<PAGE>
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Registration No. 333-______
As filed with the Securities and Exchange Commission on
July 14, 1999
- ----------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------------------------
FORM S-8
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
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UNITED TENNESSEE BANKSHARES, INC.
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(Exact Name of Registrant as Specified in Its Charter)
TENNESSEE 62-1710108
------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
344 W. BROADWAY
NEWPORT, TENNESSEE 37821-0247
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(Address of Principal Executive Offices)
UNITED TENNESSEE BANKSHARES, INC. MANAGEMENT RECOGNITION PLAN
UNITED TENNESSEE BANKSHARES, INC. 1999 STOCK OPTION PLAN
- ----------------------------------------------------------------
(Full Title of the Plans)
RICHARD G. HARWOOD, PRESIDENT
UNITED TENNESSEE BANKSHARES, INC.
344 W. BROADWAY
NEWPORT, TENNESSEE 37821-0247
-------------------------------------
(Name and Address of Agent For Service)
(423) 623-6088
- ----------------------------------------------------------------
(Telephone Number, Including Area Code, of Agent For Service)
COPIES TO:
JAMES C. STEWART, ESQUIRE
DANIEL L. HOGANS, ESQUIRE
HOUSLEY KANTARIAN & BRONSTEIN, P.C.
1220 19th STREET N.W., SUITE 700
WASHINGTON, D.C. 20036
(202) 822-9611
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
==============================================================================
Title Of Securities Amount Proposed Maximum Proposed Maximum Amount Of
To Be To Be Offering Price Aggregate Offering Registration
Registered Registered Per Share Price Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
no par value 203,665 (1) (2) $2,317,684.91 (2) $644.32
=================================================================================================
<FN>
(1) Maximum number of shares issuable under the United Tennessee Bankshares, Inc. Management
Recognition Plan (58,190 shares) and the United Tennessee Bankshares, Inc. 1999 Stock Option
Plan (145,475 shares), as such amounts may be increased in accordance with said plans in the
event of a merger, consolidation, recapitalization or similar event involving the
Registrant.
(2) Under Rule 457(h) the registration fee may be calculated, inter alia, based upon the
exercise price ($11.28125)for shares covered by outstanding options (132,237) and for the
remaining shares (71,428) based on the average of the bid and ask price of the common
stock of the Registrant as reported on the Nasdaq SmallCapSMMarket on July 13, 1999 of
$11.5625 per share ($2,317,684.91 in the aggregate).
</FN>
</TABLE>
<PAGE>
<PAGE>
PART I
INFORMATION REQUIRED IN THE SECTION
10(a) PROSPECTUS
ITEM 1. PLAN INFORMATION*
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ITEM 2. REGISTRANT INFORMATION AND EMPLOYEE PLAN ANNUAL
- ------ INFORMATION*
*Documents containing the information required by Part
I of this Registration Statement will be sent or given to
participants in the United Tennessee Bankshares, Inc. Management
Recognition Plan and the United Tennessee Bankshares, Inc. 1999
Stock Option Plan (together, the "Plans") in accordance with
Rule 428(b)(1). In accordance with Note to Part I of Form S-8,
such documents are not filed with the Securities and Exchange
Commission (the "Commission") either as part of this Registra-
tion Statement or as prospectuses or prospectus supplements.
PART II
INFORMATION REQUIRED IN THE REGISTRATION STATEMENT
ITEM 3. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
- ------
United Tennessee Bankshares, Inc. (the "Company") is
subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "1934 Act") and, accor-
dingly, files periodic reports and other information with the
Commission. Reports, proxy statements and other information
concerning the Company filed with the Commission may be
inspected and copies may be obtained (at prescribed rates) at
the Commission's Public Reference Section, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549. The Commission also
maintains a Web site that contains reports, proxy and infor-
mation statements and other information regarding registrants
that file electronically with the Commission, including the
Company. The address for the Commission's Web site is
"http://www.sec.gov".
The following documents are incorporated by reference
in this Registration Statement:
(a) The Company's Annual Report on Form 10-KSB for the
fiscal year ended December 31, 1998 (Commission File No.
0-23551).
(b) The Company's Quarterly Report on Form 10-QSB for
the quarter ended March 31, 1999 (Commission File No. 0-23551).
(c) The Company's Current Reports on Form 8-K filed
January 26, 1999, May 4, 1999 and June 15, 1999. (Commission
File No. 0-23551).
(d) The description of the Company's securities
contained in the Company's Registration Statement on Form 8-A
filed December 27, 1997 (Commission File No. 0-23551).
ALL DOCUMENTS SUBSEQUENTLY FILED BY THE COMPANY
PURSUANT TO SECTIONS 13(a), 13(c), 14, AND 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED, AFTER THE DATE
HEREOF AND PRIOR TO THE TERMINATION OF THE OFFERING OF THE
SHARES OF COMMON STOCK, NO PAR VALUE ("COMMON STOCK") SHALL BE
DEEMED TO BE INCORPORATED BY REFERENCE IN THIS REGISTRATION
STATEMENT, AND TO BE A PART HEREOF FROM THE DATE OF FILING OF
SUCH DOCUMENTS.
1
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ITEM 4. DESCRIPTION OF SECURITIES
- ------
Not applicable, as the Common Stock is registered under
Section 12 of the Securities Exchange Act of 1934.
ITEM 5. INTERESTS OF NAMED EXPERTS AND COUNSEL
- ------
Not Applicable.
ITEM 6. INDEMNIFICATION OF DIRECTORS AND OFFICERS
- ------
Directors, officers and employees of the Company and/or
the Bank may be entitled to benefit from the indemnification
provisions contained in the Tennessee Business Corporation Act
(the "TBCA"), the Company's Charter and federal regulations
applicable to the Bank. Sections 48-18-501 through 48-18-508
of the TBCA set forth circumstances under which directors,
officers, employees and agents may be insured or indemnified
against liability which they may incur in their capacities.
TENNESSEE BUSINESS CORPORATION ACT
48-18-501 DEFINITIONS. -- In this part:
(1) "Corporation" includes any domestic or foreign
predecessor entity of a corporation in a merger or other
transaction in which the predecessor's existence ceased upon
consummation of the transaction;
(2) "Director" means an individual who is or was a
director of a corporation, including individuals acting pursuant
to Section 48-18-101, or an individual who, while a director of
a
corporation, is or was serving at the corporation's request as a
director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise. A
director is considered to be serving an employee benefit plan at
the corporation's request if his duties to the corporation also
impose duties on, or otherwise involve services by him to the
plan or to participants in or beneficiaries of the plan.
"Director" includes, unless the context requires otherwise, the
estate or personal representative of a director;
(3) "Expenses" includes counsel fees;
(4) "Liability" means the obligation to pay a
judgment, settlement, penalty, fine (including an excise tax
assessed with respect to an employee benefit plan), or
reasonable expenses incurred with respect to a proceeding;
(5) "Official capacity" means:
(A) When used with respect to a director, the office
of director in a corporation; and
(B) When used with respect to an individual other than
a director, as contemplated in Section 48-18-507, the office in
a corporation held by the officer or the employment or agency
relationship undertaken by the employee or agent on behalf of
the corporation. "Official capacity" does not include service
for any other foreign or domestic corporation or any partner-
ship, joint venture, trust, employee benefit plan, or other
enterprise;
(6) "Party" includes an individual who was, is , or is
threatened to be made a named defendant or respondent in a
proceeding; and
(7) "Proceeding" means any threatened, pending, or
completed action, suit, or proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal.
2
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<PAGE>
48-18-502 AUTHORITY TO INDEMNIFY. -- (a) Except as
provided in subsection (d), a corporation may indemnify an
individual made a party to a proceeding because he is or was a
director against liability incurred in the proceeding if:
(1) He conducted himself in good faith; and
(2) He reasonably believed:
(A) In the case of conduct in his official capacity
with the corporation, that his conduct was in its best interest;
and
(B) In all other cases, that his conduct was at least
not opposed to its best interests; and
(3) In the case of any criminal proceeding, he had no
reasonable cause to believe his conduct was unlawful.
(b) A director's conduct with respect to an employee
benefit plan for a purpose he reasonably believed to be in the
interests of the participants in and beneficiaries of the plan
is conduct that satisfies the requirement of subdivision
(a)(2)(B).
(c) The termination of a proceeding by judgment,
order, settlement, conviction, or upon a plea of nolo contendere
or its equivalent is not, of itself, determinative that the
director did not meet the standard of conduct described in this
section.
(d) A corporation may not indemnify a director under
this section:
(1) In connection with a proceeding by or in the right
of the corporation in which the director was adjudged liable to
the corporation; or
(2) In connection with any other proceeding charging
improper personal benefit to him, whether or not involving
action in his official capacity, in which he was adjudged liable
on the basis that personal benefit was improperly received by
him.
48-18-503 MANDATORY INDEMNIFICATION. -- Unless
limited by its charter, a corporation shall indemnify a director
who was wholly successful, on the merits or otherwise, in the
defense of any proceeding to which he was a party because he is
or was a director of the corporation against reasonable expenses
incurred by him in connection with the proceeding.
48-18-504 ADVANCE FOR EXPENSES. -- (a) A
corporation may pay for or reimburse the reasonable expenses
incurred by a director who is a party to a proceeding in advance
of final disposition of the proceeding if:
(1) The director furnishes the corporation a written
affirmation of his good faith belief that he has met the
standard of conduct described in Section 48-18-502;
(2) The director furnishes the corporation a written
undertaking, executed personally or on his behalf, to repay the
advance if it is ultimately determined that he is not entitled
to indemnification; and
(3) A determination is made that the facts then known
to those making the determination would not preclude
indemnification under this part.
(b) The undertaking required by subsection (a)(2) must
be an unlimited general obligation of the director but need not
be secured and may be accepted without reference to financial
ability to make repayment.
3
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(c) Determinations and authorizations of payments
under this section shall be made in the manner specified in
Section 48-18-506.
48-18-505 COURT ORDERED INDEMNIFICATION. -- Unless
a corporation's charter provides otherwise, a director of the
corporation who is a party to a proceeding may apply for
indemnification to the court conducting the proceeding or to
another court of competent jurisdiction. On receipt of an
application, the court, after giving any notice the court
considers necessary, may order indemnification if it determines:
(1) The director is entitled to mandatory indemnifi-
cation under Section 48-18-503, in which case the court shall
also order the corporation to pay the director's reasonable
expenses incurred to obtain court-ordered indemnification; or
(2) The director is fairly and reasonably entitled to
indemnification in view of all the relevant circumstances,
whether or not he met the standard of conduct set forth in
Section 48-18-502 or was adjudged liable as described in Section
48-18-502(d), but if he was adjudged so liable his
indemnification is limited to reasonable expenses incurred.
48-18-506 DETERMINATION AND AUTHORIZATION OF
INDEMNIFICATION. -- (a) A corporation may not indemnify a
director under Section 48-18-502 unless authorized in the
specific case after a determination has been made that
indemnification of
the director is permissible in the circumstances because he has
met the standard of conduct set forth in Section 48-18-502.
(b) The determination shall be made:
(1) By the board of directors by majority vote of a
quorum consisting of directors not at the time parties
to the proceeding;
(2) If a quorum cannot be obtained under subdivision
(1), by majority vote of a committee duly designated by the
board of director (in which designation directors who are
parties may participate), consisting solely of two (2) or more
directors not at the time parties to the proceeding;
(3) By independent special legal counsel:
(A) Selected by the board of directors or its
committee in the manner prescribed in subdivision (1) or (2); or
(B) If a quorum of the board of directors cannot be
obtained under subdivision (1) and a committee cannot be
designated under subdivision (2), selected by majority vote of
the full board of directors (in which selection directors who
are parties may participate); or
(4) By the shareholders, but shares owned by or voted
under the control of directors who are at the time parties to
the proceeding may not be voted on the determination.
(c) Authorization of the indemnification and evalua-
tion as to reasonableness of expenses shall be made in the same
manner as the determination that indemnification is permissible,
except that if the determination is made by special legal
counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled under
subdivision (b)(3) to select counsel.
48-18-507 INDEMNIFICATION OF OFFICERS, EMPLOYEES,
AND AGENTS. -- Unless a corporation's charter provides
otherwise:
4
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(1) An officer of the corporation who is not a
director is entitled to mandatory indemnification under Section
48-18-503, and is entitled to apply for court-ordered
indemnification under Section 48-18-505, in each case to the
same extent as a director;
(2) The corporation may indemnify and advance expenses
under this part to an officer, employee, or agent of the
corporation who is not a director to the same extent as to a
director; and
(3) A corporation may also indemnify and advance
expenses to an officer, employee, or agent who is not a director
to the extent, consistent with public policy, that may be
provided by its charter, bylaws, general or specific action of
its board of directors, or contract.
48-18-508 INSURANCE. -- A corporation may purchase
and maintain insurance on behalf of an individual who is or was
a director, officer, employee, or agent of the corporation,
or who, while a director, officer, employee, or agent of the
corporation, is or was serving at the request of the corporation
as a director, officer, partner, trustee, employee, or agent of
another foreign or domestic corporation, partnership, joint
venture, trust, employee benefit plan, or other enterprise,
against liability asserted against or incurred by him in that
capacity or arising from his status as a director, officer,
employee, or agent, whether or not the corporation would have
power to indemnify him against the same liability under Section
48-18-502 or Section 48-18-503.
CHARTER OF THE COMPANY
Article XIII of the Company's Charter sets forth
circumstances under which directors,
officers, employees and agents may be insured or indemnified
against liability which they may
incur in their capacities.
ARTICLE XIII - INDEMNIFICATION
(A) Except as provided in Section (B) of this Article,
the Corporation shall indemnify a director who is made a party
to any threatened, pending, or completed action, suit or
proceeding, whether civil, criminal, administrative, or
investigative ("proceeding"), because he is or was a director
against liability incurred in such proceeding if (1) he
conducted himself in good faith; (2) he reasonably believed, (a)
in the case of conduct in his official capacity with the
Corporation, that his conduct was in the Corporation's best
interest and, (b) in all other cases, that his conduct was at
least not opposed to its best interests; and, (3) in the case of
any criminal proceeding, he had no reasonable cause to believe
his conduct was unlawful.
The Corporation shall further indemnify any director
and any officer who is not a director who was wholly successful,
on the merits or otherwise, in the defense of any proceedings to
which he was a party because he is or was a director of the
Corporation against reasonable expenses incurred by him in
connection with the proceeding.
(B) The Corporation shall not indemnify a director in
connection with a proceeding by or in the right of the
Corporation in which the director was adjudged liable to the
Corporation or in connection with any other proceeding charging
improper personal benefit to him, whether or not involving
action in his official capacity, in which he was adjudged liable
on the basis that personal benefit was improperly received by
him.
(C) The Corporation may pay for or reimburse the
reasonable expenses incurred by a director who is a party to a
proceeding in advance of final disposition of the proceeding if
(1) the director furnishes the Corporation a written affirmation
of his good faith belief that he has met the standard of conduct
set forth in Section (A) of this Article; (2) he provides the
Corporation a written undertaking, executed personally or on his
behalf, to repay the advance if it is ultimately determined that
he is not entitled to indemnification; and (3) a determination
is made that the facts then known to those making the
determination would not preclude indemnification under this
Article XIII.
(D) The Corporation may not indemnify a director
hereunder unless authorized in the specific case after a
determination has been made that indemnification of the director
is permissible in the circumstances because he has met the
standard set forth in Section (A) of this Article XIII. The
determination shall be made:
5
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(1) By the board of directors by majority vote of
a quorum consisting of directors not at the time
parties to the proceeding;
(2) If a quorum cannot be obtained under
Subsection (1) of this Section, by majority vote of a
committee duly designated by the board of directors (in
which designation directors who are parties may
participate), consisting solely of two or more
directors not at the time parties to the proceeding;
(3) By independent special legal counsel;
(a) Selected by the board of directors or its
committee in the manner prescribed in Subsections
(1)or (2) of this Section;
(b) If a quorum of the board of directors
cannot be obtained under Subsection (1) of this
Section and a committee cannot be designated under
Subsection (2) of this Section, selected by
majority vote of the full board of directors (in
which selection directors who are parties may
participate); or
(4) By the shareholders, but shares owned by or
voted under the control of directors who are at the
time parties to the proceeding may not be voted on the
determination.
(E) Authorization of indemnification and evaluation
that indemnification is permissible shall be made in the same
manner as the determination that indemnification is permissible,
except that, if the determination is made by special legal
counsel, authorization of indemnification and evaluation as to
reasonableness of expenses shall be made by those entitled
under Subsection (3) of this Section to select counsel.
(F) The Corporation may indemnify and advance expenses
to an officer, employee or agent of the Corporation who is not a
director to the same extent as a director hereunder.
(G) The Corporation may purchase and maintain
insurance on behalf of an individual who is or was a director,
officer, employee, or agent of the Corporation, or who, while a
director, officer, employee, or agent of the Corporation, is or
was serving at the request of the Corporation as a director,
officer, partner, trustee, employee, or agent of another foreign
or domestic corporation, partnership, joint venture, employee
benefit plan or other enterprise, against liability asserted
against or incurred by him in that capacity or arising from his
status as a director, officer, employee or agent, whether or not
the Corporation would have power to indemnify him against the
same liability hereunder.
ITEM 7. EXEMPTION FROM REGISTRATION CLAIMED
- ------
Not Applicable.
ITEM 8. EXHIBITS
- ------
For a list of all exhibits filed or included as part of
this Registration Statement, see "Index to Exhibits" at the end
of this Registration Statement.
ITEM 9. UNDERTAKINGS
- ------
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to
this registration statement --
(i) To include any prospectus required by
Section 10(a)(3) of the Securities Act of 1933;
6
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<PAGE>
(ii) To reflect in the prospectus any facts
or events which, individually or together,
represent a fundamental change in the information
set forth in the registration statement. Not-
withstanding the foregoing, any increase or
decrease in volume of securities offered (if the
total dollar value of securities offered would not
exceed that which was registered) and any devia-
tion from the low or high end of the estimated
maximum offering range may be reflected in the
form of prospectus filed with the SEC pursuant to
Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than 20 percent
change in the maximum aggregate offering price set
forth in the "Calculation of Registration Fee"
table in the effective registration statement;
(iii) To include any additional or changed
material information on to the plan of distri-
bution; provided, however, that paragraphs
(a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3 or S-8, and
the information required to be included in a post-
effective amendment is incorporated by reference
from the periodic reports filed by the small
business issuer under the Securities Exchange Act
of 1934.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new
registration statement relating to the securities
offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide
offering thereof.
(3) To file a post-effective amendment to remove
from registration any of the securities that remain
unsold at the end of the offering.
The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant
to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit
plan's annual report pursuant to Section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising
under the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the small business issuer
pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act of 1933
and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the small business issuer of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Securities Act of 1933 and will be governed by the final
adjudication of such issue.
7
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SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, as amended, the registrant certifies that it has
reasonable grounds to believe that it meets all of the
requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the
undersigned thereunto duly authorized, in the City of Newport,
State of Tennessee, on July 12, 1999.
UNITED TENNESSEE BANKSHARES, INC.
By: /s/ Richard G. Harwood
-------------------------------------
Richard G. Harwood
President and Chief Executive Officer
(Duly Authorized Representative)
POWER OF ATTORNEY
We, the undersigned Directors of United Tennessee
Bankshares, Inc., hereby severally constitute and appoint
Richard G. Harwood, who may act, with full power of substi-
tution, our true and lawful attorney and agent, to do any and
all things in our names in the capacities indicated below which
said Richard G. Harwood, who may act, may deem necessary or
advisable to enable United Tennessee Bankshares, Inc. to comply
with the Securities Act of 1933, as amended, and any rules,
regulations and requirements of the Securities and Exchange
Commission, in connection with the registration of United
Tennessee Bankshares, Inc. common stock, including specifically,
but not limited to, power and authority to sign for us in our
names in the capacities indicated below, the registration
statement and any and all amendments (including post-effective
amendments) thereto; and we hereby ratify and confirm all that
said Richard G. Harwood shall do or cause to be done by virtue
thereof.
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Richard G. Harwood President and Chief Executive July 12, 1999
- --------------------------- Officer, Director and Principal
Richard G. Harwood Executive, Financial and Accounting Officer
/s/ J. William Myers Chairman of the Board July 12, 1999
- --------------------------- of Directors
J. William Myers
/s/ Tommy C. Bible Director July 12, 1999
- ---------------------------
Tommy C. Bible
/s/ Clyde E. Driskill, Jr. Director July 12, 1999
- ---------------------------
Clyde E. Driskill, Jr.
/s/ William B. Henry Director July 12, 1999
- ---------------------------
William B. Henry
/s/ Ben W. Hooper, III Director July 12, 1999
---------------------------
Ben W. Hooper, III
Director
- ---------------------------
Robert L. Overholt
/s/ Robert D. Self Director July 12, 1999
- ---------------------------
Robert D. Self
</TABLE>
<PAGE>
<PAGE>
INDEX TO EXHIBITS
Exhibit Description
--------- -----------
5.1 Opinion of Housley Kantarian & Bronstein, P.C.
as to the validity of the Common Stock being
registered
23.1 Consent of Housley Kantarian & Bronstein, P.C.
(appears in their opinion filed as Exhibit
5.1)
23.2 Consent of Pugh & Company, P.C.
24 Power of Attorney (contained in the signature
page to this registration statement)
99.1 United Tennessee Bankshares, Inc. Management
Recognition Plan and associated trust
agreement
99.2 United Tennessee Bankshares, Inc. 1999 Stock
Option Plan
99.3 Form of Stock Option Agreement to be entered
into with Optionees with respect to Incentive
Stock Options granted under the United
Tennessee Bankshares, Inc. 1999 Stock
Option Plan
99.4 Form of Stock Option Agreement to be entered
into with Optionees with respect to
Non-Incentive Stock Options granted under the
United Tennessee Bankshares, Inc. 1999
Stock Option Plan
99.5 Form of Agreement to be entered into with
Optionees with respect to Stock Appreciation
Rights granted under the United Tennessee
Bankshares, Inc. 1999 Stock Option Plan
99.6 Notice of MRP Award
99.7 Memorandum concerning taxation of MRP Awards,
and associated election form
<PAGE>
July 12, 1999
Board of Directors
United Tennessee Bankshares, Inc.
344 W. Broadway
Newport, Tennessee 37821-0247
Re: United Tennessee Bankshares, Inc. Management
Recognition Plan and United Tennessee Bankshares,
Inc. 1999 Stock Option Plan
-------------------------------------------------
Registration Statement on Form S-8
Gentlemen:
We have acted as special counsel to United Tennessee
Bankshares, Inc., a Tennessee corporation (the "Company"), in
connection with the preparation of the Registration Statement on
Form S-8 (the "Registration Statement") to be filed with the
Securities and Exchange Commission under the Securities Act of
1933, as amended, relating to 203,665 shares of common stock, no
par value (the "Common Stock") of the Company which may be
issued pursuant to the United Tennessee Bankshares, Inc.
Management Recognition Plan and the United Tennessee Bankshares,
Inc. 1999 Stock Option Plan (together, the "Plans"), all as more
fully described in the Registration Statement. You have
requested the opinion of this firm with respect to certain legal
aspects of the proposed offering.
We have examined such documents, records and matters of
law as we have deemed necessary for purposes of this opinion and
based thereon, we are of the opinion that the Common Stock when
issued pursuant to and in accordance with the terms of the Plans
will be legally issued, fully paid, and nonassessable.
We hereby consent to the filing of this opinion as an
exhibit to the Registration Statement and to references to our
firm included under the caption "Legal Opinion" in the
Prospectus which is part of the Registration Statement.
Very truly yours,
Housley Kantarian & Bronstein, P.C.
By: /s/ James C. Stewart, Esquire
-------------------------------
James C. Stewart, Esquire
<PAGE>
[LETTERHEAD OF PUGH & COMPANY, P.C.]
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
United Tennessee Bankshares, Inc.
344 W. Broadway
Newport, Tennessee 37821-0247
Re: Registration Statement on Form S-8
United Tennessee Bankshares, Inc. Management
Recognition Plan and
United Tennessee Bankshares, Inc. 1999 Stock Option Plan
We consent to the incorporation by reference in this
Registration Statement on Form S-8 of our report dated January
29, 1999, on our audits of the consolidated statements of
financial condition of United Tennessee Bankshares, Inc. and
subsidiary as of December 31, 1998 and 1997, and the related
consolidated statements of income, comprehensive income, changes
in shareholders' equity and cash flows for the years ended
December 31, 1998, 1997 and 1996, which were included or
incorporated by reference in United Tennessee Bankshares, Inc.'s
Annual Report on Form 10-KSB for the fiscal year ended
December 31, 1998.
/s/ Pugh & Company, P.C.
-------------------------------
Pugh & Company, P.C.
July 9, 1999
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UNITED TENNESSEE BANKSHARES, INC.
MANAGEMENT RECOGNITION PLAN
ARTICLE I
ESTABLISHMENT OF THE PLAN
1.01 The Company hereby establishes this Plan upon the
terms and conditions hereinafter stated.
1.02 Through acceptance of their appointment to the
Committee, each member of the Committee hereby accepts his or
her appointment hereunder upon the terms and conditions
hereinafter stated.
ARTICLE II
PURPOSE OF THE PLAN
2.01 The purpose of the Plan is to reward and retain
personnel of experience and ability in key positions of
responsibility by providing Employees and Directors of the
Company, the Bank, and their Affiliates with a proprietary
interest in the Company, and as compensation for their past
contributions to the Bank, and as an incentive to make such
contributions in the future.
ARTICLE III
DEFINITIONS
The following words and phrases when used in this Plan with
an initial capital letter, shall have the meanings set forth
below unless the context clearly indicates otherwise. Wherever
appropriate, the masculine pronoun shall include the feminine
pronoun and the singular shall include the plural.
3.01 "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Internal
Revenue Code of 1986, as amended.
3.02 "Bank" means Newport Federal Bank.
3.03 "Beneficiary" means the person or persons
designated by a Participant to receive any benefits payable
under the Plan in the event of such Participant's death. Such
person or persons shall be designated in writing on forms
provided for this purpose by the Committee and may be changed
from time to time by similar written notice to the Committee.
In the absence of a written designation, the Beneficiary shall
be the Participant's surviving spouse, if any or if none, his
estate.
3.04 "Board" means the Board of Directors of the
Company.
3.05 "Change in Control" shall mean any one of the
following events: (i) the acquisition of ownership, holding or
power to vote more than 25% of the voting stock of the
Association or the Company, (ii) the acquisition of the ability
to control the election of a majority of the Association's or
the Company's directors, (iii) the acquisition of a controlling
influence over the management or policies of the Association or
of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange
Act of 1934), or (iv) during any period of two consecutive
years, individuals (the "Continuing Directors") who at the
beginning of such period constitute the Board of Directors of
the Association or of the Company (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
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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. Notwithstanding the
foregoing, the Company's ownership of the Association shall not
of itself constitute a Change in Control for purposes of the
Agreement. 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.
3.06 "Committee" means the Management Recognition Plan
Committee appointed by the Board pursuant to Article IV hereof.
3.07 "Common Stock" means shares of the common stock of
the Company.
3.08 "Company" means United Tennessee Bankshares, Inc.
3.09 "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company in the case of transfers between payroll locations of
the Company or between the Company, an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
3.10 "Date of Conversion" means the date of the
conversion of Newport Federal Savings & Loan Association from
mutual to stock form.
3.11 "Director" means a member of the Board.
3.12 "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
3.13 "Effective Date" means the date on which the Plan
first becomes effective, as determined under Section 8.07
hereof.
3.14 "Employee" means any person who is employed by the
Company or an Affiliate.
3.15 "Non-Employee Director" shall have the meaning
provided in Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended.
3.16 "Participant" means an Employee or Director who
holds a Plan Share Award.
3.17 "Plan" means this United Tennessee Bankshares, Inc.
Management Recognition Plan.
3.18 "Plan Shares" means shares of Common Stock held in
the Trust which are awarded or issuable to a Participant
pursuant to the Plan.
3.19 "Plan Share Award" means a right granted under this
Plan to receive Plan Shares.
3.20 "Plan Share Reserve" means the shares of Common
Stock held by the Trustee pursuant to Sections 5.02 and 5.03.
3.21 "Trust" and "Trust Agreement" mean the restated
grantor trust agreement entered into pursuant to the terms
hereof between the Company and the Trustee, and "Trust" means
the trust created thereunder.
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3.22 "Trustee" means that person(s) or entity appointed
by the Board pursuant to the Trust Agreement to hold legal title
to the Plan assets for the purposes set forth herein.
3.23 "Year of Service" shall mean a full twelve-month
period, measured from the date of a Plan Share Award and each
annual anniversary of that date, during which a Participant's
Continuous Service has not terminated for any reason.
ARTICLE IV
ADMINISTRATION OF THE PLAN
4.01 ROLE AND POWERS OF THE COMMITTEE. The Plan shall be
administered and interpreted by the Committee, which shall
consist of not less than two members of the Board who are
Non-Employee Directors. In the absence at any time of a duly
appointed Committee, the Plan shall be administered by those
members of the Board who are Non-Employee Directors, and by the
Board if there are less than two Non-Employee Directors.
The Committee shall have all of the powers allocated to it
in this and other Sections of the Plan. Except as limited by
the express provisions of the Plan or by resolutions adopted by
the Board, the Committee shall have sole and complete authority
and discretion, subject to compliance with the Office of Thrift
Supervision regulations, (i) to make Plan Share Awards to such
Employees as the Committee may select, (ii) to determine the
form and content of Plan Share Awards to be issued under the
Plan, (iii) to interpret the Plan, (iv) to prescribe, amend and
rescind rules and regulations relating to the Plan, and (v) to
make other determinations necessary or advisable for the
administration of the Plan. The Committee shall have and may
exercise such other power and authority as may be delegated to
it by the Board from time to time. Subject to Section 4.02, the
interpretation and construction by the Committee of any
provisions of the Plan or of any Plan Share Award granted
hereunder shall be final and binding. The Committee shall act
by vote or written consent of a majority of its members, and
shall report its actions and decisions with respect to the Plan
to the Board at appropriate times, but in no event less than one
time per calendar year. The Committee may recommend to the
Board one or more persons or entity to act as Trustee(s) in
accordance with the provisions of this Plan and the Trust.
4.02 ROLE OF THE BOARD. The members of the Committee
shall be appointed or approved by, and will serve at the
pleasure of, the Board. The Board may in its discretion from
time to time remove members from, or add members to, the
Committee. The Board shall have all of the powers allocated
to it in this and other Sections of the Plan, may take any
action under or with respect to the Plan which the Committee is
authorized to take, and may reverse or override any action taken
or decision made by the Committee under or with respect to the
Plan, provided, however, that the Board may not revoke any Plan
Share Award already made or impair a participant's vested rights
under a Plan Share Award. Members of the Board who are eligible
for or who have been granted Plan Share Awards (other than
pursuant to Section 6.04) may not vote on any matters affecting
the administration of the Plan or the grant of Plan Shares or
Plan Share Awards (although such members may be counted in
determining the existence of a quorum at any meeting of the
Board during which actions with regard thereto are taken).
Further, with respect to all actions taken by the Board in
regard to the Plan, such action shall be taken by a majority of
the Board where such a majority of the directors acting in the
matter are Non-Employee Directors.
4.03 LIMITATION ON LIABILITY. No member of the Board or
the Committee or the Trustee(s) shall be liable for any
determination made in good faith with respect to the Plan or any
Plan Shares or Plan Share Awards granted under it. If a member
of the Board or the Committee or any Trustee is a party or is
threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of anything done or
not done by him in such capacity under or with respect to the
Plan, the Company shall indemnify such member against expenses
(including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding if he or she
acted in good faith and in a manner he or she reasonably
believed to be in the best interests of the Company and its
Affiliates and, with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was
unlawful.
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ARTICLE V
CONTRIBUTIONS; PLAN SHARE RESERVE
5.01 AMOUNT AND TIMING OF CONTRIBUTIONS. The Board shall
determine the amounts (or the method of computing the amounts)
to be contributed by the Company to the Trust, provided that the
Bank may also make contributions to the Trust. Such amounts
shall be paid to the Trustee at the time of contribution. No
contributions to the Trust by Employees shall be permitted.
5.02 INVESTMENT OF TRUST ASSETS; MAXIMUM PLAN SHARE
AWARDS. The Trustee shall invest Trust assets only in accor-
dance with the Trust Agreement; provided that the Trust shall
not purchase, and Plan Share Awards shall not be made with
respect to, more than 58,190 Shares (with such number being
subject to adjustment pursuant to Section 8.01(a) hereof, and
increased to the extent necessary to permit the purchase of
Shares with any dividends accrued pursuant to Section 7.02
hereof). Such shares may be newly issued Shares, treasury
Shares, or Shares held in grantor trust.
5.03 EFFECT OF ALLOCATIONS, RETURNS AND FORFEITURES UPON
PLAN SHARE RESERVES. Upon the allocation of Plan Share Awards
under Section 6.02, the Plan Share Reserve shall be reduced by
the number of Shares subject to the Awards so allocated. Any
Shares subject or attributable to an Award which may not be
earned because of a forfeiture by the Participant pursuant to
Section 7.01 shall be added to the Plan Share Reserve.
ARTICLE VI
ELIGIBILITY; ALLOCATIONS
6.01 ELIGIBILITY. Except as otherwise provided in Section
6.04 hereof, the Committee shall make Plan Share Awards only to
Employees. In selecting those Employees to whom Plan Share
Awards will be granted and the number of shares covered by such
Awards, the Committee shall consider the position, duties and
responsibilities of the eligible Employees, the value of their
services to the Company and its Affiliates, and any other
factors the Committee may deem relevant. Notwithstanding the
foregoing, the Committee shall automatically make the Plan Share
Awards specified in Section 6.04 hereof.
6.02 ALLOCATIONS. The Committee will determine which
Employees will be granted discretionary Plan Share Awards, and
the number of Shares covered by each Plan Share Award, provided
that in no event shall any Awards be made which will violate the
governing instruments of the Bank or its Affiliates or any
applicable federal or state law or regulation. In the event
Plan Shares are forfeited for any reason or additional shares of
Common Stock are purchased by the Trustee, the Committee may,
from time to time, determine which of the Employees referenced
in Section 6.01 above will be granted additional Plan Share
Awards to be awarded from the forfeited or acquired Plan Shares.
6.03 FORM OF ALLOCATION. As promptly as practicable after
a determination is made pursuant to Section 6.02 that a Plan
Share Award is to be made, the Committee shall notify the
Participant in writing of the grant of the Award, the number of
Plan Shares covered by the Award, and the terms upon which the
Plan Shares subject to the Award may be earned. The date on
which the Committee so notifies the Participant shall be
considered the date of grant of the Plan Share Awards. The
Committee shall maintain records as to all grants of Plan Share
Awards under the Plan.
6.04 AUTOMATIC GRANTS. In addition, on the Effective
Date, each of the following individuals shall receive a Plan
Share Award as to the number of Plan Shares listed below:
SHARES SUBJECT TO
EMPLOYEE PLAN SHARE AWARD
-------- ----------------
Richard Harwood 14,547
Nancy Bryant 7,667
Peggy Holston 6,881
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Each of Directors Myers, Henry, Self, Driskill, and Overholt
shall receive, on the Effective Date, a Plan Share Award for
4,350 Shares. Plan Share Awards received under the provisions
of this Section shall become vested and nonforfeitable according
to the general rules set forth in subsections (a) and (b) of
Section 7.01, and the Committee shall have no discretion to
alter or accelerate said vesting requirements. Unless otherwise
inapplicable or inconsistent with the provisions of this Sec-
tion, the Plan Share Awards to be granted hereunder shall be
subject to all other provisions of this Plan.
6.05 ALLOCATIONS NOT REQUIRED. Notwithstanding anything
to the contrary in Sections 6.01 and 6.02, but subject to
Section 6.04, no Employee or Director shall have any right or
entitlement to receive a Plan Share Award hereunder, such Awards
being at the total discretion of the Committee, nor shall any
Employees or Directors as a group have such a right. The
Committee may, with the approval of the Board (or, if so
directed by the Board) return all Common Stock in the Plan Share
Reserve to the Company at any time and cease issuing Plan Share
Awards.
ARTICLE VII
EARNINGS AND DISTRIBUTION OF PLAN SHARES; VOTING RIGHTS
7.01 EARNING PLAN SHARES; FORFEITURES.
(a) GENERAL RULES. Unless the Committee, in its discre-
tion, imposes a different vesting schedule on a Plan Share
Award, twenty-five percent (25%) of the Plan Shares subject to a
Plan Share Award shall be earned and non-forfeitable immediately
upon award, and an additional twenty-five percent (25%) shall
become earned and non-forfeitable upon the Participant's comple-
tion of each of the next three Years of Service.
(b) ACCELERATION FOR TERMINATIONS DUE TO RETIREMENT, DEATH,
DISABILITY, OR CHANGE IN CONTROL. Notwithstanding the general
rule contained in Section 7.01(a) above: (i) all Plan Shares
subject to a Plan Share Award held by a Participant whose
service with the Company or an Affiliate terminates due to
the Participant's retirement at or after age 70, death, or
Disability shall be deemed earned and 100% vested as of the
Participant's last day of service with the Company or an
Affiliate, and (ii) all Plan Shares subject to a Plan Share
Award held by a Participant shall be deemed earned and 100%
vested as of the earlier of a Change in Control or, if earlier,
the execution of an agreement to effect a Change in Control.
(c) DISCRETIONARY ACCELERATION. Notwithstanding Sections
7.01(a) and 7.01(b) above, the Committee may at any time and for
any lawful reason accelerate the vesting on all or any part of a
Participant's Plan Share Award.
7.02 ACCRUAL OF DIVIDENDS. Whenever Plan Shares are paid
to a Participant or Beneficiary under Section 7.03, such
Participant or Beneficiary shall also be entitled to receive,
with respect to each Plan Share paid, an amount equal to any
cash dividends (including special large and nonrecurring
dividends, including one that has the effect of a return of
capital to the Company's stockholders) and a number of shares of
Common Stock equal to any stock dividends, declared and paid
with respect to a share of Common Stock between the date the
relevant Plan Share Award was initially granted to such
Participant and the date the Plan Shares are being distributed.
There shall also be distributed an appropriate amount of net
earnings, if any, of the Trust with respect to any cash
dividends so paid out.
7.03 DISTRIBUTION OF PLAN SHARES.
(a) TIMING OF DISTRIBUTIONS: GENERAL RULE. Except as
provided in subsections (c) and (d) below, the Trustee shall
distribute Plan Shares and accumulated cash from dividends and
interest to the Participant or his Beneficiary, as the case may
be, as soon as practicable after they have been earned. No
fractional shares shall be distributed.
(b) FORM OF DISTRIBUTION. The Trustee shall distribute
all Plan Shares, together with any shares representing stock
dividends, in the form of Common Stock. One share of Common
Stock shall be given for each Plan Share earned. Payments
representing cash dividends (and earnings thereon) shall be
made in cash.
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(c) WITHHOLDING. The Trustee shall withhold from any cash
payment made under this Plan sufficient amounts to cover any
applicable withholding and employment taxes, and if the amount
of such cash payment is not sufficient, the Trustee shall
require the Participant or Beneficiary to pay to the Trustee
the amount required to be withheld as a condition of delivering
the Plan Shares. The Trustee shall pay over to the Company or
Affiliate which employs or employed such Participant any such
amount withheld from or paid by the Participant or Beneficiary.
(d) TIMING: EXCEPTION FOR 10% SHAREHOLDERS. Notwith-
standing Subsections (a) and (b) above, no Plan Shares may be
distributed prior to the date which is five (5) years from the
Date of Conversion to the extent the Participant or Beneficiary,
as the case may be, would after receipt of such Shares own in
excess of ten percent (10%) of the issued and outstanding shares
of Common Stock unless such action is approved in advance by a
majority vote of non-employee directors of the Board. To the
extent this limitation would delay the date on which a Parti-
cipant receives Plan Shares, the Participant may elect to
receive from the Trust, in lieu of vested Plan Shares, a cash
amount equal to the fair market value of such Plan Shares. Any
Plan Shares remaining undistributed solely by reason of the
operation of this Subsection (d) shall be distributed to the
Participant or his Beneficiary on the date which is five years
from the Date of Conversion.
(e) REGULATORY EXCEPTIONS. No Plan Shares shall be
distributed unless and until all of the requirements of all
applicable law and regulation shall have been fully complied
with, including the receipt of approval of the Plan by the
stockholders of the Company by such vote, if any, as may be
required by applicable law and regulations.
7.04 VOTING OF PLAN SHARES. All shares of Common Stock
held by the Trust (whether or not subject to a Plan Share Award)
shall be voted by the Trustee in the same proportion as the
trustee of the Company's Employee Stock Ownership Plan votes
Common Stock held in the trust associated therewith, and
in the absence of any such voting, shall be voted in the manner
directed by the Board.
7.05 DEFERRAL ELECTIONS BY PARTICIPANTS. At any time that
is at least six months prior to the next date on which a Parti-
cipant is scheduled to become vested in the unvested portion of
his or her Plan Share Award, the Participant may irrevocably
elect, on the form attached hereto as Exhibit "A" (the "Election
Form"), to defer the receipt of all or a percentage of the Plan
Shares that would otherwise be transferred to the Participant
upon the future vesting of such award (the "Deferred Shares").
The MRP Committee shall establish and maintain an individual
account in the name of each Participant who files an Election
Form for the purpose of tracking deferred earnings attributable
to cash dividends paid on Deferred Shares (the "Cash Account").
On the last day of each fiscal year of the Company, the
Committee shall credit to the Participant's Cash Account
earnings on the balance of the Cash Account at a rate equal to
the yield on Common Stock, as determined from time to time
by the MRP Committee in its sole discretion.
The Deferred Shares, together with any cash or stock
dividends attributable thereto (the "Deferred Earnings"), will
be distributed to the Participant in accordance with the
deferral schedule (the "Deferral Schedule") selected by the
Participant in his or her Election Form. The Trustee shall
hold each Participant's Deferred Shares and Deferred Earnings in
the Trust until distribution is required pursuant to the
election set forth in the Participant's Election Form.
Notwithstanding any other provision of the Plan or a
Participant's Election Form, in the event the Participant
suffers an unforeseeable emergency hardship within the contem-
plation of this paragraph, the Participant may apply to the
Committee for a distribution of all or a portion of his Deferred
Shares and Deferred Earnings prior to the basis for any such
distribution. The hardship must result from a sudden and
unexpected illness or accident of the Participant or a dependent
of the Participant, casualty loss of property, or other similar
conditions beyond the control of the Participant. Examples of
purposes which are not considered hardships include
post-secondary school expenses or the desire to purchase a
residence. In no event will a distribution be made to the
extent the hardship could be relieved through reimbursement or
compensation by insurance or otherwise, or by liquidation of the
Participant's nonessential assets to the extent such liquidation
would not itself cause a severe financial hardship. The amount
of any distribution hereunder shall be limited to the amount
necessary to relieve the Participant's financial hardship. The
determination of whether a Participant has a qualifying hardship
and the amount which qualifies for distribution, if any, shall
be made by the
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Committee in its sole discretion. The Committee may require
evidence of the purpose and amount of the need, and may
establish such application or other procedures as it deems
appropriate.
No Participant may assign his or her claim to Deferred
Shares and Deferred Earnings during his or her lifetime, and any
deferral election made hereunder shall be irrevocable. A
Participant's right to Deferred Shares and Deferred Earnings
shall at all times constitute an unsecured promise of the
Company to pay benefits as they come due. The right of the
Participant or his or her beneficiary to receive benefits
hereunder shall be solely an unsecured claim against the general
assets of the Company. Neither the Participant nor his or her
beneficiary shall have any claim against or rights in any
specific assets or other fund of the Company, and any assets in
the Trust shall be deemed general assets of the Company.
All distributions made by the Company and/or the Trustees
pursuant to elections made hereunder shall be subject to
applicable federal, state, and local tax withholding and to such
other deductions as shall at the time of such payment be
required under any income tax or other law, whether of the
United States or any other jurisdiction, and, in the case of
payments to a beneficiary, the delivery to the Committee and/or
Trustees of all necessary waivers, qualifications and other
documentation.
ARTICLE VIII
MISCELLANEOUS
8.01 ADJUSTMENTS FOR CAPITAL CHANGES.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and
kind of shares which may be purchased under the Plan, and the
number and kind of shares subject to outstanding Plan Share
Awards, shall be proportionately adjusted for any increase,
decrease, change or exchange of shares of Common Stock for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation, recapitali-
zation, reorganization, reclassification, stock dividend,
split-up, combination of shares, or similar event in which the
number or kind of shares is changed without the receipt or
payment of consideration by the Company.
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE SURVIVING
ENTITY. In the event of (i) the liquidation or dissolution of
the Company, (ii) a merger or consolidation in which the Company
is not the surviving entity, or (iii) the sale or disposition of
all or substantially all of the Company's assets (any of the
foregoing to be referred to herein as a "Transaction"), all
outstanding Plan Share Awards shall be adjusted for any change
or exchange of shares of Common Stock for a different number or
kind of shares or other securities which results from the
Transaction.
(c) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR
DIFFERENT SHARES OR SECURITIES. If, by reason of any adjustment
made pursuant to this Section, a Participant becomes entitled to
new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and
restrictions which were applicable to the shares pursuant to the
Plan Share Award before the adjustment was made. In addition,
the Committee shall have the discretionary authority to impose
on the Shares subject to Plan Share Awards to Employees such
restrictions as the Committee may deem appropriate or desirable,
including but not limited to a right of first refusal, or
repurchase option, or both of these restrictions.
(d) OTHER ISSUANCES. Except as expressly provided in this
Section, the issuance by the Company or an Affiliate of shares
of stock of any class, or of securities convertible into shares
of Common Stock or stock of another class, for cash or property
or for labor or services either upon direct sale or upon the
exercise of rights or warrants to subscribe therefor, shall not
affect, and no adjustment shall be made with respect to, the
number or class of shares of Common Stock then subject to Plan
Share Awards or reserved for issuance under the Plan.
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8.02 AMENDMENT AND TERMINATION OF PLAN. The Board may, by
resolution, at any time amend or terminate the Plan; provided
that no amendment or termination of the Plan shall, without the
written consent of a Participant, impair any rights or
obligations under a Plan Share Award theretofore granted
to the Participant.
The power to amend or terminate the Plan in accordance with
this Section 8.02 shall include the power to direct the Trustee
to return to the Company all or any part of the assets of the
Trust, including shares of Common Stock held in the Plan Share
Reserve. However, the termination of the Trust shall not affect
a Participant's right to earn Plan Share Awards and to receive a
distribution of Common Stock relating thereto, including
earnings thereon, in accordance with the terms of this Plan and
the grant by the Committee or the Board.
8.03 NONTRANSFERABILITY. Plan Share Awards may not be
sold, pledged, assigned, hypothecated, transferred or disposed
of in any manner other than by will or by the laws of descent
and distribution. Notwithstanding the foregoing, or any other
provision of this Plan, a Participant who holds Plan Share
Awards may transfer such Awards to his or her spouse, lineal
ascendants, lineal descendants, or to a duly established trust
for the benefit of one or more of these individuals. Plan Share
Awards so transferred may thereafter be transferred only to the
Participant who originally received the grant or to an
individual or trust to whom the Participant could have initially
transferred the Awards pursuant to this Section 8.03. Plan
Share Awards which are transferred pursuant to this Section 8.03
shall be exercisable by the transferee according to the same
terms and conditions as applied to the Participant.
8.04 NO EMPLOYMENT OR OTHER RIGHTS. Neither the Plan nor
any grant of a Plan Share Award or Plan Shares hereunder nor any
action taken by the Trustee, the Committee or the Board in
connection with the Plan shall create any right, either express
or implied, on the part of any Employee or Director to continue
in the service of the Company, the Bank, or an Affiliate
thereof.
8.05 VOTING AND DIVIDEND RIGHTS. No Participant shall
have any voting or dividend rights or other rights of a
stockholder in respect of any Plan Shares covered by a Plan
Share Award prior to the time said Plan Shares are actually
distributed to him.
8.06 GOVERNING LAW. The Plan and Trust shall be governed
and construed under the laws of the State of Tennessee to the
extent not preempted by Federal law.
8.07 EFFECTIVE DATE. The Plan shall become effective
January 12, 1999, provided that the effectiveness of the Plan
and any Plan Share Award shall be contingent upon the Plan's
approval by a favorable vote of stockholders of the Company who
own at least a majority of the total votes cast at a duly called
meeting of the Company's stockholders held in accordance with
applicable law.
8.08 TERM OF PLAN. This Plan shall remain in effect until
the earlier of (i) termination by the Board, or (ii) the
distribution of all assets of the Trust. Termination of the
Plan shall not affect any Plan Share Awards previously granted,
and such Awards shall remain valid and in effect until they have
been earned and paid, or by their terms expire or are forfeited.
8.09 TAX STATUS OF TRUST. It is intended that (i) the
Trust associated with the Plan be treated as a grantor trust of
the Company under the provisions of Section 671 et seq. of the
Code, as the same may be amended from time to time, and (ii)
that in accordance with Revenue Procedure 92-65 (as the same may
be amended from time to time), Participants have the status of
general unsecured creditors of the Company, the Plan constitutes
a mere unfunded promise to make benefit payments in the future,
the Plan is unfunded for tax purposes and for purposes of Title
I of the Employee Retirement Income Security Act of 1974, as
amended, and the Trust has been and will continue to be main-
tained in conformity with Revenue Procedure 92-64 (as the same
may be amended from time to time).
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TRUST AGREEMENT
UNDER THE UNITED TENNESSEE BANKSHARES, INC.
MANAGEMENT RECOGNITION PLAN
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Trust Agreement
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This Agreement made this 12th day of January, 1999 by and
between United Tennessee Bankshares, Inc. (the "Company") and
William Henry, Robert Overholt, and Robert Self (acting by
majority, the "Trustee").
WHEREAS, the Company maintains the United Tennessee
Bankshares, Inc. Management Recognition Plan (the "Plan"), and
has incurred or expects to incur liability under the terms of
the Plan with respect to the individuals participating in the
Plan ("Participants");
WHEREAS, the Company wishes to establish a trust (the
"Trust") and to contribute to the Trust assets that shall be
held therein, subject to the claims of the Company's general
creditors in the event of Insolvency, as defined in Section 3(a)
hereof, until paid to Participants and their beneficiaries in
such manner and at such times as specified in the Plan;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement and shall not affect
the status of the Plan as an unfunded plan maintained for the
purpose of providing deferred compensation for a select group of
management or highly compensated employees for purposes of Title
I of the Employee Retirement Income Security Act of 1974; and
WHEREAS, it is the intention of the Company to make
contributions to the Trust to provide itself with a source of
funds to assist it in the meeting of its liabilities under the
Plan.
NOW, THEREFORE, the parties do hereby establish this Trust
and agree that the Trust shall be comprised, held and disposed
of as follows:
Section 1. Establishment of Trust
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(a) The Company hereby deposits, or will shortly hereafter
deposit, with the Trustee in trust (i) a number of shares of the
Company's common stock ("Common Stock") equal to four percent
(4%) of the number of shares of Common Stock issued by the
Company in connection with the conversion of Newport Federal
Savings & Loan Association (the "Association") from mutual to
stock form, or (ii) an amount expected to be sufficient to
permit the Trust to purchase said shares. Said shares or amount
shall become the initial principal of the Trust to be held,
administered and disposed of by the Trustee as provided in this
Trust Agreement.
(b) The Trust shall become irrevocable upon the effective
date of the Plan.
(c) The Trust is intended to be a grantor trust, of which
the Company is the grantor, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal
Revenue Code of 1986, as amended (the "Code"), and shall be
construed accordingly.
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(d) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of the Company
and shall be used exclusively for the uses and purposes of
Participants and general creditors as herein set forth.
Participants and their beneficiaries shall have no preferred
claim on, or any beneficial ownership interest in, any assets of
the Trust. Any rights created under the Plan and this Trust
Agreement shall be mere unsecured contractual rights of
Participants and their beneficiaries against the Company. Any
assets held by the Trust will be subject to the claims of the
Company's general creditors under federal and state law in the
event of Insolvency, as defined in Section 3(a) herein.
(e) The Company, in its sole discretion, may at any time,
or from time to time, make additional deposits of cash or other
property in trust with the Trustee to augment the principal to
be held, administered and disposed of by Trustee as provided in
this Trust Agreement. Neither the Trustee nor any Participant
or beneficiary shall have any right to compel such additional
deposits.
Section 2. Payments to Plan Participants and Their
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Beneficiaries.
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(a) The Company shall deliver to the Trustee a schedule
(the "Payment Schedule") that indicates the amounts payable in
respect of each Participant (and his or her beneficiaries), that
provides a formula or other instructions acceptable to the
Trustee for determining the amounts so payable, the form in
which such amount is to be paid (as provided for or available
under the Plan), and the time of commencement for payment of
such amounts. Except as otherwise provided herein, the Trustee
shall make payments to Participants and their beneficiaries in
accordance with such Payment Schedule. The Trustee shall make
provision for the reporting and withholding of any federal,
state or local taxes that may be required to be withheld with
respect to the payment of benefits pursuant to the terms of the
Plan and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported,
withheld and paid by the Company.
(b) The entitlement of a Participant or his or her
beneficiaries to benefits under the Plan shall be determined by
the Company or such party as it shall designate under the Plan,
and any claim for such benefits shall be considered and reviewed
under the procedures set out in the Plan.
(c) The Company may make payment of benefits directly to
Participants or their beneficiaries as they become due under the
terms of the Plan. The Company shall notify the Trustee of its
decision to make payment of benefits directly prior to the time
amounts are payable to Participants or their beneficiaries. In
addition, if the principal of the Trust, and any earnings
thereon, are not sufficient to make payments of benefits in
accordance with the terms of the Plan, the Company shall make
the balance of each such payment as it falls due. The Trustee
shall notify the Company where principal and earnings are not
sufficient.
Section 3. Trustee Responsibility Regarding Payments to
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Trust Beneficiary When Company Is Insolvent.
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(a) The Trustee shall cease payment of benefits to
Participants and their beneficiaries if the Company is
Insolvent. The Company shall be considered "Insolvent" for
purposes of this Trust Agreement if (i) the Company is unable to
pay its debts as they become due, or (ii) the Company becomes
subject to a pending proceeding as a debtor under the United
States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(d) hereof, the principal and income of the
Trust shall be subject to claims of general creditors of the
Company under federal and state law as set forth below.
(c) The Board of Directors and the Chief Executive Officer
of the Company shall have the duty to inform the Trustee in
writing of the Company's Insolvency. If a person claiming to be
a creditor of the Company alleges in writing to the Trustee that
the Company has become Insolvent, the Trustee shall determine
whether the
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Company is Insolvent and, pending such determina-tion, the
Trustee shall discontinue payment of benefits to Participants or
their beneficiaries.
(1) Unless the Trustee has actual knowledge of the
Company's Insolvency, or has received notice from the Company or
a person claiming to be a creditor alleging that the Company is
Insolvent, the Trustee shall have no duty to inquire whether the
Company is Insolvent. The Trustee may in all events rely on
such evidence concerning the Company's solvency as may be
furnished to the Trustee and that provides the Trustee with a
reasonable basis for making a determination concerning the
Company's solvency.
(2) If at any time the Trustee has determined that
the Company is Insolvent, the Trustee shall discontinue payments
to Plan participants or their beneficiaries, shall liquidate the
Trust's investment in Common Stock, and shall hold the assets of
the Trust for the benefit of the Company's general creditors.
Nothing in this Trust Agreement shall in any way diminish any
rights of Participants or their beneficiaries as general
creditors of the Company with respect to benefits due under the
Plan or otherwise.
(3) The Trustee shall resume the payment of benefits
to Participants or their beneficiaries in accordance with
Section 2 of this Trust Agreement only after the Trustee has
determined that the Company is not Insolvent (or is no longer
Insolvent).
(d) Provided that there are sufficient assets, if the
Trustee discontinues the payment of benefits from the Trust
pursuant to Section 3(b) hereof and subsequently resumes such
payments, the first payment following such discontinuance shall
include the aggregate amount of all payments due to Participants
or their beneficiaries under the terms of the Plan for the
period of such discontinuance, less the aggregate amount of any
payments made to Participants or their beneficiaries by the
Company in lieu of the payments provided for hereunder during
any such period of discontinuance.
Section 4. Payments to the Company.
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Except as provided in Section 3 hereof, after the Trust has
become irrevocable, the Company shall have no right or power to
direct the Trustee to return to the Company or to divert to
others any of the Trust assets before all payment of benefits
have been made to Plan Participants and their beneficiaries
pursuant to the terms of the Plan.
Section 5. Investment Authority.
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(a) The Trustee shall have sole discretion as to the
investment of Trust assets, except that to the extent reasonably
practicable, the Trustee shall invest all assets of the Trust in
Common Stock provided that the Trust shall not purchase from
time to time a number of shares of Common Stock exceeding 4% of
the shares of Common Stock issued in the Association's
mutual-to-stock conversion.
(b) All rights associated with assets of the Trust shall
be exercised by the Trustee or the person designated by the
Trustee, and shall in no event be exercisable by or rest with
Participants, except that voting rights with respect to Common
Stock will be exercised in accordance with the terms of the
Plan.
(c) Subject to applicable federal and state securities
laws, if for any reason the Trustee will be selling shares of
Common Stock, the Trustee shall sell such shares by (i) giving
each Beneficiary 20 business days within which to purchase, at
fair market value, all or part of the shares of Common Stock
that the Trustee holds for the benefit of the Beneficiary, and
(ii) to the extent purchases by Beneficiaries are insufficient
to eliminate the Trusts' excess holdings of Common Stock, to
offer to sell, and to sell, all or any part of the excess shares
held by the Trust to the following purchasers, listed here by
order of priority: first, the Company; second, any benefit plan
maintained by the Company or the Association; third, directors
of the Association; fourth, officers of the Association; fifth,
members of the general public.
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Section 6. - Disposition of Income.
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During the term of this Trust, all income received by the
Trust, net of expenses and taxes, shall be accumulated and
reinvested.
Section 7. Accounting by Trustee.
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The Trustee shall keep accurate and detailed records of all
investments, receipts, disbursements, and all other transactions
required to be made, including such specific records as shall be
agreed upon in writing between the Company and the Trustee.
Within 60 days following the close of each fiscal year of the
Company and within 20 days after the removal or resignation of
the Trustee, the Trustee shall deliver to the Company a written
account of its administration of the Trust during such year or
during the period from the close of the last preceding year to
the date of such removal or resignation, setting forth all
investments, receipts, disbursements and other transactions
effected by it, including a description of all securities and
investments purchased and sold with the cost or net proceeds of
such purchased and sold with the cost or net proceeds of such
purchases or sales (accrued interest paid or receivable being
shown separately), and showing all cash, securities and other
property held in the Trust at the end of such year or as of the
date of such removal or resignation, as the case may be.
Section 8. Responsibility of Trustee.
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(a) The Trustee shall act with the care, skill, prudence
and diligence under the circumstances then prevailing that a
prudent person acting in like capacity and familiar with such
matters would use in the conduct of an enterprise of a like
character and with like aims, provided, however, that the
Trustee shall incur no liability to any person for any action
taken pursuant to a direction, request or approval given by the
Company which is contemplated by, and in conformity, the terms
of the Plan or this Trust and is given in writing by the
Company. In the event of a dispute between the Company and a
party, the Trustee may apply to a court of competent jurisdic-
tion to resolve the dispute.
(b) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees to
indemnify the Trustee against Trustee's costs, expenses and
liabilities (including, without limitation, attorneys' fees and
expenses) relating thereto and to be primarily liable for such
payments, except in those cases where the Trustee shall have
been found by a court of competent jurisdiction to have acted
with gross negligence or willful misconduct. If the Company
does not pay such costs, expenses and liabilities in a
reasonably timely manner, the Trustee may obtain payment from
the Trust.
(c) The Trustee may consult with legal counsel with
respect to any of its duties or obligations hereunder.
(d) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals
to assist it in performing any of its duties or obligations
hereunder.
(e) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly
provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, the Trustee
shall have no power to name a beneficiary of the policy other
than the Trust, to assign the policy (as distinct from conversion
of the policy to a different form) other than to a successor the
Trustee, or to loan to any person the proceeds of any borrowing
against such policy.
(f) Notwithstanding any powers granted to the Trustee
pursuant to this Trust Agreement or to applicable law, the
Trustee shall not have any power that could give this Trust the
objective of carrying on a business and dividing the gains
therefrom, within the meaning of section 301.7701-2 of the
Procedure and Administrative Regulations promulgated pursuant to
the Code.
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Section 9. Compensation and Expenses of Trustee.
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The Company shall pay all administrative expenses and the
Trustee's fees and expenses relating to the Plan and this Trust.
If not so paid, the fees and expenses shall be paid from the
Trust.
Section 10. Resignation and Removal of Trustee.
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The Trustee (or any individual serving as one of the
trustees who act by majority as the Trustee) may resign at any
time by written notice to the Company, which resignation shall
be effective 30 days after the Company receives such notice
(unless the Company and the Trustee agree otherwise). The
Trustee (or any individual serving as one of the trustees who
act by majority as the Trustee) may be removed by the Company
on 30 days notice or upon shorter notice accepted by the
Trustee.
If the Trustee (or any individual serving as one of the
trustees who act by majority as the Trustee) resigns or is
removed, a successor shall be appointed, in accordance with
Section 11 hereof, by the effective date or resignation or
removal under this section. If no such appointment has been
made, the Trustee may apply to a court of competent jurisdiction
for appointment of a successor or for instructions. All
expenses of the Trustee in connection with the proceeding shall
be allowed as administrative expenses of the Trust. Upon
resignation or removal of the Trustee and appointment of a
successor trustee, all assets shall subsequently be transferred
to the successor trustee. The transfer shall be completed
within 60 days after receipt of notice of resignation, removal
or transfer, unless the Company extends the time limit.
Section 11. Appointment of Successor.
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If the Trustee resigns or is removed in accordance with
Section 10 hereof, the Company may appoint any other party as a
successor to replace the Trustee upon resignation or removal.
The appointment shall be effective when accepted in writing by
the new trustee, who shall have all of the rights and powers of
the former trustee, including ownership rights in the Trust
assets. The former trustee shall execute any instrument
necessary or reasonably requested by the Company or the
successor trustee to evidence the transfer.
A successor trustee need not examine the records and acts
of any prior trustee and may retain or dispose of existing Trust
assets, subject to Sections 7 and 8 hereof. The successor
trustee shall not be responsible for, and the Company shall
indemnify and defend the successor trustee from, any claim or
liability resulting from any action or inaction of any prior
trustee or from any other past event, or any condition existing
at the time it becomes successor trustee.
Section 12. Amendment or Termination.
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(a) This Trust Agreement may be amended by a written
instrument executed by the Trustee and the Company, provided
that no such amendment shall make the Trust revocable.
(b) The Trust shall not terminate until the date on which
Participants and their beneficiaries are no longer entitled to
benefits pursuant to the terms hereof. Upon termination of the
Trust, the Trustee shall return any assets remaining in the
Trust to the Company.
(c) Upon written approval of all Participants (or their
beneficiaries if they are then entitled to payment of benefits),
the Company may terminate this Trust prior to the time all
benefit payments under the Plan have been made. All assets in
the Trust at termination shall be returned to the Company.
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Section 13. Miscellaneous.
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(a) Any provision of this Trust Agreement prohibited by
law shall be ineffective to the extent of any such prohibition,
without invalidating the remaining provisions hereof.
(b) Benefits payable to Participants and their bene-
ficiaries under this Trust Agreement may not be anticipated,
assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process, except pursuant
to the terms of the Plan.
(c) This Trust Agreement shall be governed by and con-
strued in accordance with the laws of the State of Tennessee, to
the extent not preempted by federal law.
(d) The Trustee agrees to be bound by the terms of the
Plan, as in effect from time to time.
(e) The Trustee shall act by vote or written consent of a
majority of its duly appointed members.
IN WITNESS WHEREOF, the Company, by its duly authorized
officer, has caused this Agreement to be executed, and its
corporate seal affixed, and the Trustees have executed this
Agreement, this 12th day of January, 1999.
ATTEST: UNITED TENNESSEE BANKSHARES, INC.
/s/ Nancy Bryant By: /s/ Richard Harwood
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Its President
ATTEST:
/s/ Nancy Bryant /s/ William Henry
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William Henry, Trustee
/s/ Nancy Bryant /s/ Robert Overholt
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Robert Overholt, Trustee
/s/ Nancy Bryant /s/ Robert Self
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Robert Self, Trustee
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UNITED TENNESSEE BANKSHARES, INC.
1999 STOCK OPTION PLAN
1. PURPOSE OF THE PLAN.
The purpose of this Plan is to advance the interests of the
Company through providing select key Employees and Directors of
the Association, the Company, and their Affiliates with the
opportunity to acquire Shares. By encouraging such stock owner-
ship, the Company seeks to attract, retain and motivate the best
available personnel for positions of substantial responsibility
and to provide additional incentives to Directors and key
Employees of the Company or any Affiliate to promote the success
of the business.
2. Definitions.
As used herein, the following definitions shall apply.
(a) "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Company, as such terms are
defined in Section 424(e) and (f), respectively, of the Code.
(b) "Agreement" shall mean a written agreement entered
into in accordance with Paragraph 5(c).
(c) "Awards" shall mean, collectively, Options and SARs,
unless the context clearly indicates a different meaning.
(d) "Bank" shall mean Newport Federal Bank.
(e) "Board" shall mean the Board of Directors of the
Company.
(f) "Change in Control" shall mean any one of the
following events: (i) the acquisition of ownership, holding or
power to vote more than 25% of the voting stock of the
Association or the Company, (ii) the acquisition of the ability
to control the election of a majority of the Association's or
the Company's directors, (iii) the acquisition of a controlling
influence over the management or policies of the Association or
of the Company by any person or by persons acting as a "group"
(within the meaning of Section 13(d) of the Securities Exchange
Act of 1934), or (iv) during any period of two consecutive
years, individuals (the "Continuing Directors") who at the
beginning of such period constitute the Board of Directors of
the Association or of the Company (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. Notwith-
standing the foregoing, the Company's ownership of the
Association shall not of itself constitute a Change in Control
for purposes of the Agreement. For purposes of this paragraph
only, the term "person" refers to an individual or a corpora-
tion, partnership, trust, association, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization or
any other form of entity not specifically listed herein.
(g) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(h) "Committee" shall mean the Stock Option Committee
appointed by the Board in accordance with Paragraph 5(a) hereof,
provided that the Board may at any time act in lieu of the
Committee.
(i) "Common Stock" shall mean the common stock of the
Company.
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(j) "Company" shall mean United Tennessee Bankshares, Inc.
(k) "Continuous Service" shall mean the absence of any
interruption or termination of service as an Employee or
Director of the Company or an Affiliate. Continuous Service
shall not be considered interrupted in the case of sick leave,
military leave or any other leave of absence approved by the
Company, in the case of transfers between payroll locations of
the Company or between the Company, an Affiliate or a successor,
or in the case of a Director's performance of services in an
emeritus or advisory capacity.
(l) "Director" shall mean any member of the Board, and any
member of the board of directors of any Affiliate that the Board
has by resolution designated as being eligible for participation
in this Plan.
(m) "Disability" shall mean a physical or mental
condition, which in the sole and absolute discretion of the
Committee, is reasonably expected to be of indefinite duration
and to substantially prevent a Participant from fulfilling his
or her duties or responsibilities to the Company or an
Affiliate.
(n) "Effective Date" shall mean the date specified in
Paragraph 14 hereof.
(o) "Employee" shall mean any person employed by the
Company, the Association, or an Affiliate.
(p) "Exercise Price" shall mean the price per Optioned
Share at which an Option or SAR may be exercised.
(q) "ISO" shall mean an option to purchase Common Stock
which meets the requirements set forth in the Plan, and which is
intended to be and is identified as an "incentive stock option"
within the meaning of Section 422 of the Code.
(r) "Market Value" shall mean the fair market value of the
Common Stock, as determined under Paragraph 7(b) hereof.
(s) "Non-Employee Director" shall have the meaning
provided in Rule 16b-3.
(t) "Non-ISO" means an option to purchase Common Stock
which meets the requirements set forth in the Plan but which is
not intended to be and is not identified as an ISO.
(u) "Option" means an ISO and/or a Non-ISO.
(v) "Optioned Shares" shall mean Shares subject to an
Award granted pursuant to this Plan.
(w) "Participant" shall mean any person who receives an
Award pursuant to the Plan.
(x) "Plan" shall mean this United Tennessee Bankshares,
Inc. 1999 Stock Option Plan.
(y) "Rule 16b-3" shall mean Rule 16b-3 of the General
Rules and Regulations under the Securities Exchange Act of 1934,
as amended.
(z) "Share" shall mean one share of Common Stock.
(aa) "SAR" (or "Stock Appreciation Right") means a right to
receive the appreciation in value, or a portion of the apprecia-
tion in value, of a specified number of shares of Common Stock.
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(bb) "Year of Service" shall mean a full twelve-month
period, measured from the date of an Award and each annual
anniversary of that date, during which a Participant has not
terminated Continuous Service for any reason.
3. TERM OF THE PLAN AND AWARDS.
(a) TERM OF THE PLAN. The Plan shall continue in effect
for a term of ten years from the Effective Date, unless sooner
terminated pursuant to Paragraph 16 hereof. No Award shall be
granted under the Plan after ten years from the Effective Date.
(b) TERM OF AWARDS. The term of each Award granted under
the Plan shall be established by the Committee, but shall not
exceed 10 years; provided, however, that in the case of an
Employee who owns Shares representing more than 10% of the
outstanding Common Stock at the time an ISO is granted, the term
of such ISO shall not exceed five years.
4. SHARES SUBJECT TO THE PLAN.
(a) GENERAL RULE. Except as otherwise required under
Paragraph 11, the aggregate number of Shares deliverable
pursuant to Awards shall not exceed 145,475 Shares. Such Shares
may either be authorized but unissued Shares, Shares held in
treasury, or Shares held in a grantor trust. If any Awards
should expire, become unexercisable, or be forfeited for any
reason without having been exercised, the Optioned Shares shall,
unless the Plan shall have been terminated, be available for the
grant of additional Awards under the Plan.
(b) SPECIAL RULE FOR SARs. The number of Shares with
respect to which an SAR is granted, but not the number of Shares
which the Company delivers or could deliver to an Employee or
individual upon exercise of an SAR, shall be charged against the
aggregate number of Shares remaining available under the Plan;
provided, however, that in the case of an SAR granted in con-
junction with an Option, under circumstances in which the
exercise of the SAR results in termination of the Option and
vice versa, only the number of Shares subject to the Option
shall be charged against the aggregate number of Shares
remaining available under the Plan. The Shares involved in an
Option as to which option rights have terminated by reason of
the exercise of a related SAR, as provided in Paragraph 10
hereof, shall not be available for the grant of further Options
under the Plan.
5. ADMINISTRATION OF THE PLAN.
(a) COMPOSITION OF THE COMMITTEE. The Plan shall be
administered by the Committee, which shall consist of not less
than two (2) members of the Board who are Non-Employee
Directors. Members of the Committee shall serve at the pleasure
of the Board. In the absence at any time of a duly appointed
Committee, the Plan shall be administered by the Board.
(b) POWERS OF THE COMMITTEE. Except as limited by the
express provisions of the Plan or by resolutions adopted by the
Board, the Committee shall have sole and complete authority and
discretion, subject to compliance with Office of Thrift Super-
vision regulations, (i) to select Participants and grant Awards,
(ii) to determine the form and content of Awards to be issued in
the form of Agreements under the Plan, (iii) to interpret the
Plan, (iv) to prescribe, amend and rescind rules and regulations
relating to the Plan, and (v) to make other determinations
necessary or advisable for the administration of the Plan. The
Committee shall have and may exercise such other power and
authority as may be delegated to it by the Board from time to
time. A majority of the entire Committee shall constitute a
quorum and the action of a majority of the members present at
any meeting at which a quorum is present, or acts approved in
writing by a majority of the Committee without a meeting, shall
be deemed the action of the Committee.
(c) Agreement. Each Award shall be evidenced by a written
agreement containing such provisions as may be approved by the
Committee. Each such Agreement shall constitute a binding con-
tract between the Company and the Participant, and every Parti-
cipant, upon acceptance of such Agreement, shall be bound by the
terms and
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restrictions of the Plan and of such Agreement. The terms of
each such Agreement shall be in accordance with the Plan, but
each Agreement may include such additional provisions and
restrictions determined by the Committee, in its discretion,
provided that such additional provisions and restrictions are
not inconsistent with the terms of the Plan. In particular, the
Committee shall set forth in each Agreement (i) the Exercise
Price of an Option or SAR, (ii) the number of Shares subject to
the Award, and its expiration date, (iii) the manner, time, and
rate (cumulative or otherwise) of exercise or vesting of such
Award, and (iv) the restrictions, if any, to be placed upon such
Award, or upon Shares which may be issued upon exercise of such
Award. The Chairman of the Committee and such other Directors
and officers as shall be designated by the Committee are hereby
authorized to execute Agreements on behalf of the Company and to
cause them to be delivered to the recipients of Awards.
(d) EFFECT OF THE COMMITTEE'S DECISIONS. All decisions,
determinations and interpretations of the Committee shall be
final and conclusive on all persons affected thereby.
(e) INDEMNIFICATION. In addition to such other rights of
indemnification as they may have, the members of the Committee
shall be indemnified by the Company in connection with any
claim, action, suit or proceeding relating to any action taken
or failure to act under or in connection with the Plan or any
Award, granted hereunder to the full extent provided for under
the Company's governing instruments with respect to the
indemnification of Directors.
6. GRANT OF OPTIONS.
(a) GENERAL RULE. Only Employees shall be eligible to
receive Awards. In selecting those Employees to whom Awards
will be granted and the number of shares covered by such Awards,
the Committee shall consider the position, duties and responsi-
bilities of the eligible Employees, the value of their services
to the Company and its Affiliates, and any other factors the
Committee may deem relevant. Notwithstanding the foregoing, the
Committee shall automatically make the Awards specified in
Paragraphs 6(b) and 9 hereof.
(b) AUTOMATIC GRANTS TO EMPLOYEES. On the Effective Date,
each of the following Employees shall receive an Option (in the
form of an ISO, to the extent permissible under the Code) to
purchase the number of Shares listed below (but not to exceed
the OTS Award Limitations), at an Exercise Price per Share equal
to the Market Value of a Share on the Effective Date; provided
that such grant shall not be made to an Employee whose
Continuous Service terminates on or before the Effective Date:
PARTICIPANT NUMBER OF SHARES
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Richard Harwood 36,369
Nancy Bryant 19,166
Peggy Holston 17,202
With respect to each of the above-named Participants, the
Option granted to the Participant hereunder (i) shall vest in
accordance with the general rule set forth in Paragraph 8(a) of
the Plan, (ii) shall have a term of ten years from the Effective
Date, and (iii) shall be subject to the general rule set forth
in Paragraph 8(c) with respect to the effect of a Participant's
termination of Continuous Service on the Participant's right to
exercise his Options.
(c) SPECIAL RULES FOR ISOs. The aggregate Market Value,
as of the date the Option is granted, of the Shares with respect
to which ISOs are exercisable for the first time by an Employee
during any calendar year (under all incentive stock option
plans, as defined in Section 422 of the Code, of the Company or
any present or future Affiliate of the Company) shall not exceed
$100,000. Notwithstanding the foregoing, the Committee may
grant Options in excess of the foregoing limitations, in which
case Options granted in excess of such limitation shall be
Non-ISOs.
4
<PAGE>
<PAGE>
7. EXERCISE PRICE FOR OPTIONS.
(a) LIMITS ON COMMITTEE DISCRETION. The Exercise Price as
to any particular Option shall not be less than 100% of the
Market Value of the Optioned Shares on the date of grant. In
the case of an Employee who owns Shares representing more than
10% of the Company's outstanding Shares of Common Stock at the
time an ISO is granted, the Exercise Price shall not be less
than 110% of the Market Value of the Optioned Shares at the time
the ISO is granted.
(b) STANDARDS FOR DETERMINING EXERCISE PRICE. If the
Common Stock is listed on a national securities exchange
(including the NASDAQ National Market System) on the date in
question, then the Market Value per Share shall be the average
of the highest and lowest selling price on such exchange on such
date, or if there were no sales on such date, then the Exercise
Price shall be the mean between the bid and asked price on such
date. If the Common Stock is traded otherwise than on a
national securities exchange on the date in question, then the
Market Value per Share shall be the mean between the bid and
asked price on such date, or, if there is no bid and asked price
on such date, then on the next prior business day on which there
was a bid and asked price. If no such bid and asked price is
available, then the Market Value per Share shall be its fair
market value as determined by the Committee, in its sole and
absolute discretion.
8. EXERCISE OF OPTIONS.
(a) GENERALLY. Unless the Committee, in its sole discre-
tion, designates a different vesting schedule in an Agreement,
each Option shall become exercisable with respect to twenty-five
percent (25%) of the Optioned Shares upon the date of the
Option's grant, and shall become exercisable with respect to an
additional twenty-five percent (25%) of the Optioned Shares upon
the Participant's completion of each of the next three Years of
Service, provided that an Option shall become fully (100%)
exercisable immediately upon termination of the Participant's
Continuous Service due to the Participant's retirement at or
after age 70, Disability, or death. All outstanding Options
shall also become fully exercisable upon a Change in Control or
the execution of a written agreement that would effect a Change
in Control. An Option may not be exercised for a fractional
Share.
(b) PROCEDURE FOR EXERCISE. A Participant may exercise
Options, subject to provisions relative to its termination and
limitations on its exercise, only by (1) written notice of
intent to exercise the Option with respect to a specified number
of Shares, and (2) payment to the Company (contemporaneously
with delivery of such notice) in cash, in Common Stock, or a
combination of cash and Common Stock, of the amount of the
Exercise Price for the number of Shares with respect to which
the Option is then being exercised. Each such notice (and
payment where required) shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the
Company at its executive offices. Common Stock utilized in full
or partial payment of the Exercise Price for Options shall be
valued at its Market Value at the date of exercise, and may
consist of Shares subject to the Option being exercised.
(c) PERIOD OF EXERCISABILITY. Except to the extent
otherwise provided in the terms of an Agreement, an Option may
be exercised by a Participant only while he is an Employee and
has maintained Continuous Service from the date of the grant of
the Option, or within one year after termination of such
Continuous Service (but not later than the date on which the
Option would otherwise expire, and the Participant must exercise
an ISO within three months after termination of Continuous
Service in order to preserve the Option as an ISO), except if
the Employee's Continuous Service terminates by reason of --
(1) "Just Cause" which for purposes hereof shall have
the meaning set forth in any unexpired employment or
severance agreement between the Participant and the
Association and/or the Company (and, in the absence of any
such agreement, shall mean termination because of the
Employee's personal dishonesty, incompetence, willful
misconduct, breach of fiduciary duty involving personal
profit, intentional failure to perform stated duties,
willful violation of any law, rule or regulation (other
than traffic violations or similar offenses) or final
cease-and-desist order), then the Participant's rights to
exercise such Option shall expire on the date of such
termination;
5
<PAGE>
<PAGE>
(2) death, then to the extent that the Participant
would have been entitled to exercise the Option immediately
prior to his death, such Option of the deceased Participant
may be exercised within two years from the date of his
death (but not later than the date on which the Option
would otherwise expire) by the personal representatives of
his estate or person or persons to whom his rights under
such Option shall have passed by will or by laws of descent
and distribution;
(3) Disability, then to the extent that the Partici-
pant would have been entitled to exercise the Option
immediately prior to his or her Disability, such Option may
be exercised within one year from the date of termination
of employment due to Disability, but not later than the
date on which the Option would otherwise expire.
(d) EFFECT OF THE COMMITTEE'S DECISIONS. The Committee's
determination whether a Participant's Continuous Service has
ceased, and the effective date thereof, shall be final and
conclusive on all persons affected there-by.
(e) MANDATORY SIX-MONTH HOLDING PERIOD. Notwithstanding
any other provision of this Plan to the contrary, common stock
of the Company that is purchased upon exercise of an Option or
SAR may not be sold within the six-month period following the
grant of that Option or SAR.
9. GRANTS OF OPTIONS TO NON-EMPLOYEE DIRECTORS
(a) AUTOMATIC GRANTS. Notwithstanding any other
provisions of this Plan, each of Directors Myers, Henry, Self,
Driskill, and Overholt shall receive, on the Effective Date, a
Non-ISO to purchase 10,900 Shares. In addition, Directors Bible
and Hooper shall receive, on the Effective Date, a Non-ISO to
purchase 2,500 shares. All of such Non-ISOs shall have an
Exercise Price per Share equal to the Market Value of a Share on
the date of grant.
(b) TERMS OF EXERCISE. Options received under the
provisions of this Paragraph (i) shall become exercisable in
accordance with paragraph 8(a) of the Plan, and (ii) may be
exercised from time to time by written notice of intent to
exercise the Option with respect to all or a specified number of
the Optioned Shares, and payment to the Company (contempora-
neously with the delivery of such notice), in cash, in Common
Stock, or a combination of cash and Common Stock, of the amount
of the Exercise Price for the number of the Optioned Shares with
respect to which the Option is then being exercised. Each such
notice and payment shall be delivered, or mailed by prepaid
registered or certified mail, addressed to the Treasurer of the
Company at the Company's executive offices. A Director who
exercises Options pursuant to this Paragraph may satisfy all
applicable federal, state and local income and employment tax
withholding obligations, in whole or in part, by irrevocably
electing to have the Company withhold shares of Common Stock, or
to deliver to the Company shares of Common Stock that he already
owns, having a value equal to the amount required to be with-
held; provided that to the extent not inconsistent herewith,
such election otherwise complies with those requirements of
Paragraphs 8 and 19 hereof.
Options granted under this Paragraph shall have a term of
ten years; provided that Options granted under this Paragraph
shall expire one year after the date on which a Director ter-
minates Continuous Service on the Board for a reason other than
death, but in no event later than the date on which such Options
would otherwise expire. In the event of such Director's death
during the term of his directorship, Options granted under this
Paragraph shall become immediately exercisable, and may be
exercised within two years from the date of his death by the
personal representatives of his estate or person or persons to
whom his rights under such Option shall have passed by will or
by laws of descent and distribution, but in no event later than
the date on which such Options would otherwise expire. Unless
otherwise inapplicable or inconsistent with the provisions of
this Paragraph, the Options to be granted to Directors hereunder
shall be subject to all other provisions of this Plan.
(c) Effect of the Committee's Decisions. The Committee's
determination whether a Participant's Continuous Service has
ceased, and the effective date thereof, shall be final and
conclusive on all persons affected thereby.
6
<PAGE>
<PAGE>
10. SARs (STOCK APPRECIATION RIGHTS)
(a) Granting of SARs. In its sole discretion, the
Committee may from time to time grant SARs to Employees either
in conjunction with, or independently of, any Options granted
under the Plan. An SAR granted in conjunction with an Option
may be an alternative right wherein the exercise of the Option
terminates the SAR to the extent of the number of shares
purchased upon exercise of the Option and, correspondingly, the
exercise of the SAR terminates the Option to the extent of the
number of Shares with respect to which the SAR is exercised.
Alternatively, an SAR granted in conjunction with an Option may
be an additional right wherein both the SAR and the Option may
be exercised. An SAR may not be granted in conjunction with an
ISO under circumstances in which the exercise of the SAR affects
the right to exercise the ISO or vice versa, unless the SAR, by
its terms, meets all of the following requirements:
(1) The SAR will expire no later than the ISO;
(2) The SAR may be for no more than the difference between
the Exercise Price of the ISO and the Market Value of
the Shares subject to the ISO at the time the SAR is
exercised;
(3) The SAR is transferable only when the ISO is
transferable, and under the same conditions;
(4) The SAR may be exercised only when the ISO may be
exercised; and
(5) The SAR may be exercised only when the Market Value of
the Shares subject to the ISO exceeds the Exercise
Price of the ISO.
(b) EXERCISE PRICE. The Exercise Price as to any
particular SAR shall not be less than the Market Value of the
Optioned Shares on the date of grant. The provisions of
Paragraph 8(c) regarding the period of exercisability of Options
are incorporated by reference herein, and shall determine the
period of exercisability of SARs.
(c) EXERCISE OF SARs. An SAR granted hereunder shall be
exercisable at such times and under such conditions as shall be
permissible under the terms of the Plan and of the Agreement
granted to a Participant, provided that an SAR may not be
exercised for a fractional Share. Upon exercise of an SAR, the
Participant shall be entitled to receive, without payment to the
Company except for applicable withholding taxes, an amount equal
to the excess of (or, in the discretion of the Committee if
provided in the Agreement, a portion of) the excess of the then
aggregate Market Value of the number of Optioned Shares with
respect to which the Participant exercises the SAR, over the
aggregate Exercise Price of such number of Optioned Shares.
This amount shall be payable by the Company, in the discretion
of the Committee, in cash or in Shares valued at the then Market
Value thereof, or any combination thereof.
(d) PROCEDURE FOR EXERCISING SARs. To the extent not
inconsistent herewith, the provisions of Paragraph 8(b) as to
the procedure for exercising Options are incorporated by
reference, and shall determine the procedure for exercising
SARs.
11. EFFECT OF CHANGES IN COMMON STOCK SUBJECT TO THE PLAN.
(a) RECAPITALIZATIONS; STOCK SPLITS, ETC. The number and
kind of shares reserved for issuance under the Plan, and the
number and kind of shares subject to outstanding Awards, and the
Exercise Price thereof, shall be proportionately adjusted for
any increase, decrease, change or exchange of Shares for a
different number or kind of shares or other securities of the
Company which results from a merger, consolidation,
recapitalization, reorganization, reclassification, stock
dividend, split-up, combination of shares, or similar event in
which the number or kind of shares is changed without the
receipt or payment of consideration by the Company.
7
<PAGE>
<PAGE>
(b) TRANSACTIONS IN WHICH THE COMPANY IS NOT THE SURVIVING
ENTITY. In the event of (i) the liquidation or dissolution of
the Company, (ii) a merger or consolidation in which the Company
is not the surviving entity, or (iii) the sale or disposition of
all or substantially all of the Company's assets (any of the
foregoing to be referred to herein as a "Transaction"), all
outstanding Awards, together with the Exercise Prices thereof,
shall be equitably adjusted for any change or exchange of Shares
for a different number or kind of shares or other securities
which results from the Transaction.
(c) SPECIAL RULE FOR ISOs. Any adjustment made pursuant
to subparagraphs (a) or (b)(1) hereof shall be made in such a
manner as not to constitute a modification, within the meaning
of Section 424(h) of the Code, of outstanding ISOs.
(d) CONDITIONS AND RESTRICTIONS ON NEW, ADDITIONAL, OR
DIFFERENT SHARES OR SECURITIES. If, by reason of any adjustment
made pursuant to this Paragraph, a Participant becomes entitled
to new, additional, or different shares of stock or securities,
such new, additional, or different shares of stock or securities
shall thereupon be subject to all of the conditions and restric-
tions which were applicable to the Shares pursuant to the Award
before the adjustment was made.
(e) OTHER ISSUANCES. Except as expressly provided in this
Paragraph, the issuance by the Company or an Affiliate of shares
of stock of any class, or of securities convertible into Shares
or stock of another class, for cash or property or for labor or
services either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, shall not affect, and no
adjustment shall be made with respect to, the number, class, or
Exercise Price of Shares then subject to Awards or reserved for
issuance under the Plan.
(f) CERTAIN SPECIAL DIVIDENDS. The Exercise Price of
shares subject to outstanding Awards shall be proportionately
adjusted upon the payment of a special large and nonrecurring
dividend that has the effect of a return of capital to the
stockholders.
12. NON-TRANSFERABILITY OF AWARDS.
Awards may not be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner other than by will or
by the laws of descent and distribution. Notwithstanding the
foregoing, or any other provision of this Plan, a Participant
who holds Awards may transfer such Awards (but not Incentive
Stock Options) to his or her spouse, lineal ascendants, lineal
descendants, or to a duly established trust for the benefit of
one or more of these individuals. Awards so transferred may
thereafter be transferred only to the Participant who originally
received the grant or to an individual or trust to whom the
Participant could have initially transferred the Awards pursuant
to this Paragraph 12. Awards which are transferred pursuant to
this Paragraph 12 shall be exercisable by the transferee
according to the same terms and conditions as applied to the
Participant.
13. TIME OF GRANTING AWARDS.
The date of grant of an Award shall, for all purposes, be
the later of the date on which the Committee makes the determi-
nation of granting such Award, and the Effective Date. Notice
of the determination shall be given to each Participant to whom
an Award is so granted within a reasonable time after the date
of such grant.
14. EFFECTIVE DATE.
The Plan shall become effective January 15, 1999, provided
that the effectiveness of the Plan and any Awards shall be
contingent upon approval of the Plan by a favorable vote of
stockholders owning at least a majority of the total votes cast
at a duly called meeting of the Company's stockholders held in
accordance with applicable laws.
8
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<PAGE>
15. MODIFICATION OF AWARDS.
At any time, and from time to time, the Committee may
authorize execution of an instrument providing for the
modification of any outstanding Award, provided no such
modification shall confer on the holder of said Award any right
or benefit which could not be conferred on him by the grant of a
new Award at such time, or impair the Award without the consent
of the holder of the Award.
16. AMENDMENT AND TERMINATION OF THE PLAN.
The Board may from time to time amend the terms of the Plan
and, with respect to any Shares at the time not subject to
Awards, suspend or terminate the Plan. No amendment, suspension
or termination of the Plan shall, without the consent of any
affected holders of an Award, alter or impair any rights or
obligations under any Award theretofore granted.
17. CONDITIONS UPON ISSUANCE OF SHARES.
(a) COMPLIANCE WITH SECURITIES LAWS. Shares of Common
Stock shall not be issued with respect to any Award unless the
issuance and delivery of such Shares shall comply with all
relevant provisions of law, including, without limitation, the
Securities Act of 1933, as amended, the rules and regulations
promulgated thereunder, any applicable state securities law, and
the requirements of any stock exchange upon which the Shares may
then be listed.
(b) SPECIAL CIRCUMSTANCES. The inability of the Company
to obtain approval from any regulatory body or authority deemed
by the Company's counsel to be necessary to the lawful issuance
and sale of any Shares hereunder shall relieve the Company of
any liability in respect of the non-issuance or sale of such
Shares. As a condition to the exercise of an Option or SAR, the
Company may require the person exercising the Option or SAR to
make such representations and warranties as may be necessary to
assure the availability of an exemption from the registration
requirements of federal or state securities law.
(c) COMMITTEE DISCRETION. The Committee shall have the
discretionary authority to impose in Agreements such
restrictions on Shares as it may deem appropriate or desirable,
including but not limited to the authority to impose a right of
first refusal or to establish repurchase rights or both of these
restrictions.
18. RESERVATION OF SHARES.
The Company, during the term of the Plan, will reserve and
keep available a number of Shares sufficient to satisfy the
requirements of the Plan.
19. WITHHOLDING TAX.
The Company's obligation to deliver Shares upon exercise of
Options and/or SARs shall be subject to the Participant's
satisfaction of all applicable federal, state and local income
and employment tax withholding obligations. The Committee, in
its discretion, may permit the Participant to satisfy the
obligation, in whole or in part, by irrevocably electing to have
the Company withhold Shares, or to deliver to the Company Shares
that he already owns, having a value equal to the amount
required to be withheld. The value of the Shares to be
withheld, or delivered to the Company, shall be based on the
Market Value of the Shares on the date the amount of tax to be
withheld is to be determined. As an alternative, the Company
may retain, or sell without notice, a number of such Shares
sufficient to cover the amount required to be withheld.
9
<PAGE>
<PAGE>
20. NO EMPLOYMENT OR OTHER RIGHTS.
In no event shall an Employee's or Director's eligibility
to participate or participation in the Plan create or be deemed
to create any legal or equitable right of the Employee,
Director, or any other party to continue service with the
Company, the Association, or any Affiliate of such corporations.
Except to the extent provided in Paragraphs 6(b) and 9(a), no
Employee or Director shall have a right to be granted an Award
or, having received an Award, the right to again be granted an
Award. However, an Employee or Director who has been granted an
Award may, if otherwise eligible, be granted an additional Award
or Awards.
21. GOVERNING LAW.
The Plan shall be governed by and construed in accordance
with the laws of the State of Tennessee, except to the extent
that federal law shall be deemed to apply.
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
1999 STOCK OPTION PLAN
---------------------------------
Stock Option Agreement
---------------------------------
FOR INCENTIVE STOCK OPTIONS UNDER SECTION 422
OF THE INTERNAL REVENUE CODE
STOCK OPTION (the "Option") for a total of ________ shares
of Common Stock, no par value per share, of United Tennessee
Bankshares, Inc. (the "Company"), which Option is intended to
qualify as an incentive stock option under Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), is
hereby granted to _____________(the "Optionee") at the price set
forth herein, and in all respects subject to the terms, defini-
tions and provisions of the United Tennessee Bankshares, Inc.
1999 Stock Option Plan (the "Plan") which was adopted by the
Company and which is incorporated by reference herein, receipt
of which is hereby acknowledged.
1. Exercise Price. The exercise price per share is
-------------- $______, which equals 100% */ of the
fair market value, as determined by the Committee, of the Common
Stock on the date of grant of this Option.
2. Exercise of Option. This Option shall be exercisable
------------------- in accordance with the Plan and the
following provisions:
(i) Schedule of rights to exercise.
------------------------------
Percentage of Total Shares
Years of Continuous Employment Subject to Option
After Date of Grant of Option Which May Be Exercised
- ---------------------------------- ---------------------------
Upon Grant 25%
1 Year 25%
2 Years 25%
3 Years 25%
__________________
*/ 110% in the case of an Optionee who owns shares representing
- - more than 10% of the outstanding common stock of the Company
on the date of grant of this Option.
<PAGE>
<PAGE>
(ii) Method of Exercise. This Option shall be exercisable
------------------ by a written notice by the
Optionee which shall:
(a) state the election to exercise the Option, the number
of shares with respect to which it is being exercised, and
the Optionee's address and Social Security Number;
(b) contain such representations and agreements as to the
holder's investment intent with respect to such shares of
Common Stock as may be satisfactory to the Company's
counsel;
(c) be signed by the person or persons entitled to
exercise the Option and, if the Option is being exercised
by any person or persons other than the Optionee, be
accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise
the Option; and
(d) be in writing and delivered in person or by certified
mail to the Treasurer of the Company.
Payment of the purchase price of any shares with respect to
which the Option is being exercised shall be by cash, Common
Stock, or such combination of cash and Common Stock as the
Optionee elects. The certificate or certificates for shares of
Common Stock as to which the Option shall be exercised shall be
registered in the name of the person or persons exercising the
Option.
(iii) Restrictions on Exercise. This Option may not be
------------------------ exercised if the issuance
of the shares upon such exercise would constitute a violation
of any applicable federal or state securities or other law or
valid regulation. As a condition to the Optionee's exercise of
this Option, the Company may require the person exercising this
Option to make any representation and warranty to the Company as
may be required by any applicable law or regulation.
3. Withholding. The Optionee hereby agrees that the
------------ exercise of the Option or any installment
thereof will not be effective, and no shares will become trans-
ferable to the Optionee, until the Optionee makes appropriate
arrangements with the Company for such tax withholding as may be
required of the Company under federal, state, or local law on
account of such exercise.
4. Non-transferability of Option. This Option may not be
------------------------------ transferred in any
manner otherwise than by will or the laws of descent or distri-
bution. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the
Optionee.
<PAGE>
<PAGE>
5. Term of Option. This Option may not be exercisable
-------------- for more than ten **/ years from the
date of grant of this Option, as stated below, and may be
exercised during such term only in accordance with the Plan and
the terms of this Option.
__________________
Date of Grant UNITED TENNESSEE BANKSHARES, INC.
1999 STOCK OPTION PLAN COMMITTEE
By: __________________________________
Authorized Member of the Committee
Witness: _____________________________
____________________
**/ Five years in the case of an Optionee who owns shares
__ representing more than 10% of the outstanding common stock
of the Company on the date of grant of this Option.
<PAGE>
<PAGE>
INCENTIVE STOCK OPTION EXERCISE FORM
PURSUANT TO THE
UNITED TENNESSEE BANKSHARES, INC.
1999 STOCK OPTION PLAN
___________
Date
Treasurer
United Tennessee Bankshares, Inc.
344 W. Broadway
Newport, Tennessee 37821-0249
Re: United Tennessee Bankshares, Inc. 1999 Stock Option Plan
--------------------------------------------------------
Dear Sir:
The undersigned elects to exercise the Incentive Stock
Option to purchase ______shares, no par value per share, of
Common Stock of United Tennessee Bankshares, Inc. under and
pursuant to a Stock Option Agreement dated _____, 199 .
Delivered herewith is a certified or bank cashier's or
teller's check and/or shares of Common Stock, valued at the fair
market value of the stock on the date of exercise, as set forth
below.
$________ of cash or check
$________ in the form of _______ shares of Common
Stock, valued at $____ per share
$======== Total
The name or names to be on the stock certificate or certi-
ficates and the address and Social Security Number of such
person(s) is as follows:
Name ___________________________________________________________
Address ________________________________________________________
Social Security Number _________________________________________
Very truly yours,
____________________
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
1999 STOCK OPTION PLAN
-----------------------
Stock Option Agreement
-----------------------
FOR NON-INCENTIVE STOCK OPTIONS
STOCK OPTION (the "Option") for a total of ______ shares of
Common Stock, no par value per share, of United Tennessee
Bankshares, Inc. (the "Company") is hereby granted to
_______________ (the "Optionee") at the price set forth herein,
and in all respects subject to the terms, definitions and
provisions of the United Tennessee Bankshares, Inc. 1999 Stock
Option Plan (the "Plan") which has been adopted by the Company
and which is incorporated by reference herein, receipt of which
is hereby acknowledged. Such Stock Options do not comply with
Options granted under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
1. Exercise Price. The exercise price per share is
--------------- $_______, which equals 100% of the fair
market value, as determined by the Committee, of the Common
Stock on the date of grant of this Option.
2. Exercise of Option. This Option shall be exercisable
------------------ in accordance with the Plan and the
following provisions:
(i) Schedule of rights to exercise.
------------------------------
Percentage of Total Shares
Years of Continuous Employment Subject to Option
After Date of Grant of Option Which May Be Exercised
- ---------------------------------- ---------------------------
Upon Grant 25%
1 Year 25%
2 Years 25%
3 Years 25%
(ii) Method of Exercise. This Option shall be exercisable
------------------ by a written notice by the Optionee
which shall:
(a) state the election to exercise the Option, the number
of shares with respect to which it is being exercised, and
the Optionee's address and Social Security Number;
(b) contain such representations and agreements as to the
holder's investment intent with respect to such shares of
Common Stock as may be satisfactory to the Company's
counsel;
<PAGE>
<PAGE>
Non-ISO Agreement
Page 2
(c) be signed by the person or persons entitled to exer-
cise the Option and, if the Option is being exercised by
any person or persons other than the Optionee, be
accompanied by proof, satisfactory to counsel for the
Company, of the right of such person or persons to exercise
the Option; and
(d) be in writing and delivered in person or by certified
mail to the Treasurer of the Company.
Payment of the purchase price of any shares with respect to
which the Option is being exercised shall be by cash, Common
Stock, or such combination of cash and Common Stock as the
Optionee elects. The certificate or certificates for shares of
Common Stock as to which the Option shall be exercised shall be
registered in the name of the person or persons exercising the
Option.
(iii) Restrictions on Exercise. The Option may not be
------------------------ exercised if the issuance
of the shares upon such exercise would constitute a violation of
any applicable federal or state securities or other law or valid
regulation. As a condition to his exercise of this Option, the
Company may require the person exercising this Option to make
any representation and warranty to the Company as may be
required by any applicable law or regulation.
3. Withholding. The Optionee hereby agrees that the
------------ exercise of the Option or any installment
thereof will not be effective, and no shares will become trans-
ferable to the Optionee, until the Optionee makes appropriate
arrangements with the Company for such tax withholding as may be
required of the Company under federal, state, or local law on
account of such exercise.
4. Non-transferability of Option. This Option may not be
------------------------------ transferred in any
manner otherwise than by will or the laws of descent or distri-
bution. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the
Optionee. Notwithstanding any other terms of this agreement, to
the extent permissible under Rule 16b-3 of the Securities
Exchange Act of 1934, as amended, this Option may be transferred
to the Optionee's spouse, lineal ascendants, lineal descendants,
or to a duly established trust, provided that such transferee
shall be permitted to exercise this Option subject to the same
terms and conditions applicable to the Optionee.
<PAGE>
<PAGE>
Non-ISO Agreement
Page 3
5. Term of Option. This Option may not be exercisable
--------------- for more than ten years from the date
of grant of this Option, as set forth below, and may be
exercised during such term only in accordance with the Plan and
the terms of this Option.
__________________
Date of Grant UNITED TENNESSEE BANKSHARES, INC.
1999 STOCK OPTION PLAN COMMITTEE
By: __________________________________
Authorized Member of the Committee
Witness: _____________________________
<PAGE>
<PAGE>
NON-INCENTIVE STOCK OPTION EXERCISE FORM
PURSUANT TO THE
UNITED TENNESSEE BANKSHARES, INC.
1999 STOCK OPTION PLAN
_________________
Date
Treasurer
United Tennessee Bankshares, Inc.
344 W. Broadway
Newport, Tennessee 37821-0249
Re: United Tennessee Bankshares, Inc. 1999 Stock Option Plan
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Dear Sir:
The undersigned elects to exercise his Non-Incentive Stock
Option to purchase ___________ shares, no par value per share,
of Common Stock of United Tennessee Bankshares, Inc. under and
pursuant to a Stock Option Agreement dated _____________, 199__.
Delivered herewith is a certified or bank cashier's or
tellers check and/or shares of Common Stock, valued at the fair
market value of the stock on the date of exercise, as set forth
below.
$________ of cash or check
$________ in the form of _______ shares of Common
Stock, valued at $____ per share
$======== Total
The name or names to be on the stock certificate or
certificates and the address and Social Security Number of such
person is as follows:
Name ___________________________________________________________
Address ________________________________________________________
Social Security Number _________________________________________
Very truly yours,
____________________
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
MANAGEMENT RECOGNITION PLAN
- ----------------------------------------------------------------
Election to Include Value of Restricted Stock in Gross Income
in Year of Transfer Under Code Section 83(b)
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* * * * * * * * * * * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * * * * * * * * * * *
The undersigned hereby makes the election permitted under
Section 83(b) of the Internal Revenue Code of 1986, as amended,
with respect to the property described below, and supplies the
following information in accordance with the regulations
promulgated thereunder:
1. The name, address, and taxpayer identification or social
security number of the undersigned are:
Name: ________________________________
Address: ________________________________
________________________________
I.D. No. ________________________________
2. Description of the property with respect to which the
election is being made:
____________________( ) shares of common stock,
no par value per share, of United Tennessee
Bankshares, Inc. (hereinafter, the "Common Stock").
3. The date on which the Common Stock was transferred is
______________ ___, 19__. The taxable year to which this
election relates is calendar year 19__.
4. The nature of the restrictions to which the Common Stock
is subject is as follows:
The Common Stock is forfeitable until it is earned
in accordance with Article VII of the United
Tennessee Bankshares, Inc. Management Recognition
Plan (the "Plan"). For special rules regarding the
vesting of the undersigned's interest in the Common
Stock, see Section 7.01 of the Plan.
<PAGE>
<PAGE>
Section 83(b) Election
Page 2 of 2
The Common Stock is non-transferable until the
undersigned's interest therein becomes vested and
nonforfeitable, pursuant to Section 8.03 of the
Plan.
5. Fair market value:
The fair market value at the time of transfer
(determined without regard to any restrictions other
then restrictions which by their terms will never
lapse) of the stock with respect to which this
election is being made is $_____ per share.
6. Amount paid for Common Stock:
The amount paid by taxpayer for said Common Stock is
$0.00 per share.
7. Furnishing statement to employer:
A copy of this statement has been furnished to
United Tennessee Bankshares, Inc.
8. Notice:
Nothing contained herein shall be held to alter,
vary or affect any of the terms, provisions or
conditions of the Plan, or the award made thereunder
to the undersigned.
Dated: ____________ __, 199__.
______________________________
Taxpayer/Plan Participant
<PAGE>
UNITED TENNESSEE BANKSHARES, INC.
MANAGEMENT RECOGNITION PLAN COMMITTEE
NOTICE OF AWARD
---------------
WHEREAS, the Board of Directors of United Tennessee
Bankshares, Inc. (the "Company") has previously adopted the
United Tennessee Bankshares, Inc. Management Recognition Plan
(the "Plan"); and
WHEREAS, the Board of Directors of the Company has
previously appointed Directors William B. Henry, Robert L.
Overholt, and Robert D. Self as members of the Management
Recognition Plan Committee (the "Committee") pursuant to the
terms of the Plan, and by resolution dated _______________, 19__
the Committee made awards under the Plan.
PLEASE TAKE NOTICE, that the following individual be
granted an award under the Plan ("Plan Share Award"), effective
__________________________:
Number of Shares Subject to
Recipient Plan Share Award
____________________ ___________________________
------
AND BE IT FURTHER RESOLVED, that the Plan Share Award
specified herein shall be subject to the restrictions and other
provisions of Section 7.01 of the Plan.
Date of Notice:
_____________, 199__
UNITED TENNESSEE BANKSHARES, INC.
MANAGEMENT RECOGNITION PLAN
COMMITTEE
By: _________________________
Its Chairman
<PAGE>
MEMORANDUM
TO: Participants in the United Tennessee Bankshares, Inc.
(the "Company") Management Recognition Plan
DATE: July__, 1999
FROM: Housley Kantarian & Bronstein, P.C.
RE: Taxation of MRP Awards
================================================================
* * * * * * * * * * * * * * * * * * * * * * * * * *
THIS DOCUMENT CONSTITUTES PART OF
A PROSPECTUS COVERING SECURITIES
THAT HAVE BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933
* * * * * * * * * * * * * * * * * * * * * * * * * *
This memorandum concerns the taxation of the awards that
will automatically occur under the Company's Management
Recognition Plan (the "MRP") upon its receipt of stockholder
approval. Tofacilitate your review, the discussion below is
divided as follows:
Part I: General Tax Principles and Application to
the MRP
Part II: Accelerated Taxation under Section 83(b)
Please understand that this memorandum is merely designed
to summarize the tax rules generally applicable to MRP awards.
We could provide individual tax advice to the recipients of MRP
awards ("Recipients"), should anyone desire assistance.
The deadline for making a Section 83(b) election is 30 days
after the award date.
<PAGE>
<PAGE>
Taxation of MRP Awards
July ___, 1999
Page 2
PART I:
GENERAL TAX PRINCIPLES
Section 83 -- Generally. Section 83 of the Internal
Revenue Code (the "Code") controls the federal income taxation
of property that is transferred in connection with the
performance of services. In the absence of the Section 83(b)
election described in Part II, the recipient of restricted
property (such as an MRP award) recognizes income not on the
date of the award but on the date that his or her interest
vests. The amount of the recipient's taxable income will equal
the fair market value of the restricted property when vesting
occurs. Subsequent gain or loss is treated as capital gain,
with the amount that is included in the recipient's ordinary
income determining his or her basis in the property.
Operation of the MRP. The Bank's MRP will generally work
as follows for Recipients who do not make Section 83(b)
elections:
Date Event
---- -----
Award Date The MRP should provide a "Notice of
MRP Award" to each Recipient. The
notice will specify the number of
shares subject to the award
Recipients will not receive shares
of the Company's common stock, or
be subject to federal income
taxation as the result of receiving
an award.
Each Vesting Date The MRP trust will transfer to each
Recipient a number of unrestricted
shares equal to the number of
shares that have become vested,
plus any dividends attributable to
those shares (provided that the
Recipient has not previously
terminated service).
Vesting will accelerate to 100% upon a Recipient's
termination of service due to retirement at or after age 70,
death, disability, or upon a change in control. Special rules
apply if a transfer of Common Stock would cause the Recipient to
own in excess of 10% of the Common Stock.
Tax Withholding. In the case of Recipients who are non-
employee directors, federal income tax withholding is not
required when their MRP awards give rise to taxable income. On
the other hand, Recipients who are employees must satisfy
federal income tax withholding not only at the time their MRP
awards generate taxable income, but also before they may receive
shares of Common Stock from the MRP trust.
[FN]
_______________________
1 This contrasts with the financial accounting treatment for
MRP awards (i.e., expense recognition is determined by the
fair market on the date of the award).
</FN>
<PAGE>
<PAGE>
Taxation of MRP Awards
July ___, 1999
Page 3
IRS Reporting. In the case of an employee, the ordinary
income arising from the vesting of MRP awards and from the
payment of tax bonuses is reportable on Form W-2, in Box 11. In
the case of a non-employee director, such income is reportable
on Form 1099-MISC, in Box 7.
PART II:
ACCELERATED TAXATION UNDER SECTION 83(b)
Section 83(b) Generally. Within 30 days after receiving an
MRP Award, a Recipient may make a special, irrevocable election
under Code Section 83(b), and thereby accelerate ordinary income
taxation to the date that the property transfer occurred. The
amount of the Recipient's ordinary income will equal the fair
market value of the Common Stock subject to the MRP award as of
the date on which the award occurred. Subsequent gain (or loss,
if the award is forfeited or depreciates) would be long- or
short-term capital gain, not ordinary income.
Procedural Requirements. Section 83(b) elections must
include the information set forth in the form of Section 83(b)
election that we have attached hereto. Further, Section 83(b)
elections must be filed with the IRS Service Center where the
Recipient files his or her return (both within 30 days after the
transfer occurs, and as an attachment to his or her tax return
for the year to which the Section 83(b) election relates). A
copy of the Section 83(b) election must also be filed with the
Company.
Tax Caveat. In several recent private letter rulings
(which, while not binding precedent, are indicative of current
IRS policy), the Internal Revenue Service has taken the position
that, for purposes of Section 83 of the Code, no "transfer" of
property occurs when an individual receives an interest in an
employer's grantor trust. Because the trust associated with the
MRP is a grantor trust (by design, in order to secure deferred
taxation of awards), these rulings suggest that the IRS could
question whether Section 83(b) elections may be made with
respect to MRP awards. While we do not believe that this
theoretical possibility involves a substantial tax risk for
Recipients, each Recipient should contact his or her personal
tax counsel for independent advice about this issue.
Tax Reporting and Withholding. The rules described in Part
I would apply, as though vesting occurred on the date of the
Recipient's Section 83(b) election.
CONCLUSION
Whether or not a Recipient should make a Section 83(b)
election depends on a variety of factors, including the
Recipient's expectations as to (i) the short-term and long-term
future value of the Common Stock, (ii) the length of time the
Recipient is likely to hold the Common Stock, (iii) future tax
rates -- as to both income and capital gain, (iv) the risk of
forfeiture, and (v) the Recipient's ability to pay the taxes
associated with the MRP award.
