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<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. ___)
Filed by the Registrant [x] Filed by a Party other than the
Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
UNITED TENNESSEE BANKSHARES, INC.
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(Name of Registrant as Specified in its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the
Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(1) and 0-11.
1. Title of each class of securities to which transaction
applies:
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2. Aggregate number of securities to which transaction
applies:
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3. Per unit price or other underlying value of transaction
transaction computed pursuant to Exchange Act Rule 0-11
(Set forth the amount on which the filing fee is calcu-
lated and state how it was determined):
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4. Proposed maximum aggregate value of transaction:
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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3 Filing Party:
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4. Date Filed:
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UNITED TENNESSEE BANKSHARES, INC.
P.O. BOX 458
NEWPORT, TENNESSEE 37822-0458
April 10, 2000
Dear Fellow Shareholder:
We invite you to attend the 2000 annual meeting of
shareholders of United Tennessee Bankshares, Inc., the holding
company for Newport Federal Bank, to be held at the Bank's main
office, 344 W. Broadway, Newport, Tennessee on Tuesday, May 16,
2000 at 5:00 p.m.
The accompanying notice and proxy statement describe the
formal business to be transacted at the meeting. During the
meeting, we will also report on our operations during the fiscal
year ended December 31, 1999. Our directors and officers will
be present to respond to any questions the shareholders may
have.
ON BEHALF OF THE BOARD OF DIRECTORS, WE URGE YOU TO SIGN,
DATE AND RETURN THE ACCOMPANYING FORM OF PROXY AS SOON AS
POSSIBLE EVEN IF YOU CURRENTLY PLAN TO ATTEND THE ANNUAL
MEETING. Your vote is important, regardless of the number of
shares you own. This will not prevent you from voting in person
but will assure that your vote is counted if you are unable to
attend the meeting.
Sincerely,
/s/ Richard G. Harwood
Richard G. Harwood
President
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UNITED TENNESSEE BANKSHARES, INC.
344 W. BROADWAY
NEWPORT, TENNESSEE 37821-0249
(423) 623-6088
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON MAY 16, 2000
NOTICE IS HEREBY GIVEN that the annual meeting of
shareholders (the "Annual Meeting") of United Tennessee
Bankshares, Inc. (the "Company") will be held at the main office
of Newport Federal Bank, 344 W. Broadway, Newport, Tennessee on
Tuesday, May 16, 2000 at 5:00 p.m.
A proxy statement and form of proxy for the Annual Meeting
accompany this notice.
The Annual Meeting is for the purpose of considering and
acting upon:
1. The election of three directors of the
Company; and
2. The transaction of such other business as may
properly come before the Annual Meeting or any
adjournments thereof.
The Board of Directors is not aware of any other business
to come before the Annual Meeting.
Any action may be taken on any one of the foregoing pro-
posals at the Annual Meeting on the date specified above or on
any date or dates to which, by original or later adjournment,
the Annual Meeting may be adjourned. Shareholders of record at
the close of business on April 3, 2000 are the shareholders
entitled to vote at the Annual Meeting and any adjournments
thereof.
You are requested to fill in and sign the accompanying
form of proxy which is solicited by the Board of Directors and
to mail it promptly in the accompanying envelope. The proxy
will not be used if you attend and vote at the Annual Meeting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peggy Holston
PEGGY HOLSTON
SECRETARY
Newport, Tennessee
April 10, 2000
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE
COMPANY THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER TO
ENSURE A QUORUM. THE ACCOMPANYING FORM OF PROXY IS ACCOMPANIED
BY A SELF-ADDRESSED ENVELOPE FOR YOUR CONVENIENCE. NO POSTAGE
IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
<PAGE>
PROXY STATEMENT
OF
UNITED TENNESSEE BANKSHARES, INC.
344 W. BROADWAY
NEWPORT, TENNESSEE 37821-0249
ANNUAL MEETING OF SHAREHOLDERS
MAY 16, 2000
GENERAL
This proxy statement is furnished in connection with the
solicitation of proxies by the Board of Directors of United
Tennessee Bankshares, Inc. (the "Company") to be used at its
annual meeting of shareholders (the "Annual Meeting") which will
be held at the main office of Newport Federal Bank (the "Bank"),
344 W. Broadway, Newport, Tennessee, on Tuesday, May 16, 2000 at
5:00 p.m. This proxy statement and the accompanying notice and
proxy card are being first provided to shareholders on or about
April 10, 2000.
VOTING AND REVOCABILITY OF PROXIES
Shareholders who execute proxies retain the right to
revoke them at any time. Unless so revoked, the shares
represented by such proxies will be voted at the Annual Meeting
and all adjournments thereof. Proxies may be revoked by written
notice to Peggy Holston, Corporate Secretary, at the address
shown above, by filing a later dated proxy prior to a vote being
taken on a particular proposal at the Annual Meeting or by
attending the Annual Meeting and voting in person.
Proxies solicited by the Company's Board of Directors will
be voted in accordance with the directions given therein. WHERE
NO INSTRUCTIONS ARE INDICATED, PROXIES WILL BE VOTED FOR EACH OF
THE NOMINEES FOR DIRECTOR SET FORTH BELOW. The proxy confers
discretionary authority on the persons named therein to vote
with respect to the election of any person as a director where
the nominee is unable to serve or for good cause will not serve,
and matters incident to the conduct of the Annual Meeting. If
any other business is presented at the Annual Meeting, proxies
will be voted by those named therein in accordance with the
determination of a majority of the Board of Directors. Proxies
marked as abstentions, and shares held in street name which have
been designated by brokers on proxies as not voted, will not be
counted as votes cast. Proxies marked as abstentions or as
broker non-votes will, however, be treated as shares present for
purposes of determining whether a quorum is present.
VOTING SECURITIES AND BENEFICIAL OWNERSHIP
Shareholders of record as of the close of business on
April 3, 2000 (the "Record Date") are entitled to one vote for
each share then held. At the Record Date, the Company had
1,382,013 shares of common stock, no par value (the "Common
Stock"), issued and outstanding. The presence, in person or by
proxy, of at least a majority of the total number of shares of
the Common Stock outstanding and entitled to vote will be
necessary to constitute a quorum at the Annual Meeting.
Persons and groups owning in excess of 5% of the Common
Stock are required to file certain reports regarding such
ownership pursuant to the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). Based on these reports, the
following table sets forth, as of the Record Date, certain
information as to shares of the Common Stock known by management
to be beneficially owned by persons owning in excess of 5% of
the Common Stock and by all of the Company's directors and
executive officers as a group.
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<PAGE>
<TABLE>
<CAPTION>
AMOUNT AND PERCENT OF
NATURE OF SHARES OF
NAME AND ADDRESS BENEFICIAL COMMON STOCK
OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING
- ------------------- ----------- ------------
<S> <C> <C>
United Tennessee Bankshares, Inc.
Employee Stock Ownership Plan ("ESOP")
344 W. Broadway
Newport, Tennessee 37821-0249 116,163(1) 8.4%
United Tennessee Bankshares, Inc.
Grantor Trust Agreement
(the "Stock Option Plan Trust")
344 W. Broadway
Newport, Tennessee 37821-0249 125,835(2) 9.1%
All directors and executive officers
as a group (11 persons) 298,948(3) 21.6%
<FN>
___________
(1) Reflects unallocated shares held in a suspense account for future
allocation among participating employees as the loan used to purchase the
shares is repaid. The ESOP trustees, currently Directors Henry, Overholt
and Self, vote all allocated shares in accordance with instructions of
the participants; unallocated shares and shares for which no instructions
have been received generally are voted by the ESOP trustees in the same
ratio as participants direct the voting of allocated shares or, in the
absence of such direction, as directed by our Board of Directors.
(2) Consists of shares held in trust to satisfy potential obligations of the
Company under the United Tennessee Bankshares, Inc. 1999 Stock Option
Plan. Voting rights with respect to the Common Stock held by the Stock
Option Plan Trust are exercised by the trustees in accordance with the
terms of the ESOP.
(3) Reflects shares over which one or more directors and executive officers
have sole or shared voting and/or dispositive power. Excludes 116,163
unallocated shares in the ESOP which are voted as described in note 1.
Also excludes 125,835 shares held by the Stock Option Plan Trust, 32,772
unvested shares held by the Company's Management Recognition Plan Trust
and 14,061 shares held in a grantor trust for the Bank directors'
retirement plan. The trustees of these trusts, currently Directors
Myers, Henry and Overholt, vote all such shares in the same proportion on
all matters as the ESOP trustees vote the ESOP shares. Includes 98,034
shares which directors and executive officers have the right to acquire
pursuant to options exercisable within 60 days of the Record Date.
</FN>
</TABLE>
PROPOSAL I -- ELECTION OF DIRECTORS
GENERAL
The Company's Board of Directors currently consists of
eight members. The Company's Charter requires that directors be
divided into three classes, as nearly equal in number as
possible, with approximately one-third of the directors elected
each year. The Board has nominated directors William B. Henry,
J. William Myers and Tommy C. Bible for reelection to serve as
directors for full three-year terms. Under Tennessee law,
directors are elected by a plurality of all votes cast at a
meeting at which a quorum is present. If the nominees are
unable to serve, the shares represented by all valid proxies
will be voted for the election of such substitute as the Board
may recommend or the size of the Board may be reduced to
eliminate the vacancy. At this time, the Board knows of no
reason why the nominees might be unavailable to serve.
The following table sets forth the names of the nominees
for election as directors and the directors whose terms expire
in future years. Also set forth is certain other information
with respect to each person's age, the year he first became a
director of the Bank, the Company's principal subsidiary, on
whose board each director of the Company also
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serves, the expiration of his term as a director and the number
and percentage of shares of the Common Stock beneficially owned.
With the exception of Messrs. Bible and Hooper who first became
directors in 1998, each director first became a director of the
Company upon its incorporation in 1997.
<TABLE>
<CAPTION>
SHARES OF
YEAR FIRST COMMON STOCK
AGE AT ELECTED AS CURRENT BENEFICIALLY
DECEMBER 31, DIRECTOR OF TERM OWNED AT THE PERCENT
NAME 1999 THE BANK TO EXPIRE RECORD DATE(1) OF CLASS
------ ------------ ---------- --------- -------------- --------
BOARD NOMINEES FOR TERMS TO EXPIRE IN 2003
<S> <C> <C> <C> <C> <C>
William B. Henry 69 1978 2000 32,803 2.4%
J. William Myers 58 1975 2000 34,850 2.5
Tommy C. Bible 46 1998 2000 24,854 1.8
DIRECTORS CONTINUING IN OFFICE
Clyde E. Driskill, Jr. 68 1980 2001 30,062 2.2
Robert L. Overholt 56 1983 2001 34,754 2.5
Ben W. Hooper, III 35 1998 2001 3,254 0.2
Richard G. Harwood 53 1989 2002 59,875 4.3
Robert D. Self 69 1978 2002 17,995 1.3
<FN>
_________
1 Reflects shares over which the named individuals have sole or shared voting
and/or dispositive power; excludes unallocated shares held by the ESOP and
certain shares held by the Company's defined contribution thrift plan and its
directors' retirement plan (see "Voting Securities and Beneficial Ownership")
above. Includes 26,961 shares which Mr. Harwood has the right to acquire
pursuant to options exercisable within 60 days of the Record Date, 8,081 shares
which each of Messrs. Myers, Driskill, Henry, Overholt and Self have the right to
acquire pursuant to such options and 1,854 shares which each of Messrs. Bible and
Hooper have the right to acquire pursuant to such options.
</FN>
</TABLE>
Set forth below is information concerning the
Board's nominees for election as director and continuing
directors. Unless otherwise stated, all directors have held the
positions indicated for at least the past five years.
WILLIAM B. HENRY has been an optometrist in Newport,
Tennessee since 1961. He is presently serving as the secretary
of the Newport Utilities Board and is a member of the
Newport/Cocke County Economic Development Commission.
J. WILLIAM MYERS is a partner in the law firm of
Myers & Bell, P.C. in Newport, Tennessee. He has practiced law
in Newport, Tennessee since 1966. Mr. Myers serves as the
Chairman of the Board for the Company and the Bank. He is
active with Habitat for Humanity.
TOMMY C. BIBLE is the General Manager of the
Jefferson-Cocke County Gas Utility District that serves natural
and propane gas to the Jefferson County and Cocke County areas.
Prior to joining Jefferson-Cocke, he worked 15 years for Newport
Utilities Board as the Administrative Manager. Mr. Bible is a
member of the Cocke County Election Commission and is a director
for the Newport/Cocke County Economic Development Commission.
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<PAGE>
CLYDE E. DRISKILL, JR. retired in 1999 after having
been the owner and president of Driskill's Furniture, Inc., a
furniture and appliance retail establishment located in Newport,
Tennessee, since 1960. Mr. Driskill has served as the Chairman
of the Newport Regional Planning Commission and of the
Newport/Cocke County Industrial Development Commission.
ROBERT L. OVERHOLT retired in 1999 after having been
the owner/manager of Home Supply of Newport, Tennessee, Inc., a
building supply establishment, since 1966. Mr. Overholt is
active with the Shriners and Habitat for Humanity.
BEN W. HOOPER, III is an attorney in general
practice with Campbell and Hooper in Newport, Tennessee. Mr.
Hooper also serves as legal counsel to the Cocke County Amvets
and Del Rio Culture & Preservation Society. He is a director
and the current chairman of the Cocke County Recreation Advisory
Board and is a member of the Cocke County Bar Association,
Tennessee Bar Association and Tennessee Trial Lawyers
Association.
RICHARD G. HARWOOD serves as President and Chief
Executive Officer of the Company and the Bank. Mr. Harwood
joined the Bank as Senior Vice President in 1984. He has acted
as the Chairman of the Economic Development Commission, a
director for the United Way of Cocke County and Treasurer for
the Newport Lions Club.
ROBERT D. SELF retired in 1999 after having been the
owner of Bob Self Auto Parts, an auto parts supplier located in
Newport, Tennessee, since 1969. Mr. Self is active with the
Newport Lions Club and serves on the board of directors of the
Stokley Memorial Library.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
The Company's Board of Directors holds regular
meetings and special meetings as needed. During the year ended
December 31, 1999, the Board met five times. No nominee for
election as a director or continuing director attended fewer
than 75% in the aggregate of the total number of Board meetings
held while he was a member during the year ended December 31,
1999 and the total number of meetings held by committees on
which he served during such fiscal year.
The full Board of Directors acts as an audit
committee and met once in this capacity in connection with the
independent audit for fiscal 1999.
The Board of Directors has an Executive Committee,
which consists of Chairman Myers and Directors Harwood and Henry
and acts as a compensation committee. This committee reviews
the performance of the Company's officers and met 12 times for
fiscal 1999.
The Board of Directors does not have a standing
nominating committee. Under the Company's Bylaws, the full
Board of Directors acts as a nominating committee and met once
in this capacity to select the nominees for election at the
Annual Meeting.
DIRECTOR COMPENSATION
FEES. Directors currently receive fees of $6,000
per year, plus $300 per regular board meeting attended and $100
per executive committee meeting attended, plus the amount of any
credit to their account under a long-term incentive plan
implemented in fiscal 1997 and described below. In addition,
the Chairman receives a salary of $9,600 per year. For fiscal
1999, directors' fees totaled $96,350. Directors do not receive
additional compensation for service as directors of the Company.
For additional information, see "Transactions with Management"
below.
LONG-TERM INCENTIVE PLAN. The Bank has adopted a
long-term incentive plan for directors in order to provide
competitive compensation to directors, attract, retain and
motivate directors and to encourage the long-term financial
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<PAGE>
success of the Bank. On the effective date, a bookkeeping
account was established in the name of each director, and each
account was credited with an amount equal to the product of (i)
$1,291 and (ii) the director's full years of service as a
director, up to 20 years. On each December 31, each participant
who is then a director and has 20 or fewer years of service
shall have his account credited with an amount equal to the
product of $1,291 and the safe performance factor, which is
determined based on the Bank's actual performance as compared to
budgeted goals for return on average equity, non-performing
assets and composite regulatory rating. The safe performance
factor may not exceed 1.2. All amounts credited to
participants' accounts are fully vested at all times. Until
distributed in accordance with the terms of the plan, each
participant's account will be credited with a rate of return
equal to the Bank's highest rate of interest paid on
certificates of deposit having a term of one year. Each
participant may prospectively elect to have the dividend-
adjusted rate of return on the Common Stock measure future
appreciation. Beginning with the fiscal year following a
participant's termination of service, the participant's account
will receive an investment return measured by the participant's
election between up to two different mutual funds (or other
investments) selected by the Board of Directors.
Each participant may elect to receive plan benefits
in a lump sum or over a period shorter than ten years, and in
the absence of an election will receive payments in five
substantially equal installments. In the event of a
participant's death, the balance of his plan account will be
paid in a lump sum (unless the participant elects a distribution
period up to ten years) to his designated beneficiary or, if
none, his estate.
Any compensation accrued under the plan will be paid
from the Bank's general assets. The Bank has established a
trust in order to hold assets with which to pay compensation.
Trust assets would be subject to claims of the Bank's general
creditors. If a participant were to prevail over the Bank in a
legal dispute as to the terms or interpretation of the plan, he
would be reimbursed for his legal and other expenses.
On December 31, 1999, the accounts of Messrs. Bible,
Driskill, Harwood, Henry, Hooper, Myers, Overholt and Self were
credited with $1,937, $9,354, $5,427, $8,720, $1,937, $8,730,
$8,045 and $8,720, respectively, including earnings on their
accounts.
DEFERRED COMPENSATION PLAN. Under the Bank's
deferred compensation plan, each non-employee director may elect
to defer receipt of all or part of his fees for the year, and
any other participant may elect to defer receipt of up to 25% of
his or her compensation for the year. Deferred amounts are
credited at the end of the calendar year to a bookkeeping
account in the participant's name along with the investment
return which would have resulted if such deferred amounts had
been invested, based upon the participant's choice, between the
dividend-adjusted rate of return on the Common Stock and the
Bank's highest annual rate of interest on certificates of
deposit having a one-year term. Each participant may make an
election to receive distributions either in a lump sum or in
annual installments over a period up to ten years.
The Bank expects (but is under no legal obligation)
to make quarterly contributions to a grantor trust in an amount
equal to the accrued expense associated with the deferred
compensation plan. In the event of a change in control (as
defined in the employment agreement described below), the Bank
will contribute to the trust an amount sufficient to provide the
trust with assets having an overall value equal to the aggregate
account balances under the plan. The trust's assets would
remain subject to the claims of the Bank's general creditors and
be available for eventual payments to participants.
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EXECUTIVE COMPENSATION
SUMMARY. The following table sets forth
compensation for the fiscal years ended December 31, 1999, 1998
and 1997 awarded to or earned by the Company's Chief Executive
Officer for services rendered in all capacities. No executive
officer received salary and bonus in excess of $100,000 during
the fiscal years 1999, 1998 or 1997.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
----------------------------- -----------------------
RESTRICTED SECURITIES
NAME AND OTHER ANNUAL STOCK UNDERLYING ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) AWARD(S) OPTIONS COMPENSATION
- ------------------ ---- ------ ----- --------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Richard G. Harwood 1999 $82,796 $9,861 $ -- $178,201(2) 53,922(3) $54,679(4)
President and Chief 1998 81,440 5,916 -- -- -- 41,015
Executive Officer 1997 70,118 4,945 -- -- -- 11,220
<FN>
________
(1) Excludes indirect compensation in the form of certain perquisites and other personal benefits which
did not exceed 10% of salary and bonus.
(2) Based on the closing price of the Common Stock on the date of grant ($12.25 per share) multiplied
by the number of shares awarded. Mr. Harwood was awarded 14,547 shares of restricted stock on
January 12, 1999 under the United Tennessee Bankshares, Inc. Management Recognition Plan ("MRP")
subject to shareholder approval. Mr. Harwood's restricted stock award was 25% vested as of the
date of grant and vests at the rate of 25% per year thereafter. Dividends received in respect of
MRP shares are held for the benefit of participants and distributed upon vesting of the underlying
shares. Based on the closing price of the Common Stock at December 31, 1999 ($11.00 per share),
the 10,910 shares held by the MRP trust for Mr. Harwood on that date had a value of $120,010 not
including the value of the $4.00 special dividend paid with respect to such shares.
(3) Pursuant to the United Tennessee Bankshares, Inc. 1999 Stock Option Plan (the "Option Plan"), Mr.
Harwood was granted options to acquire 36,369 shares of the Common Stock at $12.75 per share
effective January 15, 1999. In accordance with the terms of the Option Plan, the exercise
price of such options was adjusted to maintain the same relation with the fair market of the Common
Stock before and after the Company's return of capital distribution and the aggregate number of shares
subject to the Option was adjusted to maintain the aggregate in-the-money value of the options.
As a result of this adjustment, the exercise price of Mr. Harwood's options was adjusted to $8.60 per
share and the number of shares subject to the option was adjusted to 53,922 shares.
(4) Consists of director fees ($11,500), allocation to ESOP account ($36,028), Company contribution to
long-term incentive plan ($1,510) and earnings on accounts in long-term incentive and deferred
compensation plans ($5,641) for fiscal 1999; excludes appraisal fees for services to borrowers.
</FN>
</TABLE>
OPTION GRANTS IN LAST FISCAL YEAR. The following table
contains information concerning the grants of stock options to
the Chief Executive Officer. The number of shares underlying
such options and the exercise price have been adjusted to
reflect the special distribution paid on November 30, 1999.
<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION
NAME GRANTED(1) FISCAL YEAR PRICE DATE
- ---- ---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Richard G. Harwood 53,922 27.5% $8.60 1/15/09
<FN>
___________
(1) Mr. Harwood's options were 25% vested at the date of grant and vest at
the rate of 25% per year thereafter subject to accelerated vesting in the
event of the termination of service due to retirement disability or
death. Mr. Harwood's options will also become immediately exercisable
upon a change in control of the Company.
</FN>
</TABLE>
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<PAGE>
OPTION YEAR-END VALUE TABLE. The following table sets
forth information concerning the value of options held by
the Chief Executive Officer at the end of fiscal year 1999. The
number of shares underlying such options and the exercise price
therefor have been adjusted for the special distribution paid
November 30, 1999. No options were exercised during fiscal year
1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT YEAR-END AT YEAR-END (1)
--------------------------- ----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Richard G. Harwood 13,481 40,441 $32,354 $97,058
<FN>
___________
(1) Based on the difference between the closing sales price for the Common Stock
on December 31, 1999 as reported on the Nasdaq SmallCap Market ($11.00 per
share) and the exercise price per share ($8.60 per share) multiplied by the
number of shares subject to the option. Options are considered in-the-money
if the fair market value of the underlying securities exceeds the exercise
price.
</FN>
</TABLE>
EMPLOYMENT AGREEMENT
The Bank has entered into an employment agreement
pursuant to which Richard G. Harwood serves as the Bank's
President and Chief Executive Officer. In such capacities, Mr.
Harwood is responsible for overseeing all of its operations and
for implementing the policies adopted by the Board of Directors.
The Company has entered into a guarantee agreement with Mr.
Harwood pursuant to which it has agreed to be jointly and
severally liable for the payment of amounts due under the
employment agreement.
The employment agreement became effective on January
1, 1998 and provided for an initial term of three years with an
annual base salary equal to Mr. Harwood's existing base salary
rate in effect on the effective date. On each anniversary date
of the commencement of the employment agreement, the term of Mr.
Harwood's employment may be extended for an additional one-year
period beyond the then-effective expiration date, upon a
determination by the Board of Directors that the performance of
Mr. Harwood has met the required performance standards and that
such employment agreement should be extended. Mr. Harwood's
employment agreement has accordingly been extended through
January 1, 2003. The employment agreement provides Mr. Harwood
with a salary review by the Board of Directors not less often
than annually, as well as with inclusion in any discretionary
bonus plans, retirement and medical plans, customary fringe
benefits, vacation and sick leave. The employment agreement
shall terminate upon Mr. Harwood's death, may terminate upon Mr.
Harwood's disability and is terminable by the Company for "just
cause" (as defined in the employment agreement). In the event
of termination for just cause, no severance payment is
available. If the Company terminates Mr. Harwood without just
cause, Mr. Harwood will be entitled to a continuation of his
compensation from the date of termination through the remaining
term of the employment agreement. In addition, Mr. Harwood is
entitled, at his election, to either continued participation in
compensation plans which he would have been eligible to
participate in through his employment agreement's expiration
date or the cash equivalent thereof. If Mr. Harwood's
employment is terminated for any reason other than just cause,
he shall be entitled to purchase from the Company, at his own
expense which shall not exceed applicable statutory rates,
family medical insurance under any group health plan that the
Company maintains for its employees. This right shall be in
addition to, and not in lieu of, any other rights that Mr.
Harwood has under the employment agreement and shall continue
until he first becomes eligible for participation in Medicare.
If the employment agreement is terminated due to Mr. Harwood's
"disability" (as defined in the agreement), Mr. Harwood will be
entitled to a continuation of his compensation through the date
of such termination, including any period prior to the
establishment of Mr. Harwood's disability. In the event of Mr.
Harwood's death during the term of the employment agreement, Mr.
Harwood's estate will be entitled to receive his salary through
the last day of the calendar month in which Mr. Harwood's death
occurred. Mr. Harwood is able to voluntarily terminate the
employment agreement by providing
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90 days' written notice to the Company, in which case Mr.
Harwood would be entitled to receive only his compensation,
vested rights and benefits up to the date of termination.
In the event of (i) Mr. Harwood's involuntary
termination of employment other than for "just cause" during the
12-month period following a change in control or (ii) Mr.
Harwood's voluntary termination within 90 days of the occurrence
of certain specified events occurring during that period, Mr.
Harwood will be paid within 10 days of such termination (or the
date of the change in control, whichever is later) an amount
equal to the difference between (a) 2.99 times his base amount,
as defined in Section 280G(b)(3) of the Internal Revenue Code,
and (b) the sum of any other parachute payments, as defined
under Section 280G(b)(2) of the Internal Revenue Code, that he
receives on account of the change in control. "Change in
control" means any one of the following events: (i) the
acquisition of ownership, holding or power to vote more than 25%
of our voting stock, (ii) the acquisition of the ability to
control the election of a majority of the Company's directors,
(iii) the acquisition of a controlling influence over the
Company's management or policies by any person or by persons
acting as a "group" (within the meaning of Section 13(d) of the
Exchange Act) or, (iv) during any period of two consecutive
years, individuals ("continuing directors") who at the beginning
of such period constituted the Company's Board of Directors (the
"existing board") cease for any reason to constitute at least
two-thirds thereof, provided that any individual whose election
or nomination for election as a member of the existing board was
approved by a vote of at least two-thirds of the continuing
directors then in office shall be considered a continuing
director. For purposes of this paragraph only, the term
"person" refers to an individual or a corporation, partnership,
trust, association, joint venture, pool, syndicate, sole
proprietorship, unincorporated organization or any other form of
entity not specifically listed herein. The payments that would
be made to Mr. Harwood assuming his termination of employment
under the foregoing circumstances at December 31, 1999, would
have been approximately $277,000. These provisions may have an
anti-takeover effect by making it more expensive for a potential
acquirer to obtain control of the Company. If Mr. Harwood were
to prevail over the Company, or obtain a written settlement, in
a legal dispute as to the employment agreement, he would be
entitled to be reimbursed for his legal and other expenses.
CERTAIN TRANSACTIONS
The Company offers loans to directors, officers and
employees through the bank. These loans are made in the
ordinary course of business with the same collateral, interest
rates and underwriting criteria as those of comparable
transactions prevailing at the time and do not involve more than
the normal risk of collectibility or present other unfavorable
features, except each director, officer and employee may obtain
one mortgage loan and one consumer loan with waived origination
fees and a 1% discount on the interest rate (on adjustable-rate
loans, the discounted rate applies only until the rate adjusts).
At December 31, 1999, the Company loans to directors and
executive officers totaled approximately $662,000, or 5.6% of
its shareholders' equity and 0.7% of its total assets at that
date. Except as disclosed below, no director or executive
officer had more than $60,000 of preferential loans from the
Company at any time during fiscal year 1999.
<TABLE>
<CAPTION>
Highest Balance at
Name & Relation Date Interest Balance Since December
to Company Type of Loan Originated Rate January 1, 1999 31, 1999
- --------------- ------------ ---------- -------- --------------- ----------
<S> <C> <C> <C> <C> <C>
Richard G. Harwood Residential 3/30/99 6 1/4% $150,000 $123,673
President and Chief Mortgage
Executive Officer
</TABLE>
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J. William Myers is a principal in the law firm of Myers &
Bell, P.C., Newport, Tennessee, which performs routine legal
services on behalf of the Company and its borrowers, principally
in connection with the closing of mortgage loans. In fiscal
1999, the law firm's fees for such services totaled $105,909.
Richard G. Harwood, the Company's President and Chief
Executive Officer, and Nancy L. Bryant and Peggy Holston, the
Company's Vice President and Treasurer and Assistant Secretary
and Branch Manager, respectively, are licensed real estate
appraisers. They perform routine appraisal services on behalf
of the Bank's borrowers principally in connection with the
closing of mortgage loans. In fiscal 1999, Mr. Harwood's and
Mses. Bryant's and Holston's fees for such services totaled
$24,756, $15,443 and $14,766, respectively.
OTHER MATTERS
The Board of Directors is not aware of any business to
come before the Annual Meeting other than those matters
described above in this proxy statement. However, if any other
matters should properly come before the Annual Meeting, it is
intended that proxies in the accompanying form will be voted in
respect thereof in accordance with the determination of a
majority of the Board of Directors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Pursuant to regulations promulgated under the Exchange
Act, the Company's officers, directors and persons who own more
than ten percent of the outstanding Common Stock are required to
file reports detailing their ownership and changes of ownership
in such Common Stock, and to furnish the Company with copies of
all such reports. Based on the Company's review of such reports
which the Company received during the last fiscal year, or
written representations from such persons that no annual report
of change in beneficial ownership was required, the Company
believes that, during the last fiscal year, all persons subject
to such reporting requirements have complied with the reporting
requirements except for Mr. Jones who was late filing his Form 3
and Messrs. Myers and Overholt who were each late filing a Form
4.
MISCELLANEOUS
The cost of soliciting proxies will be borne by the
Company. The Company will reimburse brokerage firms and other
custodians, nominees and fiduciaries for reasonable expenses
incurred by them in sending proxy materials to beneficial owners
of shares of the Common Stock. In addition to solicitations by
mail, our directors, officers and regular employees may solicit
proxies personally or by telegraph or telephone without
additional compensation.
FINANCIAL INFORMATION
The annual report to shareholders, including financial
statements, has been mailed to all shareholders of record as of
the close of business on the Record Date. Any shareholder who
has not received a copy of such annual report may obtain a copy
by writing to the Company's Corporate Secretary. Such annual
report is not to be treated as a part of the proxy solicitation
material or as having been incorporated herein by reference. A
COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-KSB FOR THE
FISCAL YEAR ENDED DECEMBER 31, 1999 AS FILED WITH THE SECURITIES
AND EXCHANGE COMMISSION WILL BE FURNISHED WITHOUT CHARGE TO EACH
SHAREHOLDER AS OF THE RECORD DATE UPON WRITTEN REQUEST TO THE
COMPANY'S CORPORATE SECRETARY, UNITED TENNESSEE BANKSHARES,
INC., 344 W. BROADWAY, NEWPORT, TENNESSEE 37821-0249.
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INDEPENDENT AUDITORS
Pugh & Company, P.C. was the Company's independent auditor
for the 1999 fiscal year and has been retained by the Board of
Directors to be its auditor for the 2000 fiscal year. A
representative of Pugh & Company, P.C. is expected to be present
at the Annual Meeting to respond to shareholders' questions and
will have the opportunity to make a statement if he or she so
desires.
SHAREHOLDER PROPOSALS
In order to be eligible for inclusion in the Company's
proxy materials for next year's Annual Meeting of Shareholders,
any shareholder proposal to take action at such meeting must be
received at the Company's main office at 344 W. Broadway,
Newport, Tennessee 37821-0249, no later than December 12, 2000.
Any such proposal shall be subject to the requirements of the
proxy rules adopted under the Exchange Act.
Shareholder proposals to be considered at the Annual
Meeting, other than those submitted pursuant to the Exchange
Act, must be stated in writing, delivered or mailed to the
Company's Secretary, not less than thirty days nor more than
sixty days prior to the date of the Annual Meeting. If less
than forty days' notice is given to shareholders, such notice
shall be delivered or mailed to the Secretary not later than the
close of business on the tenth day following the day on which
notice of the meeting was mailed to shareholders.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Peggy Holston
PEGGY HOLSTON
SECRETARY
Newport, Tennessee
April 10, 2000
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[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE UNITED TENNESSEE BANKSHARES, INC.
ANNUAL MEETING OF SHAREHOLDERS
May 16, 2000
The undersigned hereby appoints Peggy Holston and Ben W. Hooper,
III, with full powers of substitution, to act as proxies for the
undersigned, to vote all shares of common stock of United
Tennessee Bankshares, Inc. (the "Company") which the undersigned
is entitled to vote at the annual meeting of shareholders (the
"Annual Meeting"), to be held at 344 W. Broadway, Newport,
Tennessee, on Tuesday, May 16, 2000 at 5:00 p.m., and at any and
all adjournments thereof, as follows:
WITH- FOR
FOR HELD EXCEPT
1. The election as
directors of all / / / / / /
nominees listed
(except as marked
to the contrary
below):
William B. Henry
J. William Myers
Tommy C. Bible
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY LISTED
NOMINEE, MARK "FOR EXCEPT" AND WRITE THAT NOMINEE'S NAME IN
THE SPACE PROVIDED BELOW.
_____________________________________________
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE LISTED
NOMINEES.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE
SPECIFIED, THIS PROXY WILL BE VOTED FOR THE LISTED NOMINEES. IF
ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING, THIS
PROXY WILL BE VOTED BY THOSE NAMED IN THIS PROXY IN ACCORDANCE
WITH THE DETERMINATION OF THE BOARD OF DIRECTORS. AT THE
PRESENT TIME, THE BOARD OF DIRECTORS KNOWS OF NO OTHER BUSINESS
TO BE PRESENTED AT THE ANNUAL MEETING. THIS PROXY CONFERS
DISCRETIONARY AUTHORITY ON THE HOLDERS THEREOF TO VOTE WITH
RESPECT TO THE ELECTION OF ANY PERSON AS DIRECTOR WHERE THE
NOMINEE IS UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE AND
MATTERS INCIDENT TO THE CONDUCT OF THE ANNUAL MEETING.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS.
Please be sure to sign and Date
date this proxy in the box
below
Shareholder sign above. Co-holder (if any) sign above.
Should the undersigned be present and elect to vote at the
Annual Meeting or at any adjournment thereof and after
notification to the Secretary of the Company at the Annual
Meeting of the shareholder's decision to terminate this proxy,
then the power of said attorneys and proxies shall be deemed
terminated and of no further force and effect.
The undersigned acknowledges receipt from the Company prior to
the execution of this proxy of notice of the annual meeting, a
proxy statement therefor and an annual report to shareholders.
Please sign exactly as your name appears on this proxy card.
When signing as attorney, executor, administrator, trustee or
guardian, please give your full title. If shares are held
jointly, each holder should sign.
PLEASE ACT PROMPTLY
SIGN, DATE AND MAIL YOUR PROXY TODAY
