorney, executor, administrator, trustee or
guardian, please give your full title.
If shares are held jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY TODAY
